Saturday, July 11, 2009


7/11/09 Reserves

Thermopolis, Wyo.-based Bank of Wyoming was closed by regulators Friday, marking the 53rd U.S. bank failure of 2009 as the credit crisis continues to claim victims. It was Wyoming's first bank failure since 1991.

Thomas Jefferson: "And I sincerely believe that banking establishments are more dangerous than standing armies."

Paul Kasriel: "Reserves created by the Fed have increased by a staggering $858 billion in the 12 months ended May. But excess reserves on the books of depository institutions have increased by almost as much, $842 billion. So, in the 12 months ended May, 98% of the increase in reserves created by the Fed has simply ended up as idle reserves on the books of depository institutions."

The Obama administration is working on a plan that would make available funds from the $700 billion banking-system bailout package to millions of small businesses, according to a report late Friday in the online edition of the Washington Post, which cites sources familiar with the matter. The initiative would expand a Small Business Administration lending program called 7(a), which helps companies borrow money from banks at low rates to keep their businesses running. Talks about the plan, which is aimed at reviving the economy by saving jobs, have reached the highest levels of the administration. The plan is being proposed by senior officials at the Treasury Department, according to the report.

Indonesia’s economy may double in the next six years as the world’s biggest exporter of power-station coal and largest producer of palm oil taps surging demand from India and China, CLSA Asia-Pacific Markets said.

Doug Noland: "The global system remains in historic, uncharted, troubled and uncertain waters. But with $2 Trillion of US federal debt issuance on tap this year - perhaps matched by upwards of (a previously unimaginable) $2 Trillion of Chinese bank Credit growth – ongoing “Monetary Disorder” remains the best bet. And, of course, our policymakers are keen to this dynamic, and it would be typical of policymakers in such a predicament to resort to increasingly creative means to try to stabilize a desperately unstable pricing system. Can Washington rein in speculative flows? Can they channel and mobilize them?"

As of Friday morning, the California state controller had mailed 101,930 IOUs covering more than $389 million in payments.

Ron Paul put forward a 2-1/2 page bill that would explicitly repeal a provision of law that prohibits the Government Accountability Office, a government watchdog agency, from auditing monetary policy decisions. He has 250 co-sponsors in the House.

"It's going to take years and years, like five years at least before we see any real growth coming out of this,"Rupert Murdoch said.
"We don't see things improving," added Martin Sorrell, chief executive of WPP Group, one of the world's largest conglomerates of advertising agencies and someone pretty close to knowing the willingness of companies to spend money.

If McDonald's espresso coffee drinks can contain up to 80% milk, how is it that the price of milk has declined to the extent that dairy owners are selling their herds and leaving the business? Something is wrong with this picture.

According to USA Today, in 2009, banks are expected to reap a record $38.5 billion from overdraft fees, nearly twice the $20.5 billion they stand to collect from credit card penalties such as late and over-limit fees.

Nouriel Roubini: " Recession will Last Another Six Months and the Recovery will be Shallow."

Volkswagen AG has increased its offer to take a 49.9 percent stake in troubled sports car maker Porsche to more than euro4 billion ($5.56 billion), according to a media report Saturday.

CIT Group Inc. has hired a premier bankruptcy firm as the troubled commercial lender awaits word on whether it will receive funds from a federal program designed to help banks, the company confirmed Saturday.
The New York-based company has hired Skadden, Arps, Slate, Meagher & Flom LLP, which has a prominent bankruptcy practice. The hiring was first reported in The Wall Street Journal Saturday.

Friday, July 10, 2009


7/10/09 Understated

Mike Shedlock: "The continuing claims number that mainstream media focuses on is 6,883,000. However, that number ignores extended benefits from the
Emergency Unemployment Compensation (EUC) program.
Those on extended benefits are not counted in the continuing claims numbers....As noted in Continuing Claims Soar by 159,000 to New Record the record continuing claims number is dramatically understated by over 2.5 million."

The U.S. food stamp program now has a record enrollment of over 33.8 million people. Food stamps helped one in nine American’s buy groceries in April, says the latest from the Agriculture Department, at an average benefit of $133.28 per person.
April was the fifth month of record enrollment in a row.

Chevron Corp., in its interim quarterly update, said late Thursday it faces "significantly lower" results from its refining and marketing operations in the second-quarter compared with the first quarter. Without providing specific estimates, it also said that while higher oil prices boosted earnings in its exploration and production activities, the gains were "largely offset by substantial unfavorable currency effects."

Japan's domestic corporate goods price index -- the nation's measure of wholesale prices - fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday.

August crude down $1.20 at $59.19 a barrel. August gold falls 0.9% to $907.60 an ounce.

China's exports dropped 21.4% in June from the year-earlier month and its imports declined 13.2%, as the global economic crisis continued to weigh on the nation's trade, the state-run Xinhua news reported Friday.

Global oil demand will rebound 1.7 percent next year, led by rising consumption in emerging economies as the developed world recovers from recession, the International Energy Agency said on Friday.
But the IEA, adviser to 28 industrialized economies, still predicted demand would shrink this year and said the need for OPEC oil would be limited.

247wallst: "Housing website
reports that “the price of nearly one in four U.S. homes for sale on July 1 had been sliced at least once.” The average cut was 10%, but in some cities it was much more.
Detroit, Miami, and Las Vegas are all markets where prices have been chopped by 15%.
The prices of homes in the US is already down an average of more than 20% and in some markets in California, Florida, Michigan, and Nevada that figure is above 40%. Economists have hoped that housing would find a bottom due to price cuts which make buying homes much more affordable.
Mortgage rates are also near historic lows.
But, the new numbers show that the housing correction is probably far from over. A market like Detroit could end up with a price correction of more than 50% if past cuts and current cuts on asking prices are taken into account."

The time it takes to close a home has gone from less than 30 days to upwards of 45, said real estate brokers, who blame more rigid mortgage rules.

Chevron Corp. and its partners may approve next month development of the $39 billion Gorgon liquefied natural gas venture in Western Australia, JPMorgan Chase & Co. said.

One of the Seattle area's most prominent homebuilders has lost most of one new Eastside housing development to foreclosure, and expects to lose another big property.
Most of Conner Homes' upscale, partly built Bentley subdivision in Bothell was sold at auction last month after the company defaulted on a $24.8 million loan, county records indicate.
Another auction has been scheduled in October for 35 acres Conner owns and once planned to develop in North Bend. The builder hasn't made loan payments on that land since at least December, according to a foreclosure notice filed with the county last week.
Conner Homes' predicament "just goes to show that even well-established family-run firms are in distress," said Seattle land-use economist Matthew Gardner.

For the first time in 13 years, the
assessed value of all property in Los Angeles County has declined, according to a report released Thursday by the county assessor's office.
County property rolls lost about $1 billion in value last fiscal year -- losses driven largely by downward reassessments of homes as the housing market has slumped.

Banks are refusing to cash IOUs issued by the state of California after July 10, putting pressure on the Golden State to resolve its budget crisis.

There will be no rebound in car markets in Europe and Japan before 2011, the head of carmakers Renault and Nissan was quoted Friday as saying.

May exports of $123.3 billion and imports of $149.3 billion resulted in a goods and services deficit of $26.0 billion, down from $28.8 billion in April, revised. May exports were $1.9
billon more than April exports of $121.4 billion. May imports were $0.9 billion less than April imports of $150.2 billion. In May, the goods deficit decreased $2.6 billion from
April to $37.3 billion, and the services surplus increased $0.2 billion to $11.4 billion. Exports of goods increased $2.0 billion to $82.1 billion, and imports of goods
decreased $0.5 billion to $119.4 billion. Exports of services decreased $0.1 billion to $41.3 billion, and imports of services decreased $0.4 billion to $29.9 billion.
U.S. demand for imported auto parts was held down in May by production cutbacks and factory shutdowns by Detroit-based General Motors Corp. and Chrysler LLC, based in Auburn Hills, Michigan, two of the nation’s three largest automakers.

”We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system,” said Mr Dai, according to the Chinese foreign ministry.
While he did not name the dollar, Mr Dai was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies.

States faced a cumulative budget gap of $121bn this year, according to the National Conference of State Legislatures, a research group.

Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.
The encounter ending today in L’Aquila, Italy at the annual
Group of Eight summit dramatized the ascendance of emerging nations -- led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.
“Everyone was of the opinion that the G-8 isn’t any longer the most ideal structure for dealing with the governance of the world economy,” Italian Prime Minister
Silvio Berlusconi told reporters after chairing the session.

U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
price of goods at factory gates fell an annual 1.2 percent, compared with a 0.3 percent decline in May, the Office for National Statistics said today in London. Economists predicted a 0.8 percent drop, according to the median of 19 forecasts in a Bloomberg News survey. On the month, prices declined 0.2 percent, the first decline since November.

William Pesek: "Rumors of the dollar’s demise are no longer exaggerated. What is being exaggerated, though, is how easy it will be for Asia to get out of the quandary it’s in. Cutting off the U.S. government’s credit card, for example, means American consumers can’t buy your goods. And any sudden divorce between the world’s two main economic powers won’t be pretty. Far from it."

Prices of imported goods rose 3.2% in June, the largest increase since November 2007 and the fourth consecutive monthly gain, as petroleum prices shot higher, the Labor Department estimated Friday. Despite the monthly gain, import prices were down a substantial 17.4% in the past year. In May, the imports index rose a revised 1.4%, compared with a prior estimate of a 1.3% gain. In June, imported petroleum prices increased 20.3%, the largest monthly gain since April 1999 and the fifth consecutive monthly increase. However, the petroleum imports price index is down almost 46% over 12 months. Non-petroleum import prices rose 0.2% in June, but are down 6.5% for the year, the largest 12-month decline since the data began publication in March 1985. Prices received by U.S. exporters rose 1.1% in June, the largest increase since July 2008, with gains in agricultural and non-agricultural products. The exports index is down 6.4% over 12 months.

The Organization of the Petroleum Exporting Countries (OPEC) increased crude oil production by 80,000 barrels per day (b/d) to 28.47 million b/d in June, according to a just-released Platts survey of OPEC members, oil industry officials and analysts. This is an increase from 28.39 million b/d in May.

The New York Times reports that it’s the slowest summer on Nantucket locals have ever seen. There are over 600 properties for sale – and none of them is selling. Even at discounts of up to a third off! Restaurants and bars are offering discounts too – anything to lure in the customers.

Richard Daughty: "Federal Reserve Credit dropped $58.5 billion last week, taking the total amount of Federal Reserve credit that they created to a hefty $1.997 trillion. Now, one does not have to be a paranoid, gold-bug, gun-nut, Austrian-school economist lunatic moron like me to see that if you take this weekly decrease in Fed credit and multiply it by 52 to get the yearly total, it comes to a staggering $3.042 trillion a year, which be a whopping 40% decrease in the M2 money supply, which would be plenty bad enough if that were the end of it, but this is Fed Credit, which is the stuff of legend where it appears as if by magic – poof! – in the books of the banks (although it is not magic that put it there, but the mere whim of Ben Bernanke), which the banks use to lend out gigantic multiples of that increase in credit! Gaaahhh!"

U.S. consumer sentiment fell sharply in early July, according to a survey released Friday by the University of Michigan and Reuters. Sentiment fell to 64.6 from 70.8 in June.

The new GM now owns four brands: Chevrolet, Cadillac, GMC and Buick. 14 plants will be closed, and the company will eliminate about 20,000 of its 88,000 U.S. positions.

Wal-Mart is trading 1 1/4 points from its 52-week low. The company's profits are holding their own. Compare that to Nordstrom, Abercrombie, Macy's,Target etc etc. Then look at their stocks compared with their 52-week low.

“Warrantless surveillance of American citizens, in defiance of FISA, is unlawful and unconstitutional,” the motion quotes then-Senator Obama telling the Boston Globe in December 2007. Similar statements recounted in the motion come from Holder; Solicitor General Elana Kagan; Kagan’s deputy Neal Katyal; Assistant Attorney General David Kris; and Associate Deputy Attorney General Donald Verrilli.
“What does Obama do?” Eisenberg said. “This is not just a question of hypocrisy. It’s a big constitutional mistake if he endorses [former Vice President Dick] Cheney’s theory of executive power.”
A full court hearing before Judge Walker is scheduled for Sept. 1.

Russia's central bank on Friday cut its key refinancing rate by 50 basis points to 11%, according to a statement posted on its Web site.

Seekingalpha: " California wants to rewrite some of its contracts, and asks 2,000+ vendors to cut their rates by up to 15%. "For heaven's sake," says one vendor. "It's a contract. If something happened to my company and I said, 'I mis-bid that and I need another half a penny,' they'd say no way."

Since April 1, Costco has held the $44 level 4 times. We'll have to see whether this continues.

Canada lost 7,400 jobs in June as the unemployment rate climbed to its highest level in 11 years.
Statistics Canada announced Friday that the unemployment rate rose to 8.6 percent last month from 8.4 percent in May.

Montana Gov. Brian Schweitzer is asking the Obama administration to force General Motors Corp. to honor its contract with a platinum mine instead of buying the precious metal from overseas. Stillwater Mining Co. of Columbus, Mont., is the only platinum and palladium producer in the country. It is highly dependent on sales to GM and Ford Motor Co., which use the metal in catalytic converters.

Yield is not enough. Case in point-- BRE Properties. The stock yields 11%. At $20 the shares are back down to the same level where they traded 15 years ago and are down 50 points from the all-time high.

The Dow Jones Industrial Average fell 36.65 points, or 0.5%, to end at 8,146.5, leaving it with a weekly decline of 1.6%. The S&P 50 Index shed 3.55 points, or 0.4%, to 879.13, off 1.9% from the week-ago close. The Nasdaq Composite gained 3.48 points, or 0.2%, to 1,756.0, with the technology-laden index left with a decline of 2.3% for the week.

Thursday, July 09, 2009

Retail Sales

7/9/09 Retail Sales

Leaders of the Group of Eight nations and the Group of Five emerging economies agreed Thursday to refrain from competitive devaluations of their currencies, Reuters reported, citing an unidentified German source. A joint statement to be released later Thursday will read: "We will refrain from competitive devaluation of currencies and promote a stable and well-functioning monetary system," the report said. Leaders and representatives of the G5 nations, which includes China and India, are meeting with G8 leaders at the G8 summit in L'Aquila, Italy. The G8 includes the United States, Japan, Germany, France, Italy, Great Britain, Canada and Russia.

Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- demanded a greater stake in the management of the global economy, signaling the drift in power away from the financially wracked West.

Silver is set to outperform gold, argued Citigroup in a note published Thursday, with the broker saying investment flows into gold are moderating while the outlook for silver is improving. The ratio fo gold-to-silver prices should return to its historical norm between 55 and 60 from the current 69, it said.

Costco Wholesale Corp reported that for June, same-store sales fell 6%, matching the consensus estimate of analysts surveyed by Thomson Reuters. Net sales for the month fell 4% to $6.88 billion from $7.15 billion in the year-earlier month. The same-store sales reflected declines of 6% in the U.S. and 3% internationally. Excluding the impact of gasoline-price declines in the U.S. and foreign-exchange translations -- largely in Canada, the U.K. and South Korea -- comparable sales rose 1%.

Central Intelligence Agency Director Leon Panetta told lawmakers that CIA officials misled Congress "for a number of years" since 2001, The Wall Street Journal reported Wednesday, citing a letter released from six Democratic lawmakers. The lawmakers said the CIA also withheld information about unspecified "significant actions," but didn't identify what those actions were or when Panetta made the statements, the report said. "This is similar to other deceptions of which we are aware from other recent periods, " it quoted the letter as saying.

Nordstrom Inc.said Thursday that its June sales at stores open at least one year fell 10%.

Gap Inc. and Abercrombie & Fitch Co. reported June sales declines that were steeper than analysts estimated as a rise in U.S. unemployment and a drop in consumer confidence kept shoppers away from the malls.

First-time claims for state unemployment benefits fell in the latest weekly data, after seasonal adjustment, while continuing claims hit a record high, the Labor Department reported Thursday. The number of initial claims in the week ending July 4 fell 52,000 to 565,000 - the lowest level since January - as the manufacturing layoffs, predominantly automotive, that had been expected have already occurred at some companies, according to the Labor Department, which added that some seasonally expected layoffs may come later or not at all. The four-week average of initial claims fell 10,000 to 606,000. For the week ending June 27, the number of Americans receiving state jobless benefits rose 159,000 to a record 6.88 million, more than double the level during the same period in the prior year. The four-week moving average of these continuing claims rose 12,000 to a record 6.77 million. The insured unemployment rate, which represents the portion of all workers covered by unemployment insurance who are collecting benefits, rose to 5.1% from 5%.
According to Bloomberg, weekly claims tend to be volatile at this time of the year, when automakers idle workers while they re-equip factories to build new models. Claims this month were also distorted due to early shutdowns following bankruptcies at General Motors Corp. and Chrysler LLC, according to Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York.
A number of plants at GM and Chrysler closed in May and June, ahead of the normal summer shutdowns, shifting into those two months the applications that would typically be filed in early July, Reinhart said. Any move in claims due to so-called seasonal factors “is temporary, and will reverse in later weeks,” he said.

China surpassed the United States as the world's biggest auto market for the first half of 2009 after June sales soared 36.5 percent from a year earlier, according to data reported Thursday.

Macy's Inc. said June same-store sales fell 8.9%.

Royal Dutch Shell Plc may close or sell its Montreal East refinery in Quebec, Canada, among various options it’s considering for the plant as part of a global review of assets.

German exports fell sharply in May as the global recession cut into demand, while consumer prices in June inched up somewhat, the Federal Statistical Office said Thursday.
The Wiesbaden-based office said exports from Europe's largest exporter declined by a quarter in May, while imports dropped 23 percent compared with May 2008.
The office said that compared to April, exports rose a slight 0.3 percent and imports decreased by 2.1 percent.

Alcoa expects further weakness in the aerospace industry, with a 6 percent decline in deliveries of large aircraft. Given the current difficult market conditions, Alcoa, which makes aluminum and uses it to manufacture products such as truck wheels and fighter jet parts, is maintaining a forecast for an industrywide demand contraction of 7 percent this year, the CEO said.

Regence BlueShield is raising premiums for individual health plans by an average of 17% in August. It's the third consecutive year of double-digit rate increases by Washington state's largest insurer.

According to Bloomberg, the first fund set up by Pacific Investment Management Co. to buy troubled mortgages lost 33% since opening at the onset of the credit-market crisis in October 2007, according to an investor.

The $3-billion Pimco Distressed Mortgage Fund LP fell 25% in the fourth quarter of 2008, said the investor, who asked not to be identified because the fund is private.

Los Angeles commercial real estate continues to spiral downward, according to a report released Wednesday by Real Capital Analytics Inc.
The New York-based real estate research firm found that Los Angeles had $4.5 billion in troubled commercial properties at the end of June. In all, 263 properties are in default, foreclosure or bankruptcy, the firm reported. At the beginning of the year there were 113, a 133% increase.

World demand for OPEC's oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction, the group said on Wednesday, justifying its slower spending on new supplies.

PMI Group is forecasting that home prices will be lower in 2011 than they are today, including 30 of the 50 largest metro areas. The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump.

Houston's heat index will climb to about 108 degrees and forecasters warn residents to avoid outdoor activity, especially between about 3 p.m. and 6 p.m.
On Wednesday, state power grid officials asked Texans to conserve power in the afternoon to reduce stress on the system, although so far no similar guidance has been issued today, according to the Electric Reliability Council of Texas.
They also caution people who are outdoors to wear sunscreen and to drink plenty of water to avoid becoming overheated or dehydrated.
The heat index is how hot the air feels when temperature and humidity combine.
The high temperature will be about 100 degrees Friday with a low near 80 under sunny skies. The heat index is expected to be 107.
The record high temperature for the date is 101 degrees, which was set in 1998.

U.S. corn, soybean and wheat stockpiles will be higher than forecast last month, after the Department of Agriculture raised its estimates of planted acreage, according to a Bloomberg News survey.

Broadcom drops bid for Emulex.

U.S. natural gas inventories rose 75 billion cubic feet in the week ended July 3 to reach 2,796 billion cubic feet, the Energy Information Administration reported Thursday. Analysts had expected a boost of between 80 billion and 84 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. After the data, August natural gas futures rose 6.8 cents, or 2.1%, to $3.421 per million British thermal units. At the current level, inventories were 601 billion cubic feet higher than last year at this time and 452 billion cubic feet above the five-year average.

Wholesale inventories fell for a ninth consecutive month in May, a decline that has contributed to the longest recession since World War II as factories have been forced to slash production amid crimped demand.The Commerce Department said Thursday that inventories dipped 0.8 percent in May. The further decline in inventories and the small rise in sales left the inventory to sales ratio at 1.29. That's slightly below the 1.31 reading in April, but above the 1.12 reading of a year ago. The May level means it would take 1.29 months to reduce stockpiles at the May sales pace.

American International Group shares (AIG) slumped more than 20% Thursday after Citigroup analyst Joshua Shanker said there's a strong chance that the troubled insurer's common stock goes to zero. "Our valuation includes a 70% chance that the equity at AIG is zero," the analyst wrote in a note to investors late Wednesday.

A summer El Nino can lead to wetter than normal conditions in the intermountain regions of the United States and over central Chile. In an El Nino year there tend to be more Eastern Pacific hurricanes and fewer Atlantic hurricanes.
The forecasters said they expect this El Nino to continue strengthening over the next few months and to last through the winter of 2009-2010.
"Advanced climate science allows us to alert industries, governments and emergency managers about the weather conditions El Nino may bring so these can be factored into decision-making and ultimately protect life, property and the economy," NOAA Administrator Jane Lubchenco said in a statement.

Thirty years after Dave Smith and Paul Hawken founded gardening tool importer Smith & Hawken in Mill Valley, the company will be shut down by the weed killer maker that purchased it in 2004.
Ohio-based parent company Scotts Miracle-Gro Co. said Wednesday that it will cease all Smith & Hawken business by the end of 2009, having a hired a liquidator, Gordon Brothers Group of Boston, to help it do so.
The move calls for the closure of all of Smith & Hawken's 56 retail stores in the U.S. and the layoff of the company's 700 employees nationwide, including 70 at its corporate offices at Hangar Four in Hamilton Landing and 30 at its retail store in the Strawberry Village shopping center in Mill Valley.
Some of those employees will be kept on through early December to help with the liquidation of the company's inventory, all of which will occur through its stores.

Google Inc. captured 74% of the U.S. Internet search market in the four weeks ended June 27, though Microsoft Corp.experienced strong weekly growth thanks to its new Bing search engine, according to data released Thursday by Hitwise. Microsoft captured 5.25% of the search market in the period, Hitwise said.

Cerberus Capital Management is still declining to let investors out of its main hedge fund, according to the Wall Street Journal.

In a letter to clients reviewed by the Journal, Cerberus chairman Stephen Feinberg said the firm is revamping investor terms on its main hedge fund.

The letter cites weak market conditions that are still preventing Cerberus from giving clients their money back. Cerberus also says significant macro risks may affect future results. The letter also notes that the firm has had difficulty selling existing positions.

The Dow Jones Industrial Average gained 4.76 points, or less than 0.1%, to 8,183.1. The S&P 500 Index added 3.12 points, or 0.4%, to 882.68, and the Nasdaq Composite rose 5.38 points, or 0.3%, to 1,752.5.

Benchmark crude for August delivery rose 27 cents to settle at $60.41 a barrel on the New York Mercantile Exchange.

Retail gasoline prices fell about a penny overnight to a new national average of $2.58 a gallon on Thursday, according to AAA. Gasoline prices have fallen every day for two weeks and are far below last year at this time, when gas cost more than $4.108 a gallon.

A recent survey from BigResearch shows retailers have reason to be anxious. Consumers are likely to out-Scrooge Scrooge this holiday season. More than one in three — some 36.2 percent — say they plan to spend less this holiday season compared with last, while a paltry 2.7 percent expect to spend more, and one in four — or about 26.1 percent — plan to spend the same. (About 29.1 percent say it's too early to know and 5.8 percent don't celebrate the season, BigResearch

The International Council of Shopping Centers-Goldman Sachs same-store sales tally for June was down 5.1 percent from June 2008, worse than the latest forecast for a 4.5 percent decline.

The U.S. Dollar Index was weak and closed at 79.89.

Wednesday, July 08, 2009


7/8/09 Oil

The corporate entities behind credit cards issued by U.S. banks posted record-high losses in May, according to a report from Standard & Poor's Ratings Services.
S&P said the losses among bankcard trusts in its U.S. Credit Card Quality Index reached a record 10 percent for the month, as unemployment continued to rise, making it difficult for consumers to pay down credit card debt. That was a 66.8 percent increase from May 2008. Bankcards generally carry the logos of MasterCard, Visa or American Express.

"Even prime mortgages are starting to see rising defaults. The government waste dump is going to accept even less" of troubled assets, Rick Santelli believes.

Bruce Krasting: "It is my contention that the Social Security Trust Fund (SSTF) is experiencing a slow motion ‘Tipping Point’. The surpluses of the SSTF are invested back into the economy through purchases of Treasury securities. At $2.4 Trillion the Fund is America’s largest single creditor. The annual surpluses that have funded our deficits since WWII are rapidly drying up. This could not be happening at a worse time. Our deficits are exploding. Our need for investors is rapidly increasing. The SSTF is on track for reducing its purchases of Treasury debt by 6% this year. That is the first YOY decline in history. In 2007 the Fund provided the liquidity for half of the entire federal deficit. That number will be less than 10% this year. It is possible that as early as 2010 the remaining surpluses will be eliminated....Based on the YTD numbers my forecast for the full year 2009 surplus is $115 billion. If that proves to be correct it would represent a fall of 50% from the 2007 peak."

Japan's current account surplus slipped 34.2% in May from that month last year, as the trade suplus fell 22.1%, data from the Ministry of Finance showed Wednesday, suggesting the global recession continued to take a toll that month.

Paccar Inc. said late Tuesday that the board cut its quarterly dividend to 9 cents from 18 cents.

Google Inc. is working on a new operating system for inexpensive computers in a daring attempt to wrest away Microsoft Corp.'s long-running control over people's computing experience.
The new operating system, announced late Tuesday night on Google's Web site, will be based on the company's nine-month-old Web browser, Chrome. Google intends to rely on help from the community of open-source programmers to develop the Chrome operating system, which is expected to begin running computers in the second half of 2010.

Brett Steenbarger: " I would emphasize that we now have fewer than 20% of SPX stocks trading above their 20-day moving averages and new 65-day lows now outnumber 65-day highs."

Exelon took its offer directly to NRG shareholders after the power producer’s board rejected the bid and refused to negotiate.

Unless Machinists reach a long-term no-strike agreement by this fall, Boeing will build a second 787 production line out of state, warn members of the Wash.'s congressional delegation.

Amgen said its experimental osteoporosis drug reduced and delayed serious bone complications among patients with advanced breast cancer, and the news sent its shares up almost 13% in after-hours trade. The Phase 3 study assessed the incidence of serious bone complications among 2,049 such patients, including fractures, or the need for radiation or surgery to bone.

“We are not an island,” said Martin N. Baily, chairman of the Council of Economic Advisers under President Bill Clinton and now a fellow at the Brookings Institution. “We are part of the global economy, and there are concerns out there among those who have been buying our debts that we owe too much.”

Switzerland has vowed to prevent UBS from handing over client information to U.S authorities, in an attempt to defend bank secrecy, saying a tax case targeting its main bank is souring diplomatic ties.

The Baltic Dry Index .BADI which measures changes in the cost of shipping key commodities fell 4.7 percent overnight.

The global economy is beginning to pull out of recession but the recovery is expected to be sluggish, according to the latest economic update from the International Monetary Fund released Wednesday. The IMF raised its forecast for growth in 2010 to a 2.5% rate, which is higher than the 1.9% growth rate forecast in April. There is much less concern about systemic failure in the financial system. A gradual recovery in the U.S. seems on track, the IMF said. Japan is stabilizing after a dismal first quarter. Growth in the euro-area is expected to strengthen more slowly than elsewhere. Inflation pressures remain low, the agency said. Risks for sustained deflation are small.

New loans surged to 1.53 trillion Chinese yuan ($223.9 billion) in June, a dramatic increase from 664.5 billion yuan in May, the People's Bank of China reported on its Web site on Wednesday. This brings aggregate new lending in 2009 to 7.37 trillion yuan, up 201% year-over-year from the first half of 2008, and well above the official full-year target of 5 trillion yuan, according to Jing Ulrich, managing director of China equities at J.P. Morgan. "The rapid pace of credit creation has had a stirring impact on China's corporate sector and asset markets, helping to support domestic demand," Ulrich said in emailed comments.

World demand for OPEC's oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction, the group said on Wednesday, justifying its slower spending on new supplies.

In its 2009 World Oil Outlook, the Organization of the Petroleum Exporting Countries said consumption of its crude would not return to 31 million barrels per day (bpd), the level it averaged in 2008 before the economic crisis cut oil use, until 2013.

"Oil demand levels will drop in the short- to medium-term — leading to a rise in overall spare capacity," OPEC Secretary General Abdullah al-Badri said in the Foreword to the 277-page report.

The U.S. Energy Information Administration on Tuesday revised upward its forecast for OPEC's crude oil output in 2009 after two months of downgrades.
Crude oil production from the Organization of Petroleum Exporting Countries will average 28.63 million barrels a day this year, the U.S. Department of Energy estimates in its latest monthly outlook. This is up by 140,000 barrels a day from the last estimate of 28.49 million barrels a day.
EIA also revised upward its forecast for OPEC's 2010 oil output to 28.96 million barrels a day from the last estimate of 28.78 million barrels a day.

Crude has now dropped $12 a barrel in a very short time since I suggested cutting back on positions. Don't get excited. My long-term bullishness on natural gas has taken it on the chin. How many companies can make money with natural gas at $3.39?

A new poll found that President Barack Obama’s approval rating has dropped by 13 percentage points from two months ago in Ohio, traditionally a critical swing state in presidential elections.

The survey by Quinnipiac University released today showed 49 percent of Ohio voters approved of Obama’s job performance, down from 62 percent in a May 6 poll. The disapproval figure for Obama in the new poll was 44 percent, up from 31 percent in the May survey.
The pollsters termed Obama’s ratings “lackluster” in a release, and said the numbers were his lowest marks “in any national or statewide Quinnipiac University poll since he was inaugurated.”

The Obama administration said Tuesday it could continue to imprison non-U.S. citizens indefinitely even if they have been acquitted of terrorism charges by a U.S. military commission.
Jeh Johnson, the Defense Department's chief lawyer, told the Senate Armed Services Committee that releasing a detainee who has been tried and found not guilty was a policy decision that officials would make based on their estimate of whether the prisoner posed a future threat.

The Oil Drum: "Maybe it’s a stretch to say that the production peak occurred at one identifiable moment, but attributing it to the day oil prices reached their high-water mark may be a useful way of fixing the event in our minds. So I suggest that we remember July 11, 2008 as Peak Oil Day.
We are now approaching the first-year anniversary of Peak Oil Day. Where are we now? The global economy is in tatters, yet oil prices have recovered somewhat (they’re now about half what they were in July 2008). World energy consumption is down, world trade is down, the airline industry is shrinking, and most of the world’s automakers are on life support.
It is too late to prepare for Peak Oil—a year too late, in fact. Now the name of the game is adaptation. We are in an entirely new economic environment, in which old assumptions about the inevitability of perpetual growth, and the usefulness of leveraging investments based on expectations of future growth, are crashing in flames. Even if economic activity picks up somewhat, this will occur in the context of an economy significantly smaller than the one that existed in July 2008, and energy scarcity will quickly cause most green shoots to wither.
It is impossible to say what will happen in the future with regard to oil prices. Clearly, very high prices kill demand by undercutting economic activity. Thus it is possible that the barrel price of petroleum may never break last year’s record. On the other hand, if the value of the dollar were to collapse, then the sky’s the limit for prices in dollars per barrel.
It is easier to forecast the oil supply trend: though we’ll see level-to-rising production temporarily from time to time, in general it’s down, down, downhill from now on."

"Foreclosure sales, short sales and first-time homebuyers taking advantage of tax credits is purely illusionary and hides the underlying problems of lending and inventory," says Anthony Sanders, a finance professor at George Mason University's Hall School of Management. "Plus, the jumbo and non-first-time market has to show volume."

August crude futures lost $1.33, or 2.1%, to $61.58 a barrel in electronic trading on Globex. Crude inventories fell by 2.9 million barrels in the week ended July 3, the Energy Information Administration reported. Analysts surveyed by Platts had expected a decline of 3.2 million barrels. Gasoline inventories rose 1.9 million barrels, while distillate stockpiles, which include diesel and heating oil, increased 3.7 million barrels. The analysts surveyed by Platts had expected a buildup of 900,000 in gasoline and 1.7 million barrels in distillate.

Wholesale pork fell 1.3 percent yesterday to 54.23 cents a pound, near a six-year low, according to the U.S. Department of Agriculture. U.S. warehouses held about 584.1 million pounds of pork at the end of May, up 0.8 percent from a year earlier, the USDA said last month. Pork exports through April were down 11 percent from a year earlier.

Christian Menegatti: "The United States is in the 20th month of a recession that has been by far the longest and most severe of the post-war period. While comparisons with the Great Depression are frequent and appropriate (especially if we look at the pace of contraction in industrial production), the aggressiveness of policy measures has significantly reduced the probability of a near-depression. Economic activity fell off a cliff in Q4 2008 and Q1 2009, with two consecutive quarters of sharp contraction – by 6.3% and 5.5% respectively – in line with our previous forecasts. The general consensus is that this recession will end sometime in the second half of 2009. While RGE Monitor expects more quarters of negative real GDP growth in 2009, we also expect the pace of contraction of economic activity to slow significantly. We forecast negative real GDP growth in Q2 2009 and Q3 2009, and for real GDP to remain flat in Q4. After the sharp contraction in economic activity in 2009, growth will reenter positive territory only in 2010, and then at a very sluggish rate, well below potential.
Even if economic activity stops contracting by the end of 2009, that might not mark the official end of this recession. Recessions are not measured exclusively by GDP contractions. Unemployment, industrial production, real manufacturing, wholesale retail trade sales and real personal income (less transfer) are all considered when it is time for the National Bureau of Economic Research (NBER) to put dates around recession periods. As reported by the NBER, this recession started in December 2007, and all the above indicators peaked between November 2007 and June 2008. U.S. real GDP will stop contracting at the end of 2009, but it is likely that many of the above indicators will not bottom out (or peak, in the case of unemployment) before mid-2010."

Bloomberg: "Tax incentives for buying vehicles fueled by natural gas would be doubled in size and extended for a decade under legislation being introduced by U.S. Senate Majority Leader Harry Reid of Nevada.
The credits, which can be used to cover 80 percent of the added cost to buy natural gas-fueled vehicles over conventional automobiles, would jump to as high as $12,500 for passenger cars and light trucks and as much as $64,000 for higher weight-class vehicles, according to a summary of the legislation.
The bill would also expand and extend tax incentives for purchases of natural gas used as a vehicle fuel and for the installation of refueling stations. The credits were set up as part of a broad energy law passed in 2005 to help secure energy supplies and lower costs, issues that are back in the forefront of Congress following record-high oil and gas prices in 2008.
“We saw last summer how the wild fluctuations in oil prices helped to wreck our economy,” said Senator Robert Menendez, a New Jersey Democrat, who is sponsoring the latest measure. “By making it easier and cheaper to own a vehicle that runs on natural gas, we can help families save money on energy, create new manufacturing jobs and clean our air.”

Global stock markets could crash in October, as by then it will be clear that the economic recovery many people pinned their hopes on will not materialize, the stimulus option will no longer be a viable one, and proprietary trading desks will decide to go short, economist and investor Enzio von Pfeil, CEO of, told CNBC.
"The economic time has to worsen and so these green shoots will morph into black shoots very badly, culminating probably in an October crash," Pfeil said.

NetApp Inc.has ended its attempt to acquire data-backup technology company Data Domain Inc. In a statement released after the market closed, NetApp said it would not revise its $30-a-share cash-and-stock offer for Data Domain, and had received a $57 million breakup fee from that company. NetApp orginally agreed to acquire Data Domain for $25 a share in May, but rival EMC Corp soon stepped in with an unsolicited, all-cash tender offer for Data Domain. On Monday, EMC raised its bid for Data Domain to $33.50 a share and analysts doubted NetApp's ability to stay in the running for Data Domain.

The Dow Jones Industrial Average added 14.81 points, or 0.2%, to 8,178.4. The S&P 500 Index fell 1.47 points, or 0.2%, to 879.56, while the Nasdaq Composite added 1 point to end at 1,747.1.

Alcoa Inc.reported a second-quarter loss of $454 million, or 47 cents a share, vs. a profit of 66 cents a share, or $546 million, a year ago. Losses from continuing operations came to 32 cents a share. Excluding restructuring charges, the company would have lost 26 cents a share. Revenue fell to $4.2 billion from $7.2 billion a year ago.

May consumer credit outstanding fell at a 1.5 percent annual rate to $2.5196 trillion from $2.5229 trillion in April, as the U.S. recession crimped borrowing, albeit at a much milder pace than in the previous three months.
"The figures show recession, but recession going to a period of stabilization, and then improvement," said Marshall Front, chairman of Front Barnett Associates LLC in Chicago.
Analysts polled by Reuters had forecast consumer credit to decline by $9.5 billion in May, compared with April's drop which was revised to show a record decline of $16.52 billion. This was previously reported as a $15.7 billion fall.
The current string of four monthly declines in consumer credit is the longest since June-December 1991, the Fed said. Consumer credit has also declined in eight out of the last 10 months.
With credit card defaults at record highs, companies are slashing lending limits and closing accounts to curb losses.

Crude dropped to $60.14. Soybeans declined to a 3-month low.

Tuesday, July 07, 2009


7/7/09 Delinquencies

Just days after losing their jobs, a huge portion of the newly jobless get a second nasty surprise: At least 25% of those who file unemployment claims will find that their former employers have challenged their rights to benefits.

Fallout from a still deteriorating housing market caused the rate of consumer loan payments at least 30 days late to rise to 3.23 percent in the January-to-March period from 3.22 percent in the 2008 fourth quarter, the American Bankers Association said.
Delinquencies were the highest since the ABA began tracking the data in 1974. Late payments on home equity borrowings set records, rising to 3.52 percent from 3.03 percent on loans and to 1.89 percent from 1.46 percent on lines of credit.
The overall delinquency rate actually understates consumer pain because it excludes bank-issued credit cards, where credit deterioration was severe. "The biggest driver is job losses," ABA Chief Economist James Chessen said in an interview. "When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we're going to see higher job losses in the next year, and I expect elevated delinquencies."

August gold futures gained $5.60, or 0.6%, to $929.90 an ounce in early North American electronic trading.

Chain-store sales for the week ended July 4 rose 0.5% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales climbed 0.1%. ""Sales for the industry were uneven in June as the first half of the month was softer than the second half," said Michael Niemira, ICSC's chief economist. "Dollar stores and stores offering a wide array of staples continued to perform best throughout the entire month."

The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week’s Group of Eight summit of leading industrial powers.
Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.

Niels C. Jensen: "The point I really want to make is that the inflation v. deflation story is the single biggest investment story right now and being on the right side of that trade will effectively secure your investment returns for years to come. If I am wrong and inflation spikes, you want to load your portfolio with index linked government bonds (also known as TIPS for our American readers), gold and other commodities, commodity related stocks as well as property....All in all, deflation is ugly and not conducive to attractive investment returns. It is also not what governments want and need right now. With a mountain of debt hitting the streets of Europe and America over the next few years, as the cost of fixing the credit and banking crisis is financed, one can make a strong case for rising inflation actually being the favoured outcome if you look at it from the government's point of view. The problem, as the Japanese can attest to, is that deflation is excruciatingly difficult to get rid of, once it has become entrenched. I am in no doubt which of the two evils I would prefer, but we may not have the luxury of choosing our own destiny."

Migrating toward natural gas for fuel rather than oil will shake off the US dependency on foreign oil, strengthening its security, T. Boone Pickens, founder and chairman of BP Capital Management, told CNBC Tuesday.

"If we get down through 877 on the S&P, people will be talking about a 'head-and-shoulders' — and that will not be too happy," Art Cashin warned.

"This calendar year they'll do over $500 million," Andreessen said in an interview, noting that Facebook has more than 225 million users, so revenue per user is still small.

Skechers USA Inc. said it still continues to believe it will break even for the first half of 2009 before returning to profitability in the second half as retailers slowed their orders. The Manhattan Beach, Calif.-based sneaker maker also said it got a new $250 million, four-year, syndicated secured credit line.

Weyerhaeuser cut its quarterly dividend 80%, to 5 cents from 25 cents a share, but the company backed its previous outlook for second quarter earnings. Chief Executive Dan Fulton said in a Tuesday presses release that, ""Although our guidance for the recently completed quarter remains unchanged, the economic outlook for our businesses continues to be challenged and uncertain."

The stock market is still in danger of breaking through its March lows as the economy continues to struggle, economist David Rosenberg told CNBC.

An additional round of government stimulus is likely to have little more impact than "cushioning the blow" of unemployment that will "easily" break the post-World War II high of 10.8 percent in 1982, said Rosenberg, chief economist and strategist at Gluskin Sheff.

He opined we are going through a massive consumer deleveraging and that the consumer is not going to save the economy anytime soon.

Microsoft Corp. has taken the rare step of warning about a serious computer security vulnerability it hasn't fixed yet.
The vulnerability disclosed Monday affects Internet Explorer users whose computers run the Windows XP or Windows Server 2003 operating software.
It can allow hackers to remotely take control of victims' machines. The victims don't need to do anything to get infected except visit a Web site that's been hacked.

Oil dipped below $63 a barrel on Tuesday, pressured by investors' caution over prospects for economic recovery and by an expected increase in U.S. gasoline stocks for the week when Americans traditionally drive the most.
U.S. crude futures fell $1.17 to $62.88 a barrel by 1405 GMT, reversing an earlier gain to as high as $64.91. London Brent crude was 92 cents lower at $63.13.

Boone Pickens notes the US natural gas reserves are around 2,000 trillion cubic feet, compared with Russia's 1,500 TCF and Iran's 1,100 TCF, he said. "Our 2000 trillion will move us above the largest."

Supply-chain problems for the Boeing Co. 787 Dreamliner has pushed out one analyst's first-delivery estimate to at least the fourth quarter of next year, with a chance it could be pushed out further given the risks involved in the plane's first flight.

The S&P 500 lost 18 points, or nearly 2%, at 881.03, with only health-care stocks rising. The Dow Jones Industrial Average sank 161 points, or 1.9%, to 8,163.6 points. The Nasdaq Composite fell 41 points, or 2.3%, to 1,746.2 points.

Monday, July 06, 2009

Bullish and Bearish Options

7/6/09 Bullish and Bearish Options

The International Council of Shopping Centers said 6,913 retail stores — of all types — announced closures last year, compared with 4,603 in 2007.
Excess Space Retail of Lake Success, N.Y, specializes in real estate disposition and lease restructuring for retailers, including Home Depot, Wal-Mart, JC Penny and Kmart. The company has seen a more than 30 percent jump in the number of empty retail locations in the past year, he said.
"We are handing in excess of 2,000 locations for some 50-odd retailers, said Michael Burden, a principal with Excess Space Retail. "The square footage is in the tens of millions."
Home Depot, for example, closed 15 underperforming stores last year, and 41 its smaller home improvement brands, including Expo Design Centers and YardBIRDS.

India's fiscal deficit for the year ending March 31, 2010, is expected to jump to 6.8% of the country's gross domestic product, Finance Minister Pranab Mukherjee said in his budget speech Monday, according to reports. The federal government's deficit is much higher than the 5.5% deficit forecast by Mukherjee in an interim budget in February, and also larger than the 6.2% deficit recorded by the government in the previous year ended March 31. Mukherjee's budget also provides tax relief to individuals, by raising the income-tax exemption limits and scrapping a surcharge on personal income tax. The 30-stock Sensex was down 2.9% at 14,487.37 following the budget announcement. India’s Finance Minister Pranab Mukherjee announced plans to borrow a record 4.51 trillion rupees ($93 billion) to fund budget spending on roads, power and aid for the poor. Stocks, bonds and the currency slumped.

The Special Drawing Right (SDR), a unit of account used by the International Monetary Fund, presents a viable alternative to the dollar as a global reserve currency, said Li Ruogu, chairman of the Export-Import Bank of China, a major state-run bank.
"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted 'currency basket' that would replace the dollar at the heart of the monetary system," Li was cited as saying in Financial News, a newspaper published by the central bank.

"The financial crisis caused the global economy to suffer heavy losses and it also let us clearly see how unreasonable the current international monetary system is," Li, a former central bank vice governor, said.
"But it would be difficult to find and implement a feasible replacement plan in the short term, so we will still have to travel a relatively long road for reform of the international monetary system."

Crude oil futures fell sharply, hitting a five-week low and falling back below $64 a barrel as they extended the previous week's losses. The August-dated light-crude contract dropped $2.91 to $63.82 a barrel.

The year-over-year profit slide for Standard & Poor’s 500 Index members may narrow to 21 percent from July through September, after declines of an estimated 34 percent in the second quarter and about 60 percent in the year’s first three months, according to data compiled by S&P and Bloomberg.

EMC raises Data Domain offer to $33.50 a share.

August gold futures fell $7.70, or 0.8%, to $923.20 an ounce in early North American electronic trading.

20m US homeowners are already in negative equity ( data).

BASF may cut 3,700 jobs from the business it acquired from Ciba Holding. It said 23 of the 55 acquired production sites are under review for restructuring, sale or closure. The German chemicals firm said it may save 400 million euros a year from 2012 onward, and 300 million euros a year by the end of 2010. "Between 4 pm (after the market closed) and 5:30 pm eastern on Thursday (when the SEC stops accepting most filings), companies filed a whopping 324 8-Ks. That’s 3.6 filings per minute. We compared that to the previous Thursday (6/25) when 248 8-Ks were filed during those 90 minutes (and when the market was open the next day). That’s a 30% increase!

In addition to the 8-Ks, which felt like a better measure than 10-Ks or 10-Qs since those are a bit less flexible in terms of deadlines, we also took a look at Form 4s, which we don’t normally spend much time looking at. Unlike other filings, the SEC actually accepts Form 4s until 9:30, so the window is a bit larger. But the results were even more shocking: after the market closed on Thursday, we counted over 1,700 Form 4s filed between 4 pm and 9:30 pm. Compare that to just 324 that were filed all day on June 25. That’s a more than four-fold increase.
Now maybe this is all just due to chance and we (or even better — someone else) probably needs to look at other holidays over several years. But it certainly seems more than just a strange coincidence."

Over 238,000 state workers in California have been working two days less a month without pay since February. Variants of this are happening in 22 states.

George Ure: "Two great warnings about 'rights' in America have stuck with me over the years. The first was that "Rights are usually taken away from those least able to defend them first..." Something I expect First People on this continent would have no reservations about endorsing. The second thing to strike me is the 'extensibility' of the phrase "When guns are outlawed, only outlaws will have guns." It extends to thoughts like "When only special interests have access, only special interests have laws." I'm worried that with the recent blatant ignoring of the Will of the People expressed on bailouts and such to congress, that our beloved Constitution is in great peril. I hear the social contract tearing. Is it time to flag Old Glory upside down - as we're certainly in 'distress'. Enough so that I've started working on my own "Personal Constitution" as a portable back-up should the one that keeps the States 'united" fail in the midst of economic turmoil in the next year or two. Should that arrive, whether by terrorism, economic collapse, or an electric grid-killing solar flare, the relevance of the Constitution may disappear as the central government can only exists so long as it can exact tribute from We the People. I love the Constitution, but since it's being hacked up by fits and starts, it may be time to think the once unthinkable....write our own."

According to the Washington Times, workers who lose their jobs if the pending climate change legislation becomes law could get a weekly paycheck for up to three years, subsidies to find new work and other generous benefits -- all courtesy of Uncle Sam -- under a little-noticed provision of the bill.
Touted by its House Democratic authors as a jobs engine, the bill offers extraordinary compensation for those who would lose their paycheck as a consequence of its passage.
Adversely affected employees in oil, coal and other fossil-fuel sector jobs would qualify for a weekly check worth 70 percent of their current salary for up to three years. In addition, they would get $1,500 for job-search assistance and $1,500 for moving expenses from the bill's "climate change worker adjustment assistance" program, which is expected to cost $4.2 billion from 2011 to 2019.

At $12.40, UNG made a new 52-week low and is now down 51 points from the high.

Antal E. Fekete: "We are witnessing the closing of the regime of irredeemable currency and irredeemable debt. We may not know how long its death throes will take, but there will be no other chance. Financial journalists and mainstream economists, in their blind stupor acting as cheerleaders for the disastrous monetary policy of the government and the insane credit policy of the banks, have exhausted and destroyed their own credibility for once and all....Once the government makes the currency irredeemable, it puts itself in the position to curtail the rights and freedoms of the people as it sees fit. Constitutional government is effectively overthrown. Once the government usurps the public purse, its power becomes uncontrollable. Budget debate in Parliament or in Congress becomes an annual farce. Nothing stands in the way of unscrupulous politicians to undermine constitutional government. The purchasing power of the currency is constantly undermined year in, year out. The banks are freed from constraints on them exercised by the people under the gold standard. Pandora's box of corruption is opened and its contents contaminate the nation's economic, political, and social system.
Governments which employ irredeemable currency grab unconditional control over foreign trade, exchange rates, foreign investments and travel, even the amount of currency an individual can take in or out of the country. The more powerful governments will buy the allegiance of the less powerful. Out of this feudalistic web of allegiances financed by irredeemable currency come various adventures in fomenting and waging wars in far-away lands, spilling the blood of the young people of the nation for causes alien to them."

U.S. June ISM services index 47.0% vs 44.0% in May. The business activity index rose to 49.8% in June from 42.4% in the previous month. New orders rose to 48.6% from 44.4%. The employment index rose to 43.4% from 39.0%. Inflation pressures picked up. The price index rose to 53.7% from 46.9% in the previous month.

The volume of acquisitions of targets in bankruptcy increased 229 percent, to $26.3 billion this year from $8 billion at the same time last year. The number of those deals increased from 148 to 231.

Investors are spending the most since August 2008 to protect against a 10 percent decline in the Standard & Poor’s 500 Index versus wagers on an advance, according to data compiled by Bloomberg. That’s one month prior to New York-based Lehman’s bankruptcy. The premium on so-called put contracts increased even after the Chicago Board Options Exchange Volatility Index, a gauge of U.S. options prices known as the VIX, fell 40 percent last quarter.
Traders are locking in gains on the S&P 500, which rose as much as 40 percent since March, on concern the worst U.S. recession in a half century isn’t abating, according to Huntington Asset Management, BlackRock Inc. and Fiduciary Trust Co. The widening gap between bullish and bearish options belies the VIX’s retreat to below its level when Lehman collapsed and comes as U.S. companies prepare to report second-quarter earnings this week.

The Group of Eight nations should not presume a global economic recovery is near, World Bank President Robert Zoellick said in a letter to G8 host Italian Prime Minister Silvio Berlusconi obtained by Reuters on Monday.
"Yet 2009 remains a dangerous year. Recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain," Zoellick wrote.

The Dow Jones Industrial Average added 44.13 points, or 0.5%, to 8,324.8. The S&P 500 Index added 2.3 points, or 0.3%, to 898.72, while the Nasdaq Composite fell 9.12 points, or 0.5%, to 1,787.4.

California suffered a new setback in its financial crisis on Monday when Fitch Ratings cut its rating on the state's general obligation debt to just two notches above junk status.

Sunday, July 05, 2009

Oil And Equities

7/5/09 Oil And Equities

Mike Burk: "The coming week has to be one of the best of the year. The averages have been up by all measures over the coming week and the OTC has only been down only once during the 1st year of the Presidential Cycle, in 1969....Brief sharp declines occur in up markets and, although nasty, I think that is what Thursday's move was. Seasonally the pattern for next week has been a little weakness early in the week with a strong finish. I think the seasonal pattern is likely to be followed.I expect the major indices to be higher on Friday July 10 than they were on Thursday July 2."

"Unlike after the last three recessions, this time government cannot fire up the economy and a new speculative bubble, and then back off and let the bubble generate the paper wealth and credit to keep profits flowing into the business sector and the economy expanding," David Levy, chairman of The Jerome Levy Forecasting Center, wrote in his latest forecast released this week.
Consumers are simply too broke, he said.

The number of international travelers arriving at Seattle-Tacoma International Airport fell 13 percent through May compared with last year, while hotels statewide filled just over half their rooms on average, according to Smith Travel Research.

Kuwait, the sixth-biggest OPEC producer, wants to see oil prices stay above $60 a barrel and will watch the market closely before deciding on its output at OPEC’s meeting in September, the country’s oil minister said.
“We’d like to see the price not go below a certain level, at least to meet our budgetary target,” Sheikh Ahmed al-Abdullah al-Sabah told reporters today in Kuwait City. That certain level for Kuwait is $60 a barrel, he said.

Downward pressure on oil prices is so great that crude could trade for as little as $20 a barrel by the end of the year -- less than a third of what it traded for this week and an 86% drop from its peak last year, analysts said.
That could push gasoline prices back down to $2 a gallon, prices last seen this March after last fall's slide slammed retail gasoline to its lowest value in four years.

The reasons are simple, said Philip K. Verleger Jr., an expert on energy markets at the University of Calgary in Canada: The still-sputtering economy has lessened demand at a time when there is already a big surplus of oil.
For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market.
"That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it." By one estimate, before oil surged to its high this year of $73.38 a barrel in June, as many as 67 supertankers -- each capable of carrying 2 million barrels of oil -- were being used as floating storage.
Verleger said it represented a largely risk-free investment for those who could sell that oil for huge profits on the futures markets.

But the glut has gone on for so long, he said, that the cost of all of that storage is bound to rise. When it rises enough, some suppliers will refuse to pay and a lot of that oil will be dumped onto the market.

One might consider the recent relationship between the price of oil and the price for equities. When the price of oil declined significantly, so did equities. Why? The price reflects on consumer habits as well as the lack of economic growth.

Natural gas burns more cleanly than oil or coal. Used in a vehicle, natural gas emits 70 percent less carbon monoxide, 87 percent less nitrogen oxide and 20 percent less carbon dioxide than gasoline vehicles, according to lobby group NGV America.
Electric cars might be cleaner than natural gas, but only if the power is generated with cleaner technology, such as wind or solar. Most power in Texas comes from natural gas-fired plants.

Brett Steenbarger: "I continue to view this as a corrective movement within a bull market and a broad range bound market. Having failed to reach the range highs and significantly weakened thereafter, the market appears poised to test its range lows; I would not be surprised to see us take out those lows--particularly if new 20-day lows among stocks continue to outnumber fresh 20-day highs. I will be tracking market indicators closely and posting them before the open via Twitter; those will help us determine whether we ultimately trade back into the two-month range or start a more significant bear leg/correction. "

Chinese President Hu Jintao left Beijing Sunday for Italy, to attend a meeting of the G8 industrial powers, along with leaders from other emerging economies, state media reported. Hu will join leaders from India, Brazil, South Africa and Mexico in the meeting scheduled for July 8-10 in L'Aquila, Italy.

The Labor Department said Thursday that as of June, unemployed workers 55 or older were jobless an average of nearly 30 weeks, compared with about 21 weeks for those under 55. That gap has widened during the recession: In 2006, it averaged only six weeks.
And the jobless rate for those 55 and older rose to 7 percent in June, the highest for that age group on records dating to 1948.
Complaints of age bias to the Equal Employment Opportunity Commission jumped 29 percent to 24,852 in the year that ended in September, the most recent 12-month period for which figures are available. That's the highest such total on records dating back 16 years.
The number of such complaints has continued at a high pace this year, the EEOC said.

The U.S. International Trade Commission recommended imposing punitive duties of as much as 55% on low-cost Chinese tire imports because they are disrupting the U.S. market, in a move that could sharply increase costs for consumers.
China was the largest source of car-tire imports to the U.S. in 2008, shipping nearly 46 million tires valued at more than $1.7 billion, according to the union. The Chinese-made tires sell for about $50 to $60 each, half the price of some premium U.S. brands.
GITI Tire, China's largest tire manufacturer, on Monday called the move "decidedly protectionist" and said it would take its case to President Obama. "The administration has a broader set of responsibilities and a wider vantage point to devise a successful solution in this case," said Vic DeIorio, GITI's executive vice president in the U.S.

Vice President Joe Biden said in a broadcast interview Sunday that administration officials "misread how bad the economy was," when the stimulus package was being put together at the beginning of the year.

A new law gives Michigan homeowners facing foreclosure a 90-day window to stay in their house and potentially work out a resolution with their lender.
The law goes into effect The legislation lets homeowners delay foreclosure proceedings for 90 days after getting a notice of foreclosure if they meet with a housing counselor and the bank. Lenders refusing to rework loans for those qualified homeowners would have to go to court to finish the foreclosure.