Friday, June 19, 2009

State Tax Revenue

6/19/09 State Tax Revenue

The total of $165B in Treasurys up for sale next week would annualize to $8.58T,
Karl Denninger notes. "Now obviously they won't keep doing that for the next 52 weeks (one hopes), but you have to be smoking something if you think the market can continue to absorb this sort of supply and shrug it off."

GM says it will stop making the Pontiac Vibe small car in August at a factory it runs jointly with Toyota in Fremont, Calif.
The Detroit automaker is phasing out the Pontiac brand no later than next year and will stop selling the Vibe and other models. The Vibe is the same car as the Toyota Matrix.

The U.S. Navy is tracking a North Korean ship under new United Nations sanctions, according to media reports late Thursday. The ship, called Kang Nam, reportedly left an unspecified North Korean port on Wednesday and is now in international waters. Recent U.N. sanctions have called for the international community to request permission to board North Korean vessels suspected of carrying heavy weapons, such as missile parts or nuclear technology, or to track the vessel to its next port if permission is denied.

SINGAPORE investment agency Temasek Holdings may have taken a hit recently on some of its high-profile banking investments, but over the longer term it has outperformed key global benchmarks.
Figures obtained by The Straits Times show that over a 10-year period to March this year, Temasek outgunned several closely-watched equity indexes.

It also beat other notable long-term investors such as Berkshire Hathaway, a top US investment company headed by billionaire Warren Buffett.

This year's peak home-buying season was lackluster, as buyers seeking to trade up to larger houses were absent, said the head of one of the country's largest real estate firms. Jim Gillespie, president and chief executive of Coldwell Banker Real Estate, in an interview with Reuters, said sales were only modest during the spring, with demand overwhelmingly dominated by first-time home buyers and investors.

Brett Steenbarger: "One theme stressed on this blog is the importance of trading volume, largely because of its correlation with volatility.
As stocks have moved higher since the March lows, volume has steadily declined and so has the average high-low trading range. Stocks now provide almost 1/3 the expectable range as earlier in the year.
This is why I find it crucial to adjust profit targets for volatility. Without such adjustment, we inevitably expect too much out of a trade when volatility comes out of the market, leaving us open to frequent and frustrating reversals."

The Star Tribune Co. says it has filed a reorganization plan in U.S. Bankruptcy court, with the goal of emerging from Chapter 11 protection this fall.

Wash State's lead forecaster projects tax collections will drop an additional $482M between now and 2011, continuing a long string of bad news for Wash's budget.

A crackdown on credit limits by card companies is squeezing the nation’s 27 million small businesses, exacerbating the problems brought on by a stagnant economy.

Moscow and Beijing have suggested using the International

Monetary Fund’s Special Drawing Rights (SDR) instead of the


The SDR was created in 1969. At present, it is an artificial

metric which consists of 0.6 US dollars, 0.4 euros, 18.4 yen and

0.09 British pounds. Its value fluctuates with exchange rates.

Today, one SDR is equal to 1.54 US dollars. The SDR is not

a tangible medium of exchange or a claim on one. It’s simply an

accounting metric the IMF uses to balance its books.

Edward Harrison: "State income-tax revenue fell 26% in the first four months of 2009 compared to the same period last year, according to a survey of states by the nonprofit Nelson A. Rockefeller Institute of Government.The report, conducted by the public-policy research arm of the State University of New York, is one of the most up-to-date measures of how deep the recession is digging into Americans’ wallets and, consequently, state coffers.States are required by law to balance the budget, so lower tax revenues will translate in service cuts, rather than red ink. Already states such as Kansas are slowing the payment of income-tax refunds and delaying payments to local school districts, according to the report."

If we are a consumer-based economy, and state income tax revenue has fallen 26% in the first four months of this year, then what could be the outlook going forward with the work-week hours at a record low 33.1 hours and the actual income for Americans declining?

A "distressingly slow" U.S. housing recovery, with inflation-adjusted home values expected to decline over the next five years, makes it unlikely that housing wealth will drive consumer spending in the next decade, a Reuters/University of Michigan survey found. Consumers are apt to maintain their renewed emphasis on savings and paring debt, Richard Curtin, director of the survey, said in a June home price update Friday. "To be sure, refinancing has reduced the burden of mortgage payments, giving consumers more discretionary income, but the refinancing impact on spending will fade as mortgage rates increase," Curtin said. "Moreover, conventional refinancing is largely limited to consumers whose home is worth about 20 percent more than their current outstanding mortgage."

Billionaire property investor Simon Halabi’s real estate companies defaulted on 1.15 billion pounds ($1.9 billion) of bonds backed by nine London office buildings as the recession cut the value of the properties by about 50 percent.
The properties, including JPMorgan Chase & Co.’s offices at 125 London Wall and 60 Victoria Embankment, are now worth less than the value of the loans that back them, loan manager Hatfield Philips International Ltd. said in a statement today.

Royal Dutch Shell Plc, Europe’s largest oil company, made a natural gas discovery at a record depth in the northern Norwegian Sea that may equal the size of Norway’s annual production of the fuel.

Goldman Sachs raised Microsoft’s price target to $29 per share from $25 per share and issued a “buy” rating on the stock. Microsoft shares closed at $23.50 Thursday.
It's interesting that the stock has risen almost every day for some time. Why not recommend the shares at $16? It's a better buy at $23?

Supreme Leader Ayatollah Ali Khamenei said the re-election of President Mahmoud Ahmadinejad was valid and warned of a crackdown on Iran’s “political elites” if protests continue.

South Carolina's unemployment rate rose to a record 12.1 percent in May. Coastal Carolina University Economist Don Schunk told the state Board of Economic Advisors last week that he expected the May jobless report would show about 12 percent unemployed. He says the state's rate will peak above 13 percent by the end of the year and average 15 percent next year.

The Movement for the Emancipation of the Niger Delta, or MEND, said it blew up an Agip pipeline that delivers oil to the Brass export terminal. They attacked a Royal Dutch Shell Plc pipeline two days ago, cutting oil production that supplies the Forcados oil terminal.

PetroChina is in negotiations to invest in an oil refinery in Scotland, a move that would give PetroChina its first European refining operation.

Tyler Durden: "In summary, over the past two years, while unemployment claims have climbed from 2,688 million in March 2007 to 6,157 in May 2009, monthly unemployment payments have skyrocketed from $3,238 million to $10,807 over the same time period. Furthermore, run rating June 15 intramonth results, indicates that this will be the all time most cash outflowing month for unemployment benefits, at $12,354 million.
What all this means is that the Average Monthly Unemployment "Paycheck" has exploded from on average $1,000 to $1,800 in recent months (and over $2,000 runrated for June). Has the government been "pushing" benefits to the unemployed since December of 2008, when the increase commenced?"

Signs that unemployment pains may be easing in individual US states in April disappeared by May, when jobless rates jumped in 48 states andthe District of Columbia, according to data released on Friday.

Mexico's central bank cut its benchmark interest rate by a half-percentage point on Friday, signaling that it may be approaching its last rate cut of the year as it seeks to revive growth and help the country emerge from deep recession.
The bank slashed its interbank lending rate to 4.75 percent from 5.25 percent, its sixth rate cut this year.

Baker Hughes said Friday its weekly industry count of oil and gas rigs rose by 23 rigs to 899 in U.S. as oil prices held over the $70 a barrel mark. The rig count remains below the year-ago boom time by a count of 1,007 rigs. In Canada, the number of rigs in the ground rose by 35 to 143 in the past week. Internationally, the rig count rose by 7 to 993.

Americans drove 0.6% more miles in April than the year-ago period despite the weaker economy, as gasoline prices fell about $1.50 a gallon, the Federal Highway Administration said Friday. Travel on all roads and streets rose by 1.4 billion vehicles miles to 249.5 billion vehicle miles in April.

Crude ends below $70 for first time since June 8.

California’s credit rating, already the lowest among U.S. states, may be cut several levels by Moody’s Investors Service as government leaders seek ways to eliminate a $24 billion budget deficit.
The move would affect $72 billion of debt, Moody’s said in a statement today. California’s full faith and credit pledge is rated A2 by Moody’s, five steps above junk.

Bank failures in Georgia and North Carolina have brought the number of failures in 2009 to 39, according to the Federal Deposit Insurance Corp. late Friday.

Goodyear Tire & Rubber Co. is curbing production at its Union City, Tenn., tire plant because of weak industry demand. The company said it will move to a five-day, three-shift operation from a continuous operating schedule on July 6. As a result, 550 workers will take buyout packages, and Goodyear will record a $60 million charge in the second quarter.

The Dow Jones Industrial Average shed 15.87 points, or 0.2%, to end at 8,539.7, giving it a weekly loss of 3%. The S&P 500 added 2.86 points, or 0.3%, to 921.23, leaving it down 2.6% from the week-ago close. The Nasdaq Composite rose 19.75 points, or 1.1%, to end at 1,827.4, with the tech-heavy index off 1.7% for the week.

Thursday, June 18, 2009

Government Debt

6/18/09 Government Debt

Rune Likvern: "As a result of these forces, I believe that there is a substantial chance that oil prices may again experience a rapid drop to perhaps as low as $30 barrel before Christmas. One reason I believe this is likely is based on my research with respect to US Oil Fund
USO. In February USO held 100 000 WTI contracts (1 contract = 1 000 bbls), but this had dropped to 50 000 WTI contracts recently, as ETF purchasers increasingly switched to Natural Gas. Strange as it may seem, the sale of these USO contracts may be part of what is holding WTI prices up, and natural gas prices down. As the number of WTI contracts reaches a minimum, this influence may turn around the other way."

Barry Ritholtz: "In just about one short year (march 2008 - March 2009), the bailouts managed to spend far in excess nearly every major one time expenditure of the USA, including WW2, the moon shot, the New Deal, Iraq, Viet Nam and Korean wars — COMBINED.
206 years versus 12 months. Total cost: ~$15 trillion and counting."

The World Bank raised its forecast for China's economic growth this year to 7.2%.

According to the NY Times, a substantial majority of Americans say
President Obama has not developed a strategy to deal with the budget deficit, according to the latest New York Times/CBS News poll, which also found that support for his plans to overhaul health care, rescue the auto industry and close the prison at Guantánamo Bay, Cuba, falls well below his job approval ratings. A distinct gulf exists between Mr. Obama’s overall standing and how some of his key initiatives are viewed, with fewer than half of Americans saying they approve of how he has handled health care and the effort to save General Motors and Chrysler. A majority of people said his policies have had either no effect yet on improving the economy or had made it worse, underscoring how his political strength still rests on faith in his leadership rather than concrete results. 56 percent of Americans give Obama a thumbs-up on his performance as president, down from 61 percent percent in April. The proportion expressing disapproval rose to 34 percent from 30 percent.

Four million Americans would fall below the federal poverty line if the interest they pay on their credit cards and other consumer debt were subtracted from their incomes, say two economics professors who call these people the "debt poor."

Real estate experts said sales are collapsing because appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay.

Washington State University will cut 359 jobs and eliminate three academic programs to deal with severe budget cuts imposed by the state, school President Elson Floyd said today.

Continuing jobless claims fell by 148,000 to 6.68 million during the week ending June 6, the Labor Department reported Thursday. It was the lowest since May 9. Initial claims, meanwhile, rose by 3,000 to 608,000. The four-week average of continuing claims rose by 2,250 to 6.75 million. The insured unemployment rate -- the proportion of insured workers who are collecting benefits -- fell to 5.0%, down 0.1 percentage point. Forty-five states and territories reported an increase in new claims for the week ended June 6, while eight had a decrease.

The amount of natural gas available for production in the United States has soared 58% in the past four years, driven by a drilling boom and the discovery of huge new gas fields in Texas, Louisiana and Pennsylvania, a new study says.
The report, due to be released Thursday by the nonprofit Potential Gas Committee, concludes the U.S. has more than 2,000 trillion cubic feet of natural gas still in the ground, or nearly a century's worth of production at current rates. That's a 35.4% jump over the committee's last estimate, in 2007, of 1,532 trillion cubic feet, the biggest increase in the committee's 44-year history.

According to the BLS, real average weekly earnings fell by 0.3 percent from April to May 2009. As weekly hours drop and gas at the pump rises, it is difficult to envision the standard of living stabilizing.

"The economy seems to be out of intensive care,"
says David Shulman, senior economist at UCLA Anderson School of Management. "The freefall stage in dropping output and employment seems to be over, but the economy is still sick."

James Picerno: "In short, interpreting the economic outlook promises to be quite difficult going forward, much more so than usual. Beware: The risk of false dawns is rising."

May imports are down 18% at the Port of Los Angeles.

Chris Puplava: "The Cass Corporate Freight Shipments Index, which is based on transportation dollars and shipments of 1500 of Cass Information Systems clients, has failed to confirm the rebound in the Dow Transports. A similar occurrence was seen in the 2001 rally that saw the Transports stage an impressive rally while the Cass Freight Shipments Index continued to head south. It was only when the Cass Index bottomed that the Dow Transports put in their final bottom in early 2003. While the Dow Transports have rallied meaningfully off the March lows, the Cass Freight Shipments Index has merely stabilized and does not support the rally in the Transports."

Winnebago Industries Inc. swung to a wider-than-expected fiscal third-quarter loss on a continued decline in motor-home deliveries and production.

Exelon Corp. said Thursday it's cutting 500 jobs as it faces "economic challenges confronting all parts" of its business as part of a plan to save $350 million. The Chicago-based power generator expects to carry out most of the job cuts by Aug. 31.

Long-term mutual funds saw net inflows for the 13th week in a row as the pace into stock funds increased from the previous three weeks, according to figures released Wednesday from the Investment Company Institute.
Total estimated inflows were $12.48 billion in the week ended June 10, bringing the total inflows for the past 13 weeks to almost $140 billion.

Willie Walsh, chief executive of
British Airways, warned on Wednesday night that the worst of the recession was “still ahead” for the global airline industry, in a bleak assessment that chimed with the grim mood at this week’s Paris air show.

John Browne: "The U.S. dollar is clearly coasting on its legacy. The Obama Administration's actions have eroded confidence to the point that the rapidly developing BRIC membership has risked its own substantial stake in dollar investments to publicly call for an alternative. These comments are the tip of the iceberg. Behind the scenes, we can bet that creditor states are preparing for flight. Though the dollar's slide has been stayed by pronouncements of confidence from Russia, Japan, China, and others, there will come a time when the pain is too great and the outcome too certain. Private investors who haven't already left the collapsing dollar ballroom may be crushed when the big players stampede for the door."

Apple, which will launch its new iphone 3G S handset in eight countries on Friday, is expected to sell half a million of the devices before the weekend is over and sales of the $99 iphone 3G model are tallied into the mix.

Employers who offer health insurance coverage could see a 9 percent cost increase next year, and their workers may face an even bigger hit, according to a report from consulting firm PricewaterhouseCoopers.
Costs will rise in part because workers worried about losing their jobs are using their health care more while they still have it, the firm said in the report released to The Associated Press. The report also said rising unemployment is driving up medical costs.

Aaron Task: "The U.S. economy is not bottoming, let alone recovering," says Charles Biderman, CEO of TrimTabs Investment Research.
Biderman takes a very different view on the "green shoots" than Schwab's Liz Ann Sonders, who
believes the recession has already ended.
In taking the opposing view, Biderman cited the following: Income tax withholdings are down 5.1% on a year-over-year basis, based on the Treasury's daily reports. "That's an amazingly large decline in income," he says, and a much worse than the 2% drop ahead of the 2001 recession.
That decline in income suggests the personal savings rate is not improving nearly as much as the Bureau of Economic Analysis says, because their analysis is based on lagging data.
More importantly, Biderman says falling incomes are going to make it very hard for Americans to make the $1 trillion in consumer debt service payments that are due annually. As a result, Biderman believes foreclosures are going to pick up again after the recent lull, with Alt-A and jumbo loans being the next problem areas. In addition, credit card default rates will rise sharply from their already elevated levels, he predicts, noting default rates at Bank of America increased to 12.5% in May vs. 10.5% in April."

The Philly Fed index improved to negative 2.2 in June from negative 22.6 in May. The employment index remained far below zero.

The U.S. recession is "losing steam" and a slow recovery should begin by the end of the year, the Conference Board said Thursday as it announced that the index of leading economic indicators rose 1.2% in May, the second straight increase. The coincident index fell 0.2% in May, "but the declines are less intense," said Ken Goldstein, an economist for the organization. The index tracks payrolls, incomes, sales and production.

Japan, Asia’s biggest wheat importer, bought 127,000 metric tons of milling wheat from the U.S. and Canada at a tender today, the largest purchase in seven weeks.
The volume purchased is for August shipment and the biggest since April 30, when the country bought 148,000 tons, the
Ministry of Agriculture, Forestry and Fisheries said today.

U.S. natural gas inventories up 114 bcf last week. At 2,557 billion cubic feet, stocks were 622 billion cubic feet higher than last year at this time and 472 billion cubic feet above the five-year average.

Ten-year note yields rose 12 basis points to 3.81%. The difference in yield between 2- and 10-year notes widened to 2.56 percentage points, the most in over a week. The Treasury Department said Thursday it plans to sell $104 billion in short- and medium-term debt next week. It will auction $40 billion 2-year notes on Tuesday and $37 billion in 5-year notes the following day. Finally, $27 billion in 7-year notes will end the note auctions on Thursday. The amounts of 5- and 7-year debt are more than expected by Wrightson ICAP, a research firm specializing in government debt. The dollar index slipped to 80.16.

Slovakia's export to China reached some euro420 million last year, while the country imported Chinese products worth euro2.4 billion. The Chinese president arrived Thursday in the Slovak capital for a two-day official visit meant to boost economic ties.
& amp; amp; amp; amp; amp; amp; amp; amp; amp; lt;

Rob Hanna: "Also notable about Wednesday’s action was that while the market has declined for at least 3 days in a row, the rate of decline has lessened both of the last 2 days. Back in September I found this pattern to have bullish consequences when the market was trading below its 200-day moving average. I decided to test it out when above the 200ma as well. I found that prior to 1987 there was no bullish influence based on the pattern. Since 1987 one has appeared."

SeekingAlpha: Mark Spitznagel, the hedge fund manager who made billions betting on 2008's 'black swan' market crash: "People have been very quick to think that the low is in. They've lost all perspective on what a bear market can look like and how long it can last."

Sales of foreclosures in the Bay Area continued at a brisk pace and accounted for 42.1 percent of area homes resold in May, compared with 27.7 percent a year earlier and a peak of 52.0 percent in February.
Government-insured mortgages are helping clear the region's inventory of foreclosures and low-priced housing. Federal Housing Administration loans accounted for 24.5 percent of home purchase loans in the area last month, compared with a record 26.0 percent in April and 7.3 percent a year earlier.

At a June 10 meeting, the Brazilian Central Bank cut its reference Selic interest rate by a full percentage point to 9.25% annually, its lowest level ever. The reductions began at the beginning of the year, when Selic stood at a towering 13.75%.
But in minutes from last week's meeting, released earlier Thursday, the bank hinted that an end to the easing is drawing near.

The Dow Jones Industrial Average added 58.42 points, or 0.7%, to 8,555.6. The S&P 500 Index rose 7.66 points, or 0.8%, to 918.37, while the Nasdaq Composite fell fractionally to 1,807.7.

Research In Motion's revenue for the first quarter of fiscal 2010 was $3.42 billion, comparable with $3.46 billion in the previous quarter and up 53% from $2.24 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 81% for devices, 13% for service, 2% for software and 4% for other revenue. During the quarter, RIM shipped approximately 7.8 million devices.
Approximately 3.8 million net new BlackBerry® subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 28.5 million.
GAAP net income for the quarter was $643.0 million, or $1.12 per share diluted, compared with net income of $518.3 million, or $0.90 per share diluted, in the prior quarter and net income of $482.5 million, or $0.84 per share diluted, in the same quarter last year. Adjusted net income for the first quarter was $564.4 million, or $0.98 per share diluted. Adjusted net income excludes the impact of certain unusual items that were recognized in the quarter, including a charge to selling, marketing and administration expense of $96.4 million relating to the payment of certain employee tax liabilities relating to certain exercised stock options and the foreign exchange impact relating to the previously disclosed enactment of the functional currency tax rules in Canada that became effective in the first quarter of fiscal 2010. In addition, there was a benefit to RIM's income tax provision of $175.1 million primarily as a result of the enactment of the functional currency tax rules.

Treasury urged banks to "remain vigilant regarding attempts by North Korean customers to make large cash deposits into new or existing accounts" and to be on the lookout for counterfeit currency. The United States has long accused North Korea of counterfeiting U.S. currency.
The United States is worried that, as it targets North Korean financial operations, the North will start using cash, including counterfeit U.S. $100 bills, to avoid sanctions.

Wednesday, June 17, 2009

Fraud And A Sham

6/17/09 Fraud And A Sham

FedEx: Not enough visibility for full-year outlook. The CEO sees estremely difficult
environment persisiting into late 2009. FedEx sees earnings of 30 cents to 45 cents a share in the first quarter, compared to $1.23 a year ago.

The 16-nation euro zone ran a 2.7 billion euro ($3.8 billion) trade surplus with the rest of the world in April, up from a 2.2 billion surplus in the same month last year and a 1.8 billion euro surplus in March, the statistics agency Eurostat reported Wednesday.

The British unemployment rate in the three months ending in April rose to 7.2%, up from 6.5% in the three months to January, the Office for National Statistics reported Wednesday.

The Bank of Japan said Wednesday that in the coming months, Japan's economy is "likely to show clearer evidence of leveling out over time," according to the central bank's June report of Recent Economic and Financial Developments.

Prices for agricultural commodities are likely to remain higher than over the past decade due to the biofuel industry's growing use of feedstock and renewed food demand in developing nations, an OECD report said Wednesday.

Watson Pharmaceuticals says it is buying generic drug maker Arrow Group for $1.75 billion in cash and stock. Watson expects the deal to close later this year, and add to its profit in 2010. It says privately held Arrow is one of the fastest growing generic drug companies, with $647 million in sales in 2008. Watson reported $2.54 billion in revenue last year.
The deal includes $1.05 billion in cash with the rest in common and preferred stock. The boards of both companies approved the deal.

The U.S. Current Account Deficit fell to $101.5B in Q1 from $154.9B in Q4 (revised), the smallest deficit since Q4 2001. Goods exports decreased to $249.4 from $290.6B, while imports decreased to $373.4B from $469.4B.

U.S. consumer price index fell 1.3% in the past year, the sharpest decline since April 1950, the Labor Department reported Wednesday. In a monthly basis, however, the CPI increased a seasonally adjusted 0.1% in May, rising for the first month in three. Energy was down 27.3% unadjusted from a year ago. On the Comex division of the New York Mercantile Exchange, August gold fell $1.70, or 0.2%, to $930.50 an ounce.

Gov. Arnold Schwarzenegger sidestepped the constitutionality of California's ban on same-sex marriage in a legal filing Tuesday but said a suit by two couples challenging the November ballot measure is worthy of federal court review. He urged Chief U.S. District Judge Vaughn Walker to decide the case quickly. Walker has scheduled a hearing July 2.

According to Bloomberg, Moody’s Investors Service may cut its ratings on banks’ subordinated capital, including so-called hybrid bonds, if it goes through with plans to change the way it rates the securities.
Moody’s wants to abandon its assumption that bank capital securities will benefit from government support, it said in a report today. When rescuing banks in the credit crunch, authorities have shown they’re less willing to bail out investors in junior debt and preferred stock than senior creditors, the New York-based ratings company said.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended June 12 decreased 15.8 percent to 514.4, the lowest since the week ended Nov. 21, 2008.

IBD: "A report by Deloitte Touche last week said that about $500 billion of the $787 billion in stimulus will be spent through the "traditional (government) procurement network." Using past performance as a gauge, Deloitte Touche predicted as much as $50 billion will end up being fraudulently spent — or 10% of the total.
Similarly, the head of the Recovery Act Accountability and Transparency Board estimates $55 billion in waste, fraud and abuse.
We're not surprised. The whole stimulus program has been a fraud from the start, promising millions of jobs and delivering few, and playing on Americans' fears to get the stimulus passed right away, because we simply couldn't wait. So far, only 6% of the total has been spent. The "emergency" was a sham."

Google boosted its share of the core U.S. search market in May to 65%, up from 64.2% in April, and 61.8% a year ago, according to new data from ComScore, as reported in a research report from Thomas Weisel analyst Christa Quarles. The company’s chief rivals headed in the opposite direction.
Yahoo had 20.1% share in May, down from 20.4% in April, and 20.6% a year ago.
Microsoft had 8% of the U.S. search market for the month, down from 8.2% in April and 8.5% a year ago.
Microsoft Corp.'s new Bing search engine continued to gain market share in its second week of availability, said data tracker comScore Inc.
Microsoft continued to gain in two measures of the U.S. Internet-search market share. Microsoft's share of search results pages -- a measure of the intensity of search activity by online users -- rose to 12.1% between June 8 and June 12, from 11.3% a week earlier and 9.1% in the week before Bing's launch.
Microsoft also reached more searchers on the Internet during the second week of Bing, seeing its share of search penetration rise to 16.7% last week from 15.5% a week earlier, according to comScore.

Brad Setser: "A weaker dollar helps to limit the spillover of the US stimulus into external demand – and pushes other countries to rely less on exports for growth. It thus pushes them to do more to stimulate domestic demand (as in say Japan). And by lowering the US trade deficit, it reduces the amount of financing the US needs to attract from the erst of the world.
A declining dollar, though, forces a host of emerging economies are to decide how much to intervene to try to limit their currencies’ appreciation. And in some cases, they have to decide whether or not it makes sense to (still) peg to the dollar. "

The cost to protect U.S. corporate bonds from default rose the most since March as tumbling U.S. wholesale prices and industrial output further undercut optimism after a three-month rally in the riskiest assets.

Aluminum inventories monitored by the London Metal Exchange will jump 16% by the end of the year as producers resume output from idled smelters, said David Wilson, the director of metals research at Societe Generale. Stockpiles tallied by the LME will reach 5 million metric tons by the end of 2009, Wilson forecast. Warehouse supplies reached a record 4.32 million tons and are up 86% this year, LME data show.

President Barack Obama’s definition of “transparency” apparently doesn’t include revealing the names of business representatives and other individuals who visit the White House. Despite his pledge to make government more open to the public, the Obama administration has decided to continue a court battle that first began during the presidency of George W. Bush to keep White House visitor logs secret.

The government has already lost two rulings by a federal judge in the case involving White House visitor records during the Bush years. That case was still pending when Obama took office, and his Justice Department has been instructed to continue the fight started by Republicans. The Obama administration is arguing that the White House visitor logs are presidential records, and thus not subject to Freedom of Information Act requests.
Both MSNBC and the Citizens for Responsibility and Ethics in Washington (CREW) have separately sought access to the visitor logs. The cable news network is seeking a complete list of all visitors since Obama took office on January 20, while CREW wants just the names of executives of coal mining companies. On Tuesday, CREW filed a lawsuit to force the administration to release the names.
CREW's lawsuit is before U.S. District Judge Emmet Sullivan, a Clinton-era appointee.
The government's refusal to release the records contrasts with President Barack Obama's pledge of transparency.
The Secret Service also turned aside a request by for the names of all White House visitors since Jan. 20.
In a letter, the Homeland Security Department told CREW that most of the records the group seeks are not agency records subject to disclosure under the Freedom of Information Act. Instead, DHS said the records are governed by the Presidential Records Act and not subject to disclosure under the FOIA.
A White House official said the issue of the visitor logs is one of several secrecy policies under review by the White House legal counsels, along with the "state secrets privilege" under which the government keeps information secret during trials. Basically, the noted commitment to transparency is pure bullshit. Either the Freedon of Information Act is valid or all the speeches aren't worth their hot air.
A week and a half before Obama took office, U.S. District Judge Royce Lamberth brushed aside the Bush administration's argument that revealing Secret Service logs would impede the president's ability to perform his constitutional duties. The court said that the likelihood of harm is not great enough to justify curtailing the public disclosure goals of the FOIA.

Embattled German retailer Arcandor AG on Wednesday placed 15 additional subsidiaries under bankruptcy protection along with its Karstadt department stores and the Quelle GmbH mail-order company.

Shares of Beazer Homes USA Inc. were down 10% in early trading Wednesday after Standard & Poor's downgraded the home builder's credit rating. S&P in a press release after Tuesday's closing bell said the downgrade was driven by a "large second-quarter net loss that further eroded shareholder equity, raised the company's already-high leverage ratios and increased covenant pressures."

Norway's central bank on Wednesday cut its key lending rate by a quarter of a percentage point to 1.25%.

Standard & Poor’s reduced its credit ratings or cut its outlook on 22 U.S. banks, including Wells Fargo & Co., PNC Financial Services Group and KeyCorp, citing tighter regulation and increased market volatility.

PT Timah, the world’s second-largest tin producer, may sell more this year than previously estimated if prices and demand continue to recover, executives from the Indonesian company said.
“If prices rise to about $18,000 to $20,000, we can enter the spot market to add to contractual sales; that can boost sales to 50,000 tons,” Corporate Secretary Abrun Abubakar said today in Jakarta. To be sure, “we still target sales volume of 45,000 tons to 47,000 tons this year,” Abrun told reporters.

Exports from the 16 nations that use the euro dropped by more than a fifth in the first three months of the year as global demand for European machinery and cars waned, the EU statistics agency Eurostat said Wednesday.
Euro-zone exports shrank 21 percent to euro303 billion in the January to March period from euro385 billion a year earlier, it said.

Abercrombie & Fitch is closing its 29 Ruehl-branded stores and related direct-to-consumer operations. The company anticipates the closure will be substantially complete by the end of the current fiscal year.

The EIA reported Wednesday that crude supplies decreased by 3.9 million barrels during the week ended June 12 to stand at 357.7 million barrels.The EIA also reported that gasoline inventories rose by 3.4 million barrels last week, while analysts polled by Platts had expected a rise of only 650,000 barrels. The EIA also said that distillate inventories rose by 0.3 million barrels last week.

North Korea warns the U.S. of a "thousand-fold" military strike if provoked.

Retail gas prices climbed for the 50th straight day Wednesday, the longest streak in records dating to 1996, even as benchmark crude fell for the fourth day in a row.

Faced with plummeting demand, French tiremaker Michelin announced a plan Wednesday to cut 1,093 jobs over a three year period, starting in 2010.
The company said the cuts will be made on the basis of voluntary departures and that no workers will be laid off.

"The pricing of the warrants held by Treasury ... will be critical to ensuring an appropriate return on investment for the government and, consequently, American taxpayers," the two chief watchdogs of the financial rescue wrote this week in a letter obtained by Reuters.
A financial industry source said banks' negotiations with Treasury over the value of the warrants are "calm" but said "the price ranges are all over the place.
Banks want to pay less to tear up the warrants than Treasury says they're worth. But until banks have bought back the warrants, the banks will remain tied to the federal program. Several banks said they had told Treasury they wished to buy the warrants, officially starting the negotiation process.

Brett Steenbarger: "Two of the sectors that failed to make highs along with the major indexes in June are now trading below their May highs: banks and homebuilders. It is difficult to imagine a sustained, vigorous bull market when the financial system and housing are not inspiring investor confidence."

The leaders of Russia and China agreed to expand use of the ruble and yuan in bilateral trade to lessen dependence on the U.S. dollar a day after they took part in the first summit of the so-called BRIC countries.
“We agreed to take further steps in this direction, including, perhaps, by adjusting contracts and laws that already exist,” Russian President Dmitry Medvedev told reporters in the Kremlin today after talks with his Chinese counterpart Hu Jintao.
Russia, the world’s biggest energy supplier, wants to start selling oil to China in rubles, said Deputy Prime Minister Igor Sechin, who is also chairman of OAO Rosneft, Russia’s biggest oil company. Energy sales in rubles are a “strategic” issue for Russia, he said, adding that oil exports to China over the next 20 years will surpass $100 billion.

Eddie Bauer Holdings Inc. filed for Chapter 11 bankruptcy protection.

Iran has accused the United States of "intolerable" meddling in its internal affairs, alleging for the first time that Washington has fueled a bitter post-election dispute.
A state television channel in Iran says the government summoned the Swiss ambassador, who represents U.S. interests in Iran, to complain about American interference. The two countries broke off diplomatic relations after the 1979 Islamic Revolution. An English-language state-run channel quoted the government as calling Western interference "intolerable."

July oil ends up 56 cents at $71.03 a barrel. Natural gas rose 12 cents to end at $4.25. Gold rose $5.50 to end at $937.

Standard & Poor's Ratings Service said Wednesday it is unlikely to change its AAA credit rating for the United States in the "near term."

Tuesday, June 16, 2009

Capacity Utilization

6/16/09 Capacity Utilization

U.S. industrial output tumbled 1.1% in May, led by big drops in motor vehicles, mining and high-technology products, the Federal Reserve reported Tuesday. The decrease was a bit worse than forecasts of a 1% drop, particularly after April's output was revised lower to a decrease of 0.7% from 0.5% reported earlier. Output is down 13.4% in the past year, the largest year-over-year decline since 1946. Output has fallen in 16 of the past 17 months since the recession began in December 2007. Since that month, industrial output is down 14.8%. Capacity utilization in industry fell to a record-low 68.3%. In manufacturing alone, capacity utilization fell to a record-low 65%.
If there are green shoots, then they are the result of ingesting LSD.

Edward Harrison: "When one looks at statistics like industrial production, this downturn is looking as bad as the Great Depression."

Nouriel Roubini, president of RGE Monitor, said a recovery in risk assets like stocks and emerging markets would not last, since it had been based on unrealistic expectations for a global economic rebound.

"I see subpar, anemic, below-trend growth for the next couple of years," Roubini said on a panel sponsored by Time Warner.

Housing expert and MIT Professor Robert Shiller was equally pessimistic, saying, with regards to the four-year housing downturn: "This thing is not over yet."

Banking analyst Meredith Whitney said she was even more bearish than her fellow panelists, saying that better bank earnings would eventually be challenged by the toxic assets on their balance sheets.

China will extend a $10bn (£6bn) loan to Russia and four Central Asian states to help them in the financial crisis, Chinese President Hu Jintao has said.

Medvedev calls for use of national currencies in trade.
Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar as their leaders meet today for a summit in Russia’s Ural Mountains.
The leaders of the so-called BRIC countries will discuss measures to promote regional currencies, including “possibly placing part of reserves in the financial instruments of partner countries,” when they meet in Yekaterinburg, Arkady Dvorkovich, Russian President Dmitry Medvedev’s top economic adviser, told reporters.
The BRIC countries have combined reserves of $2.8 trillion and are among the biggest holders of U.S. Treasuries. The first BRIC summit comes after Brazil, China and Russia announced plans to shift some foreign reserves into International Monetary Fund bonds, driving Treasuries and the dollar lower.
The Russian leader reiterated his intention to push for the creation of a “supranational currency” to challenge the dollar and encouraged China and called on other Shanghai group members to use each other’s currencies for trade.
“There can be no successful global currency system if the financial instruments that are used are denominated in only one currency,” Medvedev said. “Today this is the case and the currency is the dollar.”

The dollar index stood at 80.387. Ahead of the data, it stood at 80.498. Producer prices rose 0.2% in May, while the core rate, which excludes food and energy prices, fell 0.1%.
The core producer price index has gained 3% over the past year.

U.S. housing starts in May rose 17.2% to a seasonally adjusted annual rate of 532,000 after plunging 12.9% in April to a postwar low, the Commerce Department estimated Tuesday. The increase was led by a 62% gain in new construction of multifamily dwellings. Starts of single-family homes rose 7.5% to a 401,000 rate, the highest since November. Building permits rose 4% in May to a seasonally adjusted annual rate of 518,000. Permits for single-family homes rose 7.9% to a 408,000 annual rate, the highest since November.
Starts are down 45.2% from last year's 971,000.

Best Buy Co. Inc. says its first-quarter profit fell 15 percent as same-store sales declined 6 percent amid the recession. The stronger dollar also hurt overseas results.
The nation's biggest consumer electronics retailer still beat earnings estimates.

Crude oil for July delivery rose $1.83, or 2.6%, to $72.45 a barrel in electronic trading on Globex.
Gold rose for the first time in three sessions in New York as the dollar weakened before a report that may show U.S. industrial output fell last month.
Gold futures for August delivery climbed $11.50, or 1.2 percent, to $939 an ounce at 8:28 a.m. on the New York Mercantile Exchange’s Comex unit.

Ten-year note yields rose 7 basis points to 2.79%.

The Bank of Japan raised its assessment of economic conditions Tuesday for a second time this year, acknowledging that economic conditions have "begun to stop worsening."

General Motors announced Tuesday that it had reached a tentative agreement to sell its Swedish unit, Saab Automobile, to a consortium led by the sports car maker Koenigsegg Automotive.

Rob Hanna: "Yesterday’s drop moved the S&P 500 from a 10-day closing high to a 10-day closing low. Since 1960 there have been only 10 other times this has happened. Results suggest more downside, especially over the next 2-4 days."

Gazprom, the world's biggest gas producer, may delay the launch of a major field because it expects gas demand in Russia and Europe to be depressed through 2012, an executive said on Tuesday.

Nucor Corp. expects a second-quarter loss of 55 cents to 65 cents a share. By comparison, Nucor reported a loss of 60 cents a share in the first quarter of 2009 and earned $1.94 per share in the second quarter of 2008. The steel maker's chief executive Dan DiMicco said, "Order entry has improved in recent weeks. Nevertheless, the economic outlook remains very uncertain in light of the continuing severe structural challenges facing the U.S. and global economies."

Martin Hutchinson: "Now a small house, Amherst Holdings, has beaten the Wall Street titans at their own horrid game, according to the Wall Street Journal. It found a pool of $29 million of particularly repulsive California subprime mortgages, then sold $130 million notional of CDS on them, pocketing around $100 million in premiums, since this waste was so toxic the big houses were prepared to pay up to 80% to insure against it. Clear so far? It sold insurance for 4½ times the maximum possible loss, but hey, that's finance.
Then it quietly went round and paid all the debts of the lucky homeowners owing the $29 million. At that point, since there were no defaults, it was able to keep the $100 million in premiums (net of the loan repayments, a $70 million profit). Simple, really! Wall Streeters are furious and, inevitably, suing, but in fact Amherst's coup was a perfectly legitimate use of this corrupt and foolish structure, far more so than many of the shenanigans undertaken by the likes of Goldman Sachs – after all, Amherst's operation PREVENTED a number of defaults and foreclosures....There will be another crash of course, there always is. But before it happens, some very unpleasant people will have made further speculative billions – and doomed the U.S. economy to a decade of stagflation."

About a third of the world's people now live in areas of water stress, said Brooke Barton, manager of corporate accountability for Ceres, a network of environmental groups and investors seeking to address sustainability challenges. By 2025, she said it will be more like two-thirds.

Global demand is down by more than 3 million barrels a day in the current quarter, while spare capacity tops 6 million barrels a day, according to the IEA.

Randall W. Forsyth: "The bottom line is that foreign investors have reduced their holdings of agency debt and mortgage-backed securities by $147.9 billion in the past 12 months. The heaviest selling came in the wake of setting up the federal backstop for Fannie and Freddie last July and in the fourth quarter during worst of the flight from risk.

At the same time, even as foreign investors were selling off T-bills, U.S. banks' net liabilities showed a marked change. In the latest 12 months, their net liabilities were down just $7.9 billion versus minus $353.4 billion in the year-earlier period. Foreigners have been scrambling to repay their dollar borrowings; the resulting demand for dollars has been a major support for the U.S. currency during the crisis.

Meanwhile, Americans were actively buying foreign bonds and stocks to the tune of $23 billion in the latest month. So, U.S. investors have been pouring money into high-return investments abroad while foreign investors have largely been buying T-bills yielding virtually nothing.

As the Russian comic Yakov Smirnoff would say, What a country!"

Irwin Kellner: "The Federal Reserve is creating dollars at a rapid pace to help jump-start the economy. Liquid money is up 11% over the past year, the monetary base has increased by 110%, while bank reserves are a thumping 903% larger than they were a year ago.
With this much money being created, the dollar has only one way to go -- down. It's nothing more mysterious than supply and demand."

RGE Monitor: "In sum, the dollar's future as the world's dominant reserve currency looks bleak. Reserve accumulation looks unlikely to resume on an aggregate EM basis in 2009 (Merrill Lynch). In the longer-term, the dollar's strength will largely lie in how the US will be able to unwind both previous spending commitments and current crisis-induced bailouts without having to resort to inflation (Merrill Lynch). Euro could overtake dollar as early as 2015."

California has implemented a new foreclosure moratorium to goad banks into modifying mortgages for struggling homeowners.

The state budget crisis will pour salt in California's economic wounds and help push the statewide unemployment rate to 12.1 percent by the end of 2010, according to a bleak forecast issued today. "California's state government, saddled with anachronistic revenue and spending processes, has no choice but to contract at the worst possible time," wrote UCLA Anderson economist Jerry Nickelsburg.

At the close of trading Tuesday, the S&P 500 had lost 12 points, or 1.3%, to nearly 912 and the Dow Jones Industrial Average sank 107 points, or 1.3%, to almost 8,505. The Nasdaq Composite slid 20 points, or 1.1%, to 1,796. Healthcare was the only sector to gain on the S&P 500.

The U.S. economy may have bounced off the bottom, but that is not the same as a robust recovery, said Fedearl Reserve Gov. Kevin Warsh in a speech to international bankers in New York on Tuesday. Warsh said he expects business and consumer spending to remain weak for several quarters, and unemployment to remain high. In the longer run, Warsh said he feared that an emphasis on economic stability could harm the economy's capacity to grow faster. "A larger risk is that changes in public policies may, in the pursuit of stability, hold down the growth of the U.S. economy," he said.

Monday, June 15, 2009

Foreign Capital Outflow

6/15/09 Foreign Capital Outflow

U.S. net international capital flows dropped to negative $58.4 billion in April, the Treasury Department reported Monday. Foreign central banks bought $5.2 billion in U.S. assets on net, while the foreign private sector sold $58.4 billion. China reduced its holdings of U.S. Treasurys by $4.4 billion to $763.5 billion. Japan reduced its holdings by $800 million to $685.0 billion, while holdings in the Caribbean banking centers fell by $8.9 billion to $204.7 billion.

James Picerno: "It wouldn't surprise us if, late this year, NBER looks back and declares that the recession ended midway in 2009, or thereabouts. But while the technical finale to this nightmare is certainly welcome, what worries us is what comes after. This time, there's more reason to wonder than usual. Yes, the end may be near, but the beginning is still further away than it appears."

World leaders need to be cautious in attempting to roll back economic stimulus measures because the worst of the global recession isn't over, International Monetary Fund Managing Director Dominique Strauss-Kahn said Monday in Kazakhstan, according to Reuters.

The US Postal System lost nearly $2 billion in its last fiscal year and is faced with cuts of up to 3,100 offices potentially eliminating thousand of jobs. Media reports say that first class mail volumes are plunging.

John Hussman: "Presently, the price-to-book ratio on the S&P 500 is about 1.9. If you think about the 1974 and 1982 lows, we observed price/book ratios at about 0.8, while price-to-normalized earnings multiples were at about 7. So the S&P 500 would have to drop by about 60% to match the best valuations that we've seen during the past 40 years. Investors shouldn't kid themselves that stocks are cheap – in the sense of being priced to deliver outstanding long-term returns – just because we've observed a wicked decline. We're not even close....At this point, however, stocks are priced to require an economic recovery. That is a difficult bet, in my view, because as I noted last week, economic expansions are emphatically not driven by a “consumer recovery.” They are invariably driven by swings in gross domestic investment – capital spending, autos, housing, factories, and other outlays that are heavily reliant on debt financing. That's why housing starts have such a strong correlation with GDP growth.

It is a very hard sell to expect a sustained recovery in debt-financed gross investment in an economy under strong deleveraging pressure. That's particularly true since the U.S. itself has not financed a penny of the growth in U.S. gross domestic investment in more than a decade – all of the growth has been financed by foreign capital inflows via a massive current account deficit. With government spending now drawing on those foreign savings to defend bank bondholders from losses, and a continuing need to shrink the current account deficit in the years ahead, gross domestic investment is likely to continue to be squeezed. We are in the midst of – and will continue to require – perhaps the largest adjustment in U.S. personal, corporate and government balance sheets that we will see in our lifetimes. This will be a very long slog. The outlook is not up, but very widely sideways. "

Europe’s economy lost a record 1.22 million jobs in the first quarter as companies cut spending to survive the worst global economic slump in more than six decades.

Natural gas producers have been idling rigs for six months, trying to reduce output and boost prices that fell sharply amid bloated inventories and recession-shrunken demand.

That sweet spot remains elusive, despite a 56 percent reduction in the number of rigs drilling for natural gas, to 700 from the September peak of more than 1,600.

“It’s a self-correcting mechanism,” said David Pursell, an analyst with Tudor, Pickering, Holt & Co. Securities in Houston. “Prices go low, the rig count follows, and voila, production falls and the market fixes itself.” The Energy Information Administration doesn’t expect natural gas prices to mimic crude’s recent uptick. Instead, the agency projects that natural gas prices will average $4.13 per million Btu this year and creep up to an average of $5.49 in 2010.Natural gas for July delivery closed at $3.86 per million Btu Friday on the New York Mercantile Exchange.

Port of Long Beach figures show May inbound cargo was down 22.8% YoY and outbound cargo was down 26.7%.

George Ure: " How is it that in an admittedly small sample (of more than a dozen people) I've heard reports about, NO ONE is getting the same serial number precious metal bars shown on their warehouse receipts when they go to take delivery! Why aren't bar numbers matching up? Little accounting problem going on, or something else?"

The New York Fed's "Empire State" general business conditions index fell to minus 9.41 in June from minus 4.55 in May.

Capital One Financial said in a filing to the Securities and Exchange Commission that its net charge-off in the U.S. were 9.41% at the end of May, up from 8.56% the prior month.

So far this year, Boeing -- which is cutting 10,000 jobs -- has taken orders for 73 planes, but with cancellations of 66, the net order intake is only 7 jets.
Airbus -- which hasn't announced extra job cuts but had already been cutting payroll in a restructuring program launched in 2007 -- has booked fewer orders at 32, but with fewer cancellations has a better net balance of 11 jets.
Still both plane makers are cushioned by order backlogs of around 3,500 planes.

Bloomberg reported John Yoo, a ex-Justice Department attorney who wrote memos justifying harsh interrogations of terrorism detainees, lost his bid to dismiss a lawsuit blaming him for alleged violations of a detainee’s rights.
Jose Padilla, convicted last year of supporting terrorists and conspiring to commit murder, was detained for three years as an enemy combatant in the U.S., where he claims he was subjected to physical abuse.
He sued Yoo, who wrote in advisory memos for the Bush administration that terrorism suspects weren’t protected by Geneva Convention bans on physical abuse. Padilla claimed Yoo created a system of torture. U.S. District Judge Jeffrey White denied most of Yoo’s motion to dismiss the case, saying even enemy combatants are protected by the U.S. Constitution.

Wal-Mart Stores Inc. was cut to neutral from buy by Goldman Sachs on Monday.

Data Domain said Monday morning that its board of directors is recommending against a $30-per-share, all-cash takeover offer from EMC Corp. In a statement, Data Domain cited the binding terms of its existing merger agreement with NetApp as well as the "conditional nature" of the bid from EMC. Data Domain says terminating its agreement with NetApp, which has also offered $30 per share in a cash-and-stock deal, would force it to pay a $57 termination fee to the latter.

The Federal Reserve should stop buying government debt and instead focus on kick-starting areas of the credit markets having to do with consumers, Steve Forbes, Forbes CEO, told CNBC Monday.

In the first 75 minutes of trading the Dow had dropped 212 points. During this time UNG had already traded over 18 million shares and was up about 4%. An average trading day is 21 million shares. Meanwhile, July crude down $2.13, or 3%, to $69.91 a barrel.

Mark Anthony: "From the energy point of view, 5.3 TCF of natural gas contains the same amount of energy as one barrel of oil, so $4 per TCF is equivalent to $21 per barrel oil. When crude oil price is already at $68, the low price in natural gas is unsustainable as industry energy consumers will try to use more natural gas and less oil.
How to play natural gas? Buying the United States Natural Gas fund (UNG) is the best way."

U.S. home builders grew more pessimistic in June about sales over the medium term, sending their monthly sentiment index down one point to 15, the National Association of Home Builders reported Monday. It was the first decline in the index since January, when it fell to an all-time low of 8. At 15, the index shows that about one in six home builders thinks the market is "good." The index peaked at 72 four years ago and was at 18 a year ago.

The European Central bank estimates that the impact of the global financial crisis on banks is not over yet and that those in the euro zone could face an additional $283 billion in losses by the end of 2010.

Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection on Monday, citing massive debt stemming from its 2007 acquisition by the Lightstone Group and a sharp drop in business travel due to the recession.

U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's lending portfolio, in another sign that consumers remain under severe stress.

With one hour left in the trading session UNG has risen 7% and the volume traded is a whopping 54 million shares. At the end of trading it rose 7% on 64 million shares.
Natural gas rose 31 cents to $4.17. July oil ends down $1.42 at $70.62 a barrel.

The Dow Jones Industrial Average fell 187 points, or 2.1%, to end at 8,612, with 28 of its 30 components ending lower. The S&P 500 index fell 22 points, or 2.4%, to 923, while the Nasdaq Composite lost 42 points, or 2.3%, to end at 1,816.

Sunday, June 14, 2009

The Tide

6/13/09 The Tide

The University of Michigan/Reuters consumer sentiment numbers conclude that expectations fell to 65.4 from 69.4. Consumers are becoming more worried about jobs, energy costs, and the general health of the economy as they look out over the next few months.

Brett Steenbarger: "On a day where we made a closing high in U.S. large caps, we had 796 NYSE, NASDAQ, and ASE stocks make fresh 20-day highs and 427 make new lows. That is the highest level of new lows since May 28th.
In short, we have a rising tide, but it's not lifting all boats. That often occurs when the tide is starting to come in."

Doug Noland: "Global reflation and international markets are – as inflation and market dynamics tend to do - taking on a life of their own. And just as Credit Bubble dynamics overwhelmed Greenspan rate tinkering back in 2004/05, there are now strong countervailing market forces working against the efficacy of Bernanke helicopter money. If global reflation takes hold simultaneous with a weakening dollar, inflation could easily emerge as a major threat here in the U.S. And if global markets begin determining longer-term U.S. Treasury and MBS yields – as opposed to the Bernanke Fed manipulating them artificially low – the U.S. recovery outlook becomes greatly more clouded....It is fundamental to my analysis that the unfolding reflation will be altogether different than previous ones. On a global basis - and contrary to the consensus view - I expect the U.S. economy to under-perform. Already, a scenario is unfolding where reflation hurts the U.S. consumer through higher energy and import costs, rising borrowing costs, and a greater tax burden. And in contrast to more recent inflations, U.S. securities will be anything but the focal point of global reflation dynamics. I expect global markets to increasingly determine U.S. market yields, with resulting higher borrowing costs and less liquidity generally stymieing recovery in our asset markets....The really problematic scenario unfolds when market yields spike higher, the Fed monetizes, dollar selling intensifies, and the world questions our capacity to service our federal and mortgage debts.
An economy can only inflate Credit, devalue its currency, flood the world with its debt obligations – all working to disburse financial and economic power out to the world – until at some point power dynamics reach a tipping point. There is No Conundrum, Again."

Mike Shedlock: "Ben Bernanke and the Fed have lost control of the mortgage market (not that the Fed was ever in control in the first place). They weren't. It was all an illusion.
For now, the stock market is shrugging this off. If rates stay above 5.5% for long, don't expect that to last. And it may not last anyway."

Adam Brochert: "So, when the Gold bugs say that rising bond yields indicate the coming hyperinflation and when the CNBC jag-offs say the rising bond yields are due to a recovery and/or concerns regarding inflation, ask them to explain bond yields between 1931-1932. I am not saying that there won't be a coming inflation - of course there will be, eventually. But the path we have started down is deflationary, not hyperinflationary.
Eventually, all fiat currencies depreciate until they are completely worthless and subsequently abandoned. That's as safe a bet as there is! But the death throes of a fiat currency in extremis are not as easy to game as you might think. A deflationary collapse can precede hyperinflation (or just regular aggressive inflation) and holding Gold is thus the easiest no-brainer investment for the typical retail investor in this environment.
Holders of Gold will do just fine in this deflationary environment. Those who understand Gold know that Gold is money. Gold is a currency. Holding "real" cash in a deflationary depression maintains wealth and enhances it relative to one's neighbors who stay invested in stocks, commodities, corporate bonds and real estate. If you hold onto your physical Gold, you will be able to buy your neighbors' stocks, commodities, corporate bonds and real estate at pennies on the dollar in a few short years."

U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year,
RealtyTrac Inc. said.
A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said today in a statement. One in 398 U.S. households received a filing last month.

Retailers aren’t likely to resume spending on their IT infrastructure again until at least 2010, according to NCR Chairman and CEO William Nuti.

Edward Harrison: "Each of the BRICs has amassed a large level of reserves. Brazil has the least at about $205 billion, just below India’s $251 billion. Russia has almost as much as both of them put together with almost $410 billion. China dwarfs all of them, individually and collectively, with nearly $2 trillion in reserves. Together they account for a third of the world’s currency reserves."

The amusement park company Six Flags is seeking Chapter 11 bankruptcy protection, saying it needs to reorganize and shed $1.8 billion of debt.

Brian Pretti: "As we add up the numbers, about 12 months back the US had national debt of roughly $12 trillion. The current stimulus/bailout spending will add near another $13 trillion to the money printing/debt accumulation hole if enacted fully. Add in maybe $50 trillion in unfunded NPV of SSI and Medicare promises and the US is looking at something like $75 trillion in forward liabilities to be covered over the decades ahead. There are only two ways this will be accomplished as is clear – default or with “cheaper” dollars. And you already know which choice politicians will make, so we can frame our investment decision making with this constantly in mind....But the fiscal issues facing the municipalities are severe. Declining property tax revenues and retail sales tax overrides are meeting up with increased benefit and general obligation costs for these folks. We need to add in the time bomb of pension costs escalating meaningfully at the exact time many a fund is seriously under funded due to financial market losses of the last few years....But as we look ahead, THE big question becomes, are we looking at a multi-decade buyer of US equities that is now set to go into more of a distributory mode as per the character of in place plans? You bet we are. Again, not Armageddon for equities immediately or looking forward by any means, but simply the lessened impact of what has been a meaningful buyer of equities for the last three decades. It’s a generic support to the equity market that will not be as forceful and as important a buyer ahead based solely on the demographics....It's estimated that public funds lost 30% of their value last year, a huge number in the world of actuarial pension accounting. Just huge....can public pension funds afford to shoulder more investment risk ahead now that their net funding status has deteriorated meaningfully? Do they go for broke in the hopes of regaining lost ground? Yes or no? And just what does this mean for what has been their multi-decade support of equity prices specifically?"

North Korea vowed to embark on a uranium enrichment program and "weaponize" all its plutonium, rejecting U.N. sanctions imposed hours earlier.

Nationwide foreclosures won't peak until 2011, according to one prominent economist.
David Crowe, chief economist of the
National Association of Home Builders, made that prediction in a BusinessWeek story about foreclosures spreading to high-end homes.
Crowe told BusinessWeek that foreclosures would not crest before unemployment tops out, which he expects to happen later this year, and upward resets on adjustable-rate mortgages would continue to cost people their homes after that. The story cited a Credit Suisse analysis that resets would peak in mid 2010 and stay high well into 2012.

Mike Burk: "The market got very dull last week. OTC NH continued to move upward (good) while the secondaries were a little weaker than the blue chips (not good).
I expect the major indices to be lower on Friday June 19 than they were on Friday June 12."