Saturday, August 22, 2009


8/22/09 Clunkers

Failure Friday claims First Coweta, of Newnan, Ga., and CapitalSouth Bank, of Birmingham, Ala., to bring the 2009 toll to 80. The combined cost of the two to the FDIC's Deposit Insurance Fund is an estimated $199M.

Guaranty Bank of Austin, Tex. became the 81st bank failure of 2009 after it was closed by Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corp. as receiver, the federal agency said late Friday. The FDIC said it has entered into a "purchase and assumption agreement" with BBVA Compass of Birmingham, Ala. As of June 30, Guaranty Bank had total assets about $13 billion and total deposits of about $12 billion.

George Ure: "The number of bank branches closed since IndyMac really got things going last year, is up to 3,610. Since this doesn't count the ATM's involved, nor does it count online banking use, a direct comparison the 1930's Depression (1) and the Second Depression (SD) may be elusive."

Floyd Norris: "As the United States rolls up record budget deficits, Asian countries are showing a reduced willingness to finance the debt.
Figures released by the Treasury Department this week indicated that China reduced its holdings of Treasury securities by $25 billion in June, the most China had ever sold in a month....
In May, China increased its holdings by $38 billion, according to the Treasury figures.
Nonetheless, the decline highlighted a fact shown in the accompanying graphics: Asia’s appetite for Treasury securities is not growing as fast as it once did. That means the United States will have to turn to other buyers, including American citizens, who are now saving as they did not do during the boom years, to finance the deficits."

Doug Noland: "My view differs from both the bullish consensus reflation viewpoint and that of the protagonists/ “deflationists.” And, to cut to the chase, I do believe a period of global reflation can evolve in the face of weak U.S. consumption. And while a troubled bond market would likely stop reflation in it tracks, a downtrodden American consumer is an impediment to be hurdled with a powerful boost from ultra-easy global “money.” Indeed, deep underlying U.S. fragility – and resulting market assurance that the Fed is indefinitely wedded to ultra-loose policy – is a critical facet of my global reflation thesis.
Fundamentally, it is my view that the nexus of global reflation emanates from irreparable structural impairment to the international dollar reserve system. The global dollar monetary “regime” some time back stopped functioning as a disciplining or restraining force for Credit systems around the world. Today, even in this nervous post-crisis landscape, the prospect of an unending expansion of dollar reserves works to foment synchronized Credit and speculative excesses. And the deeply maladjusted U.S. “Bubble” economy ensures heavy ongoing non-productive U.S. debt issuance that manifests as enormous trade and speculative dollar financial flows - to further inundate the saturated world. The unfolding breakdown in this dollar “system” is the genesis of global inflationary forces....I’ll posit that artificially low interest rates everywhere are global reflation’s greatest champion. It is the nature of Bubbles that the longer markets misprice risk the greater the pain when the Bubble eventually bursts. Credit and market analysis could not be more challenging or fascinating."

S&P said 201 borrowers with $453.1bn in debt have defaulted this year, exceeding the 126 defaults for all of 2008, which comprised debt worth $433bn.

GM's board rejected management's proposal for a sale of its Opel unit, asking for new details and a reconsideration of a second bidder.

Jim MCTAGUE: "OBAMACARE HAS KICKED THE BUCKET. IT IS pushing up daisies; has shuffled off this mortal coil. The proposal is deader than Monty Python's famed dead parrot.
ObamaCare was put to sleep by a death panel: The American public. It has carefully read the three House bills and one Senate bill on the Internet and consequently is shaken. Numerous polls show a majority of persons desire Congress to scrap the plan and begin anew. A recent Rasmussen Report survey found that 54% of Americans don't want Congress to vote on the measure this year.
It's not merely the loud-mouths at the town brawl meetings who are opposed to the current bills; so are many open-minded people who have read the legislation cover to cover. They find it vague and confusing and consequently, very worrisome. They cannot decide whether they are reading boilerplate with a foundation of sound case law or the hasty concoction of exhausted aides whose ideological bosses want to railroad the plan through both houses by the fall."

Eric Savitz: "A recovery in IT spending may take a while." What does that mean for tech stocks?

Guy Lerner: "The Dollar Index has closed below the low of a positive divergence bar, and I am expecting prices to accelerate lower over the next 4 months. A weekly close above the pivot low point at 79.46 would be a reason to re-evaluate this position...
As far as equities are concerned, well I am starting to sound like a broken record: the market is overbought, oversubscribed (i.e., too many bulls) and has limited upside potential. "Where do we go from here?" is a refrain I often ask myself, and I am starting to think about what happens when investors rush for the exits. From a reward to risk perspective, this isn't my "cup of tea". The market remains range bound albeit we are at the upper limit of that range.
If the Dollar Index continues its downward spiral, then I would expect commodities, gold, and long term Treasury yields to out pace equities. As I have shown in the past, when the trends in these assets are strong, equities face a stiff headwind."

Coming this fall, a clunkers-type program to boost sales of energy-efficient home appliances will authorize rebates of $50 to $200. How about a cash for elected officials do over? Hand in your clunker vote and receive someone who keeps his/her word and promises. If they don't keep promises, promise not to pay taxes.

“Among chief executive officers who expect profits to increase, 56 percent believe cost reductions will drive profits up, while 33 percent cite market/demand growth as the main source of improvement. Only 7 percent cite new technology as a driver of growth and the remaining 4 percent cite price increases.”Brian Pretti observes: "Confidence surveys are for show, business spending, revenue gains and actual hiring are for dough."

Earthfiles: " NOAA's National Climatic Data Center in Asheville, NC, reports Earth’s average ocean surface temperature worldwide in July 2009 has broken all records at 62.6 degrees F. That is 1.06°F above
the 20th century average of 61.5°F. Heat is most noticeable near the Arctic, where water temperatures
are as much as 10 degrees F. above average. Right: Leed's University reports that West Antarctica's
largest glacier, Pine Island, has thinned four times more quickly than expected over a decade.
If the melt rate continues or accelerates, projected sea level rise for this 21st Century
could be higher than the projected 20 cm (8 inches)."

Friday, August 21, 2009

Clunkers: A Clusterf---

8/21/09 Clunkers: A Clusterf---

China is now Japan's largest export market, surpassing the U.S. despite a drop in overall trade, according to recent figures from the Japan External Trade Organization. Japan's exports to China fell 25.3% during the first half of the year to $46.5 billion, the agency said, but due to a steeper drop in shipments to the U.S., China became Japan's largest trade destination for the first time. According to a report Thursday in China Daily, China is also Japan's largest source of imports.

Meredith Whitney, the analyst who predicted that Citigroup Inc. would cut its dividend last year, said the number of U.S. bank failures will quadruple as lenders struggle with bad loans.
“There will be over 300 bank closures,” Whitney said in an interview with Bloomberg Television from Jackson Hole, Wyoming. “The small-business owner on Main Street continues to see liquidity come away.”

The Washington Post-ABC News survey found that less that half of Americans — 49 percent — say they believe the president will make the right decisions for the country. That's down from 60 percent at the 100-day mark of the Obama presidency.
The poll published Friday says Obama's overall approval is 57 percent, 12 points lower than it was at its peak in April. Fifty-three percent disapprove of the way he's handling the budget deficit and his approval on health care continues to deteriorate.

The dollar’s role as a good store of value is “questionable” and the currency has a high degree of risk, said Nobel Prize-winning economist
Joseph Stiglitz.
“There is a need for a global reserve system,” Stiglitz, a Columbia University economics professor, said at a conference in Bangkok today. Support from countries like China should ensure orderly discussions on a new reserve system, he added.

24/7WallSt: "Jay Brinkmann, MBA’s Chief Economist said, “While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime
ARM loans . The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase.”
The well-to-do are having trouble making their house payments which should send a shiver through the spines of executives at banks and
mortgage loan firms. These companies are just beginning to recover from the subprime mortgage fiasco and are suddenly faced with a new wave of trouble.
There are probably several reasons for prime mortgages hitting a troubled patch. Unemployment has not spared the middle and upper classes. It is probably harder for someone who has lost a $100,000 job to find one quickly than it is for someone making $25,000. The universe of jobs gets smaller as people move up the compensation ladder. Added to that is the fact that prime borrowers had fairly valuable homes, at least at one point. That may have allowed them to borrow relatively significant amounts of money though
home equity loans . Many of those loans are underwater, further pressuring owners."

The King Report: "Is Bernanke purposely aiding & abetting the usual market manipulation that occurs during expiration
week? In July, Ben poured $80.2B into the system, mostly by monetizing MBS, during expiration week, igniting a huge rally. The Fed balance sheet contracted for most of June and July before Ben’s gambit.
For the week ended Wednesday, Ben increased the
Fed balance sheet $46.157B. Ben monetized
$66.646B MBS this time."

China's banking regulator is considering new rules that could crimp loan expansion by disqualifying subordinated debt from being counted as bank capital.

China has teamed up with 40 countries or regions on energy cooperation and established national-level bilateral energy dialogues with 36 countries, said an official with the National Energy Administration in Beijing on Thursday.
China has also joined 22 international energy organizations and forums conducting multilateral negotiations and discussions.

Crude oil for October delivery rose 98 cents, or 1.4%, to $73.88 a barrel in electronic trading on Globex. Earlier, the new front-month contract hit an intraday high of $74.05 a barrel. Separately, September natural-gas futures extended their decline after ending at a 7-year low in the previous session. Natural-gas prices were last down 4 cents, or 1.4%. December gold futures were last up $17.20, or 1.8%, at $958.80 an ounce in electronic trading.

Brett Steenbarger: "We only had 698 stocks make 20-day highs yesterday, against 229 lows. That compares to over 3000 20-day highs in the last half of July."

Nearly 70% of all Americans surveyed by Gallup say they expect higher taxes by the end of Obama's term. That could explain the difficulty selling a healthcare overhaul.

U.S. dollar index falls to 77.75. Last September the index dropped to 76.

AMG Data Services reports for the week ended Aug. 21 Equity Fund Outflows -$1.1 Bil; Taxable Bond Fund Inflows $2.8 Bil
xETFs - Equity Fund Outflows -$64 Mil; Taxable Bond Fund Inflows $2.2 Bil.

As of Thursday, the National Highway Traffic Safety Administration said it had processed only 170,000 or so of the more than 457,000 applications from new-car dealers. Only $145 million in reimbursement checks have been sent to dealers -- a fraction of the roughly $1.9 billion they say they are owed. Many dealers have stopped participating because of the delays. You should trust this government with your healthcare?

New-vehicle retail sales in August are forecast to cross the 1 million mark for the first time in the past 12 months because of the program, according to J.D. Power and Associates.

Resales of U.S. single-family homes and condos rose 7.2% in July to a seasonally adjusted annual rate of 5.24 million, the highest level since August 2007, the National Association of Realtors reported Friday. Resales have gained for four consecutive straight months. Inventories of unsold homes remain elevated, with a 9.4-month supply at the July sales rate, matching the prior month's result. Without seasonal adjustment, the median sales price fell 15.1% in the past year to $178,400. Distressed properties accounted for 31% of sales in July.

Barry Ritholtz: "A combination of historically low rates, first-time home buyer $8,000 tax credit, and foreclosure pummeled prices have combined to move some inventory."

“It is tough times in the gas business, certainly,” said Thomas F. Darden, chief executive of Quicksilver Resources, a major natural gas producer, after the government stockpile report was released. “Prices today are below our costs to produce, so in our view this is not a sustainable scenario.” For the week, natural-gas prices tumbled 43.40 cents, or 13.4%, from last Friday's closing level of $3.238. Meanwhile, October crude futures rose to an intraday high of $74.72 a barrel in electronic trading on Globex. That's the highest level for a front-month contract since late 2008, according to FactSet Research data.

“We have never been here before in terms of what to expect when storage gets this high,” said Aubrey K. McClendon, chief executive of Chesapeake Energy, another major gas producer. “It’s like a balloon; there comes a point where you can’t blow any more air into it....It doesn’t set the stage for $10 gas, but it does set the stage for $6 to $8 gas, which is in our view a fair price for consumers and producers,” Mr. McClendon added.”

China is Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($56 billion) in 2008. China is also Australia’s largest source of foreign investment.

China is Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($56 billion) in 2008. China is also Australia’s largest source of foreign investment.

Gold settles at $954.70, up $13 an ounce.

Natural-gas futures tumbled over 5% on Friday, extending their losses from the previous session when the contract ended at a seven-year low. September natural-gas futures dropped 15.50 cents, or 5.2%, to $2.791 per million British thermal units in electronic trading on Globex. Earlier, the contract fell to an intraday low of $2.776 per million British thermal units.

n a court filing submitted close to midnight Thursday in San Francisco, the Justice Department asked a federal judge to dismiss a lawsuit brought by a Muslim charity, the Al-Haramain Islamic Foundation, and two of its lawyers, all of whom contend they were illegally wiretapped as part of Bush's so-called Terrorist Surveillance Program.
The foundation and its attorneys allege that the government inadvertently revealed the surveillance in 2004 by sending them a top secret log of communications that were intercepted. However, the courts have taken that document off the table in the litigation after the Bush administration asserted the state secrets privilege, a claim the Obama administration later joined in even though candidate Obama complained that the privilege had been overused.
In the new filing, the Justice Department said the foundation and its lawyers don't have enough other evidence to prove that they were actually subjected to the allegedly illegal wiretapping program.
"Plaintiffs are now required to set forth specific, uncontroverted facts establishing that they were the targets of, or have been subjected to, warrantless electronic surveillance. Plaintiffs instead continue to rely on the same speculative 'inferences' and conjecture that plainly fail to establish their standing.
Plaintiffs’ evidence is no more than a string of speculation that fails to demonstrate that plaintiffs were in fact subject to any surveillance, that any such surveillance was 'electronic surveillance' as defined by the [Foreign Intelligence Surveillance Act], or that any such surveillance was undertaken without judicial authorization," the government's new brief declares.

During the campaign, Obama and other officials who would later take up senior roles in his administration asserted that the warrantless wiretapping program was illegal. Lawyers for the foundation had hoped the Justice Department would repeat or repudiate that position, but the new brief doesn't take a position one way or the other, and instead urges Judge Vaugn Walker not to rule on the issue.
The brief says whatever allegedly illegal surveillance may have been imposed on the plaintiffs is unlikely to recur because Congress authorized a version of Bush's program in 2007.
Another hearing in the suit is set for Sept. 23.

Oct. crude ends up 98 cents at $73.89/brl on Nymex.

Burt P. Flickinger III, a retail consultant, estimates that in 25 percent of shoppers' trips to the store, they're ditching at least one item. In the recession of the early 1990s, it was 15 to 20 percent. In good times, it's more like 10 percent.

Atlanta-based Ebank became the 78th bank failure of 2009, according to the Federal Deposit Insurance Corp. on Friday. Stearns Bank of St. Cloud, Minn. will assume all of the deposits and purchase Ebank's assets.

The Dow Jones Industrial Average added 155.91 points, or 1.7%, to 9,505.96. The S&P 500 added 18.76 points, or 1.9%, to end at 1,026.13. The Nasdaq Composite Index rose 31.68 points, to 1.6%, to 2,020.9.

Copper for September delivery gained 14 cents, or 5%, to end at $2.8805 a pound on the New York Mercantile Exchange.

The Obama administration will increase its 10-year budget deficit projection to roughly $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday. So much for fiscal rationality.

Thursday, August 20, 2009

Natural Gas

8/20/09 Natural Gas

Gallup reports that disapproval of the president's economic policies has grown to 49% in July from 30% in February. Even among the president's core supporters, young people in the 18-29 age group, his overall approval has dropped 11 points since January. In a July 2009 Gallup poll, the No. 1 reason for disapproval of the president's economic policies was, literally, "spending too much." In second place was the worry that the president is "leading the nation toward socialism" through government takeovers and bailouts.

A hedge fund has made a large bet that natural gas prices will triple by winter just as the price of the commodity slides to a seven-year low.
Traders took notice last week when the fund, as yet undisclosed, spent millions for the right to buy US natural gas at $10 (£6.03) per million British thermal units in January and February, up from Wednesday’s spot level just above $3 per mBtu.

The White House plans to announce the federal deficit is about $262 billion less than officials predicted earlier this year -- in part because the administration has provided less aid than expected to Wall Street.The federal deficit this year will total $1.58 trillion, a senior White House official said late Wednesday. That's three times more red ink than last year. The official spoke on the condition of anonymity to discuss the report before its release next Tuesday. The nation's debt now stands at $11.7 trillion.

Among all adults, 51 percent now say the Afghan war is not worth fighting, up six percentage points since last month and 10 since March. Less than half, 47 percent, say the war is worth its costs. Those strongly opposed (41 percent) outweigh strong proponents (31 percent).

Citigroup Global Markets Inc. predicts that this will be the first year that back-to-school sales will decline since at least 1995.

Initial claims for state unemployment insurance benefits rose 15,000 to a seasonally adjusted 576,000 in the week ended August 15 from 561,000 the prior week, the Labor Department said.
Analysts polled by Reuters had forecast new claims slipping to 550,000 last week from a previously reported 558,000. A Labor Department official said there were no special factors influencing the report.
The number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended August 8, the latest week for which the data is available. However, the four-week moving average declined 2,500 to 6.27 million.
The insured unemployment rate, which measures the percentage of the insured labor force who are jobless, was unchanged at 4.7 percent.

Sears Holding Corp reported a quarterly loss on Thursday instead of the profit Wall Street was expecting as the retailer struggled to cut costs to keep up with falling revenues, and its shares fell nearly 13 percent.

China's current-account surplus in the first half of the year was 32% lower than the same period a year earlier, according to data released by the foreign-exchange regulator and reported Thursday by Dow Jones Newswires. The current-account surplus narrowed to $130 billion in the six months through June, compared to the year-ago total of $191.72 billion, according to previous data from the State Administration of Foreign Exchange, which were reportedly released on its Web site Tuesday. The trade surplus in goods totaled $118.33 billion, while a deficit of $18.64 billion was reported in services. Year-ago figures for these results weren't provided by the agency, the report said.

Jet Republic, which bills itself as a "private jet club" by allowing members to fly on a per-hour basis, declared itself insolvent on Thursday.

GameStop cut its full-year profit forecast to as much as $2.64 from a previous projection of as much as $2.93 a share.

''You keep challenging and violating our core national interests, and we have to react,'' People's Liberation Army Chief of the General Staff Chen Bingde said at a meeting in Beijing with his U.S. counterpart, Gen. George Casey.
Chen said the United States has sought China's help in international operations such as the war in Afghanistan or in fighting piracy off Somalia but undermined the mutual trust needed for such cooperation with its arms sales to Taiwan.
''Once the United State needs us to cooperate, they are good to us, they are friendly to us. Otherwise, they can do anything they want, even to offend the Chinese people. But I don't think that kind of cooperation can continue,'' Chen said at the meeting, which was open to the media.

Major U.S. pension funds have recouped less than half of the $53.8 billion in cash they've invested in private-equity funds started since 2000. All told, they haven't seen a paper profit in seven years. That means less money for the plans' retirees.

Xcel officials proposed a natural gas commodity price of 31.77 cents per therm for September. The proposed price is up 2 percent from August’s 31.24 cents per therm price and lower than the September 2008 price of 43.81 cents per therm. If the Colorado Public Utilities Commission approves the price, it would take effect Sept. 1.
Next month, typical Xcel residential customers are expected to increase their natural gas usage by 45 percent, meaning their bills would increase to $21.71, based on the projected use of 21.7 therms, Xcel officials said in a release. The typical residential customer’s energy bill in August was $18.27 on the projected use of 15 therms.
During September 2008, the typical residential customer paid $23.91, if adjusted for next month’s projected usage of 21.7 therms.

Frontline mentioned the volume of crude oil in ships being used as storage had increased from 80 million to 100 million barrels. I would suggest one consider reducing positions in crude. This could be the top for some time.

The Philly Fed index rose to 4.2 in August from negative 7.5 in July. "The region's manufacturing sector is showing some signs of stabilizing," the report said. The new orders index edged six points higher, from negative 2.2 to 4.2, also its highest since November 2007. The shipments index increased 10 points. Employment indexes remained negative.

Mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, the highest percentage ever recorded by the Mortgage Bankers Association, the industry group reported on Thursday. The delinquency rate for mortgages on one- to four-unit properties rose to a seasonally adjusted 9.24% of all mortgage loans outstanding in the second quarter, up from 9.12% in the first quarter. Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the first quarter, the MBA said.

An economic recovery may begin soon, and the recession is bottoming out, the Conference Board said Thursday. For its fourth consecutive monthly gain, the index of leading economic indicators rose in 0.6% in July, following an upwardly revised increase of 0.8% in June. Economists polled by MarketWatch were looking for a gain of 0.7% in July. The interest rate spread was the largest positive contributor, while a reading on consumer expectations was the largest negative contributor. Overall, six of the 10 indicators were positive contributors, three were negative, and one was steady. The six-month growth rate for the overall index hit its highest level since mid-2004, according to the Conference Board.

Working gas in storage was 3,204 Bcf as of Friday, August 14, 2009, according to EIA estimates. This represents a net increase of 52 Bcf from the previous week. Stocks were 562 Bcf higher than last year at this time and 513 Bcf above the 5-year average of 2,691 Bcf. In the East Region, stocks were 162 Bcf above the 5-year average following net injections of 46 Bcf. Stocks in the Producing Region were 275 Bcf above the 5-year average of 799 Bcf after a net injection of 1 Bcf. Stocks in the West Region were 75 Bcf above the 5-year average after a net addition of 5 Bcf. At 3,204 Bcf, total working gas is above the 5-year historical range. Natural gas dropped 17 cents to $2.95 per million British thermal units and oil is $73 a barrel or roughly a 24:1 ratio, and that has never taken place before.

Sales of new homes are down 72 percent from their 2005 peak, while existing ones are off 24 percent from their peak a year later.

Randall Forsyth: "As Paul Macrae Montgomery points out in his Universal Economics letter, the S&P and Dow topped out intraday on Aug. 7, -- marking 38.2% retracements of their bear-market losses. Fibonacci fans will immediately recognize the significance of that percentage move. (If you're not, search Fibonacci for an explanation.)

Also, Aug. 7 was the 154th day after the market hit its low on March 6. "This is the same number of days that the historic 1929-1930 bear market rally lasted," he observes. Just as with Russell, Montgomery says, "So we will remain defensive, unless stocks better their early August highs."

Gold for December delivery settled at $941.7 an ounce, down $3.10, or 0.3%.

Mohamed El-Erian, chief executive officer of Newport Beach, California-based Pacific Investment Management Co., said in an interview:
“The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund whose firm runs the world’s largest bond fund. “The real risk is that you will get a disorderly decline.”

Natural gas for September delivery dropped 17.40 cents, or 5.6%, to end at $2.945 per million British thermal units on the New York Mercantile Exchange. That was the lowest closing level for a front-month contract since Aug. 14, 2002, when futures settled at $2.910 per million British thermal units, according to historical data from the CME Group. As a long term investor, it would be difficult to see a better risk/reward than natural gas at these prices. Drilling will come to a halt at these prices. Wells will be capped.

U.S. govt. to end "Cash for Clunkers" Aug. 24.

Mexico's gross domestic product contracted 10.3% in the second quarter.

The Dow Jones Industrial Average rose 70.89 points, or 0.8%, to 9,350.05. The S&P 500 Index added 10.91 points, or 1.1%, to 1,007.37, bringing it above the 1,000-level for the first day in four. The Nasdaq Composite advanced 19.98 points, or 1%, to 1,989.22.
& lt; br>Karen Weaver of Deutsche Bank predicted that, by 2011, nearly half of American mortgage holders would be underwater (meaning that they'll owe more on their mortgages than their houses were worth).

Half of mortgage holders means about one-third of American households. Put another way, Weaver forecasts 25 million mortgage holders will be under water by 2011, up from an estimated 14 million currently.

The size of the Federal Reserve’s balance sheet rose 2.3 percent as the central bank bought more U.S. Treasuries and mortgage-backed securities.
Fed assets gained $46.2 billion to $2.06 trillion in the week that ended yesterday, the central bank said today in Washington. Holdings of mortgage-backed securities jumped $66.6 billion to $609.5 billion, and the Fed’s portfolio of U.S. Treasury securities increased $7.1 billion to $736.1 billion.

Wednesday, August 19, 2009

U.S. Dollar

8/19/09 U.S. Dollar

Pacific Investment Management Co., which runs the world’s biggest bond fund, said the dollar will probably fall as it loses its status as a reserve currency.
The dollar will especially drop against emerging-market counterparts,
Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. Investors should consider cutting their holdings of the U.S. currency, he said.

Deere & Co. said Wednesday its fiscal third-quarter earnings fell to $420 million, or 99 cents a share, from $575 million, or $1.32 a share, in the year-ago period. Sales plunged 24% to $5.9 billion. For 2009, the Moline, Ill., farming-equipment maker forecast a net income of $1.1 billion, in line with analysts' mean expectation. Deere lowered its 2009 sales forecast amid declining demand for lawn and construction machinery.

Mainland China's top stock markets suffered their latest in a string of heavy falls Wednesday, with the Shanghai Composite Index closing down 4.3% and the Shenzhen Composite Index ending 4.9% lower. The Shanghai A-share benchmark index has served as something of a leading indicator for quarterly GDP growth over the past three years.

Warren Buffett: "With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap...Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress."

German producer prices have recorded their largest year-on-year fall since the second world war, highlighting the weakness of inflationary pressures across Europe.
Prices of industrial products were 7.8 per cent lower in July than 12 months earlier, the steepest such fall since records began in 1949, the German federal statistics office reported.

Stora Enso Oyj said Wednesday it will lay off up to 1,100 workers, cut production and close mills in Finland as the Nordic paper maker continues to struggle with dwindling revenue.
The announcement came four weeks after the company reported a second-quarter net loss of euro368 million ($523 million) and a 24-percent drop in net sales to euro2.2 billion.
Stora Enso said it will close a pulp mill by the end of the year and a sawmill in 2010. Also, cutbacks and reorganization at other mills will be made to save costs, it added.

Natural gas prices fell to seven-year lows Tuesday.

Near-term futures prices in New York slid 7 cents, or 2.1%, to $3.10 per million British thermal units -- the ninth straight decline and the lowest price since Aug. 2002.

While crude oil prices have jumped 55% this year, to $69.19 a barrel as of Tuesday, natural gas has plunged 45%.

George Ure: "So if printing is up 17% on the money side, and the annualized current report rate of deflation (finished producer prices annualized) is still down 11%, that means true deflation is still in control, which is enough to scare the hell out of the central banksters.

But that's OK, since the dealing of the Treasury and the Fed are allowing banks to do a little money laundering on their balance can rest assured: "Good times are just ahead."

In May, RISD revealed that its endowment had fallen from $374 million in December 2007 to about $250 million. The school also announced layoffs of about 20 staff members, a tuition hike and the closure of the museum for all of August.

Nouriel Roubini: "So, the end of this severe global recession will be closer at the end of this year than it is now, the recovery will be anaemic rather than robust in advanced economies, and there is a rising risk of a double-dip recession. The recent market rallies in stocks, commodities and credit may have gotten ahead of the improvement in the real economy. If so, a correction cannot be too far behind."

Chinese refiners increased their combined crude oil processing volume to a new record high of 33.11 million metric tons, or 7.83 million barrels per day, in July, while overall implied oil demand in China rose 4.2% from a year ago to 34.92 million metric tons, energy information provider Platts said in a statement on Wednesday. July was the fourth consecutive month to register a year-on-year increase in China's apparent oil demand, which includes barrels moving into storage, Platts said.

Ian Mathias: "The “cash for clunkers” program is creating a small jobs boom — for the government. The Obama administration has vowed to triple the number of government employees processing “cash for clunker” vouchers from U.S. dealerships. The program has been such a “success” that the government can’t keep up with the vouchers coming in, and poor dealers are complaining that they have to sit on big losses while they wait for government reimbursement.
By the end of the week, up to 1,100 people will be working full time to process cash for clunker reimbursements...stimulation of consumption by issuing public debt is not the best solution to an extended period of overconsumption… especially one fueled by household debt, which, in turn, was built up on the back of asset bubbles.."

Obama's approval rating on healthcare was at 41 percent, unchanged from last month, while 36 percent believed his reform plans were a good idea and 42 percent a bad idea -- also unchanged from last month's NBC/Wall Street Journal poll.

If iron ore prices into China have topped out, then there could be further weakness in the Baltic Dry Index and this could relate to equities in the U.S. losing demand.

Today, the U.S. has about 150 oil refineries with a total operating capacity of roughly 17.6 million barrels per day. Over 40 percent of that capacity is located in Texas and Louisiana, and about half of that amount is within the Greater Houston area.

In June, petroleum refineries employed 76,100 people, according to the Bureau of Labor Statistics.

In Texas, petroleum and coal products — a manufacturing sector that includes refining — employed 27,000 statewide and 14,300 in the Houston area, Texas Workforce Commission data show.

Refiners began cutting output last year, and are currently running plants at about 85 percent of capacity, well below the 90-plus percent range they have seen in recent years.

Energy Department projections show utilization could drop to 78.5 percent next year, its lowest since 1985, as fuel demand remains weak and new refinery expansion projects come online.

EIA: Crude stocks down 8.4 million barrels. Platts expected a rise of 1.1 million barrels. Gasoline stocks down 2.1 million barrels. Crude prices rally to $71.

Rep. Ron Paul: "I happen to believe that because it [the creation of fiat money] is a moral issue more than an economic issue, it is for this reason that the people have lost trust in their government, trust in the banks, trust in business, trust in themselves, and that we are a nation of distrust." M.A. Nystrom: "The first step in that direction is a full audit of the Fed, and the next step is to end it."

The U.S. dollar index weak at 78.40. Ten yield govt bond yields fall to 3.44%. Fools gold with spiralin out of control U.S. debt levels.

Seeking Alpha: " Credit-card interest rates are moving sharply upward ahead of new regulations taking effect, though banks' own borrowing costs are decreasing. The average lowest rates are around 11-12% and rates overall have moved up some 20% since January."

December gold futures end up 0.6% at $944.80. Oil futures up 4.5% at $72.25/brl on Globex.

Wells Fargo is facing a lawsuit claiming the bank illegally reduced the size of customers' home equity lines of credit.

It's been a tough year for the travel and leisure industry as hotels have slashed room rates and attendance at conventions is down, according to Greg Ortale, president and CEO of the Greater Houston Convention & Visitors Bureau.

That, in turn, has depressed the collection of the hotel occupancy tax, which funds about 90 percent of the bureau's budget, said Ortale, whose report for the bureau's annual meeting on Tuesday was not as upbeat as previous years. This quarter alone, tax revenues are down about 25  percent.

A New York dealership group says hundreds of its members have left the Cash for Clunkers program, citing delays in getting reimbursed by the government.
The president of the Greater New York Automobile Dealers Association says about half its 425 members have stopped offering rebates from the program because they can no longer afford them.
Mark Schienberg says the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made, leaving many short on cash.
If the govt can't handle this program, can you imagine the mess they will make of healthcare? Too much govt breeds trouble not solution.

Energy companies are not showing a lot of interest in offshore leases for natural gas being offered by the government.
With prices down two-thirds, it's no surprise.
Producers put up $115.5 million in winning bids on 162 federal tracts during Wednesday's auction by the Minerals Management Service.
That's down sharply from last year's western Gulf of Mexico sale when $483.9 million in winning bids were put up for 313 tracts.

Commercial real estate values in the U.S. fell 27 percent in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending.
The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. A rebound isn’t likely until the second half of next year, the National Association of Realtors forecast in a separate report.

Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.

PetSmart projected a 2009 earnings outlook of $1.37 to $1.45 a share, compared with $1.53 a share estimated by analysts.

The Dow Jones Industrial Average rose 61.22 points, or 0.7%, to end at 9,279.16. The S&P 500 Index climbed 6.79 points, or 0.7%, to 996.46, while the Nasdaq Composite advanced 13.32 points, or 0.7%, to end at 1,969.24.

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank by market value, was selected to take over the assets of Guaranty Financial Group Inc. in a government-assisted transaction, according to people familiar with the situation. The Austin, Texas-based lender said last month that it was unable to raise capital as demanded by regulators and will probably fail.

Tuesday, August 18, 2009

Personal Wealth

8/18/09 Personal Wealth

John M. Mason: "Gross federal debt held by the public increased by more than 28 percent, year-over-year, at the end of the second quarter of this year. That is up from 24 percent at the end of the fourth quarter of 2008 and 15 percent at the end of the third quarter of 2008. With the forecast figures for the deficit, these numbers are going to continue to be at relatively high rates in the near term....ForeclosureRadar warned that California was on the verge of a new wave of foreclosure sales as notices of default, the first step in the foreclosure process, rose 12% in July from one year ago. Prime borrowers that were behind on their mortgage payments rose 13.8% between March and June.
On top of this household debt remains at about 130 percent of disposable income and household net worth continues to decline.
Business defaults are above 11 percent and are heading toward 13 percent according to some experts."

Between June 2007 and December 2008, for instance, inflation-adjusted personal wealth fell by 22.8 percent — the most since the Federal Reserve began collecting data almost 60 years ago. Some $6 trillion in housing wealth alone was lost in 2008. Consumer spending shrank for two consecutive quarters for the first time in half a century.

"Consumers simply have to retrench, save more, spend less," says David Jones of DMJ Advisors. "That in itself will give us a much slower, longer and uneven recovery."

"In previous recessions, with stimulus programs, orders in housing get underway, they start to create a little confidence, banks start to lend more, consumers start to borrow more, " says Barbara Marcin, a portfolio manager with Gameco Investors. "I don't think there are any signs of that."

On an adjusted basis, Home Depot said it sees earnings per share from continuing operations declining by 15% to 20% and sales declining 9%. Home Depot’s sales in the three months ended Aug. 2 decreased 9.1 percent to $19.1 billion.

“Concerns about the housing market, rising unemployment and softness in the overall economy continue to pressure consumers,” Chief Executive Officer Frank Blake said in the statement. “Our business performed well in a down market. We captured market share and drove operating productivity.”

Australia and China struck their biggest trade deal ever on Tuesday as the world's two most valuable listed oil companies, Exxon Mobil and PetroChina , agreed a $41 billion liquefied natural gas deal.

"It's a statement about the nature of our two economies and the fact that Australia is important to China, just like China is important to Australia," Australian Resources Minister Martin Ferguson told Reuters in Beijing.
The gas sale agreement between Exxon and PetroChina comes just weeks after Exxon inked a A$10 billion Gorgon LNG sales deal with India's Petronet , which marked Australia's first ever LNG contract with India.

No. 2 U.S. discounter Target Corp. said Tuesday that its second-quarter profit fell to $594 million, or 79 cents a share, from $634 million, or 82 cents, a year earlier. Total revenue including credit card contribution fell 2.6% to $15.1 billion. Comparable-store sales dropped 6.2%.

U.S. housing starts were flat in July, as a small increase in new construction of single-family homes was offset by a large decline in multifamily units. Starts fell 1% in July to a seasonally adjusted annual rate of 581,000 from an upwardly revised 587,000 rate in June, the Commerce Department estimated Tuesday. Single-family starts rose 1.7%, while multifamily starts fell 13%. Economists surveyed by MarketWatch were expecting starts to rise to a 596,000 rate. Building permits for single-family homes rose 5.8% in July to a seasonally adjusted annual rate of 458,000, the fourth increase in a row and a strong sign that building activity may have finally stopped plunging.
In sum, July Housing Starts: 581K vs. consensus of 605K. Permits 560K vs. 577K. Starts are 1% lower than June's 587K (revised) and 37.7% lower than last July. Housing starts peaked at roughly two million per year in late 2005.

Producer prices fell 0.9% in July, after seasonal adjustments, as prices for energy and food dropped, the Labor Department reported Tuesday. In a report that could further ease inflation concerns, the government said the core producer price index, which excludes volatile food and energy prices, fell 0.1%. Economists polled by MarketWatch had expected the overall producer price index to fall 1%, and for the core to gain 0.1%. In the past year the producer price index, which tracks inflation at the wholesale level, has dropped a record 6.8%, the government said. The data go back to 1947. However, the core producer price index has gained 2.6% over the past year. In July, energy prices fell 2.4%, and food prices fell 1.5%. In June, the producer price index rose 1.8%, while the core gained 0.5%.

Retailer Saks Inc. said Tuesday its second-quarter loss widened as consumer spending on luxury fashion continued to languish, but the loss was not as big as analysts expected.

The operator of stores including T.J. Maxx, Marshalls and HomeGoods earned $261.6 million, or 61 cents per share, compared with $200.2 million, or 45 cents per share, a year ago.

Vaccine developer Novavax says its experimental vaccine against swine flu, produced in just weeks instead of several months for standard methods, works in animals.
That's based on a small study scientists at the federal Centers for Disease Control and Prevention did on ferrets, which react to the flu like people.
But the Maryland company's genetically engineered vaccine won't be approved and ready for commercial use in the U.S. for at least a couple years. That means it won't be available to help here in the current epidemic of novel H1N1 influenza.

International premium air traffic fell 21.6% in June from a year ago as the decline in air-traffic demand continued to moderate, according to a Tuesday note from the International Air Transport Association. In May, international premium traffic, which includes business and first-class ticketing, fell 23.6%. The number of people flying internationally was virtually flat from May to June, after adjusting for seasonal fluctuations, the trade group said. International flights to and from South America saw the greatest improvement as the panic of swine flu subsided, with passenger numbers falling 45.2% in June form a year ago, compared to a 62.4% drop in May.

The nation's banks raised credit card rates and increased their profit from lending to consumers in the first half of 2009, according to a consumer advocacy group.
The Pew Safe Credit Cards Project said Monday the median lowest advertised credit card rate rose to 11.99% in July from 9.99% in December. At the same time, the group said, the profit banks made on credit card debt rose 46%.

Chain store sales fell 0.7% in the first two weeks of August, Redbook says, slightly worse than the -0.6% expected. According to ICSC, weekly sales were down 0.6% Y/Y and down 0.9% from the previous week as heavy discounts failed to increase sales.

ZEW's Indicator of Economic Sentiment for Germany improved in August after a surprise dip in July, rising to 56.1 points vs. 47.3 consensus and reaching its highest level since April 2006.

Consumers' confidence about their health care future and access to care is dropping, particularly among seniors, as debate over President Barack Obama's health overhaul agenda grows more contentious.
A monthly survey of consumer sentiment on health care issues shows that Americans' confidence in insurance coverage, affordability and access dropped more than 5 points in July, after having risen slightly in June.
Among seniors eligible for Medicare the drop was even more striking — 10.4 points — suggesting the health care debate is raising alarm bells for older Americans. The survey was conducted even before coverage of raucous town hall meetings that highlighted public opposition to Democrats' health overhaul plans.

Mohamed El-Erian, the chief executive of bond fund manager Pacific Investment Management Co, said on Tuesday that the rally in U.S. stock markets has topped out, as valuations are running ahead of fundamentals.
"Valuations are running far ahead of where fundamentals are," El-Erian told Reuters Television.

GM to reinstate 1,350 jobs in Canada, Ohio.

Crude for September delivery surged $2.29, or 3.4%, to $69.04 a barrel in electronic trading on Globex. Gold for December delivery, the most actively traded contract, gained $3.40, or 0.3%, to end $937.50 an ounce on the New York Mercantile Exchange.

The Dow Jones Industrial Average added 82.6 points, or 0.9%, to finish at 9,217.94. The S&P 500 Index gained 9.94 points, or 1%, to 989.67, while the Nasdaq Composite rose 25.08 points, or 1.3%, to end at 1,955.92.

Monday, August 17, 2009

The Decline

8/17/09 The Decline

John Hussman: "Aside from a gradual recovery of the “output gap” created by the current downturn, there is no structural reason to expect economic growth to be a major driver of investment returns in the years ahead. With valuations now elevated above historical norms, there is no reason to expect strong total returns on an investment basis either. The primary element that is favorable at present is speculation – excitement over the prospect that the recession is over."

NY Fed's Empire State Manufacturing Index: +13 points to 12.1, its highest level since Nov. 2007, vs. consensus of 5. New orders and shipments also reached their highest levels in several months. Employment remained below zero but showed improvement.

Our current national debt stands just a smidgen below $12 trillion and that is just $2 trillion
below our GDP. This is a calamity.

China Investment Corp, the country's $200 billion sovereign wealth fund, is set to pour up to $2 billion soon into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), sources told Reuters.

Capital One Financial Corp's U.S. credit card defaults and delinquencies rose in July, as Americans kept losing jobs and struggled to pay their debts.

Guy Lerner: "The "Dumb Money" indicator continues to hit new extremes despite last week's slight down market. The Rydex market timers continue to be bullish and leveraged to the extreme. And to round out our sentiment analysis, selling by company insiders has hit extremes as well. It is the perfect trifecta. Whether the perfect trifecta becomes the perfect storm (again) for investors is yet to be determined."

The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 32% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -9.

Thirty-five percent (35%) of American voters say passage of the bill currently working its way through Congress would be better than not passing any health care reform legislation this year. However, a new Rasmussen Reports national telephone survey finds that most voters (54%) say no health care reform passed by Congress this year would be the better option.

The Treasury Department says foreigners purchased $90.7 billion more in long-term U.S. securities than they sold in June. That's a significant rebound from May when they sold $19.4 billion more than they purchased. China reduced its holdings of U.S. Treasury debt in June by the biggest percentage in nearly nine years, according to Reuters historical data and a Treasury Department report issued on Monday.
Even with the Chinese reduction, overall net purchases of U.S. Treasuries totaled $100.53 billion in the month, up from $22.55 billion in sales in May.
Although China, the biggest holder of U.S. Treasuries, sold short-term U.S. bills in June, it subsequently rotated into longer-dated maturities. China reduced its net holdings 3.1 percent to $776.4 billion in June from $801.5 billion in May. But its June holdings were still larger than April's $763.5 billion and $767.9 billion in March.

U.S. companies in 2009 doled out the lowest salary raises in the 33 years since consulting firm Hewitt Associates first started surveying companies on their pay practices. At the same time, companies devoted the largest portion yet of their payrolls to employee bonuses.
Average salary increases this year dropped well below 3% for the first time since Hewitt started tracking the data in 1976.

Illinois Tool Works reiterated its third-quarter forecast of earnings between 39 cents and 51 cents per share, assuming sales will range between a 2 percent decline and 4 percent increase, or between $3.33 billion and $3.53 billion. That is some wide range for earnings considering the quarter is half over. If I were a shareholder, I'd be wondering how good a handle they have on their day to day numbers.

Commercial lender CIT Group Inc. said Monday its offer to repurchase outstanding debt at a discount — a crucial step to help stave off bankruptcy — was successful.
The embattled New York-based lender offered to buy $1 billion in debt that was set to mature Monday. CIT warned that if not enough bondholders were willing to sell the debt back to the company, it would likely have to file for bankruptcy protection.

Brett Steenbarger: " Note that, as long as we stay below the lows from 8/12, we are accepting value lower, below a multi-day trading range. I'm showing many more NYSE, NASDAQ, and ASE stocks registering 20-day lows than highs, indicating growing weakness in the market. We see sustainable turnarounds generally when selling dries up, not when it is accelerating. While being alert for a bounce is worthwhile, it makes sense to let the market show its strength first and not attempt the proverbial catching of falling knives....A quick look at the excellent Barchart site shows that we've made about 900 new 20-day lows across the NYSE, NASDAQ, and ASE, against only 126 20-day highs. We've also made 128 65-day lows. These are the weakest readings since early July.
If we are to stay in a bull market mode, we should see fewer new lows in the current pullback than we saw in July. At July's low, we saw 441 issues across the three exchanges make fresh 65-day lows. Should we exceed that number in coming trading days, it would be an indication of more significant corrective activity in the broad universe of stocks.
Conversely, a dip with fewer shares registering fresh intermediate-term new lows should set us up for an eventual test of market highs at the very least, as the bull pattern in the indicator would remain intact. "

Allan Sloan: "Perhaps as early as this year, Social Security, at $680 billion the nation's biggest social program, will be transformed from an operation that's helped finance the rest of the government for 25 years into a cash drain that will need money from the Treasury. In other words, a bailout."

Thousands of Catholics across Miami-Dade and Broward counties listened Sunday as pastors read a letter by Archbishop John C. Favalora announcing plans for the rapid closure of 13 churches by Oct. 1. The recession has hit the church.

Kaiser Permanente’s surprising announcement last week that it would eliminate 650 jobs in Southern California and 1,850 statewide created concerns among health care analysts, who anticipate further job losses among hospital districts as the economy takes its toll.

The publisher of Reader's Digest, the country's most popular general interest magazine, said Monday it will seek Chapter 11 protection from creditors amid declining circulation, an industrywide advertising slump and large debts.
Reader's Digest Association Inc. said it has reached an agreement with a majority of secured lenders to restructure its debt. Under the plan, the lenders get ownership of the company and will erase much of the $1.6 billion they have in senior secured notes.

A large number of political promises Obama made during his historic campaign have been pushed to the back of the agenda. Most, in fact. The Web site, which compiled a list of 515 Obama pledges, lists 374 under the category of "no action."

The home builders' index climbed to 18 in August from 17 in July. It's the highest since June 2008. At 18, the index shows that less than one in five builders thinks the housing market is good.

Light sweet crude for September delivery fell 76 cents to end at $66.75 a barrel on the New York Mercantile Exchange. The contract earlier touched an intraday low of $65.23 a barrel on Globex. December gold futures, the most active contract, dropped $12.90 to end at $935.80 an ounce on the New York Mercantile Exchange.

Lockheed Martin Corp.'s Space Systems Co. said Monday it plans to cut about 800 employees, or 4.5% of its workforce, by the end of the year in a bid to improve its competitive position.

The Federal Reserve says most banks expect their lending to remain tight through the second half of next year, with the exception of mortgage standards, which already are loosening a bit.
The Fed's latest survey of loan officers found that about 20 percent of U.S. banks tightened their lending standards on prime home mortgages in the April-June quarter, down from around 50 percent in the previous quarter.
Meanwhile, 45 percent of banks say they tightened standards on nontraditional mortgages, such as adjustable-rate loans with multiple payment options, down from 65 percent in the previous survey.

Equities were weak all day. The Dow dropped 186, the S&P 24 points, and the Nasdaq 55.
Treasurys moved higher with the 30-year yield -0.11 to 4.32%; 10-year -0.10 to 3.47%; 5-year -0.10 to 2.4%; 2-year -0.05 to 1.01%.

Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday. The Fed began collecting the data in 1985. The charge-off rate rose from a record 2.03% to a record 2.65%. Before this recession, the highest charge-off rate had been 1.70%. Delinquency rates for real estate loans rose from 7.10% to 8.27%, the highest since the data began in 1987. Delinquency rates for commercial and industrial loans rose from 3.12% to 3.73%, while delinquencies for consumer loans rose to from 4.69% to 4.92%, also a 22-year high.


8/16/09 China

John Authers: "It now looks likely that the recession, as in an outright fall in gross domestic product, probably ended in the second quarter of this year. But there is no sign that consumers are buying once more, which argues against a strong recovery.
Where does this leave us? The bullish argument is that last year was a true Edwardian panic. As in 1907, the financial sector led the way into this crisis, making this different from most other bear markets.
But if this was anything other than a panic, then there is little reason to expect this rally to go on much longer. If it does, that might even support those who argue that cheap money is inflating another bubble, just as it did in the middle of this decade after the deflating of the internet bubble.
The most likely scenario, however, is that the rally does not last much longer."

The campaign to keep Toyota at Fremont's Nummi plant appears to have failed.
A Japanese newspaper reported Saturday that Toyota has decided to end production at the plant next March, and move production to Texas.The report says Toyota will announce the decision soon.

Mexican President Felipe Calderon says he supports the idea of a free trade agreement between Brazil and Mexico, the two biggest economies in Latin America.
Calderon says he's enthusiastic about the idea of a deal proposed by Brazilian business executives to push for a commercial accord for the two nations.
Calderon made the comments Saturday in Sao Paulo at the start of a three-day visit to Brazil. He will tour installations of Brazil's state-run oil company Sunday and is to meet Monday with Brazilian President Luiz Inacio Lula da Silva.
The Mexican leader says a free trade accord could help both nations because the economies of Brazil and Mexico generate more than 70 percent of all economic activity in Latin America.

Mike Burk: "Intermediate term, there are no significant negatives for the market, however, short term the market has nothing going for it. New highs are falling, seasonally next week is terrible and money supply growth is falling.
I expect the major indices to be lower on Friday August 21 than they were on Friday August 14."

Car shopping on the Web that is tied to the clunker program is down 15% from its peak. By Aug. 20, we could be back to pre-clunker sales levels, says.

Momentum behind a new government-run health care plan appeared to slow considerably Sunday, as a lead Democratic negotiator called the option a "wasted effort" and President Obama's health secretary suggested the White House is ready to accept a health care reform package without it.
Sen. Kent Conrad, D-N.D., one of six negotiators trying to hammer out a bipartisan compromise measure on the Senate Finance Committee, told "FOX News Sunday" that the so-called public option simply does not have the votes to pass.
"The fact of the matter is there are not the votes in the United States Senate for the public option. There never have been," he said. "So to continue to chase that rabbit I think is just a wasted effort."

British home sellers knocked down their asking prices by an average of 5,102 pounds ($8,466) in August, reinforcing questions about the ability of Britain's hard-hit housing market to deliver a full-fledged recovery in the near term, property website Rightmove said Monday in its monthly survey.

Japan's Nikkei extends fall, down 2% at 10,387.29.

China secured a 35 percent cut in iron ore prices from Australia’s Fortescue Metals Group Ltd., and will ask the world’s biggest producers Vale SA, BHP Billiton Ltd. and Rio Tinto Group for a similar reduction.

The Shanghai Composite Index dropped 5.8% to 2,830.63, closing below the 3,000-point level for the first time since the end of June. Shenzhen's main share index plunged 6.6%.

Oil futures down 2.4% to $65.90 a barrel on Globex.

Lowe's for the year forecast profit of $1.13 to $1.21 a share versus analysts estimate of $1.25.

Sunday, August 16, 2009

Closed Banks

8/15/09 Closed Banks

Colonial Bank of Montgomery, Alabama, closed Friday, according to the Federal Deposit Insurance Corporation. The FDIC said the banks deposits will be assumed by BB&T Corp. Colonial Bank had 346 branches in Alabama, Florida, Georgia, Nevada and Texas. As of June 30, Colonial Bank had total assets of $25 billion and total deposits of approximately $20 billion. The bank is the 74th FDIC-insured institution to fail this year, and the first in Alabama, the agency said in a statement.

Pittsburgh, Pa.-based Dwelling House Savings and Loan Association was closed by federal regulators Friday, the 73rd U.S. bank to fail this year, and the first in Pennsylvania.

Bank regulators closed three banks late on Friday -- Community Bank of Arizona, Community Bank of Nevada, and Union Bank, N.A. -- as the struggling economy and falling home prices continued to take their toll on financial institutions.

The latest closings brought the number of bank failures this year to 77, the FDIC said.

George Ure points out the number of main and branch banks that have been closed/reorganized since IndyMac of Pasadena, CA went down a little more than a year ago: 3,433.

“I don’t think we’re at a bottom yet in home prices,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent up supply out there.”.

"The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg," said Stan Humphries, chief economist at real estate website in Seattle, Washington. According to Zillow's latest Homeowner Confidence Survey, 12 percent of homeowners said they would be "very likely" to put their home on the market in the next 12 months if they saw signs of a real estate market turnaround, 8 percent said "likely," while 12 percent said "somewhat likely." Survey results could translate into around 20 million homeowners trying to sell their homes, a startling number given that the Census bureau indicates there are 93 million U.S. houses, condos and co-ops, Humphries said.

Bloomberg: "A drug that can selectively target and kill the stem cells that drive the growth of tumors has been identified for the first time by scientists who searched more than 16,000 compounds to find it.

Researchers at Massachusetts Institute of Technology and the Broad Institute looked for compounds that could destroy the stem cells, which often resist conventional cancer treatment. One, salinomycin, cut the number of stem cells at least 100 times more than did Bristol-Myers Squibb Co.’s Taxol, a common chemotherapy medicine, according to a report on the findings published today in the journal Cell.

The researchers will conduct further testing of salinomycin in animals to assess its potential to treat humans, said Piyush Gupta, a researcher at the Cambridge, Massachusetts-based Broad Institute and co-author of the study. While the outcome of that research is unknown, he said, the work has strengthened a theory that stem cells fuel cancer and may have created a way to find effective drugs.

“We now have a method that researchers anywhere in the world can use to find agents that can kill cancer stem cells and potentially treat cancer,” Gupta said today in a telephone interview."

Stock analysts at Citigroup are predicting a decline in back-to-school sales for the first time since they began tracking the figures in 1995. They estimate August and September sales at stores open for at least a year — known as same-store sales — will fall 3 to 4 percent, compared with an increase of nearly 1 percent in the same period last year.

The National Retail Federation, an industry group, expects the average family with school-age children to spend nearly 8 percent less this year than last. And ShopperTrak, a research company, predicted customer traffic would be down 10 percent from a year ago.
“This is going to be the worst back-to-school season in many, many years,” said Craig F. Johnson, president of Customer Growth Partners, a retailing consultant firm.

Texas state climatologist John Nielsen-Gammon said Friday that at least nine of the 254 counties in Texas — the nation's most drought-stricken state — are suffering through their driest conditions since modern record-keeping began in 1895.

Making matters worse are the relentless 100-degree days across the southern portion of Texas that has been under drought conditions since September 2007.

The impact has been felt most by farmers and ranchers in the nation's No. 2 agriculture-producing state. Texas officials estimate statewide crop and livestock losses from the drought at $3.6 billion.

For the fiscal year that ends Sept. 30, the Office of Management and Budget forecasts the deficit will reach a record $1.841 trillion, more than four times the previous fiscal year’s $459 billion shortfall.

Doug Noland: "As I attempted to explain last week, I view the impairment of the stock market discounting mechanism as a key facet of Monetary Disorder. The reversal of bearish plays not only created huge buying power throughout the markets, it decisively reversed The Greed and Fear Factor. Notwithstanding today’s sell-off, the bulls are greedy and the bears are on the run. And the more that inflated stock prices entice shorting, the more games that can be played to “squeeze” the timid bears.
The end result is a highly speculative stock market increasingly detached from reality and vulnerable to wild swings in sentiment. Yet I don’t expect the emerging global reflation to this time disprove the U.S. bearish thesis, although it will no doubt be a wild market ride." "Confidence will struggle to gain ground in the months to come, as consumer budgets remain stretched. Little wage income, prospects for reduced bonus payments, reduced access to credit, and no capital gains are all constraining consumers' ability to meet their financial needs and recover from the sharp drops in wealth they have experienced. Many consumers are struggling to pay their debts. Supports are coming from reduced layoffs, equity market gains, and stimulus such as the cash for clunkers program, but that is proving inadequate to lift spirits so far. It will likely be some time before conditions turn enough for confidence to improve decisively. Key drivers of confidence include developments in the labor and housing markets and the path of energy and equity prices."

Rep. Ron Paul: "The people are realizing no matter how many things and stuff the government can promise us, eventually the government fails, so this to me is an example of a failure of government."