Friday, August 14, 2009


8/14/09 Sentiment

U.S. consumer prices were unchanged in July, after seasonal adjustments, and were down 2.1% year-over-year in the sharpest annual decline since 1950, the Labor Department reported Friday.Most of the past year's decline reflects energy prices falling 28.1 percent since peaking in July 2008. For July, energy prices fell 0.4%, and food prices fell 0.3%, while prices rose for goods such as new vehicles, tobacco, medical care and apparel. The core CPI, which excludes often-volatile food and energy prices, rose 0.1% in July, matching analysts' expectations. Of note, shelter prices in July fell 0.2%, the largest decline since 1982, while prices for meat, poultry, fish and eggs fell 1.3%, the largest decline since 1979. In June the overall CPI rose 0.7%, while the core gained 0.2%.

Boeing Co. has stopped production at a 787 Dreamliner facility in Italy that was making parts of the plane's fuselage, the Wall Street Journal reported late Thursday. The Chicago-based manufacturer ordered its subcontractor, Alenia Aeronautic in Naples, to stop work two months ago after structural flaws were discovered at where the wing and the fuselage meet, the newspaper reported. Engineers have discovered wrinkles in the fuselage skin just behind the wing that will require repair work on all the completed fuselage barrels.

Bloomberg: “More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.”

Republic Airways Holdings won the bankruptcy court auction for Frontier Airlines on Thursday, buying the Denver-based carrier for almost $108.8 million after Southwest Airlines' bid was rejected.

In dollar terms, debit cards are now used for 50.4 percent of all noncash sales, though they have a lower average dollar amount per transaction, according to research from TowerGroup, a subsidiary of MasterCard Worldwide. Those smaller sales are key: debit card sales dominate small purchases like those made in convenience stores, coffee shops and gas stations.
Big ticket items like wide-screen TVs are still more often paid for using credit cards, said Brian Riley, a TowerGroup research director and co-author of the study.

Biotech leader Amgen Inc. cleared a major hurdle in its push to win approval for its experimental osteoporosis drug from the Food and Drug.

Port of Long Beach: July of this year saw loaded inbound containers down 23% from year ago levels. And loaded outbound was down 27.2%. Port of Los Angeles was down 16.94%, in the month of July.

Floyd Norris: "It appears that Colonial BancGroup, which Mr. Lowder started with the acquisition of a small bank in Alabama in 1981, may soon become the largest bank failure of 2009, with more than $25 billion in assets. Alabama regulators have raised the possibility the Federal Deposit Insurance Corporation may take over Colonial."

The European Union's statistics office Eurostat said consumer prices in the euro zone fell by 0.7 percent in July from the previous year, 0.1 percentage point more than it had previously estimated and ahead of June's 0.1 percent fall. The monthly decline was also 0.7 percent.
Eurostat said the biggest drops were recorded in Ireland and Belgium.
It said a 5.5 percent decline in transport cost, related to lower year-on-year energy prices, was the main influence behind the further fall in overall prices.

Macy’s, the second-biggest U.S. department store chain, said yesterday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped. Walmart will accelerate efforts to cut costs after U.S. stores reduced inventory by almost 6 percent, Chief Executive Officer Mike Duke said.

Mike Shedlock: "Retail sales, frugal shoppers, and price slashing efforts at Wal-Mart, Safeway, Whole Foods and Giant, along with their Canadian counterparts, are all peas in the same deflationary pod.
Consumer attitudes towards spending have changed for good. So have banks' attitudes towards lending. It's tough to raise prices in this kind of environment. Deflation is alive and well in regard to consumer credit, bank lending standards, consumer attitudes, retail sales, and even store prices."

Capacity utilization increased to 68.5% from a record-low 68.1% in June. The gain in industrial output in July was entirely due to increased motor vehicle production, which jumped 20.1%. Thank you clunker program.

Sales in stores open at least one year, or same-store sales, fell 12.3 percent, but rose 0.8 percent at the company's off-price store — Nordstrom Rack.

Schlumberger estimates the world’s heavy oil and bitumen resources. Canada’s 400 billion cubic meters of bitumen translates into something like 1.4 trillion barrels of oil equivalent. How much is that? That's about 7 times the total oil reserves of Saudi Arabia.

U.S. Aug. UMich consumer sentiment falls to 63.2. Expectations were for a 69 reading. It was 66 in July. It is the lowest reading since March. The measure reached a three-decade low of 55.3 in November. The shoots of wrath.

Abraham Lincoln: "He who molds the public sentiment... makes statues and decisions possible or impossible to make. "

Oil futures down $1.21 to $69.30/brl on Globex.

We could have our first hurricane of the season in a few days. It would be Ana.
Storms can also occur in financial markets. It might be wise to have an evacuation
plan in place when the deluge hits. In my view, the next leg down will be ugly.

U.S. homeowners cut their asking prices by $27.8 billion with some of the biggest reductions in Nevada and Florida, states hardest hit by the property slump, Trulia Inc. said.
Owners slashed prices by 15 percent in Nevada and by 13 percent in Florida and Arizona in the year through Aug. 1, the San Francisco-based real estate data provider said today. A quarter of home sellers lowered prices at least once, by an average of 10 percent.
Connecticut, Massachusetts, Rhode Island and Illinois had the highest share of homes with price reductions at 33 percent, followed by six states at 29 percent: Oregon, Washington, New Jersey, Minnesota, New Hampshire and Maryland.
Jacksonville, Florida, had the highest rate of reductions among cities tracked as 38 percent of listings there had been cut. Portland, Oregon, followed at 35 percent. Milwaukee, Minneapolis, Boston and Seattle each had 34 percent and Albuquerque, New Mexico, and Chicago had 33 percent.
Prices were cut 22 percent in Detroit; 16 percent in Las Vegas; 15 percent in Miami; 13 percent in New York City and Phoenix; 12 percent in San Francisco and Los Angeles; and 10 percent in Washington and Honolulu, Trulia said.

The largest asset individuals have is their home. With prices eroding, jobs disappearing, hours worked declining, and wages stagnating, it is not surprising that optimism is falling. I wonder why it's not lower. This holiday season is going to be bleak for retailers.

U.S. videogame industry revenue fell more than expected in July led by a sharp drop in console sales. Sales fell 29% to $848M, the fifth straight double-digit drop and nearly twice the -15% analysts predicted.

The stock market has gotten ahead of reality, Pimco's Mohamed El-Erian told CNBC Friday. The co-chief executive officer of the largest bond fund manager in the world, said the US has yet to see a durable and sustainable recovery.

BB&T Corp. is expected to take over Colonial BancGroup Inc. as early as today in what would be the largest bank failure of 2009, according to Bloomberg News Friday, citing an unidentified source close to the matter. The Federal Deposit Insurance Corp.-backed takeover may come as soon as today, Bloomberg reported.

Light sweet crude for September delivery fell $3.01, or 4.3%, to end at $67.51 a barrel on the New York Mercantile Exchange.

U.S. commercial real estate market values fell by more than 17 percent in the first half of the year, outstripping their decline for all of 2008, according to the Investment Property Databank (IPD).

The S&P 500 sank 9 points, or 0.9%, to 1,004. The Dow Jones Industrial Average fell 77 points, or 0.8%, to 9,321. The Nasdaq Compsite sank 24 points, or 1.2%, to 1,986. For the week, the S&P 500 lost 0.6%, the Dow-30 fell 0.5% and the Nasdaq slid 0.7%.

Thursday, August 13, 2009


8/13/09 Foreclosures

Insider sales outpaced insider buys last week 136 to 10. In two weeks, insider sales have topped $2.1B.

Wal-Mart Stores Inc.said Thursday that its fiscal second-quarter profit rose to $3.45 billion, or 88 cents a share, from $3.4 billion, or 87 cents a share, a year earlier. Sales in the quarter ended July 31 fell to $100.9 billion from $102.3 billion. Same-store sales dropped 1.2%, when the retailer had projected sales to be flat to up 3%. Wal-Mart raised the bottom end of its full-year profit forecast to $3.50 to $3.60 a share from $3.45 to $3.60.

U.S. foreclosures rose 7% in July compared to the prior month, a 32% rise from July 2008, RealtyTrac said Thursday. "July marks the third time in the last five months where we've seen a new record set for foreclosure activity," noted James J. Saccacio, chief executive officer of RealtyTrac. "Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we're seeing significant growth in both the initial notices of default and in the bank repossessions."

The Labor Department says initial claims increased to a seasonally adjusted 558,000, from 554,000 the previous week. Analysts expected new claims to drop to 545,000, according to Thomson Reuters.
The number of people remaining on the benefit rolls, meanwhile, fell to 6.2 million from 6.34 million the previous week. Analysts had expected a smaller decline. The continuing claims data lags initial claims by one week.
The four-week average of initial claims, which smooths out fluctuations, rose by 8,500 to 565,000. That reverses six straight weeks of decline.

The Commerce Department said retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.
While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump — the biggest in six months — there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.
The July dip was the first setback following two months of modest sales gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast.
Gas station sales plunged 2.1 percent, due more to falling pump prices than weak demand. Excluding that drop, retail sales would have posted a modest 0.1 percent increase.
Department store sales fell 1.6 percent and the broader category of general merchandise stores, which includes big chains such as Wal-Mart Stores Inc. and Target Corp., posted a decline of 0.8 percent.

- Euro-zone gross domestic product shrank by 0.1% in the second quarter compared to the first three months of the year, the statistics agency Eurostat reported Thursday. Compared to the second quarter of last year, GDP fell 4.6%.

The Oil Drum: "Mexico's finance secretary is warning that falling oil production and prices may push the already cash-strapped nation into its worst economic recession in 30 years.
Mexico's state-owned oil company Pemex currently pumps about 2.6 million barrels a day, down from about 2.8 billion a day last year, Finance Secretary Agustin Carstens told a Senate committee Tuesday. Carstens said he expects output to slide to about 2.5 million barrels a day next year.
Mexico is the third-largest oil supplier to the United States but its reserves are drying up, and Petroleos Mexicanos has been slow to explore deep-water deposits."

General Motors has cast doubt over the long-term future of the Chevrolet Volt by claiming it may not be commercially viable and other rivals may overtake it with superior and more advanced technology.
GM submitted a regulatory filing report to the US Treasury yesterday and CEO Fritz Henderson claimed its “disclosures are consistent with our commitment to remain transparent and to keep the public informed of our progress”.

Nouriel Roubini: "Looking at the recessions of the post-war period, average monthly job losses ranged between 150,000 and 260,000. Average monthly losses in this recession are still at 350,000. For the first four months of the year, the average was at 648,000. The improvement with respect to the first part of the year is clear. The improvement with respect to what we are used to seeing in recessionary periods is much less clear cut. The latest numbers are not exactly what you'd call good news, at least not in absolute terms. In relative terms, however--after skirting a near-depression--markets seem to consider 247,000 payroll losses a breath of fresh air... So hiring is still a long way ahead. The decline in the unemployment rate from 9.5% in June to 9.4% in July was not due to an improvement in the employment situation but is explained by the large decline in the labor force (-422,000). Workers facing hiring freezes, fewer full-time jobs and jobs at lower wages are leaving the labor force....Unemployed workers are falling behind their debt payments, raising defaults on loans and making government mortgage modification programs ineffective. Default rates on various loans have already surpassed the unemployment rate.... Even as borrowing conditions remain tight and home prices continue to fall, the dip in labor compensation will continue to constrain consumer spending, notwithstanding any fiscal stimulus.In a severe, consumer-led recession like this one, the labor market is a leading (rather than lagging) indicator of economic recovery, and the consumer still drives the U.S. economy (private consumption still makes up over 70% of GDP)....Private sector labor compensation slowed to 1.5% in the 12 months ending June 2009, the smallest increase on record. Firms are reducing benefits significantly in the service sector while employers in manufacturing are largely cutting wages....However, the bid to maintain profit margins will backfire on companies in the form of subdued sales as labor incomes suffer....About 53% of the unemployed have been jobless for over three months and around 34% of them for over six months, which is the highest on record. Over 50% of the unemployed have lost their jobs permanently, again the highest on record. Underutilization of workers will lead to an erosion of human capital and a deterioration of labor productivity going forward and will negatively affect the potential growth rate of the economy. Inadequate safety nets, the dearth of labor retraining programs and tight access to student loans suggest that when workers begin looking for work during the recovery, they will face the possibility of skill mismatches. These factors might raise the structural unemployment in the economy from below 5% in 2007 to close to 7% ahead."

The U.S. dollar index stood at 78.24.

"Households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients.

Including federal emergency benefit programs, 9.25 million people received unemployment compensation in the week ending July 25, the latest data available. That's down from a record of 9.35 million the previous week. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.

Barry Ritholtz: "In Real Inflation adjusted terms, these consumers are worse off — much worse off the lower you go down the pay scale — then they were 10 years ago."

Employers initiated 2,994 extended mass layoff events in the second quarter of 2009 that resulted in 534,881 job separations. Both the number of events and separations were record second quarter highs.

Natural-gas futures turned higher Thursday, erasing their losses after the Energy Information Administration reported that supplies rose by 63 billion cubic feet during the week ended Aug. 7. Analysts polled by Platts expected an addition of 65 billion to 69 billion cubic feet. IHS Global Insight projected a storage increase of 62 billion cubic feet. After the data, September natural-gas futures rose 0.1% to $3.481 per million British thermal units. Before the data, the contract was trading down 2% at $3.408 per million British thermal units.

U.S. businesses reduced inventories for a 10th straight month in June, although total business sales posted the first increase in nearly a year.
The Commerce Department said Thursday that businesses cut stockpiles 1.1 percent in June, slightly larger than the 0.9 percent drop economists expected.

CIT Group Inc. said Thursday that it signed an agreement with the Federal Reserve that forces the troubled lender to get permission before paying dividends, borrowing money or buying back shares.

Tom Petruno: "The government has spent $3.01 trillion so far this fiscal year, a jump of $524 billion, or 21%, compared with the first 10 months of fiscal 2008. But that’s only half the problem. The other side is the plunge in taxes and other receipts amid the deep recession. Receipts through July totaled $1.74 trillion, down $354 billion, or 17%, from the same period in fiscal 2008. Personal income tax payments have crashed to $750 billion this fiscal year, a drop of 20.5% from $944 billion in the comparable period of last year. The drop in corporate income taxes has been far more dramatic, as the recession has slashed companies’ bottom lines. Total corporate tax receipts are down 58% this year, to $105 billion....
And spending by Congress itself is up 7.4% in fiscal '09, to $3.97 billion.

There’s no recession in Washington."

Short interests sink to six-month lows after their steepest drop since Sept. 30, and shorted financials declined by 31%.

Gold for December delivery gained $4, or 0.4%, to end at $956.50 an ounce on the Comex division of the New York Mercantile Exchange.

Light sweet crude for September delivery rose 36 cents to end at $70.52 a barrel on the New York Mercantile Exchange.

The Dow Jones Industrial Average rose 35.9 points, or 0.4%, to 9,397.51. The S&P 500 Index advanced 6.91 points, or 0.7%, to 1,012.72, its highest finish since early October, while the Nasdaq Composite climbed 10.63 points, or 0.5%, to stand at 2,009.35.

Wednesday, August 12, 2009

The Level

8/12/09 The Level

The U.S. posted a budget deficit of $180.6 billion in July, the Treasury Department reported Wednesday, pushing the cumulative deficit so far this year up to $1.26 trillion. Outlays were $332 billion in July, the Treasury said, up 26% from last year. Receipts were $151 billion in July, down from $215 billion in June and down 6% from a year ago.

Imports of goods and services into the United States rose for the first time in nearly a year in June, driven by higher oil prices, the government said Wednesday. Excluding oil, however, imports fell to the lowest level in five and a half years. The U.S. trade deficit rose to $27 billion in June from a 10-year low of $26 billion in May, the Commerce Department estimated. Most of the increase in imports and exports in June was driven by higher prices, not higher volumes. In inflation-adjusted terms, the trade deficit fell to the lowest level in nearly 10 years. In June, the goods and services deficit decreased $33.2 billion from June 2008. Exports were down $35.8 billion, or 22.2 percent, and imports were down $69.0 billion, or 31.1 percent.

The International Energy Agency Wednesday raised its forecast for this and next year's global oil demand, citing strong consumption from Asia especially China, the world's second-biggest oil consumer. In a monthly report, the energy adviser to 28 developed countries revised up this and next year's demand forecast by 190,000 barrels a day and 70,000 barrels a day, respectively. Despite the revision, this year's demand is still expected to be 2.7% lower than last year's, the IEA said.

House builder Toll Brothers Inc.said Wednesday that fiscal third-quarter home building revenue fell 42% to $461.3 million, with units down 36% to 792. Net signed contracts in the quarter ended July 31 rose 3% to 837 units, though the value of those contracts fell 5% to $447.7 million. The group's backlog at the end of the quarter was down 47% at $930.7 million. The group said it was the first time in sixteen quarters that its net contracts signed exceeded the prior year's level. "While we have to work very hard for our sales, it does feel as if the fence-sitters are looking for reasons to jump in on the side of buying. Price is no longer the overwhelmingly dominant factor," said CEO Robert Toll.

China's Shanghai Composite Index ended 4.7% lower at 3112.72 Wednesday, a one-month low, as investors took flight amid mounting concerns government-led investment and lending growth are beginning to moderate. The share-price decline comes a day after the People's Bank of China said lending by Chinese banks totaled 355.9 billion yuan ($52.1 billion) in July, a decline of 77% from the prior month, and fixed-asset investment growth eased to 30% in July from a rise of 35% in June. Shenzhen's Composite Index ended 4.4% lower at 1,052.51.

Guy Lerner: "As of yesterday's close, the amount of assets in the bullish and leveraged funds was 2.53 times that in the bearish and leveraged funds, and this represents the highest value since November, 2004."

U.K. unemployment rose to the highest level in 14 years as companies continue to cut jobs even as the worst recession in at least a generation begins to ease.
The number of people seeking work in the three months through June rose 220,000 to 2.44 million, the most since 1995, the Office for National Statistics said in London today. A separate measure showing claims for jobless benefit climbed by 24,900 in July to 1.58 million. The median forecast of 24 economists in a Bloomberg News survey was for a 28,000 increase.

Macy’s Inc., the second-biggest U.S. department-store chain, increased its full-year profit forecast and posted earnings that beat analysts’ estimates after it cut expenses and inventories. Macy’s raised its forecast for annual profit before restructuring costs to as much as 80 cents a share from a maximum of 55 cents predicted earlier.

In the year through the end of March 2009, the number of births in Japan fell for the first time since 2006 to 1.08 million, while there were 1.13 million deaths. Put together, that adds up to a record decline in the population of 45,914. That bests (if that’s the right word) the previous biggest decline of 29,119 in 2007. Just as worrying, the number of Japanese 65 or older increased to a record 28.21 million out of total population of 127 million. Meanwhile, the current recession—Japan’s GDP may shrink 6% this year—will likely make things worse as couples decide to delay or have fewer children.

The Bank of Israel stopped its daily dollar purchase program.

Corn supplies in the U.S., the world's biggest producer, are expected to hit a record high in the market year that begins Sept. 1 as higher yields push up production, the United States Agriculture Department reported Wednesday. Corn production for the market year is projected to rise to 12.8 billion bushels, 471 million bushels higher than the USDA had expected a month ago, as higher yields are expected to more than offset a small reduction in harvested area. Adding stockpiles left from the previous market year, this year's total corn supplies will rise to 14.5 billion bushels, the highest level on record, the USDA said. Front-month corn futures traded around $3.30 a bushel Wednesday, down nearly 20% this year.

Shopping mall operator General Growth Properties Inc. said Tuesday night that a bankruptcy judge has denied a motion by a group of lenders to keep a handful of its subsidiaries out of bankruptcy.

Taylor, Bean & Whitaker, the country's 12th-largest mortgage lender, said in court papers last week a 'bankruptcy filing is imminent' after it was forced to stop mortgage lending on Aug. 5.

Mortgage applications fell 3.5% from last week, MBA says. The average interest rate on 30-year fixed-rate mortgages rose to 5.38% from 5.17%.

The U.S. and Switzerland settled a Justice Department lawsuit against UBS AG seeking the names of Americans suspected of evading taxes through 52,000 secret Swiss accounts.
The governments have initialed agreements and will later sign a final accord, Justice Department lawyer Stuart Gibson told U.S. District Judge Alan Gold in Miami today. Gibson didn’t disclose details of the settlement or say when it would be delivered to Gold. Gibson told the judge July 31 that the countries reached an agreement in principle to settle the case and asked Aug. 7 for more time to negotiate unspecified issues.

Taleb, principal at Universa Investments and coiner of the "Black Swan" term to explain drastic, unpredictable events, said in a live interview that choking debt, continued high unemployment and a system that rewards bad behavior will hamstring an economic recovery.
"It is a matter of risk and responsibility, and I think the risks that were there before, these problems are still there," he said. "We still have a very high level of debt, we still have leadership that's literally incompetent ..."

"They did not see the problem, the don't look at the core of problem. There's an elephant in the room and they did not identify it...Long-term, I'm not comfortable treating a patient for his headaches when he has lung cancer."

The EIA said supplies rose by 2.5 million barrels during the week ended Aug. 7, higher than the rise of 1.2 million barrels expected by analysts polled by Platts. After the data, September crude futures were last up 69 cents to $70.11 a barrel on Globex. Before the data, oil futures traded just above $71 a barrel. The EIA also said that gasoline stocks fell by 1 million barrels and distillate inventories rose by 800,000 barrels last week. Analysts polled by Platts expected a decline in gasoline stocks of 1.7 million barrels as well as a rise in distillate stocks of 900,000 barrels.

Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values.
The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today.
Total existing home sales in the U.S., including single-family houses and condos, fell 2.9% in the second quarter from the year-earlier period, the National Association of Realtors said Wednesday. Sales rose 3.8% from the first quarter, the realtors group said.

“Seniors are one of the most attentive and engaged constituencies, especially on health care issues, and we’ve seen that in the Medicare Advantage programs,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.
A July 31 Gallup Poll found that just 20 percent of Americans aged 65 and older believe health care reform would improve their own situation, noticeably lower than the 27 percent of 18- to 49-year olds and 26 percent of 50-to-64-year-olds who say the same.
The senior citizen problem could pose a serious problem for the 2010 election cycle.
Older Americans turn out in much higher numbers than other age groups during midterm elections. In 2006, the 55-and-older age group still had the highest voting rate of any age group, at 63 percent, even though younger voters turned out in record numbers for a midterm, according to census data. Half of all votes cast in the 2006 midterms were from voters age 50 or older, according to AARP. And one out of four were AARP members.

The Dow Jones Industrial Average ended at 9,361.61, up 120.16, or 1.3%. The S&P 500 Index gained 11.46 points, or 1.2%, to stand at 1,005.81, while the Nasdaq Composite rose 28.99 points, or 1.5%, to 1,998.72.

Crude for September delivery rose 71 cents to $70.16 a barrel on the New York Mercantile Exchange.

"Economic activity is leveling out," the FOMC said. I guess it depends what level is used.

U.S. Natural Gas Fund said although it received regulatory clearance to register an additional 1 billion shares, the ETF's management has decided the fund won't resume issuing shares for now, according to a filing Wednesday. In explaining the move, management cited "current and anticipated new regulatory restrictions and limitations that have been and may be imposed by the Commodity Futures Trading Commission" and commodity exchanges. The ETF has seen its assets surge to more than $4 billion, fueling speculation the fund is pushing natural-gas prices higher. The fund grew so fast that earlier this summer it was forced to halt the creation of new shares while it waited for regulatory approval to increase the number of shares outstanding.

Tuesday, August 11, 2009

Fire Away

8/11/09 Fire Away

The Labor Department said second-quarter productivity jumped 6.4% and unit labor costs fell 5.8% and were due to hours worked declining faster than output.The rise in productivity was the fastest in the nonfarm business sector in nearly six years. Unit labor costs -a key indicator of inflationary pressures - plunged at a 5.8% rate, the largest decline in nine years.

George Ure: "If productivity is up 6.4% annualized, and sales are flat (after backing out inflation) or even down then you tell me, do you need more people, or less, to make things?

The answer? Hooray! We can fire more people! "

Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, said.

Chain-store sales for the week ended Aug. 8 rose 0.4% 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 were flat. Sales "were helped by the confluence of the later back-to-school starts and the 10 states that had later and non-comparable state sales tax holiday periods compared with last year," said Michael Niemira, ICSC's chief economist. "The sales performance should improve as comparisons begin to get easier and the economy is showing signs of recovery." ICSC forecast August comparable sales to decline 3.5% to 4%.

China's money supply, as measured by M2, expanded 28.4% in July from the same month a year earlier, according to data released Tuesday by the People's Bank of China. The central bank also said new loans for July totaled 355.9 billion yuan ($52 billion), easing from June's issuance of 1.53 billion yuan, and bringing total lending growth this year to 7.7 trillion yuan, a rise of 173.2% from the first seven months of last year.

China’s exports and new loans tumbled in July and industrial output rose less than estimates, underscoring government concern that the world’s third-biggest economy is yet to establish a solid recovery.
Exports fell 23 percent from a year earlier, the customs bureau said. Industrial production gained 10.8 percent, the statistics bureau reported. New loans plunged to 355.9 billion yuan ($52 billion), less than a quarter of June’s level, the central bank said.

China's imports of crude oil and iron ore hit a record high in July, customs data showed Tuesday, as the nation's $586 billion stimulus plan continued to push up commodities demand. Crude oil imports jumped 18% from a month ago to 19.63 million metric tons last month, or about 4.8 million barrels a day, according to monthly data released by China's General Administration of Customs. Iron ore imports rose 5% to 58.08 million metric tons. China, the world's second biggest oil consumer and the No. 1 user of iron ore, spent $13.8 billion in the imports of the two commodities.

In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses - as many economists fear - the banking system could again lose its footing, the panel says in a report to be released Tuesday.
"The financial system (remains) vulnerable to the crisis conditions that (the bailout) was meant to fix," the panel wrote in a draft copy of Tuesday's report.
The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute.
More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.
“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.
July's number is the highest monthly bankruptcy total since the October 2005 bankruptcy reform aka the Bankruptcy Abuse Prevention and Consumer Protection Act.

Demand for OPEC crude will average 27.97 million barrels per day (bpd), down 480,000 bpd from 2009, the Organization of the Petroleum Exporting Countries said in a monthly report. It previously expected a fall of 380,000 bpd.

China National Petroleum Corp. and Cnooc Ltd. have proposed paying at least US $17 billion for all of Repsol YPF SA's stake in its Argentine unit YPF SA, two people close to the talks said.

Bill Bonner: "The stock market is in a bear market rally, not a genuine bull market. The economy is entering a long depression…possibly a ‘great’ one."

The downward trajectory of Bay Area home values was slightly less steep in June than it was a year ago, according to a study being released today by
The grinding recession, however, is denting home prices in areas that once seemed immune - such as San Francisco and Marin counties - where values have slid more than 15 percent for the past two quarters compared with the previous year., a real estate valuation site, reported that the nine-county Bay Area saw the sharpest home-value declines in January, when houses were valued at about 20 percent lower than the previous year.
But the erosion was slower in the second quarter, which concluded at the end of June, as Zillow estimated a 17.7 percent drop compared with last year.
Marin County's mid-range home value through June was $687,661, San Francisco's was $657,180, and San Mateo's was $629,800, Zillow reported.
In contrast, the Bay Area mid-range value for last quarter came in at $466,757, and the national mid-range value was $186,500. Zillow calculated that in the second quarter, 30 percent of all single-family homeowners with a mortgage were "underwater," meaning that they owe more on the mortgage than their home is currently worth. That number was 29 percent in the first quarter of 2009.

Maguire Properties Inc., one of the region's largest commercial landlords, posted widening losses Monday and said it was about to default on seven prime office buildings in Los Angeles and Orange counties. It is defaulting on loans worth more than $1 billion.
Maguire Properties hopes that by giving back the keys to properties for which it overpaid at the peak of the last boom, it can reduce debt enough to keep the company solvent, Chief Executive Nelson Rising said in an interview Monday.

Troubled lender CIT Group Inc said on Tuesday it has delayed filing its second-quarter report with regulators and said if it could not complete its debt tender or arrange other financing, it would file for bankruptcy.

Britain's trade deficit widened a little more than forecast in June, official figures showed Tuesday, suggesting that weakness in the pound is not benefiting exporters quite as much as expected.
The Office for National Statistics said that the goods trade gap rose to 6.45 billion pounds ($10.60 billion) from 6.17 billion pounds in May. Economists had forecast a deficit of 6.2 billion pounds.

For its second quarter Wal-Mart is expected to earn about 86 cents a share.

Wholesale inventories for June decreased 1.7%, which is a sharper decrease than the 0.9% decrease that had been widely expected. The previous figure was revised downward to reflect a 1.2% decrease. Inventories have fallen in each of the past 10 months.

Typhoon Morakot "dumped more rain on Taiwan than in any 48-hour period since records began 100 years ago."

The September crude-oil futures contract was off $1.10 at $69.50 a barrel in New York while September natural gas was off 9 cents at $3.55 per million British thermal units.

Russia's economy shrank by 10.9% in the second quarter compared with the same period a year ago, according to media reports Tuesday that cited initial data from the Russian statistics office. In the first quarter, gross domestic product declined by 9.8% year-on-year.

More than 18.7 million homes, including foreclosures, residences for sale and vacation homes, stood vacant in the U.S. during the second quarter. That compared with 18.6 million a year earlier, the U.S. Census Bureau said July 24. Foreclosure re-sales made up 22 percent of all home sales in June. 29.2 percent of sellers sold homes in June for less than the previous purchase price.

“Buy American” rules that Congress included in the U.S. economic stimulus package don’t endanger free trade with Canada, President Barack Obama said after meeting with the leaders of Canada and Mexico.
“This has in no way endangered the billions of dollars of trade taking place between our two countries,” Obama said yesterday, noting that Canadian Prime Minister Stephen Harper raises the issue “every time I see him.”
The $787 billion stimulus measure approved in February stipulates that products purchased with the funds must be made in the U.S. That’s caused friction between the U.S. and Canada, its largest trading partner.

Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index rose to 50.3 in August from 46.3 in July.

The Dow Jones Industrial Average stood at 9,241.45, off 96.5 points, or 1%. The S&P 500 Index fell 12.75 points, or 1.3%, to 994.35, with the broad market gauge finishing under 1,000 for the first session in three. The Nasdaq Composite declined 22.51 points, or 1.1%, to 1,969.73.

Realogy Chief Executive Richard Smith said it is unclear the U.S. housing market is recovering.
"While the rate of decline in home sales is slowing and there are emerging positive signals, given the macroeconomic headwinds it is premature to conclude that the housing market has started its rebound," he said.

Monday, August 10, 2009

Structural Difficulties

8/10/09 Structural Difficulties

China is now Africa’s largest trading partner.

John Hussman: "Call me skeptical. But if you look carefully at the economic data that shows improvement, and correct for the impact of government outlays, it is difficult to find anything but continued deterioration in private demand and investment. What we do see is a government that has run what is now a trillion dollar deficit year-to-date, representing some 7% of GDP. That sort of tab will undoubtedly buy some amount of Cool-Aid, but it has been something of a disappointment to watch how eagerly investors have guzzled it down. It is not at all clear that short-term, deficit-financed improvement necessarily implies sustained growth in the context of a deleveraging cycle. This is like somebody borrowing money from their Uncle and then celebrating that their income has gone is dangerous to infer that structural difficulties have vanished simply because a market enjoys a strong post-crash advance.."

The top U.S. commander in Afghanistan said the U.S. will increase troop levels in Afghan population centers in response to the Taliban's growing momentum. Gen. McChrystal warned U.S. casualties will remain high.

Groceries eat up 12.5 percent of American families' budgets, on average, according to the Bureau of Labor Statistics.

Dutch trading firm Van der Moolen Holding NV filed for protection from creditors on Monday, citing liquidity problems amid a slump in earnings.
It reported a net loss of euro10.5 million ($15.07 million) for the first half of 2009, compared with a profit of euro12.7 million in the same period a year earlier, as sales fell 73 percent to euro24.9 million.
Van der Moolen, once one of the larger "specialists" on the NYSE, ran into trouble this decade as electronic trading platforms took over their role.
Specialists provide liquidity and act as brokers for stocks, bonds and other securities. Van der Moolen sold its loss-making specialist operations in the U.S. to Lehman Brothers for $0 in December 2007.

Washington Post: "Senior citizens are emerging as a formidable obstacle to President Obama's ambitious health-care plans.
The discontent in the powerful, highly organized voting bloc has risen to such a level that the administration is scrambling to devise a strategy to woo older Americans."

China’s property sales surged 60 percent by value in the first seven months, adding to concern that record lending will create a real-estate bubble in the world’s fastest-growing major economy.
Sales accelerated after a 53 percent gain in the first half from a year earlier, the statistics bureau said in a statement on its Web site today. Real estate investment rose 11.6 percent, up from 9.9 percent in the six months to June 30.
Home prices in 70 major cities advanced 1 percent in July from a year earlier, the biggest increase in nine months, the National Development and Reform Commission said today in a separate statement.

The U.S. price of gasoline jumped nearly 16 cents a gallon during the past two weeks to $2.64.

That's according to the national Lundberg Survey of fuel prices released Sunday.

McDonald's said sales at U.S. restaurants open at least 13 months rose 2.6 percent, aided by its new McCafe espresso-based coffee drinks.

The Bank of England will downgrade its growth forecasts and issue a warning this week that the UK economy risks slumping into a debt deflation trap, the Telegraph reported on Monday.

Government bonds are a "very problematic" investment right now because of the large number of issuances and because they have been pushed down by the latest rally in stocks, said Uwe Parpart, chief economist and strategist at Asia Cantor Fitzgerald.

"For the moment, be very, very careful with government bonds," Parpart advised CNBC viewers Monday.

"The hotter the waitresses, the weaker the economy," Hugo Lindgren writes in New York Magazine. He has developed the Hot Waitress Index, under the theory that attractive people land great jobs in sales...when there are jobs in sales. When the economy contracts, they trade down to waiting tables.

Rob Hanna: "One notable from Friday was the extremely low reading in the CBOE Equity Put/Call Ratio. It closed at 0.49 – more than 31% below its 200-day moving average. In June I looked in detail at other times the Equity Put/Call closed more than 25% below its 200ma. It suggested a bearish edge for the following day has existed since the end of 2007."

The Hill: "Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).
Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July."

Mike Shedlock: "Right now we know that the jobs picture still sucks, that credit card defaults are still rising, that bankruptcies and foreclosures are still rising and the budget deficit is out of control.
Furthermore, we can easily see the massive $14 trillion balance sheet of the Fed while the benefit is debatable. The "unseen" is the massive set of problems down the road unwinding the Fed's positions. Those consequences are without a doubt coming down the road.
Presuming we are indeed "On the Brink of Recovery", what PE are you willing to pay given the recovery has not even started, yet we still face the seen and unseen consequences at highlighted above?"

According to Bloomberg, options traders are increasing bets that the steepest rally in the Standard & Poor’s 500 Index since the 1930s won’t survive September...
Traders are betting the VIX, a gauge of expected stock swings, will increase 13 percent in the next five week....That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years...
“It’s a danger sign,” said Ronald Egalka, a 36-year options trader who oversees $8 billion as chief executive officer of Rampart Investment Management in Boston. “People expect volatility to pick up in the future, and that implies that there’s going to be a downward movement in the market.”

Prepare for plenty of volatility and a 20-30% drop in global stocks, says Templeton's Mark Mobius. "When you have these rapid increases, almost without correction, you will definitely have a correction at some point."

Rebecca Wilder: "Banks are writing down the foreclosures, where many of the loans are underwater (i.e., the loan amount exceeds the value of the home). Banks will increasingly be insolvent, as the value of the collateral (the home) is worth less than the mortgage itself. More banks will fail - I'm just surprised that the number is not greater than 97 to date."

"For the first time in more than 28 years, the raw sugar price in New York was pushed beyond the threshold of 21 cents per pound by concerns over a severe sugar supply shortage," said analysts at Commerzbank in a note to clients. "The International Sugar Organization forecasts that sugar production will be substantially lower than the demand, which proved to be recession-proof." In recent trading, ICE sugar futures were last up 2.9% to 21.42 cents a pound.

In July, The Conference Board Employment Trends Index (ETI)™ remained at the same level as the revised figures for May and June. The index stands at 88.3 and is down 20.1 percent from a year ago.
"The Employment Trends Index has been flat in the last three months," said Gad Levanon, Senior Economist at The Conference Board. "This suggests that we are getting closer to the point when employers are no longer cutting their workforce. However, since we are expecting a weak economic recovery, and given the record number of involuntary part-time workers – many of whom are likely to move to full-time positions before new employees are hired – we do not expect significant job growth over the next year."

The Federal Reserve Bank of New York bought $6.594 billion in Treasurys on Monday, the first of two operations this week. Dealers submitted $22.002 billion in debt maturing between 2012 and 2013 to the Fed. The U.S. central bank is more than two-thirds of the way through the $300 billion in U.S. debt it promised in March to buy in an effort to keep borrowing costs, particularly for companies and homebuyers, affordable.

According to the WSJ, Houston-based Apache Corp. has agreed to provide natural gas for export to Asia through a proposed project in Canada, the latest sign that huge gas discoveries in North America are reshaping global energy markets.
Kitimat LNG Inc., the Canadian company planning to build the liquefied-natural-gas export terminal in Kitimat, British Columbia, will announce Monday that Apache has become the second major North American gas producer to sign on to the project. Last month, another Houston-based gas producer, EOG Resources Inc., signed a similar deal.

More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.
“Rising unemployment on top of high pre-exiting debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.

Fluor sees 2009 EPS of $3.80 to $4.10.

Volume was low on the New York Stock Exchange, with 1.09 billion shares changing hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq about 1.86 billion shares traded, well below last year's daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 8 to 7, while on the Nasdaq, about 14 stocks fell for every 13 that rose.

The Dow Jones Industrial Average fell 32.12 points, or 0.3%, to end at 9,337.95, off an intraday low of 9,290.34. The S&P 500 index was down 3.38 points, or 0.3%, at 1,007.1, off a low of 1,000.99. The Nasdaq Composite dipped 8.01 points, or 0.4%, to 1,992.24.

Spot gold down $1.30 to $944.30/troy ounce. Sept. crude up 12 cents to $70.72/barrel.

The Pause

8/9/09 The Pause

Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities.

Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News.

Tudor said the 47 percent gain in the Standard & Poor’s 500 Index of the largest U.S. companies since March 9, when it fell to a 12-year low, is a “bear-market rally.” The index topped 1,000 for the first time in nine months this week after companies reported better-than-expected profits.

“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” Tudor said. “We are not inclined to aggressively chase the market here. Many doubts remain about the sustainability of this recovery, most prominently the weakness of household income growth.”

Barry Ritholtz: "“Either it’s a free market and there’s no regulation and if you screw up you go out of business, or it’s a nanny state that hyper-regulates you but guarantees that you won’t go out of business. You cannot say we want to be left alone until we’ve completely screw up and then you guys have to come in and rescue us. That just doesn’t work.”

The Oil Drum: "US Secretary of State Hillary Clinton on Sunday shifts the focus of her Africa trip to business as she works to ensure a steady oil supply from key producer Angola and counter China's growing influence.

The top US diplomat was due to make a one-day visit to the southern African nation, which vies with Nigeria as the continent's biggest oil producer but where two-thirds of the population lives on less than two dollars a day."

China will maintain its current macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to experience fallout from the global recession, Premier Wen Jiabao said.

The effect of some of China’s stimulus policies will weaken over time, and the economy is still under pressure from declining demand for exports, Wen said in a statement on the central government’s Web site today.

“We are seeing more people with homes that were on the market for $4 million to $7 million that are not selling and they are calling us,” said Jim Gall, president of Auction Company of America.

According to rigzone, Suncor Energy reported that production at its oil sands facility during July averaged approximately 304,000 barrels per day (bpd). Year-to-date oil sands production at the end of July averaged approximately 292,000 bpd. Suncor is targeting average oil sands production of 300,000 bpd (+5%/-10%) in 2009.

Baker Hughes reported that the international rig count for July 2009 was 974, up 7 from the 967 counted in June 2009, and down 118 from the 1,092 counted in July 2008. The international offshore rig count for July 2009 was 275, up 6 from the 269 counted in June 2009 and down 37 from the 312 counted in July 2008.

The U.S. rig count for July 2009 was 931, up 36 from the 895 counted in June 2009 and down 1,001 from the 1,932 counted in July 2008. The Canadian rig count for July 2009 was 175, up 50 from the 125 counted in June 2009 and down 237 from the 412 counted in July 2008.

Publicis struck a $530 million deal with Microsoft to buy the Razorfish ad agency and boost its position in digital communications, the world's third-largest communications group said on Sunday.

Jim Kuhnhenn: "If President Barack Obama wants to take the measure of his opposition, he only has to glance across Lafayette Park from the White House. There, behind 10 massive Corinthian columns, is the headquarters of the U.S. Chamber of Commerce — a leading critic of the administration's health care and banking overhaul plans.

A fortress for the business community, the chamber has emerged as a multitasking, multimillion-dollar defender of the private sector against presidential initiatives. As lawmakers spend time at home during their August vacation hearing from constituents, the chamber is adding its own heat to the season.

There's a $2 million campaign against Obama's proposals that would make the government a competitor in the health insurance market. It's trying to make the case for insurers, which oppose a government-run insurance alternative but want to work with the White House to mandate coverage for all.

The chamber also has become a pointed critic of a White House plan to create a consumer finance protection agency and is assembling finance sector trade groups to push for a delay in legislation.

With 3 million members, the chamber is working with local and regional affiliates on letter-writing campaigns to lawmakers and plans to track their public appearances to make sure they hear the chamber's point of view.

The summer effort is just a start.

The group also is readying an ambitious $100 million campaign to advocate for businesses and a free enterprise system, which chamber officials believe is under attack. The chamber is putting lawmakers on notice: the issues campaign will be timed to lead into the 2010 congressional elections.

"You've got an administration pushing the federal government into a bigger and bigger footprint," Bruce Josten, the chamber's chief lobbyist, said in an interview. "CEOs start to get concerned when they see that. We felt we needed someone to step into this space."

According to a survey by Bigresearch, more than 1 in 3 consumers (36.2%) said they would spend less this holiday season than last year. Just 2.7% of consumers said they would spend more, and 26.1% plan to spend the same. (Other totals: 29.1% say it's too early to know, and 5.8% don't celebrate the season.)

Mike Burk: "The decline in OTC NH on an up day suggests there may be a little weakness in the next few days, however, the recent highs were confirmed by most of the indicators so higher highs in the intermediate term should be expected.
I expect the major indices to be lower on Friday August 14 than they were on Friday August 7."

Guy Lerner: "In sum, the bulls remain in control, and despite the bullish extremes in investor sentiment, it will likely be some time before the market rolls over. There may be a lot of believers, and in general, this is not good for higher prices, but these buyers won't give up so easily. As I am not one to chase prices higher, I would still wait for a more risk adjusted entry."

Sunday, August 09, 2009

Musical Chairs

8/8/09 Musical Chairs

Thomas Jefferson: "A government big enough to give you all you want is strong enough to take everything you have."

Martin Hutchinson: "A Chinese economic collapse, which might well be accompanied by an Indian balance of payments crisis due to that country's perpetual government overspending, would cause a sharp "second dip" in the global economy. The amount of foreign capital tied up one way or another in the Chinese economy is now so great that a Chinese market collapse would have global repercussions in an already weakened financial system. Furthermore, it is by no means certain that China would quickly resume its role of global growth engine; Japan didn't, after all.

China could be different – it always has been. But at some stage, the mysterious Chinese economy and its thoroughly opaque banking system must respond to the same constraints that affect the rest of us. Chinese economic policy has been more stimulative than ever before, its bank lending more reckless. If China's run of apparently miraculous immunity from normal economic forces is finally about to end, the result will not be pretty for any of us."

According to the WSJ, last year, House members spent about 3,000 days overseas on taxpayer-funded trips, up from about 550 in 1995, according to the Journal's analysis.

Lawmakers disclosed they spent about $13 million traveling the world last year, a tenfold increase since 1995, when travel records first were made available electronically. The travel costs are covered by an unlimited fund created by a three-decade-old law.

U.S. bank failures rose to 72 this year with the collapse of two lenders in Florida and one in Oregon amid the worst economic slump since the Great Depression. 3,069 branches have closed since the IndyMac closure last year and another 21-branches were involved in this week's closings.

Ambac Financial Group Inc., the second-largest bond insurer, posted a net loss for the second quarter of $2.4 billion after increasing its projections for claims on bonds backed by home-equity loans.

The biggest U.S. television networks are posting declines of 15% or more in advertising commitments for the prime-time season starting next month, based on results at CBS and NBC.

Doug Noland: "My secular bearish thesis rests upon a major assumption: The U.S. economy is sustained by $2.5 Trillion (or so) of new Credit. Only this amount will stem a downward spiral of asset prices, Credit, incomes, corporate cash flows and government finances. On the other hand, if forthcoming, the $2.5 Trillion of additional – chiefly government-directed and non-productive - Credit will foment problematic Monetary Disorder. In simplest terms, another bout of Credit inflation leads further down the path of unhinged market prices, destabilizing speculation, and unwieldy flows of finance. The stock market has become illustrative of what we might experience in the way of Monetary Disorder. Speculation has returned with a vengeance, galloping blindly ahead of fledgling little greenish shoots. Those of the bullish persuasion contend that the marketplace is, as it should, simply discounting a rosy future. I would counter that problematic market dynamics have taken over, with prices increasingly disconnected from reality. In short, the market is in the midst of one major short squeeze...the stock market is indicative of the current dysfunctional financial backdrop. At the end of the day, the financial system must be capable of effectively allocating finance and real resources throughout the economy. I would argue that this is not possible for a system that congenitally misprices risk and distorts financial asset prices. Today’s stock market will inherently finance mainly speculative Bubbles and fragility. And the core systemic problem, the maladjusted "Bubble economy," well, the financial backdrop only worsens the situation....I see confirmation everywhere that policy and market dynamics are working in concert to sustain the existing financial and economic structure. I have huge doubts it will work and no doubt about the risks of failure."

247Wallst: "The Administration has a bit of a problem. The cap on the national debt, which must be approved by Congress, is $12.1 trillion. The Treasury is borrowing money so fast to fund the stimulus and budget deficits, that it will push up against the level in about two months.

With many members of Congress against the rising federal red ink, the battle lines are likely to be drawn with the stakes being how much higher the limits on federal borrowing will be allowed to go.

According to Reuters, Treasury chief Geithner sent Senate majority leader Harry Reid a letter saying, “It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

The Democrats almost certainly have the votes to move the cap higher, but they are giving the Republicans another chance to make the case that borrowing is out of control....The current request to raise the debt ceiling won’t be the last."

The Oil Drum: "Closing Utah state offices on Fridays has resulted in a 13 percent reduction in energy use according to an internal analysis of the nation’s most expansive four-day workweek program.

Since last August, about 17,000 of the state’s 24,000 executive branch employees have been working 10 hours a day, four days a week in an effort to reduce energy consumption and cut utility costs….

The state estimates that, collectively, employees will save between $5 million and $6 million annually by not commuting on Fridays and the initiative will cut greenhouse gas emissions by more than 12,000 metric tons."

Ian Morris, chief U.S. economist, HSBC: “It’s not all that often that 247,000 job losses will be met with mass celebration, but because it’s all about what actual outcomes are relative to expectations, this is one of those times. To add icing to the cake, the previous two months were revised higher by 43,000. … But the fall was attributable to a fall in the participation rate from 65.7% to 65.5%, which resulted in the labor force falling by 422k (the household measure of jobs fell by 155K). If the participation rate had stayed unchanged from June, the unemployment rate would have hit a new cycle high of 9.7% instead.”

The city of Seattle is proposing that city workers agree to take 10 days of furlough next year to prevent layoffs, according to the office of Mayor Greg Nickels.
The proposal would affect about 6,700 workers.

Sir John Templeton: "It is impossible to produce a superior performance unless you do something different from the majority."

Japanese banks should use a state- backed share purchase program to reduce stock holdings that caused $10 billion of losses at the nation’s three biggest lenders last year, the country’s top financial regulator said.

Ty Andros: "Abraham Lincoln once said:

* You cannot help the poor by destroying the rich.
* You cannot strengthen the weak by weakening the strong.
* You cannot bring about prosperity by discouraging thrift.
* You cannot lift the wage earner up by pulling the wage payer down.
* You cannot further the brotherhood of man by inciting class hatred.
* You cannot build character and courage by taking away men's initiative and independence.
* You cannot help men permanently by doing for them, what they could and should do for themselves."

The Obama administration on Friday asked the Supreme Court to block the release of disturbing pictures of detainee abuse on grounds their disclosure could incite violence in Afghanistan and Iraq and endanger U.S. troops there.

The administration took the issue to the high court after President Barack Obama in May reversed a decision to stop fighting the release of the photographs.

They were ordered released as part of a Freedom of Information Act lawsuit brought by the American Civil Liberties Union.

The Bush administration had also fought their release, and lost.

The Obama administration is considering imposing tariffs on some Chinese-made tires that could effectively ban them from the United States, a proposal that is shaping up to be the first major test trial of the White House's trade policy toward China.

The case stems from a petition filed by the United Steelworkers, who blame surging Chinese tire imports for the loss of more than 5,000 U.S. jobs since 2004.

In its investigation of the tire petition, the International Trade Commission found that between 2004 and the end of 2008, imports of passenger vehicle tires from China increased 215 percent by volume, while production by the U.S. tire industry fell 26.6 percent, net sales were down 28.1 percent, and more than 5,000 domestic jobs were lost.

Chinese tire producers and suppliers were in Washington this week to try to persuade the White House to reject the tariff hike, calling them a form of protectionism that would put 100,000 Chinese out of work without creating jobs in the United States.

"U.S. tire makers will not shift production back to the United States because they have their strategy. They want to produce high-profit tires in the United States and produce economy tires in China so even if the United States closes the border . . . they can not add more jobs," said Mary Xu, deputy secretary general of the China Rubber Industry Association.