Saturday, September 05, 2009

Bank Closures

9/5/09 Bank Closures

Five more banks were closed by regulators Friday, bringing the number of U.S. bank failures this year to 89. Since IndyMac went down last year, 3,654 branches have been closed.

Doug Noland: "So, it has reached the point where Washington is underwriting the majority of existing mortgage debt throughout the system and is now backing essentially the entire amount of net new mortgage Credit. Meanwhile, the Federal Reserve is purchasing/monetizing about $25bn of agency MBS - on a weekly basis....Effective perhaps, but what about an exit strategy? Well, I see a “No Exit” sign. These distortions have been going on for too many years and become too systemic. Indeed, government interventions are at the core of systemic fragilities that ensure Washington will continue to meddle. Exiting government intervention would entail the Fed normalizing rates and ending its massive program of monetization, while an exit by the federal government would entail an end to its expansive program of guaranteeing Trillions of mortgages and mortgage-backed securities. Understandably, the markets spend little time fretting the possibility of Washington getting cold feet on mortgages (or rates)....Yet I would argue that there is a huge and festering (latent) cost to Washington’s mortgage operations. At some point along the way – and you can count on it being a rather inconvenient juncture for the markets and economy - creditworthiness will become a hot issue. The market will finally demand higher yields for Treasuries, agencies, and GSE MBS – and will surely be less than enamored with our currency. MBS backed by today’s artifically low mortgages will come back to bite. And when the market turns against “federal” debt obligations, you can count on the market really, really turning sour on mortgage risk. That will mark the point when years of government market interventions and distortions come home to roost."

According to Bloomberg, “China, holder of the world’s largest rare-earths deposits, may build a strategic reserve in Inner Mongolia, strengthening its control over materials used in technology ranging from iPods to guided missiles. Inner Mongolia, which contains 75% of China’s deposits, is in talks with the central government to build stockpiles to support prices… China, which imports most of its iron ore, oil and copper, is tightening control over supplies of rare earths, a range of more than 15 elements such as scandium and lanthanum… ‘The plan of building a national reserve stockpile is part of a government-level strategy to protect the resources of rare earths and prevent it from being sold cheaply,’ Liu Minda, analyst at Huatai Securities Co., said…”

India may increase the price of natural gas extracted from fields awarded to state explorers by 44 percent, easing revenue losses for Oil & Natural Gas Corp., the country’s biggest energy producer.
A proposal to price the gas at $2.6 per million British thermal units from $1.8 per mBtu currently will be submitted to the cabinet soon, V.L.V.S.S. Subba Rao, joint adviser of finance in the oil ministry, told reporters in New Delhi today. The price, effective April 1, 2009, is linked to India’s wholesale price index, he said.
Higher gas prices will benefit ONGC and smaller state rival Oil India Ltd., which sell the fuel at prices controlled by the government to help curb inflation. ONGC may have lost 30 billion rupees ($614 million) selling natural gas below production costs in the year ended March 31, Chairman and Managing Director R.S. Sharma said June 11.

The number of working Americans turning to free government food stamps has surged as their hours and wages erode, in a stark sign that the recession is inflicting pain on the employed as well as the newly jobless.

Tiernan Ray: "David Rosenberg notes that 65% of companies are still cutting jobs, a “disturbing” stat, and manufacturing employment fell by 63,000 jobs in August, it’s lowest level since 1941 despite inventory replenishment that’s been widely reported.
Further, Rosenberg notes the shadow numbers, much of it buried in the “Household Survey.” The actual decline in employment was cushioned by more people working at home. Salaried workers, on the other hand, dropped 637,000, the largest decline since March. The household survey actually shows employment fell by 1 million, writes Rosenberg, if you dig into the details, “which is unprecedented,’ he notes.
Further, nine million people are now “working part-time because they have to, not want to,” adds Rosenberg. The adult male employment rate — males lost jobs at a faster rate than women in the August numbers — is already above 10% in the U.S.
Lastly, those looking for a job for more than six months without success are now a record one third of the total jobless, at 5 million, which Rosenberg argues portends a long-term trend in jobless — longer than the current downturn, in other words."

John Mauldin: "Interesting statistic. Want to know where wages are rising? Think federal government workers. The gap between civilian and government workers was less than $13,000 nine years ago, but now is almost $30,000. Inflation has been 24%, but government wages are up 55%. According to a recent release from Rasmussen Reports, a government job remains "the top employment choice in today's economic environment."

Brian Pretti: "The National Council of Real Estate Investment Fiduciaries (NCREIF) is an association of institutional real estate professionals who share a common interest in their industry. They are investment managers, plan sponsors, academicians, consultants, appraisers, CPA's and other service providers who have a significant involvement in pension fund real estate investments. They come together to address vital industry issues and to promote research. The NCREIF was established to serve the institutional real estate investment community as a non-partisan collector, processor, validator and disseminator of real estate performance information. Now you know what we are talking about in terms of integrity of the data. No tier I, II and III assets for these folks to manipulate and massage in terms of values, just honest third party actual quarterly appraisals of real properties....We’re currently looking at the most significant period of consecutive quarterly drops in value in what admittedly is the short history of the data (going back to 1978). Over the last four quarters (3Q 2008-2Q 2009) the index has recorded a 22.5% contraction in value. And just what does this infer about bank holdings of CRE loan paper? Thanks to the current Administration’s financial sector “don’t ask, don’t tell” policy for bank assets, we’re not going to really know any time soon. Good thing the US banks can simply move forward reporting record earnings and ignore the current inconvenient truth of declining CRE values, no? We only see some glimpse of the truth in asset values every Friday when we see that week's US bank failures. Did you catch how BB&T wrote down Colonial Bank asset values by 37% after Colonial's essential failure and melding into BB&T? The write down never happened until Colonial hit the tarmac nose first, yet asset values had vaporized long ago. And this is the "transparency" we've been promised?

Higher percentages of Texas, New Mexico, and Mississippi residents are without health insurance -- roughly one in four -- than is true for any other states in the U.S. In Massachusetts, where legislation requires all residents to carry health insurance coverage or face a tax penalty, 5.5% are without insurance -- the lowest percentage in the country.
Gallup previously reported an increase in the number of uninsured adults nationwide from 14.8% in 2008 to 16.2% in 2009.

Friday, September 04, 2009


9/4/09 Unemployment

The U.S. unemployment rate jumped to a 26-year high of 9.7% in August as nonfarm payrolls fell by 216,000, the 20th consecutive monthly decline, the Labor Department estimated Friday.The civilian labor force reportedly shrank 422,000 in the most recent month. The number of people not in the workforce increased by 637-thousand. U.S. payrolls have dropped by 6.9 million to 131.2 million since the recession began in December 2007, the government data showed. Unemployment has increased by 7.4 million during the recession to 14.9 million. The 216,000 decline in payrolls was close to market expectations of a 233,000 drop, but the unemployment rate rose higher than the 9.5% level expected. The unemployment rate was 9.4% in July. It was the smallest decline in payrolls since August 2008.Long-term unemployment rate (marginally attached, discouraged, part-time for economic reasons workers) rose from 16.3% in July to 16.8% in August. Revisions subtracted 49,000 from payroll figures previously reported for July and June.
Job losses continued to slow in manufacturing (63k), services (80k), residential construction (22k), non-residential construction (34k), finance (28k), business and professional services (22k), retail (9k), leisure and hospitality (21k). The government also lost 18k jobs led by job losses at the Federal, state and local government levels. There were job gains in health care and education (52k)
The average workweek was unchanged at 33.1. Aggregate weekly hours were unchanged. Average hourly earnings rose 2.6% y/y, while weekly earnings rose only 0.8% y/y..
“The labor market’s healing process is agonizingly slow,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “We expect the improvement to remain a very slow one, and therefore for the household sector to be contending with a weak labor market for some time.”

Boeing Co. said today deliveries of its commercial jets slid 22 percent and orders fell 11 percent in August, as weaker demand for air travel forces airlines to cancel or postpone plans to buy new planes.

According to the WSJ, State legislatures have struggled to cover shortfalls that have ballooned to $168 billion, or 24% of their general-fund budgets, for the current fiscal year, which for most began July 1, according to a report released Thursday by the left-leaning Center on Budget Policy Priorities.

Consumers have reined in spending, eroding sales-tax receipts, while job losses have cut income-tax collections. States have already responded by raising fees and tapping rainy-day funds, and are now forced to deal with wage costs, which make up about 13% of their budgets, according to the Rockefeller Institute of Government in Albany, N.Y.
For political and practical reasons, states have been reluctant to lay off.

Dr. Nouriel Roubini: "All elements of total labor income--jobs, hours and average hourly wages--are under pressure, which will impact consumption in the coming months. The unemployment rate in late 2009 will be higher than what was assumed for 2010 in the adverse scenario of the banks' stress tests. This will lead to further delinquencies on loans and securities and lower-than-expected recovery rates. As people with mortgages lose their jobs, they will have severe difficulties servicing their mortgages....I think that too many people are hopeful that everything is fine and unfortunately the road ahead is going to be at best bumpy, if not worse," he said.

Supertankers may halt oil trading as rates drop on supply glut, Frontline says.

The most credit-worthy borrowers are now falling behind on mortgage and credit-card payments at a faster pace than people with poor financial histories, according to Friday's Wall Street Journal. The paper reported that these so-called prime borrowers lost their jobs over the past few months and are now running out of temporary measures that were keeping them afloat. Rising delinquencies on prime mortgages pushed the total mortgage-delinquency rate to a record 9.24% in the second quarter, said the Journal. Prime mortgage delinquencies rose 5.8% in the quarter, compared to a rise of 1.8% among subprime customers.

Tony Crescenzi, a market strategist and portfolio manager at Pacific Investment Management Co., manager of the world’s biggest bond fund, said the U.S. faces a slow recovery because unemployment is persisting.
“The key ingredient for a sustainable recovery is still absent,” Crescenzi said today in an interview on Bloomberg Radio. “We need income growth to produce self-reinforcing expansion.” “The duration of unemployment will be longer and will put downward pressure on wages,” Crescenzi said.

Surcharges added to copper prices, a signal for demand, have dropped as much as about 40 percent in China as Asian stockpiles swell in response to slower buying in the world’s largest consumer of the metal, CRU said.
The so-called copper premium has slid to between $70 and $90 a metric ton in Shanghai, according to Paul Settles, an analyst at the London-based commodities researcher. The premium, which includes freight and insurance and is paid on top of London Metal Exchange prices, was $120 in the first week of August, he said.

The risk of a double-dip recession is on the rise, says Pimco CEO Mohamed El-Erian, due to softness in the job market and flat incomes.

Biogen Idec Inc.said Friday it offered $14.50 a share for all outstanding shares of Facet Biotech Corp. With about 23.9 million shares outstanding, the deal values the Redwood City, Calif.-based biotech at $346.6 million, or at a 64% premium to Facet's closing price of $8.82 a share on Thursday.

Dec. gold falls $1 to close at $996.70 an ounce. Natural gas rose 23 cents to end at $2.74.

Dow industrials off 1.1% from week ago close. S&P 500 down 1.2% on the week. Nasdaq Composite tallies weekly loss of 0.5%.

Kansas City, Mo.-based First Bank of Kansas City was closed by regulators Friday, marking the 85th U.S. bank failure of the year.

Rhode Island's state workers fretted about their livelihoods Friday as news spread that Gov. Don Carcieri will lay off 1,000 state employees unless he strikes a cost-cutting deal with their unions.

Thursday, September 03, 2009


9/3/09 Gold

Stocks in China rose the most in six months, driving the yen and Treasuries lower, on speculation the government will adopt measures to boost equities after the Shanghai Composite Index fell into a bear market.

Soybeans may slump to $8.50 a bushel, losing about 11 percent from today’s price, as farmers in the U.S. harvest a record crop, according to FCStone Group Inc.
“There’s no sign of frost,” David Smoldt, vice president at the West Des Moines, Iowa-based commodity research and brokerage company, said in a phone interview. The drop could happen at the end of September or start of October on the “realization that we have a large crop,” Smoldt said Sept. 2.

Costco Wholesale Corp on Thursday reported a smaller-than-expected 2 percent fall in August same-store sales, in a sign that the impact of the financial crisis is waning on U.S. consumer spending.
Analysts, on average, were expecting a fall of 5.7 percent in same-store sales, according to Thomson Reuters data.
Same-store sales at U.S. locations fell 4 percent, while international division sales rose 3 percent.

After a wave of redemption requests, Cerberus bars investors in two new funds from withdrawing money for three years. The multi-year lock-up is rare among hedge funds.

Japanese drug company Dainippon Sumitomo Pharma Co. is acquiring U.S. drug maker Sepracor Inc. for about $2.6 billion in an effort to expand in the U.S. market, both sides said Thursday.
Dainippon, which has largely depended on its domestic market up, said the deal will give it access to Sepracor's established sales network in the U.S., which will increase the Japanese drugmaker's overseas revenues to 40 percent of its total. It will also give it access to established drugs in the U.S. such as insomnia drug Lunesta.
The Osaka-based company said it will offer $23 per share, a 27.6 percent premium over Sepracor's closing price Tuesday, through a tender offer set to start in early September.

Doug Wakefield: "If the number of problem banks rises, while the amount of money in the Deposit Insurance Fund is depleted by 80 percent in a little over a year, how is it that we speak of bank deposits as "low risk" or "risk free" investments?....Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security. Deliberate employment of weapons of mass destruction or other catastrophic capabilities, unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies [H1N1 (?)], and catastrophic natural and human disasters are all paths to disruptive shocks. (Italics and brackets mine)"

More Americans than anticipated filed claims for jobless benefits last week, indicating companies remain focused on lowering expenses to preserve profits.
Applications fell by 4,000 to 570,000 in the week ended Aug. 29, exceeding the 564,000 median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The total number of people collecting unemployment insurance climbed. The four-week average of seasonally adjusted new claims rose 4,000 to 571,250, the highest in eight weeks. Meanwhile, the number of people collecting regular state benefits rose by 92,000 in the week ending Aug. 22 to a seasonally adjusted 6.23 million. The insured unemployment rate rose to 4.7% from 4.6%. The four-week average of continuing claims fell 27,250 to 6.22 million, the lowest since April. The number of people collecting benefits of any kind was 9.65 million, not seasonally adjusted.
States reported 3,029,668 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Aug. 15, an increase of 85,570 from the prior week. There were 1,550,093 claimants in the comparable week in 2008.

In early trading, natural gas dropped to $2.56, a price where no producer is close to making money or even breaking even. It reminds me when crude sold for $10 a barrel. Who would have thought it could rise to $147 and remain a year later around $70.
Natural gas sells at a price-per-therm that right now is $.25 cents. To give you an idea of how good that is, compared to what it was four years ago, it is about 1/4th to 1/5th the price it was running late summer/end of the fall four years ago, and excludes inflation.

China is on track to become the first purchaser of notes issued by the International Monetary Fund, a move that would diversify its foreign asset holdings and could give the IMF's quasi-currency more clout. The IMF on Wednesday said China has signed an agreement to purchase approximately $50 billion in notes from the fund. The notes are denominated in Special Drawing Rights, a quasi-currency issued by the fund and promoted by China as a potential replacement for the dollar.

The inability of the government to continue pumping stimulus into the economy could promote a double-dip recession that will mean investment opportunities in longer-term government debt, Pimco's Bill Gross told CNBC.

As inflation becomes less a possibility due to the weakening economy, 10-year notes and 30-year bonds could provide solid investment opportunities, Gross, CIO of the world's largest bond fund, said in a live interview.

Florida lost a net 58,000 people this year…for the first time since the 1940s.

The staff of the European Central Bank now are projecting growth in the 16-nation euro zone next year, seeing at the midpoint 0.2% growth versus an earlier prediction of a 0.3% contraction. For this year, the staff see a contraction of 3.9%. They also increased their inflation forecast, seeing 2009 prices rising 0.4% at the midpoint and 1.2% in 2010. Jean-Claude Trichet, the ECB's president, said rates are "appropriate" and said that while the period of contraction is over, economic uncertainty is still high.

The ISM non-manufacturing index rebounded to 48.4% in August after slipping to 46.4% in July from 47.0 in June. The increase in August was higher than expected. Economists were looking the index to rise to 48.0%. The business activity index rose to 51.3% in August from 46.1% in the previous month. New orders rose to 49.9% from 48.1%. The employment index rose to 43.5% from 41.5%. Inflation pressures picked up. The price index soared to 63.1% from 41.3% in the previous month.

Working gas in storage was 3,323 Bcf as of Friday, August 28, 2009, according to EIA estimates. This represents a net increase of 65 Bcf from the previous week. Stocks were 489 Bcf higher than last year at this time and 501 Bcf above the 5-year average of 2,822 Bcf. In the East Region, stocks were 156 Bcf above the 5-year average following net injections of 52 Bcf. Stocks in the Producing Region were 268 Bcf above the 5-year average of 818 Bcf after a net injection of 7 Bcf. Stocks in the West Region were 77 Bcf above the 5-year average after a net addition of 6 Bcf. At 3,323 Bcf, total working gas is above the 5-year historical range.

The natural gas contract on the Nymex gave up nearly 23 percent in the past six days.

September 3, 1930: "Most economists agree business upturn close; peak in business was reached July 1929, so depression has lasted about 14 months. “Those who have faith and confidence in the country and its ability to come back will profit by their foresight. This has also been the case over the past half century.”

Federal Reserve Chair Ben Bernanke threatens an economic crash if Congress audits the Fed. The count has begun on enough support becoming available to perform this audit.

Dec. gold rises as high as $999.50 an ounce. U.S. dollar index around the 78 level. Crude ends down 0.1% at $67.96 a barrel. Natural gas fell 20 cents to end at $2.51, another 7-year low. The latter has clearly increased my humility. I did not believe natural gas would drop to this level.

Same-store sales fell an average of 2.9 percent at the 30 retailers tracked by Thomson Reuters, better than the 3.8 percent decline analysts had forecast.
Half of the retailers missed analysts' expectations, and 46 percent beat them.

The Dow Jones Industrial Average gained 63.94 points, or 0.7%, to end at 9,344.61. The S&P 500 Index added 8.48 points, or 0.9%, to 1,003.23, while the Nasdaq Composite rose 16.13 points, or 0.8%, to 1,983.2.

Wednesday, September 02, 2009


9/2/09 Wegelin

Wegelin & Co., Switzerland’s oldest bank, is telling wealthy clients to sell their U.S. assets, or switch banks, because of concerns new rules will saddle investors with tax obligations in the world’s biggest economy.

With oil at $68 a barrel and natural gas at $2.80 per tcf (thousand cubic feet), the price divergence between the two commodities is near a 20-year high. These prices compare with nearly a 13-to-one average this past year. If heating the home is cheap this year, more consumers will turn on the heaters, thus using up existing supply.

ZeroHedge: "With import prices down some 19% yoy and even a record 7.3% yoy if one excludes petroleum, no wonder the price of domestic purchases has already fallen into deflation. If anything, domestic purchases inflation leads trends in both GDP and core CPI, so this is significant news."

Brett Steenbarger: "One data point worth noting is that we're already seeing more stocks making 20- and 65-day lows than we saw at those August lows. That tells me that, although the market averages are above their previous low points, we're starting to see individual stocks breaking down. Of the sector groups, the raw materials stocks (XLB) are closest to those August lows, reflecting continued weakness among commodities."

The ABC News Consumer Comfort Index stands at -45 on its scale of -100 to +100, matching last week's mark as the best since May. Four weeks without any retreat is the longest such stretch since spring, when the CCI reached its 2009 high, -42 on May 10.

Utah has 25 natural gas fueling stations in operation up and down the state. The cost is about 90 cents a gallon equivalent to about three times the cost for gasoline. We have enough supply of natural gas in the U.S. to eliminate the importation of all foreign oil.

AMR Corp's American Airlines said on Tuesday it would cut 921 flight attendant jobs, part of a previously announced capacity cut as the industry struggles with flagging demand.

ADP said 298,000 private-sector jobs were lost in August, fewer than a revised 360,000 jobs lost in July. The July decline was originally reported at 371,000 last month."Employment losses are clearly diminishing," Joel Prakken, chairman of Macroeconomic Advisors, said in a statement. "Despite recent indications that overall economic activity is stabilizing, employment, which usually trails overall economic activity, is still likely to decline for at least several more months, albeit at a diminishing rate."

Layoffs planned by major U.S. corporations dropped 21% during August from July's pace of job-cut announcements, according to Challenger Gray & Christmas. The August total of 76,456 was the second lowest of 2009 as compiled by the Chicago-based outplacement firm in its tally of job-cut announcements. Layoff announcements sank to 74,393 in June, a 15-month low, then rose to 97,373 in July. Job cuts ran 14% lower than the 88,736 layoffs announced in August 2008. Including the latest month, job-cut announcements have dropped on a month-to-month basis six times in seven, Challenger Gray said. Still, the firm's unscientific count of announced job cuts for all of 2009 has now cracked the 1 million mark, exceeding 1.07 million -- 60% more than at this point a year ago. Challenger Gray's total for all of 2008 was nearly 1.224 million. The job-cut figures aren't seasonally adjusted, and count only a fraction of the actual number of layoffs that take place each month, mostly in small- and medium-sized firms.

Baker Hughes' $5.5 billion bid for BJ Services is a marriage made in recession.

The deal between the two Houston energy services companies is as much a bet on a rebound in natural gas prices as it is a strategic move for Baker Hughes to compete with Halliburton and Schlumberger. Natural gas prices have fallen 64 percent in the past year, closing Tuesday at $2.82 per million British thermal units.

Baker Hughes hopes to expand on BJ Services' expertise in drilling for shale gas, which has been one of the hottest exploration markets in recent years. Company executives predict the acquisition will add to earnings by 2011, based on the assumption of increased drilling activity that would result if prices rise to at least $6.50, said Ted Harper, a senior research analyst with Frost Investment Advisers in Houston.

“This is definitely a call that they think we are at or near the bottom,” he said.

In early Wed. trading, gold for December delivery was up $9.30, or 1%, at $965.80 an ounce in electronic trade. U.S. stock futures were under pressure, while crude oil futures rose after two days of heavy losses and ahead of petroleum inventories data.

John Wasik: "Growing unemployment, stagnant wages and diminished home equity are weighing even more on those who may join the ranks of the foreclosed. The delinquency rate on U.S. mortgages -- those falling behind on payments -- reached a record in the first half of the year, according to the Mortgage Bankers Association, a trade group in Washington.

The current deleveraging is paring consumer spending as buyers are borrowing less for everything. They don’t feel wealthy either since their retirement funds were clobbered during the last bear market.

Lost home equity not only represented diminished wealth, it hurt confidence in the future.

BP has made a giant oil discovery at its Tiber Prospect in the deepwater Gulf of Mexico.

The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometers) southeast of Houston, is in 4,132 feet (1,259 meters) of water. The Tiber well, drilled by Transocean's Deepwater Horizon semisub, was drilled to a total depth of approximately 35,055 feet (10,685 meters) making it one of the deepest wells ever drilled by the oil and gas industry. The well found oil in multiple Lower Tertiary reservoirs. Appraisal will be required to determine the size and commerciality of the discovery.

Russian Professor Igor Panarin says that events are continuing to confirm his doomsday prediction first made over 10 years ago, that the United States will completely collapse like the Soviet Union before the end of 2010, and warns that the chaos could begin to unfold in as little as two months.

Panarin, doctor of political sciences and professor of the Russian Diplomatic Academy Ministry of Foreign Affairs, told journalists during the unveiling of his new book yesterday that President Obama has done nothing to forestall the fast approaching crisis and that it could begin to properly unfold in November.

“Obama is “the president of hope”, but in a year there won’t be any hope,” said Panarin. “He’s practically another Gorbachev – he likes to talk but hasn’t really managed to do anything. Gorbachev at least had been a secretary of a regional communist party administration, whereas Obama was just a social worker. His mentality is totally different. He’s a nice person and talks nicely – but he’s not a leader and will take America to a crash. When Americans understand that – it will be like a bomb explosion.”

Yesterday Chinese Premier Wen Jiabao seemed to give assurances that there’s no reason to be concerned Beijing will be taking away the punch bowl from China’s easy-money party. According to this story from the official Xinhua news agency, “China would not change the orientation of its stimulating economic policy” and “would continue to pursue proactive fiscal and moderately easy monetary policies.” The agency went on to quote Wen directly saying “we will not change the orientation of our policy.”

Mortgage filings drop a seasonally adjusted 2.2% in the week ended Aug. 28 compared with the week before, as lower interest rates offered on home loans prove an insufficient lure for applicants, Mortgage Bankers Association data show.

The Labor Department said Wednesday that productivity, the amount of output per hour of work, rose at an annual rate of 6.6 percent in the April-June quarter, the largest advance since the summer of 2003. Economists expected an increase of 6.4 percent, matching the government's initial estimate last month.

Labor costs fell at an annual rate of 5.9 percent. That's the largest drop since the second quarter of 2000, and slightly bigger than the 5.8 percent decline estimated a month ago.

The last time natural gas prices were below $3.00 per MMBtu, oil prices were below $30 per barrel. Similarly, when oil prices have been near $70, natural gas prices have been around $6.00.

Samsonite Company Stores LLC, the U.S. retail unit of the luggage maker, on Wednesday filed for Chapter 11 protection with a prepackaged reorganization plan that includes store closures.

The company said there would be a "significant" reduction in the number of mall-based and other stores as it concentrates its efforts on its more profitable outlet stores. It did not specify how many of its 173 U.S. stores would shut down.

Factory orders increased 1.3% in July, slightly slower than the 2.0% rise expected by economists surveyed by MarketWatch. This is the fourth straight monthly increase. Orders for durable goods increased 5.1% in July, revised up from 4.9% estimated a week ago. However, orders for nondurable goods fell 1.9%, the sharpest decline since last December. Non-defense capital goods orders excluding aircraft, known as "core" orders, fell 0.3% in July after rising 3.8% in June, the government said.

Russia ’s grain exports may fall 43% to between 1.6 million metric tons and 1.8 million tons in September from a year earlier as global trade declines, said grain transporter ZAO Rusagrotrans.

- China , the world’s largest soybean importer, may purchase 2.6 million metric tons of the commodity this month, falling below 3 million tons for the second month, the China National Grain & Oils Information Center said.

The latest Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 36% would opt for his or her Democratic opponent.

U.S. crude oil refinery inputs averaged nearly 15.0 million barrels per day
during the week ending August 28, 468 thousand barrels per day above the
previous week's average. Refineries operated at 87.2 percent of their operable
capacity last week. Gasoline production increased last week, averaging 9.2
million barrels per day. Distillate fuel production increased last week,
averaging 4.1 million barrels per day.

U.S. crude oil imports averaged 9.6 million barrels per day last week, up 351
thousand barrels per day from the previous week. Over the last four weeks,
crude oil imports have averaged 9.1 million barrels per day, 1.2 million
barrels per day below the same four-week period last year.
U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) decreased by 0.4 million barrels from the previous week. At
343.4 million barrels, U.S. crude oil inventories are above the upper boundary
of the average range for this time of year. Total motor gasoline inventories
decreased by 3.0 million barrels last week, and are in the upper half of the
average range. Both gasoline inventories and gasoline blending components
decreased last week. Distillate fuel inventories increased by 1.2 million
barrels, and are above the upper boundary of the average range for this time
of year. Propane/propylene inventories decreased by 1.6 million barrels last
week and are above the upper limit of the average range. Total commercial
petroleum inventories decreased by 4.5 million barrels last week,
and are above the upper limit of the average range for this time of year.

Danaher said it will cut 1,000 more jobs and
shut 14 more factories in addition to plans announced n April.
In all, the company will reduce 3,330 jobs and eliminate 30

Fed officials were more confident that the steep downturn in the economy was coming to an end, but had no firm grasp about the likely strength of the recovery, minutes of their Aug. 11-12 policy meeting showed.

Gold rose $25 to $981 while crude closed unchanged.

The number of Americans who view Congress favorably has dipped to a 24-year low.

The Dow Jones Industrial Average fell 29.93 points, or 0.3%, to 9,280.67. The S&P 500 Index shed 3.29 points, or 0.3%, to 994.75, while the Nasdaq Composite dropped 1.82 points, or 0.1%, to rest at 1,967.07.

Tuesday, September 01, 2009

Chandrasekhar Debt Limit

9/1/09 Chandrasekhar Debt Limit

PetroChina, Asia's largest oil and gas company, is making a $1.7 billion investment in the Canadian oil sands.
Athabasca Oil Sands said Monday that PetroChina is buying a 60 percent working interest in its Mackay River and Dover oil sands projects in northeastern Alberta.

A German court has ruled that Google Inc. must change terms of service that could be interpreted to compromise a user's rights, a decision the consumer advocacy group that brought the suit welcomed today as a victory for online transparency.

China’s manufacturing expanded at the fastest pace in 16 months in August as the economy maintained momentum after record lending in the first half of the year.
The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement.

George F. Will, the elite conservative commentator, will call in his next column for U.S. ground troops to leave Afghanistan, according to publishing sources.
“[F]orces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent special forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters,” Will writes in the column, scheduled for publication later this week.

Australia's current-account deficit widened more than expected, doubling in the second quarter from the first quarter, according to government data released Tuesday.
The deficit grew to a seasonally adjusted 13.35 billion Australian dollars ($11.27 billion) from a revised 6.35 billion Australian dollar deficit seen in the first quarter of 2009, figures from the Australia Bureau of Statistics showed.

Chain-store sales for the week ended Aug. 29 fell 0.7% 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 dropped 0.5%. "Although the back-to-school calendar shifts will, on balance, boost year-over-year sales in August a tad, there was little discernible improvement in the trend during the entire month otherwise," said Michael Niemira, ICSC's chief economist. ICSC forecast August comparable sales to decline 3.5% to 4%.

Obama blocked large pay raises for tens of thousands of federal employees, overriding statutory formulas to hold pay increases to 2% in 2010. Obama's approval rating has dropped to 42%.

For the quarter ended in June, the national rate of auto loans that were 60 days past due was up 7.35 percent, according to credit reporting agency TransUnion. While still a relatively low 0.73 percent, the rate rose from 0.68 percent at the same time a year ago.

The National Retail Federation predicts that consumers this year will spend about $47.5 billion on back-to-school and back-to-college goods. Retailers typically do swift business during the season, which starts in July and lasts through mid-September.
But the down economy means that consumer spending is likely to fall this year, after years of steady growth. The average family with students in grades K to 12 is expected to spend $548 on school merchandise, about eight percent less than last year.

Sweden's Riksbank's -0.25% deposit rate means that banks with accounts at the central bank are paying Riksbank 0.25% in interest to keep deposits at the institution. In effect, the arrangement turns the concept of a bank account on its head. Instead of earning interest, depositors are paying the bank to maintain the accounts.

Tony Allison: "The cold reality is that millions of the 76 million-strong Baby Boom generation, now starting to reach retirement age, will be unable to retire. Ever. These boomers will reach their golden years without enough assets and savings to survive for long without a paycheck. Some will reach retirement age with little but debt and good memories. For others working into their 60’s and 70’s will be no big deal. They enjoy what they do and will continue for as long as they can. For many, perhaps too many, they will be forced to keep working to make ends meet, which is not a happy prospect, especially if health concerns are an issue."

Nonperforming loans now make up 2.77% of the entire banking industry’s assets. This is up from 1.4% in June 2008 and 0.47% in June 2006.

Unemployment in the Eurozone has risen to its highest level in ten years. The latest data released by the European Union's statistics office on Tuesday showed that unemployment rate in the 16-country euro currency area rose to 9.5 percent from 9.4 percent in June.
The number of people without a job in the euro zone rose by 167,000 in July to 15.09 million.
The rise in joblessness was highest in Ireland, Spain and France.
In the whole European Union of 27 member states, unemployment rose to 9.0 percent of the workforce from June's 8.9 percent, increasing by 225,000 to 21.8 million people.

Commercial jet market still awaits recovery, EADS chief says.

Consumer prices in the euro zone fell 0.2% in August from a year earlier.

The AAII survey, which measures the percentage of individual investors who are bullish, bearish and neutral on the stock market over the coming six months, last week saw bullish sentiment falling to 34%, beneath the long-term average of 38.9%; neutral sentiment dropping to 17.5%, below the long-term average of 31.1%; and bearish sentiment climbing to 48.5%, above the long-term average of 30%.

Boosted by low prices and a home-buyer tax credit, pending sales of existing homes rose in July for the six straight month, the longest streak on record, a real estate trade group reported Tuesday. The pending home sales index rose 3.2% in July, the National Association of Realtors said. The index is 12% above July 2008.

Teachers — once among the groups exempted from furlough days — are being forced to take unpaid days off amid massive state budget cuts. School districts are facing historic cuts amid the worst economic decline in decades. But even if a district manages to avoid layoffs, teachers still are having to take furloughs on days when they would typically be planning lessons, going to conferences and meeting with other educators.

Conditions for the nation's manufacturers expanded for the first time in 19 months in August, the Institute for Supply Management reported Tuesday. The ISM index rose to 52.9% in August from 48.9% in July. This is the first time the index has been above the breakeven point since January 2008.

According to Bloomberg, “Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.”

July Construction Spending -0.2% to $958B/year, 10.5% below the year-ago estimate. For the first seven months, spending was $543.8B, 11.4% below the same period in 2008.

Illinois consumers will pay more for toiletries, candy, soft drinks and liquor starting Tuesday as lawmakers raise cash to pay for a statewide construction program.
Most candy — currently carrying a 1 percent sales tax — will be taxed at 6.25 percent. And it'll be the same for shampoos and toothpaste that until now were taxed at the lower rate if shop keepers deemed they had a medicinal effect.

Paul B. Farrell: "Lobbyists now run America, own America, rule America. Forget the 537 politicians you thought we elected to the White House, Senate and Congress to run America for us. No, they're mere puppets, pawns for the "Happy Conspiracy," an oligopoly, plutocracy, cabal, monopoly all-in-one -- a private club of America's richest few on Wall Street, in Washington and in Corporate America.
Voters and elections are irrelevant. Lobbyists decide what's in the best interests of this elite club. The usual suspects? Try the Forbes 400."

At least 49 U.S. troops died in Afghanistan in August, according to a count by The Associated Press based on official announcements.

President Barack Obama committed 21,000 new American forces to Afghanistan this year, bringing the total U.S. commitment to 68,000 by the end of the year.
A record 100,000 U.S. and NATO troops are stationed in Afghanistan.

Chrysler U.S. August sales fall 15% to 93,222. Ford Motor Co.said Tuesday that total U.S. sales in August rose 17% to 182,149 vehicles from 155,690 last year. GM August U.S. sales: -20.2%.

It's a new phenomenon - expectations are now higher than the printed consensus," said Art Hogan, chief market strategist at Jefferies & Co.

Last October, the blog, economicdisconnect, asked if the US has a debt Chandrasekhar Limit, meaning is there a point at which the US will incur so much debt that it will go supernova and explode. Now it's 11 months later. I think the answer to that question is quite clear.

Brett Steenbarger: " Particularly notable, however, was the volume to the downside: volume during the 10:00 AM CT half hour ran about four times the average value for that time of day or about eight standard deviations above the norm!
That tells us that there was tremendous institutional participation to the downside. Those are the kinds of moves with legs. The fact that the downside move followed from a scenario of continuing technical weakness was also strongly supportive of the bear case. Stocks making fresh 20-day lows continue to expand and continue to outnumber new highs, suggesting that we have, indeed, made an intermediate-term shift away from the bull."

The Oil Drum: "There is no doubt that there is a huge amount of resource in place - between 1.7 and 2.5 trillion barrels, according to the Oil Sands Discovery Centre's Oil Sands Story. Of this, 173 billion barrels (about 10%) is considered producible with current technology at 2006 prices ($66 barrel for WTI). Production to date has been relatively low, though--only 1.2 million barrels a day in 2008, according to Canadian Association of Petroleum Producers."

Market Skeptics: "I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008. This number seemed BIGGER than BIG – because the U.S is only alleged to have stockpiles of sovereign gold of 8,100 metric tonnes while annual U.S. mine production of gold is roughly 228 metric tonnes. This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production. So, I was left wondering, “just what is/are ‘gold compounds’?I contacted the USGS and queried a qualified individual [who had working knowledge of this data stream] about the definition of “Gold Compounds”. I was told that, according to the U.S. Census Bureau – who supplies not only the definition but the actual reported numbers, gold compounds were typified by industrial type products containing low percentages/amounts of actual gold content – like gold paint. I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes [when the U.S. Dollar was weaker and the Global Economy was booming]? I noted that this was counter-intuitive and made no fundamental economic sense...When confronted with reason, the individual for the USGS agreed that the data, as published, did not make logical sense and explained that the U.S. Census Bureau was questioned as to the veracity of this particular line item in their data.I asked the USGS employee if the gross weight or the gross value [not shown in the table but known to the USGS] of the “Gold Compounds” was queried. The individual confirmed that their query to the U.S. Census Bureau dealt with the gross value being assigned to these exported goods.I responded rhetorically, “being an issue of gross value – then let me guess that the U.S. Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the U.S. Census Bureau claims these items are- namely, industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents”.The individual from the USGS confirmed my reasoning when he responded, “that would be CORRECT”.
At a minimum, this is a very peculiar event. Does the US sell that much gold paint, or those little gold flakes for alcohol shots? Does the US export enough "industrial use" gold to significantly effect US trade numbers? Market Skeptics offers his own idea:Until someone explains to me what these “gold compounds” were, I am going to assume that they were half the US gold reserves leaving the country.
I am not ready to jump on that ship, but either this is a way to quietly move gold bullion on a large scale back to foreign central banks, or the numbers themselves are fictitious and constitute a blatant data manipulation on trade numbers. In any case, this is an important story."

General Electric Co expects conditions in most of its core markets to remain "challenging" for the next 12 to 18 months, a top executive of the largest U.S. conglomerate said on Tuesday.

Eric Janzsen: " Low stock valuations and interest rates have increased the number of pension funds that are not 100% or better funded from 67.6% in FY 2008 to 92.7% in FY 2009 ending in June. The median funded level has fallen to a mere 46%. By law, companies have to bring these funds up to 100%. Unless both stock prices and interest rates rise, they will have to make up shortfalls out of operating cash flow rather than of investing in growth, such as in hiring and capital expenditure."

The Dow Jones Industrial Average fell 185.68 points, or 2%, to 9,310.6, its worst daily hit in two weeks. The S&P 500 Index fell 22.58 points, or 2.2%, to end at 998.04, the index's first close below 1,000 since Aug. 20. The Nasdaq Composite Index shed 40.17 points, or 2%, to 1,968.89.

Crude dropped $1.80 to $68.15. Gold rose $4.30 to $957.80.

Monday, August 31, 2009


8/31/09 Redeterminations

Baker Hughes Inc. entered a definitive agreement to acquire BJ Services in a stock-and-cash transaction valued at $5.5 billion, the companies announced. The deal carries an acquisition premium of about 16%, based on the Aug. 28 closing price on BJ Services stock. Terms call for BJ Services shareholders to receive 0.40035 of a share of Baker Hughes as well as cash in the amount of $2.69 in exchange for each of their BJ Services common shares. "Our two companies have highly complementary products and services with very little overlap," said Chad Deaton, chairman, president and chief executive of Houston-based Baker Hughes.

According to Bloomberg, Natural-gas producers in the U.S. are heading for a day of reckoning with their banks as soon as this week.
At issue are so-called redeterminations, where banks review gas companies’ credit lines periodically and adjust amounts that can be borrowed when fuel reserves securing the debts change in value. The next redeterminations for many producers are in September, and this time around, plunging gas prices will cause credit lines to be slashed, Southwestern Energy Co. Chief Executive Officer Steven Mueller said.
“A lot of guys barely held on last redetermination, and we’ll just see what happens here,” Mueller said in an interview in Houston, where Southwestern is based.
Without the financing needed to keep their rigs operating, producers such as Forest Oil Corp. and Chesapeake Energy Corp. may need to raise capital by selling shares or bonds, said Haag Sherman, chief investment officer at Salient Partners in Houston. Companies may also opt to seek buyers, creating acquisition opportunities for larger producers such as Devon Energy Corp. and Apache Corp., he said.
“I’d be building my war chest if I were the big guys,” said Sherman, who helps manage $7.3 billion at Salient. “It could be a great year and a half for M&A activity.”

There’s little cause to hope that gas prices will rise enough in the next few weeks as credit lines are reviewed, said B.J. Willingham, chief investment officer at Moncrief Willingham Energy Advisers in Houston. Only when cold weather arrives will there be support for higher prices, he said. Benchmark gas prices will average $3.75 for the rest of this year and may climb to about $4.50 in 2010, Standard & Poor’s predicted in a report this month. Most U.S. gas-drilling projects need prices at $6 to $8 to be worthwhile, S&P said.

Consumer prices in the euro zone fell 0.2% in August, according to an initial estimate issued by Eurostat on Monday, from a 0.7% fall in July.

"Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." - Lou Jiwei, Head Of China Sovereign Wealth Fund

India's economy grew 6.1% in the fiscal first quarter compared with the year-earlier period, according to estimates released Monday by the Central Statistical Organization. The result beat expectations for 5.8% growth reported in a Dow Jones Newswires survey of economists.

Chinese shares slumped 5.4% to end the morning session in Shanghai at 2,706.96, a level the benchmark index hasn't seen since May, as concerns about the impact of weakening bank lending and capital-raising issues continued to weigh on sentiment.

Data compiled by real estate research firm Foresight Analytics in Oakland last week showed that the percentage of commercial property owners in the Bay Area with mortgages 30 days or more past due had increased to about 4 percent in the second quarter, which concluded at the end of June.
The loan delinquency rate, roughly three percentage points higher than during the same quarter last year, is on par with the national average and is getting close to the level that analysts say restricts lenders' ability to extend existing loans or make new ones.
"Five percent is a threshold that we watch for because it digs into the banks' capital," said Matthew Anderson, a partner at Foresight. "It makes them less flexible with their loans and increases the tightness in the credit market, making it harder to get loans."

John Hussman: "Straight to the chase – the U.S. stock market is overvalued, but not severely so. Prospective 10-year total returns for the S&P 500 are uninspiring, but they have been even more dismal for much of the past decade. Market action in the major indices has been clearly strong, as is breadth, but evidence of robust sponsorship is weak – particularly on the basis of trading volume. Several measures of risk aversion have abated, but have been replaced by exuberant investor sentiment, which has not been as bullish since the 2007 market peak. From the standpoint of typical post-war market cycles, there is little to get excited about, but there also does not seem to be a great deal to complain about either. That is, again, if we assume that this is a typical post-war market cycle....There is no assurance, in my view, that the current economic stabilization we've observed is more than an artifact of enormous government spending, or that the underlying structure is invulnerable to a steep double-dip."

Freedom Communications, which owns over 30 daily newspapers and 8 TV stations, reportedly plans to declare bankruptcy this week and has reached debt restructuring agreements with its lenders. Private-equity firms Blackstone Group (BX) and Providence Equity Partners, which paid $460M in 2004 for a 40% stake in Freedom, have both written down the value of their investment to zero.

Gold for December delivery was down $12.50, or 1.3%, at $946.30 an ounce in electronic trading. Shanghai's Composite Index fell 6.7%, while the Shenzhen Composite Index plunged 7.1%, among concerns of slower bank lending and that leading companies will issue new shares, diluting the value of their stock.

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-two percent (42%) Strongly Disapprove. That’s the highest level of Strong Disapproval yet recorded for this President and it gives Obama a Presidential Approval Index rating of -10 (see trends).
If Americans could vote to keep or replace the entire Congress, 57% would throw out all the legislators and start over again. Just 25% would vote to keep the Congress.

According to the FT, Brazil is preparing to infringe patents on US pharmaceutical products, in retaliation against subsidies for US cotton farmers, according to the Brazilian press.
The World Trade Organisation is expected to rule on Monday that Brazil can contravene the drug patents, say the reports.
Brazil led a challenge against US cotton subsidies in 2002 and, two years later, the WTO ruled that about $3bn paid to US cotton farmers each year distorted global prices and violated trade rules.
The US has continued the subsidies, arguing that the measures were consistent with its WTO obligations. But the WTO has supported Brazil’s case. It allowed Brazil to retaliate in 2005 but Bras√≠lia has instead sought a negotiated settlement to avoid damaging relations with the US, until recently its biggest trading partner.
However, Brazil has become increasingly frustrated by the US refusal to remove its subsidies and, under pressure from its own cotton growers, is reported to be preparing to retaliate.

Walt Disney Co. has agreed to acquire Marvel Entertainment Inc. in a stock and cash transaction. Based on the closing price of Disney stock on Aug. 28, the transaction value is $50 per Marvel share or approximately $4 billion. Marvel shareholders would receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.

US natural gas drilling rigs are still down sharply since peaking above 1600 in September, and now stand at 907 rigs, or 56 percent, below the same week a year ago.

Zman Energy Brain: "Expect to see more natural gas production curtailments in coming weeks."

Kinder Morgan Energy Partners LP will buy Crosstex Energy LP's gas-treatment business for $266 million, in a deal Kinder touts will make it the largest provider of contract-provided treating plants in the country.

Huntington, Long Island will begin to retrofit some of its municipal vehicles to use compressed natural gas. Those vehicles are used to pick up commercial garbage in business districts and residential garbage in Centerport, Huntington Station and Huntington village.

The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers. Forward freight agreements traded by brokers show the fourth-quarter average price will be 7 percent lower.
Shipping rates, which already fell 59 percent from this year’s high, are retreating as the Organization for Economic Cooperation and Development predicts a 16 percent drop in world trade for all of 2009. China’s State Council called for curbs on steel and cement production last week. A record 146 capesizes will be added this year, equal to 28 percent of the fleet, according to Fearnley Consultants A/S.
“The pressure of the new ships will be overwhelming,” said Andreas Vergottis, the Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world’s largest shipping hedge fund, with $1 billion of assets. “It will take a lot of time and a lot of pain before shipping recovers.”

Each electric Prius motor requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum. That number will nearly double under Toyota's plans to boost the car's fuel economy, he said. Currently, between 45,000 and 50,000 tons of sintered neodymium magnets are produced each year, mainly from China and Japan.

August Chicago PMI: 50 vs. consensus of 48 and up from 43.4 in July; it's the highest since Sept. 2008. New orders were up 4.5 to 52.5, while prices paid jumped 15 points to 50.

Private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”. According to Bruce Krasting, Konrad Hummler is managing partner of Wegelin & Co., private bankers, and has acted for many years as personal advisor to the chairman of the board of directors of the Union Bank of Switzerland (UBS). He serves as a colonel in the general staff of the Swiss Army.

Tyler Durden: "Tishman Speyer's 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The "biggest deal for a single American property in modern times" which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise - take the 11,227 rent-stabilized units apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties - to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling."

A wildfire scorching the mountains north of Los Angeles doubled in size in the past day, threatening more than 10,000 homes and causing more than 2,000 people to flee as hot, dry weather and winds fan the flames.

This month, PepsiCo Inc.'s Aquafina brand sold at some grocery stores for as little as $2.99 for a 24-pack of half-liter bottles -- less than a penny an ounce and about half of its typical price. Still, that wasn't as cheap as the private-label brand at supermarket chain Kroger Co., on sale for $2.49. "It used to be $6.99 for a 24-pack, then $5.99," said Michael Bellas, chief executive of New York consulting firm Beverage Marketing Corp. "But $2.49? That's the lowest I've seen." Coke's refusal to lower Dasani prices has come at a cost: The brand's U.S. sales volume slid nearly 26% in grocery and other stores, excluding Wal-Mart, in the 12 weeks ended Aug. 8, according to a report by J.P. Morgan Chase & Co., which cited data from Nielsen Syndicate Market Data.
Aquafina's sales fell a less-steep 13.8% over the same period, helped by a 5% price cut. Sales of Poland Spring, owned by Nestlé, fell 8.9% while its prices sank 11.3%.

Copper plunged the most in two months in New York as equity markets fell in Asia and Europe, signaling slower demand for industrial metals. Zinc prices also declined in Shanghai.

Fitch's Prime Credit Card Chargeoff Index fell to 10.55% in July from 10.79% the previous month.

Crude oil dropped $3 to $69.60. Gold dropped $6.20 to $952.60.

Up 3.5% for August, the Dow Jones Industrial Average fell 47.92 points, or 0.5%, to end at 9,496.28. The S&P 500 Index declined 8.31 points, or 0.8%, to stand at 1,020.62, leaving it with a 3.4% advance for August. The Nasdaq Composite dropped 19.71 points, or 1%, to rest at 2,009.06, a level that leaves the technology-laden index with a 1.5% monthly gain.

Elliott Wave's current issue, dated Aug. 27, says: "The stock market is poised to complete the bear-market rally from March. Besides achieving to price objectives originally forecast in March, the five-month push has generated optimistic extremes that exceed those that were recorded at the October 2007 all-time high." Furthermore, "The Dow is just short of the most likely stopping point, 9654/9764, previous fourth wave extreme. ... The worst seasonal month of the year is at hand (September). Prices should decline at least as fast as they rebounded. For those who felt trapped in Primary Wave 1, Wave 2 will offer a respectable place to exit. But we know from past experience that many will hold out for even higher prices, hoping to 'break even.'"

Sunday, August 30, 2009

U.S. National Debt

8/30/09 U.S. National Debt

Richard Russell: "The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let's say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof...."As I said all along, it would have been better to have allowed the bear market to run its course to conclusion. That would have been extremely painful, but the US would have recovered. However, deficits in the trillions could ultimately 'break' this nation. I can't imagine how Bernanke-Obama plan to handle the coming mind-blowing deficits, plus the interest on those deficits.
"The pressure will be on the reserve status of the dollar, the level of the dollar compared to other international currencies, interest rates, and the standard of living of all of us living in the new 'banana republic', the United States of 'bankrupt' America.
"When you take all this in, you can begin to see how this bear market could end with stocks selling below known values and people despising the stock market and capitalism."

Chris Puplava: "September has proven to be the worst month of the year and the percent of NYSE issues making new highs have not confirmed the recent market highs in the S&P 500, so a garden variety correction may be what lies in store in the coming weeks."

"Based on how participants rated their own physical and mental health, we found that people who were persistently concerned about losing their jobs reported significantly worse overall health in both studies and were more depressed in one of the studies than those who had actually lost and regained their jobs recently," said Sarah Burgard, a sociologist at the University of Michigan.

OPEC is unlikely to announce a new production cut during its meeting next week, a senior Kuwaiti oil official said in remarks published Sunday.
Imad al-Atiqi, a member of the Supreme Petroleum Council, told the Al-Seyassah daily newspaper that oil prices were stable. Oil ministers from the 12-member Organization of the Petroleum Exporting Countries will instead focus on compliance with current output quotas, he said.

Chinese companies have spent at least $13 billion acquiring oil assets overseas since December, including purchases in Singapore, Syria and Kazakhstan.

According to the Journal's story "roughly 8% of households are delinquent with utility payments." So the utilities are lettting people pay 25% now and 75% later.
The USA Today, also has a story along these lines today, saying that power is getting shut off because consumers can't afford to pay their bills.

Insider selling is 30.6x greater than insider buying! This is the highest ratio on record since TrimTabs began tracking this data in 2004. Furthermore, their data reveals that insiders have sold a record $105.2 billion worth of stock in just the last four months.

Brett Steenbarger: " The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks."

Japan's voters Sunday appear to have soundly rejected the ruling party that has set the nation's course for more than half a century, according to media tallies.

“We’re at an inflection point with respect to the American consumer,” said Mark Zandi, chief economist at Moody’s, who correctly forecast a dip in spending heading into the recession, and who provided data supporting sustained weakness.

“Lower-income households can’t borrow, and higher-income households no longer feel wealthy,” Mr. Zandi added. “There’s still a lot of debt out there. It throws a pall over the potential for a strong recovery. The economy is going to struggle.”

“Not only have people lost money, but they don’t expect as much appreciation in the money they have, and that should affect consumption,” said Andrew Tilton, an economist at Goldman Sachs. “This is a cultural shift going on. People will save more.”

Natural Gas Production – according to Bentek Energy, LLC, and U.S. marketed production of natural gas for August 2009 was down about one percent from that in August 2008. In addition, domestic natural gas production that averaged about 58.8 Bcf per day in July 2009 was down to 58.5 Bcf per day in August.

Accuweather's Chief Meteorologist and Expert Long Range Forecaster Joe Bastardi has released an early prediction for this coming winter. In fact, he believes that this winter will be the "Snowiest in Over 5 Years NYC to D.C.".

Eric Savitz: "Hewlett-Packard recently said it doesn't expect Windows 7 to be a big enough improvement over XP and Vista to spark a major refresh. Is there really a reason to be bullish on Dell? I don't see it."

Oct. crude rises 37 cents to $73.11/barrel. Oct. natural gas up 2.3 cents to $3.056/mbtu.

Spot gold up $4 to $959.60/troy ounce.

Japan's industrial production index rose a seasonally adjusted 1.9% on month in July, the Ministry of Economy, Trade and Industry said Monday. Inventories, meanwhile, fell 0.2% on month in July, the seventh straight drop. The Nomura/JMMA Manufacturing Purchasing Managers Index hit a seasonally adjusted 53.6 in August, up from the previous month's 50.4, marking the highest level since November 2006, according to Reuters. Reports cited the output index as rising to 58.7, up from 54.7.

Stronger Chinese demand may reduce the global economy’s dependence on consumers in the U.S. and Europe and rein in China’s trade surplus, curbing global imbalances in spending and saving that may have contributed to the financial crisis. The surplus fell $16.6 billion in the first seven months to $108 billion, on track for the first annual decline since 2003.
“We’re clearly seeing a surge in imports driven by domestic demand that is consistent with a new direction for China’s economy,” said Louis Kuijs, a senior China economist with the Washington-based World Bank in Beijing.
China is the world’s second- largest exporter behind Germany and the third-biggest importer after the U.S. and Germany.