Saturday, September 26, 2009

Audit The Fed

9/26/09 Audit The Fed

Floyd Norris: "Total domestic debt — the amounts owed by individuals, governments and businesses — climbed just 3.7 percent from the second quarter of 2008 through the second quarter of this year. That is the smallest increase since the Fed started these calculations in the early 1950s.
Moreover, domestic debt declined in the second quarter, falling 0.3 percent to $50.8 trillion. The figures are not seasonally adjusted, making quarter-to-quarter comparisons risky, but it was the first such decline since the first quarter of 1954, when total debt was less than $500 billion.
Over the 12-month period, nonfinancial businesses increased their debt by just 1.3 percent. Since that number is well below the interest rate most of those companies pay, it indicates that they paid back more in old loans than they took out in new ones....Over the year, total household debt fell by 1.7 percent, and mortgage debt — the largest component of household debt — fell a bit more, at a 1.8 percent pace. This is the 10th recession since the Fed began collecting the numbers, but the first in which the amount of home mortgage debt fell. Some of that decline, of course, came from foreclosures that canceled debt and left lenders with big losses...Twenty years ago, nonfinancial businesses in the United States borrowed $1.70 for every dollar borrowed by the financial sector, government-guaranteed or not. Now the figure is 68 cents."

Doug Noland: "I remain bearish because, from my analytical framework, deleterious Credit system developments suggest worse yet to come - perhaps much worse. The global Credit boom has not fully run its course, so the depths of the downturn remain indeterminable....It is worth noting that the level of nominal GDP from 1929 was not attained again until 1941 – after bottoming seven years earlier in 1934 (five years after the crash!). Statistically, GDP posted relatively strong growth in 1935, 1936, 1937, 1939, 1940 and 1941 – but in aggregate this period of “strength” only returned output back to the late-twenties level. And anyone turning bullish in 1931 – two years after the financial Bubble burst – would have had to endure a nominal GDP drop of another 25% and even worse percentage declines in the stock market. It was many years after the bursting of the financial Bubble before bullishness had much relevance....There is at this point ample confirmation that, with the bursting of the Wall Street/mortgage finance Bubble, this previously steadfast inflationary dynamic has turned impotent. The combination of securitized finance, the proliferation of leveraged speculation, contemporary unconstrained finance, and activist central banking nurtured a financial and economic environment unlike any in recent history. But analysts should no longer extrapolate from this previous boom period. Previous Credit and economic dynamics no longer apply....I’ll look to remove the bear from my lapel when a sounder Credit backdrop emerges at home and globally. It’s just not moving in that direction. I don’t see Trillions of federal government Credit as sustainable or constructive – and wouldn’t extrapolate recent system stabilization out to a sustainable economic recovery. I don’t see any semblance of restraint or monetary discipline – the requirements of a sustainable monetary regime – in key domestic Credit systems internationally. And I wouldn’t assume that the worst of Credit dislocation is behind us. And, I’ll add, the worst-case scenario at this point would include a robust global rejuvenation of Credit and asset Bubbles, rapid synchronized economic recovery, and a rebirth of bullish expectations. I do see all the makings for a grinding, debilitating, secular bear market."

Eric Janszen: "Pension fund shortfalls were problematic for most companies even before the financial and economic crisis. 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
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."

More than 12,000 Texans will exhaust their unemployment benefits by Oct. 10, with 43,000 more due to follow by the end of the year, the Texas Workforce Commission said on Friday. As individuals lose their unemployment benefits, the government no longer considers them as part of the unemployment rolls. As such, the unemployment rate declines. And the public and the congress put up with this BLS bullshit.

More than two-thirds of the members of the House of Representatives have signed on as co-sponsors of Paul's "audit the Fed" bill.
The Fed strongly opposes the legislation, saying it would subject its decisions to political influence that could shake market confidence.

According to Bloomberg, MGM has informed creditors it will skip a $12 million coupon payment.

Friday, September 25, 2009


9/25/09 Appetizer

Simmons Co. said Friday it will file for bankruptcy and reorganization under Chapter 11, and has agreed to sell its core bedding business to Ares Management and Teachers' Private Capital, the investment arm of the Ontario Teachers' Pension Plan.

Goldman Sachs has raised its global oil demand forecasts for the fourth quarter of 2009 and for 2010 by 1.2 million barrels a day and 1.6 million barrels a day, respectively.

Unilever, the maker of Dove soap, agreed to buy Sara Lee Corp.’s personal-care and European detergent unit for 1.28 billion euros ($1.88 billion), gaining Sanex shower gel in its biggest purchase in nine years.
Unilever, based in London and Rotterdam, will pay cash for the business, which makes Duschdas and Radox soap and had sales of more than 750 million euros for the year ending June 2009, according to a statement today. Sara Lee, which has been shedding units to focus on coffee and food, said the proceeds would help it buy back up to $1 billion in stock.

The government of Iran has told the International Atomic Energy Agency that it is building a second uranium enrichment plant for making fuel, the nuclear watchdog agency said Friday.

China's auto sales should soar to 12.6 million units this year, up 35 percent from 2008, boosted by subsidies that the industry is lobbying Beijing to extend, a government researcher said Friday.
China's auto sales have surpassed those of the limping U.S. market for all but two months so far this year, helped by cuts in sales tax and subsidies for more fuel-efficient vehicles.
In September, Chinese sales are likely to total 1.25 million units, said Xu Changming, senior economist for the Cabinet's State Information Center. He was speaking at a seminar organized by industry newsletters China Business Update and China Auto Review.

Boeing employees are about to lose a popular perk: company-paid education subsidies. Macquarie raised its 2010 earnings outlook for Boeing to $4.51 a share from $4.35, and maintained its 2011 forecast at $4.20 a share.Not exactly an exciting growth picture.

The recovery in the manufacturing sector stumbled in August, as a big decline in orders for new airplanes pushed total durable goods orders down 2.4%, the largest decline since January, the Commerce Department reported Friday. The 42% drop in orders for civilian aircraft accounted for most of the decline. Weaker demand wasn't confined to the aircraft sector, however. Excluding the 9.3% drop in transportation orders, orders were flat in August, the weakest showing since April.
Unfilled orders for manufactured durable goods in August, down eleven consecutive months, decreased $2.8 billion or 0.4 percent to $737.1 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 0.1 percent July decrease.

"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Julian Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."

Five U.S. troops were killed in three separate incidents in southern Afghanistan, the military said on Friday.

"Natural gas is an attractive energy source for the future," said Rune Bjornson, StatoilHydro's executive vice president for natural gas during a press seminar in Oslo on Thursday, September 24.
StatoilHydro is currently the second largest supplier of gas to Europe, and the group helps secure a stable supply of energy to Europe through export of gas from the Norwegian continental shelf (NCS) , as well as holding significant international gas positions in Algeria, Azerbaijan and in the USA.

It's predicted that by 2020, China's natural gas demand will approximately reach 240 billion cubic meters.

Cypress Gardens, which reigned as Florida's grandest theme park in the days before Disney, has shut down while its owners try to sell the attraction.

House Financial Services Committee Chairman Barney Frank, D-Mass., said he backs legislation introduced by Rep. Ron Paul, R-Texas, that would require the Government Accountability Office to audit how the Federal Reserve implements monetary policy and examines every aspect of the Fed, including how much it has lent and will lend to specific banks as part of its bank bailout program.

Benchmark borrowing costs for highly rated state and local governments dropped to a 42-year low this week, as the pace of new municipal-bond issues slowed and cash flowing into mutual funds accelerated to a record.

KB Homes reported a narrower quarterly loss, though its chief executive cautioned that he does not expect to see "meaningful improvement" in the U.S. housing market in the near future.

The value of imports of consumer goods into the U.S. peaked in August 2008 at $42 billion. (The category excludes oil, food, industrial supplies, capital goods and automotive vehicles.) In June the U.S. bought only $34 billion of products from the rest of the world, according to the U.S. Bureau of Economic Analysis. Wary Americans have gone back to saving. "In U.S. dollar terms, exports to China from Japan were only down 22% year-on-year in May, while to the U.S. they were --40%. Exports to China were $8.5 billion that month while only $6.7 billion to the U.S.," notes John Vail, chief global strategist at Nikko Asset Management in Tokyo.

By 2012, according to research company Display Search, China will be the world's biggest LCD TV market. Chinese brands Skyworth, Hisense and TCL in the space of only a year have overtaken foreign makers to dominate LCD TV sales in China.

The Group of 20 on Friday planned to approve a greater voice for Asian and Latin American countries in a historic shift that recognizes the rising influence of both regions.

According to AMG Data, in the week ended Sept.23,
Equity Fund Inflows $1.2 Bil; Taxable Bond Fund Inflows $5.3 Bil
xETFs - Equity Fund Outflows -$306 Mil; Taxable Bond Fund Inflows $4.4 Bil

Consumer sentiment improved in late September, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index jumped to 73.5 in late September from 70.2 earlier in the month.

Despite a record drop in prices, sales of new homes flattened out in August after four months of strong increases, the Commerce Department estimated Friday. Sales of new homes rose a statistically insignificant 0.7% in August to a seasonally adjusted annual rate of 429,000 from a downwardly revised 426,000 in July. Sales were down 3.4% from a year earlier, and are up 30% from the low in January. Sales were weaker than the 440,000 annual pace expected by economists surveyed by MarketWatch. The median sales price fell a record 9.5% from July to August. Inventories of unsold homes continued to fall in August, dropping 3% to 262,000, the fewest in 17 years.

The crisis the world went through is just an appetizer for a future one because the weaknesses that created it have not been addressed, Marc Faber, author and publisher of the Gloom, Doom and Boom Report, told CNBC Friday. "It's a total and complete disaster and the crisis we had is just the appetizer to the big total breakdown of financial markets and of governments in five or 10 years time when the whole system goes bust," Faber told "Worldwide Exchange." The G20 meeting is not likely to find a solution that would prevent a future meltdown, as the people who are supposed to implement the new measures are the same people who were unable to foresee this crisis, he said.

The issues of excessive leverage and the "uncontrolled, unbound credit growth," as well as the bulging deficits and interest rates at zero are not being addressed, he added.
"I think that people will have to rethink the world and that they should have little money in the US and have 50 percent of their funds in emerging economies," he said.

The European Union has decided to impose five-year anti-dumping tariffs on aluminum foil from three countries including China, and on Chinese seamless steel pipes, state media reported on Friday.

Japan's domestic vehicle sales rose in August from a year earlier for the first time in 13 months.
Toyota's Prius hybrid has been Japan's top-selling car for the past four months.

Wal-Mart and Costco both dropped $1.18 a share in Friday trading.

The Dow Jones Industrial Average fell 42.25 points, or 0.4%, to 9,665.19, giving it a weekly loss of 1.6%. The S&P 500 declined 6.4 points, or 0.6%, to 1,044.38, off 2.2% from the week-ago close. The Nasdaq Composite slumped 16.69 points, or 0.8%, to 2,090.92, a weekly loss of 2%.

Pomeroy Computer announces agreement to be acquired by Platinum Equity for $6.50 per share in cash.

Atlanta's Georgian Bank became the 95th bank failure of the year, according to the Federal Deposit Insurance Corp. on Friday. First Citizens Bank and Trust Company Inc. of Columbia, S.C., will assume all of the deposits of Georgian Bank, estimated at about $2 billion as of July 24.

Thursday, September 24, 2009


9/24/09 Unemployment

Avtovaz, Russia's biggest carmaker, said Thursday it will cut 27,600 jobs in a move to deal with the effects of the global economic crisis. Currently, 102,000 people work at Avtovaz, but staff has to be cut considering that its plant is working one shift and at 65% of capacity, the carmaker said in a statement posted on its Web site. French carmaker Renault owns a 25% stake in Avtovaz, whose main brand is Lada.

Brett Steenbarger: "An international investor who has owned U.S. stocks has seen gains in equities eroded by losses in the U.S. dollar. Similarly, holders of U.S. debt find themselves being repaid in cheaper dollars. It is difficult to imagine U.S. assets finding relative strength on a global basis when those assets are facing weak dollar headwinds."

In the week ending Sept. 19, the advance figure for seasonally adjusted initial claims was 530,000, a decrease of 21,000 from the previous week's revised figure of 551,000. The 4-week moving average was 553,500, a decrease of 11,000 from the previous week's revised average of 564,500.
The advance seasonally adjusted insured unemployment rate was 4.6 percent for the week ending Sept. 12, a decrease of 0.1 percentage point from the prior week's unrevised rate of 4.7 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Sept. 12 was 6,138,000, a decrease of 123,000 from the preceding week's revised level of 6,261,000. The 4-week moving average was 6,187,250, a decrease of 1,250 from the preceding week's revised average of 6,188,500.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.651 million.
The advance number of actual initial claims under state programs, unadjusted, totaled 434,358 in the week ending Sept. 19, an increase of 21,966 from the previous week. There were 398,070 initial claims in the comparable week in 2008.
The advance unadjusted insured unemployment rate was 3.9 percent during the week ending Sept. 12, a decrease of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 5,204,972, a decrease of 91,789 from the preceding week. A year earlier, the rate was 2.3 percent and the volume was 3,014,874.

Employers took 2,690 mass layoff actions in August that resulted in the separa- tion of 259,307 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer. The number of mass layoff events in August increased by 533 from the prior month, and the number of associated initial claims increased by 52,516. Over the year, the number of mass layoff events increased by 803, and associated initial claims increased by 70,356. Year-to-date mass layoff events (21,184) and initial claims (2,162,202) both recorded program highs through August. In August, 900 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 93,892 initial claims. Over the month, the number of manufacturing events increased by 279, and associated initial claims increased by 21,626. During the 21 months from December 2007 through August 2009, the total number of mass layoff events (seasonally adjusted) was 44,669, and the number of initial claims filed (seasonally adjusted) in those events was 4,556,636."

Rite Aid: "A more discount-driven customer buying more items on sale continued to have a negative impact on front end results. Because we expect these negative trends and a tough economy to continue throughout the second half of the year, we have lowered our outlook for fiscal 2010."

Gold for December delivery, the most active contract, fell $15.50, or 1.5%, to finish the session at $998.90 an ounce on the New York Mercantile Exchange. Gold earlier rose to an intraday high of $1,021 an ounce and fell as low as $991.30..

United Steelworkers and three paper firms filed antidumping petitions against China and Indonesia, making good on the union's threat to protect other U.S. industries after winning a recent trade decision against China.

Iran is willing to have its nuclear experts meet with scientists from the United States and other world powers as a confidence-building measure aimed at resolving concerns about Tehran's nuclear program, Iranian President Mahmoud Ahmadinejad said Wednesday.

George Ure: "We've heard rumblings, unconfirmed yet, that a lot of small businesses around America are on the verge of filing for bankruptcy in two weeks time about October 15th. That's when the second extension to file 2008 income taxes will expire.

What we're hearing in general terms is that thousands of small business owners bet on a recovery in 2009 in order to catch up on past tax debts and since that hasn't happened yet, they're going to the wall October 15th with BK filings. We may have more on this next week as we've heard that a local (to East Texas) radio show is talking to some folks."

The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody's Investors Service said on Wednesday, in another sign consumers remain under stress.

The Moody's credit card charge-off index -- which measures credit card loans that banks do not expect to be repaid -- rose to 11.49 percent in August from 10.52 percent in July.

The index resumed an upward trend after declining in July for the first time in almost a year, vanishing hopes of stabilization in the industry after record high credit losses.

Total holiday sales are expected to be the same as or less than in 2008, despite signs of an easing recession heading into the industry's most critical quarter, according to a survey released yesterday by Philadelphia's Hay Group Inc. and two others earlier in the week from Deloitte and Retail Forward Inc.
If sales remain flat, as the reports predict, the quarter will rank as the second-worst in 52 years, according to Retail Forward, of Columbus, Ohio. And one of the reports suggests a sales drop from last year's pace is even possible.
Deloitte said sales unchanged from last year would mean about $810 billion for the November through January period. Last holiday season, sales fell 2.4 percent from the year before.
"Retailers are planning for a challenging Christmas season," said Craig Rowley, vice president and global practice leader for Hay Group's retail practice in Dallas.
Deloitte based its forecast on high unemployment, tight consumer credit, and continuing home foreclosures, said Tara Weiner, managing partner of its Greater Philadelphia office.
"In any recession, the consumer is the last to feel the recession and the last to recover," said Weiner, adding that consumer attitudes may improve in mid-2010.

Al Haramain, an Oregon group that the government declared to be a terrorist organization in 2004, and which has since gone out of business, sued the Bush administration in 2006. It claimed that federal authorities had illegally listened in on its lawyers' phone calls and is seeking damages. Its officials denied the group was a terrorist outfit.
Chief U.S. District Judge Vaughn Walker, who has rebuffed Bush and Obama administration requests to dismiss the suit, did not reveal his views on the legality of the program. But he told a government lawyer that Al-Haramain had presented strong evidence that it had been wiretapped and had the right to sue.
The hearing was the first in California, and the second in the nation, to address the constitutionality of Bush's post-Sept. 11 order to intercept communications between Americans and suspected foreign terrorists without a warrant.
Since the New York Times revealed the program, and Bush confirmed it, in December 2005, would-be plaintiffs have struggled to prove they were targeted for surveillance and were entitled to challenge it.
A federal judge in Michigan declared the program unconstitutional in 2006, in the only other instance in which the issue has gone to court. But an appeals court threw the case out because none of the plaintiffs could show that their calls had been intercepted.
Al-Haramain's lawsuit is unique because the charity was inadvertently sent a classified document in 2004 that reportedly showed that its lawyers had been wiretapped.
Nevertheless, said a lawyer for Obama's Justice Department, Al-Haramain can't prove it was subject to electronic surveillance, because the document - which the group returned to the government, at officials' request - and virtually everything else about the program are secrets.
People can't sue over a confidential government program "based on speculation," said Justice Department attorney Anthony Coppolino.
A ruling on the legality of the program "is simply inappropriate," he told Walker, and even a decision on whether Al-Haramain has the right to sue would reveal information about "intelligence sources and methods."
Walker, however, has already ruled that public statements by Bush administration officials indicated that the Islamic organization had probably been wiretapped.
The judge told Coppolino that Al-Haramain "has presented a substantial array of evidence" that indicated it had been subject to electronic surveillance.

The dollar fell to 90.62 yen versus the Japanese unit, down from 91.13 yen in North American trade late Wednesday.
"One of the main agendas for the G20 Summit is the discussion of options to address global structural imbalances which would make it difficult to exclude currencies from the discussion," strategists at Brown Brothers Harriman wrote in a note.

Sales of existing U.S. homes unexpectedly fell in August for the first time in four months, signaling the housing recovery will be slow to gain speed.
Purchases dropped 2.7 percent to a 5.1 million annual rate, the second-highest level in the last 23 months, the National Association of Realtors said today in Washington. The median price dropped 12.5 percent from August 2008.

Working gas in storage was 3,525 Bcf as of Friday, September 18, 2009, according to EIA estimates. This represents a net increase of 67 Bcf from the previous week. Stocks were 509 Bcf higher than last year at this time and 485 Bcf above the 5-year average of 3,040 Bcf. In the East Region, stocks were 149 Bcf above the 5-year average following net injections of 41 Bcf. Stocks in the Producing Region were 263 Bcf above the 5-year average of 863 Bcf after a net injection of 16 Bcf. Stocks in the West Region were 73 Bcf above the 5-year average after a net addition of 10 Bcf. At 3,525 Bcf, total working gas is above the 5-year historical range.

Tyler Durden: "According to the BLS, the exhaustion rate, or the number of people who have used up their benefits, and will no longer be receiving unemployment checks, has hit an all time high of 52.40% for August. This is a staggering number, and whats worse it was grown in practically a linear fashion with not even a hope of a second (third or fourth) derivative green shoot in sight. In fact, the deterioration in "employability" is accelerating. And yet assorted "pundits" claim the employment picture is improving. We wish them and their newsletters (and, heaven forbid, LPs) all the best."

MANCHESTER, Conn.--(BUSINESS WIRE)--The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

"We are addicted to rare earths as much as we are addicted to oil," said Byron King, editor of Energy & Scarcity Investors, published by Agora Financial LLC. Yet "none of these elements are famous like gold or silver. None gets shipped in giant ore freighters like iron, aluminum or copper."

"Without these elements, much of the modern economy will just plain shut down," he said.

And yet, King said, "the only people who really study these elements are master's- and PhD-level chemists and solid-state physicists ... and national leaders in places like China."

In fact, China has all but cornered the market. The rare-earths space is like a Monopoly game, in which Beijing owns Boardwalk, Park Place, and well, pretty much all the properties, while the West owns St. James Place.

"China is the Saudi Arabia of rare elements," said Mark Williams, a risk management expert and finance professor at Boston University. And "like oil, rare elements will flow to the highest bidder."

Luxury hotel owners risk defaulting on their debt as the recession cuts occupancies and the credit crunch constrains refinancing.

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, a credit rating company that tracks commercial mortgage-backed securities. Some of the biggest loans, put on the company’s watch list because of late payments, decreasing occupancies or cash flow, were made to luxury properties where rooms can cost more than $850 a night.

“All segments are showing signs of distress but the luxury segment carries much higher loan balances and is more clearly affected,” Frank Innaurato, managing director of CMBS analytical services at Horsham, Pennsylvania-based Realpoint, said in a telephone interview.

Crude drops $3 to $65.90 while natural gas increases 10 cents to $3.96.

Hewlett-Packard Co expects its 2010 fiscal year earnings-per-share to be between $3.60 a share and $3.70 a share, on revenue of $117 billion to $118 billion.

The Dow Jones Industrial Average fell 41.11 points, or 0.4%, to 9,707.44. The S&P 500 declined 10.09 points, or 1%, to 1,050.78. The Nasdaq Composite slumped 23.81 points, or 1.1%, to 2,107.61.

Research In Motion Ltd. forecast third-quarter sales that missed analysts’ estimates, signaling the BlackBerry maker may sell phones at lower prices to compete with Apple Inc.’s iPhone. The shares sank in late trading.
Revenue in the period ending Nov. 28 will be $3.6 billion to $3.85 billion, Waterloo, Ontario-based RIM said today in a statement. Analysts on average projected sales of $3.91 billion.

Wednesday, September 23, 2009


9/23/09 Overbought

John Hussman: "My discomfort about strenuously overbought and moderately overvalued conditions overlaps with skepticism about the U.S. economic “recovery,” which appears to be nothing but an artifact of government spending, while intrinsic economic activity remains weak."

U.S. budget deficits will continue to pile up in the next decade, eventually reaching an unsustainable level that may result in an economic collapse, according to
Richard Duncan, author of “The Dollar Crisis.”
The U.S. has little chance of resolving its deteriorating financial position because the manufacturing industry continues to shrink, leaving the nation with few goods to export, said Duncan, now at Singapore-based Blackhorse Asset Management.

General Mills raised its 2010 earnings forecast to $4.40 to $4.45 per share from its earlier estimate of $4.20 to $4.25 a share.

Rob Hanna: " The average Fed day has ourperformed the average day by about 7.5 times."
The House has agreed to give the jobless in a majority of states another 13 weeks of unemployment insurance benefits.
The bill, which passed the House 331-83 , approves the extra three months of benefits for those jobless living in 27 states, plus the District of Columbia and Puerto Rico, with unemployment rates topping 8.5 percent. Similar legislation is pending in the Senate. The longtime unemployed in states with lower levels of joblessness would not get the extension.

The government of President Hugo Chavez said Tuesday that it is considering a lawsuit against U.S. oil giant ConocoPhillips for seeking Venezuela's stake in a Texas oil refinery.

Oil Minister Rafael Ramirez said a legal team representing the state oil company, Petroleos de Venezuela SA, or PDVSA, could file a lawsuit against ConocoPhillips for exercising an option to purchase PDVSA's 50 percent stake in the Sweeny refinery.

“Our lawyers are proposing a lawsuit against Conoco,” Ramirez said.

ConocoPhillips argues that PDVSA has failed deliver heavy crude as required under contract to the refinery since the beginning of the year, prompting the Houston-based company to notify PDVSA on Aug. 28 that it would exercise the option under a joint venture agreement.

U.S. mortgage applications jumped last week to their highest since late May as interest rates tumbled below 5 percent, data from an industry group showed on Wednesday.

Crude inventories rose 2.8 million barrels in the week ended Sept 18, gasoline inventories gained 5.4 million barrels, and distillate stockpiles, which include diesel and heating oil, rose 3 million barrels. Gasoline supplied, an implied gauge of consumption, fell to 8.79 million barrels a day, the lowest level since late January, the EIA data showed. On the New York Mercantile Exchange, November crude lost $2.72, or 3.8%, to $69.04 a barrel. It was down less than 2% ahead of the data.

About 40% of the 25 biggest American retail chains say they will hire between 5% and 25% fewer temp workers than even last year's poor season; last year the same survey found 29% of retailers saying they'd cut workers.

The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.

The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be, compares with 1.27 million in 2005, the analysts led by Laurie Goodman wrote today in a report. Assuming no other homes are on the market, it would take 1.35 years to sell the properties based on the current pace of existing-home sales, they said.

Up 80 points after the Fed decision to keep rates unchanged, the Dow Jones Industrial Average fell 81.32 points to 9,748.55. The S&P 500 Index declined 10.79 points to 1,060.87, while the Nasdaq Composite fell 14.88 points to 2,131.42.

The dollar index stood at 75.907.

Tuesday, September 22, 2009


9/22/09 Autumn

Dow Jones to close Far Eastern Economic Review in December. The Far Eastern Economic Review was launched in 1946.

SeekingAlpha: " AAR's latest weekly data (.pdf) shows rail traffic down another 3% Y/Y to -19.8%. The numbers are not seasonally adjusted, which means freight is back at 1993 levels. And recent data was still inflated by Cash for Clunkers."
Aaron Task: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society," Marc Faber writes in the September issue of The Gloom, Boom & Doom Report.
A statement like that pretty much speaks for itself, but it's a bit more complicated than appears on first blush.
Faber has been bullish -- especially on commodities and emerging market stocks -- for some time now and believes the current global recovery trade will last another two-to-three years, as discussed in more detail in a forthcoming clip. But he has major long-term concerns about the dollar's long-term viability given rising U.S. deficits, massive unfunded mandates and the fact "we have a money-printer at the Fed."
This combination will eventually lead to runaway inflation, wholesale debasement of the dollar, and a major lowering of living standards for most Americans and many Europeans as well, says Faber, who is "highly confident" in this grim prediction."

Lowe's Cos., on Tuesday kept its profit forecast for this year and gave an outlook for next year that may fall short of Wall Street expectations. Lowe's Companies Inc.said Tuesday it expects 2010 earnings of $1.13 to $1.21 a share. Wall Street analysts expect earnings of $1.21 share from the Charlotte, N.C. home improvement products retailer, according to a survey of analysts by FactSet Research. Lowe's expects 2011 earnings of $1.24 a share to $1.34 a share, compared to the analyst target of $1.34 a share. The company expects to open 62 to 66 stores in 2009, with total square footage growth of approximately 4%. Total 2009 sales are expected to decline approximately 3%. The company expects comparable store sales to decline 7% to 9% in 2009.

Tenneco Inc will close its original equipment ride-control plant in Cozad, Neb. Tenneco currently employs 460 hourly and 40 salaried workers at the plant.

The Oil Drum: "Saudi Aramco, the state-run oil monopoly, sees little chance of pumping crude from idle fields next year because a recovery in world demand has yet to begin, its chief executive officer said.
Saudi Arabia has idled about 4 million barrels a day, or about one third of its crude-oil production capacity, according to the oil ministry. The Dhahran-based company, the biggest exporter of unrefined crude oil, is spending $90 billion to develop new reserves and refineries over five years to 2012.
The world’s most influential oil producer is leading OPEC members cutting a record 14 percent of daily output, contributing to the 56 percent rally in crude prices since December. Global demand for oil is expected to rise by 1.27 million barrels a day, or 1.5 percent, next year, according to the International Energy Agency, not enough for Saudi Arabia to resume all of its idled fields."

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.
The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.
According to Reuters, 128,000 people in Arizona alone will face reset IO mortgages next year.

Michael Pento: "Households are reducing their debt at a 1.7% annual rate and business at a 1.8% annual rate. However, while the private sector gets their finances in order the Federal government is increasing its debt at a 28.2% annual rate!
The net effect is that the annual rate of increase in our nation's debt is currently 4.9%, which is even faster than the rate of increase of 4.1% experienced in Q1 2009. Yep, we are increasing our debt at a faster pace."

The value of U.S. homes rose by 0.3% in July compared with June, the Federal Housing Finance Agency reported Tuesday. Prices fell 4.2% in the past year and were down 10.5% from the peak in April 2007. Prices in July were at the same level as March 2005. June's increase was revised lower to a 0.1% gain from 0.5% previously reported. Prices rose in five of nine regions, led by a 1.6% gain in the Pacific states, where prices have fallen 9% in the past year. The biggest monthly drop was 0.9% in the East South Central states (Kentucky, Tennessee, Mississippi and Alabama). The index is based on repeat sales financed through Fannie Mae or Freddie Mac. Is there any reason why the August number won't be revised down as it was in July?

Stephen Labaton: "Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune."

The FDIC has the authority to borrow as much as $500 billion through 2010.

"The recession has affected everybody in one way or another as families use lots of different strategies to cope with a new economic reality," said Mark Mather, associate vice president of the nonprofit Population Reference Bureau.

"Job loss — or the potential for job loss — also leads to feelings of economic insecurity and can create social tension."

"It's just the tip of the iceberg," he said, noting that unemployment is still rising.

The percentage of people who drove alone to work dropped last year to 75.5 percent, the lowest in a decade, as commuters grew weary of paying close to $4 a gallon for gasoline and opted to carpool or take public transportation.

Twenty-two states had declines in solo drivers compared with the year before, with the rest statistically unchanged. The decreases were particularly evident in states with higher traffic congestion, such as Maryland, Texas and Washington.

Google shares above $500; first time since Aug. 08. The growth of Google Inc.'s advertising revenue is set to come back faster than expected toward the end of the year, a Canaccord Adams analyst said Tuesday.
"Our recent checks suggest that ad budgets are coming back, particularly in e-commerce," Canaccord analyst Jeff Rath said in a note to investors. He boosted his price target for Google shares to $560 from $480, which implies upside of 12.7 percent over its closing price Monday.

Last year’s holiday season arrived just months after an economic meltdown. Consumers panicked and holiday sales fell 2.4%, the first decline since 1967.
Deloitte issued a forecast today saying it expects holiday sales be flat in 2009. The firm forecasts total U.S. holiday sales of $810 billion. (That’s November to January sales, excluding motor vehicles and gasoline.)

"For those of you who like conspiracy theories: The Fed is no longer publishing MEW (Mortgage Equity Withdrawal). This was one of the engines of the financial crisis - so much for an early warning on the next housing crisis. ISI will estimate the three main components of the Fed's report and like our estimate for some the old "M" statistics it will be there down the road when needed again." - Carrie Butler

Crude ends up 2.6% at $71.55 a barrel.

The Dow Jones Industrial Average gained 51.01 points, or 0.5%, to stand at 9,829.87. The S&P 500 Index added 7 points, or 0.7%, to 1,071.66. The Nasdaq Composite rose 8.26 points, or 0.4%, to 2,146.30.

Monday, September 21, 2009


9/21/09 Russia

Russia can't sustain the rise in oil exports that saw it surpass Saudi Arabia as the world's top exporter for the first time in the post-Soviet period, according to OAO Rosneft, the country's biggest oil producer.

The trend of increasing oil exports isn't sustainable as the domestic market becomes more attractive for Russian oil producers and tax breaks for exports are lifted, Peter O'Brien, Rosneft's vice president for finance and investment, told reporters Sunday near Moscow.

Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to Energy Ministry data.

Saudi shipments decreased to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed.

Russian President

Dmitry Medvedev said Israeli leaders assured him they’re not planning a military strike against Iran.
Israeli President
Shimon Peres told Medvedev that his country does not plan any strikes against Iran, the Russian president said in a Sept. 15 interview with CNN that was released today.
“I hope this decision will not be taken,” Medvedev said in the interview. “We have to push Iran toward cooperation.”
Medvedev confirmed that Israeli Prime Minister
Benjamin Netanyahu made a secret visit to Moscow earlier this month and that the two leaders discussed “various issues.”

A bill offered by Rep. Jim McDermott, D-Wash., and expected to pass easily would provide 13 weeks of extended unemployment benefits for more than 300,000 jobless people who live in states with unemployment rates of at least 8.5 percent and who are scheduled to run out of benefits by the end of September.
The 13-week extension would supplement the 26 weeks of benefits most states offer and the federally funded extensions of up to 53 weeks that Congress approved in legislation last year and in the stimulus bill enacted last February.

U.S. distillate fuel inventories, which include heating oil and jet fuel, are the highest since 1983 at 167.8 million barrels, according to the Energy Department. U.S. gasoline supplies are 2.2 percent
greater than they were in late May, the start of the peak-demand summer driving season, at 207.7 million barrels.
stockpiles, the European equivalent of heating oil, near Europe’s refining hub of Rotterdam reached a record 3.03 million tons (23 million barrels) on Sept. 10, according to PJK International BV of Oosterhout, the Netherlands.
More than 60 million barrels of fuel is stored on tankers offshore, according to the IEA.

“There’s all this heating oil with no place to go,”
Philip Verleger, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a phone interview. “I’m fairly certain we’ll see prices in the $30s this year.”

The Conference Board's index of leading indicators rose 0.6% last month, compared with the 0.7% average forecast of economists surveyed by MarketWatch. The coincident index - designed to measure current activity - was flat in August after an upwardly revised 0.1% gain in July, the private research organization said. "These numbers are consistent with the view that, after a very severe downturn, a recovery is very near," said Ken Goldstein, economist for the organization.

Dec. gold ends down 0.5% at $1,004.90 an ounce.

Light crude futures fell more than 3 percent, settling below $70 a barrel, hurt by concerns about demand despite hopes for economic recovery. The Reuters-Jefferies CRB index of commodities tumbled 2.2 percent, its largest percentage drop in five weeks.

The Dow Jones industrial average dropped 41.34 points, or 0.42 percent, to end at 9,778.86. The Standard & Poor's 500 Index fell 3.64 points, or 0.34 percent, to 1,064.66. But the Nasdaq Composite Index gained 5.18 points, or 0.24 percent, to close at 2,138.04.


9/20/09 Fleeced

China's President Hu Jintao said Sunday the country faces difficult challenges in maintaining stable economic growth and social stability, and called for efforts to strengthen unity among the people.
"The task of dealing with the blow of the international financial crisis and maintaining stable and relatively fast economic development is arduous," Hu said.
China now faces more "unstable and uncertain factors," Hu said, describing the economic crisis as having had a "profound impact."

Risk Analytics thinks that more than 1,000 banks will fail in the current cycle. With 25 down in 2008 and 94 so far this year, that just leaves another 900 or so.

Mike Burk: "The market is overbought going into what has seasonally been a very weak week. There may be some short term weakness in the coming week or so, however, there is no sign of a developing top.
I expect the major indices to be lower on Friday September 25 than they were on Friday September 18."

Dell to acquire Perot Systems for $3.9 billion, creating comprehensive, customer-focused it-solutions company
* Says transaction is not subject to a financing condition.
* Says terms of the agreement were approved yesterday by the boards of directors of both companies
* Dell says will commence tender offer to acquire all of the outstanding class a common stock of Perot Systems for $30 per share in cash
* Says acquisition expected to be accretive to GAAP earnings in fiscal 2012
* Says Perot Systems will become dell's services unit
* Says companies together represent $8 billion in services revenue.

House builder Lennar Corp. said Monday that its fiscal third-quarter net loss widened to $171.6 million, or 97 cents a share, from $89 million, or 56 cents a share, a year earlier. Revenue for the quarter ended Aug. 31 dropped 35% to $720.7 million. Lennar said its loss included 42 cents-a-share of charges related to valuation adjustments and other write-offs and 34 cents a share related to a non-cash deferred tax asset valuation allowance. Analysts polled by FactSet had been expecting a loss of 52 cents a share on revenue of $734.4 million. The group said the drop in revenue reflected a 28% drop in the number of sales and a 12% fall in the average selling price. It added that adjusted gross margin fell 2.4 percentage points compared to a year earlier, but was up 1.6 percentage points from the second quarter. The group said that, assuming the economy continues to stabilize, it expects to return to profit in fiscal 2010.

Ty Andros: "Many ECONOMISTS AND MARKET ANALYSTS ARE PREDICTING AN END OF THE RECESSION AND GROWTH GOING FORWARD. MY RESPONSE IS THE NUMBERS HAVEN'T ADDED UP FOR YEARS, AND REGARDLESS OF WHAT THEY CLAIM, WE ARE ABOUT TO COMMENCE THE NEXT LEG DOWN INTO WHAT WILL become known as the GREATEST DEPRESSION in history. The numbers they point to are POLITICALLY-CORRECT measurements, but practically incorrect; any insights you may glean from them are HEADLINE illusions for the sheep that are being FLEECED and who have misplaced their faith in the government to PROVIDE for them."