Saturday, October 03, 2009


10/3/09 Maladies

Doug Noland: "I disagree with the policy of massive deficits. Yet the California and U.S. budget quagmires are the direct consequences of the bursting of the Wall Street/mortgage finance Bubble. And as much as greed and leverage have provided easy scapegoats, responsibility lies first and foremost with the nature of contemporary unchecked finance and flawed “activist” monetary management (trumpeted, not coincidently, by our era’s preeminent market Operators). And as much as the consensus view believes that previous financial maladies have been largely rectified, I see a continuation of the same malignant Credit system dynamics. In short, massive government intrusion into the market pricing of Credit continues to fuel economic maladjustment and Bubble dynamics....The dangerous flaw in inflationism dogma is that the Federal Reserve and policymakers can manipulate the cost and quantity of Credit with positive systemic results. In reality, the consequence of increasingly bold policy activism over time include a more distorted and unbalanced economic structure, as witnessed today. And it is my view that a flawed Credit apparatus, ill-advised government intervention, and dysfunctional market dynamics ensure economic maladjustment gets worse before it gets better."

"Most of the additional job loss... appears to be due to in part to an increase in the number of business closings," said BLS Commissioner Keith Hall in a statement.

Shares in U.S. Natural Gas Fund, an exchange-traded fund that tracks the prices of natural gas futures, edged higher in heavy volume after the close of regular trading Friday. UNG shares gained 0.5% to $11.45 as more than 24 million shares traded hands, making the stock one of the most active in the late-trading session. The rise added to a 3.3% gain in the regular session. On Friday, November natural-gas futures rose 25.2 cents, or 5.6%, to $4.718 per million British thermal units.

Three more banks were closed by regulators Friday, bringing the number of U.S. bank failures this year to 98 thanks to the lingering credit crunch.

Mike Shedlock: "The Labor Department today also published its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February. They showed the economy may have lost an additional 824,000 jobs in the 12 months ended March 2009. The data currently show a 4.8 million drop in employment during that time.The projected decrease was three times larger than the historical average, the Labor Department said. Most of the drop occurred in the first quarter of this year, probably due to an increase in business closings, the government said."

General Electric Co and Comcast Corp, working on a deal to spin off GE's NBC Universal, have valued it at $30 billion, including $9 billion of debt, a source close to the talks told Reuters on Friday.
The two sides hope to get a deal done in two to three weeks, CNBC reported on Friday, citing sources familiar with the talks. But the person close to the talks told Reuters an agreement was unlikely within that timeframe.

China's Sichuan Tengzhong Heavy Industrial Machinery is poised to complete its purchase of General Motor Corp's Hummer division within days, the South China Morning Post reported on Saturday.

InkStop Inc., a specialty retailer of ink, toner, consumer electronics and other supplies for small businesses and home offices, abruptly told its employees that it was shuttering all 152 stores nationwide as of Friday and laying off all workers until further notice.

Elise Labott: "The seven hours worth of talks in Geneva, Switzerland, ended much better than anyone anticipated. Iran pledged to admit International Atomic Energy Agency inspectors into its recently disclosed facility in Qom and agreed, in principle, to a proposal under which it ships most of its current stockpile of low-enriched uranium outside the country for further enrichment to power a reactor used for medical research....But the real winner in Thursday's round of talks is Iran, which has largely neutralized international efforts to impose new sanctions against Tehran."

"The U.S. president made a big and historic mistake,'' Iranian state TV quoted Ahmadinejad as saying during a speech Saturday. ''Later it became clear that (his) information was wrong and that we had no secrecy."

The American Bankruptcy Institute reports that the September 2009 consumer filing total reached 124,790, a 41% increase from the 88,663 consumer filings in September 2008. The number is also up 4% from August.

The Oil Drum: "Congress should consider revising or ending the 45 cent-a-gallon tax credit for blending corn ethanol with gasoline, the Government Accountability Office said.
The credit “may no longer be needed to stimulate conventional corn ethanol production because the domestic industry has matured,” GAO said in an Aug. 25 report posted on the investigative agency’s Web site today. Ethanol production “is well understood, and its capacity is already near” a 15 billion gallon-a-year congressional requirement for conventional ethanol, the report found."

Floyd Norris: "The current decade appears to have locked in the dubious honor of being the worst decade ever for the S.& P. 500, which dates back to the end of 1927. The only previous decade in which the index, including dividends, failed to keep up with inflation was the 1970s, when it fell 13 percent. With three months left in the decade, the decline is 33 percent. It would take a major rally in this quarter for the market to even do as badly as it did in the 1970s."

Robert Reich: "Unemployment will almost certainly in double-digits next year — and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before (I’m in the last category, now that the University of California has instituted pay cuts). And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases."

Andrew Bary: "A SMALL SEATTLE-AREA BIOTECHNOLOGY company is tackling some tough diseases: Duchenne muscular dystrophy, as well as bioterror-virus threats Ebola and Marburg, coronary-artery blockage and swine flu.
And now AVI BioPharma's lead drug for Duchenne is undergoing a key, early-stage clinical trial in the United Kingdom. Speculative investors may want to pay heed if it clears its next round of testing hurdles.
The Duchenne drug is designed to work at the genetic level, using RNA (ribonucleic acid) "antisense" technology to induce production of dystrophin, a protein critical to healthy muscle cells."

Copper fell to the lowest price in two months after a report showed U.S. job losses accelerated in September, signaling slowing growth and contracting demand for the metal used in pipes and wires.

Gazprom Marketing & Trading USA, the U.S. arm of the world's largest natural gas producer — which is majority owned by the Russian government — is ramping up operations in Houston in a big way.
The company has signed deals for more than 350 million cubic feet per day of physical supply at several locations around the U.S. and is set to import Russian liquefied natural gas into the country.
“We're entering a business that's very liquid, where the margins are small, so you have to come in with a position with some size,” said John Hattenberger, president of Gazprom Marketing & Trading USA. “For us it's like joining a race starting at 50 miles per hour instead of a dead stop.”
Gazprom accounted for 17 percent of the world's output of natural gas last year.

Friday, October 02, 2009

The Weak Labor Market

10/2//09 The Weak Labor Market

In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.

The U.S. labor market weakened in September as 263,000 payroll jobs were lost and the unemployment rate rose a tenth to a 26-year high of 9.8%, the Labor Department reported. It was the 21st consecutive month of job losses. Since the recession began in December 2007, 7.2 million jobs have been lost. Details of the report were almost universally dismal, with the number of unemployed rising by 214,000 to 15.1 million. An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to 17%. Total hours worked in the economy fell by 0.5%. The average workweek fell to an all-time low of 33 hours. Average hourly earnings rose just 1 cent, or 0.1%, to $18.67.
Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 603,000 to 10.4 million in September. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 450,000 to 5.4 million. In September, 35.6 percent of unemployed persons were job- less for 27 weeks or more.
The civilian labor force participation rate declined by 0.3 percentage point in September to 65.2 percent. The employment-population ratio, at 58.8 per- cent, also declined over the month and has decreased by 3.9 percentage points since the recession began in December 2007.
Reuters reports that jobless rate rose in August in all US cities.
Manufacturing employment fell by 51,000 in September, while construction industries payrolls dropped. The service-providing sector cut 147,000 workers in September, while goods-producing industries shed 116,000 positions.
Education and health services added a mere 3,000 jobs, while government employment fell 53,000.

Karl Denninger: "Weekly earnings are also down by $1.54, which is bad news too.
But the Household Data is VASTLY worse than reported. Here are the month-over-month changes, and they're in the realm of frightening. (all numbers in thousands)
Civilian Labor Force: 154,879 to 153,617 this month.
Employed: 140,074 down to 139,079 this month.
That's a loss of 995,000 jobs, not 263,000, and the labor force contracted by 1,262,000 people!"

Ten-year note yields fell 7 basis points to 3.11%. "The fundamentals of a weak economy and recently conquered levels should keep Treasuries better bid over the mid-term," said strategists at RBS Securities.

The Association of American Railroads today reported 271,659 carloads for the week ending Sept. 26, 2009, down 17.1 percent compared with the same week in 2008. Combined North American rail volume for the first 38 weeks of 2009 on 13 reporting U.S., Canadian and Mexican railroads totaled 12,840,626 carloads, down 18.9 percent from last year, and 8,882,029 trailers and containers, down 16.8 percent from last year.

The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery.
Small businesses in the United States are not getting enough access to credit and the phenomenon is being reflected in dismal consumer spending trends, prominent banking analyst Meredith Whitney wrote in an opinion column on the Wall Street Journal's website.
"In the U.S., small businesses employ 50 percent of the country's workforce and contribute 38 percent of GDP," Whitney wrote.
"Without access to credit, small businesses can't grow, can't hire, and too often end up going out of business."
"I believe that we are only in the early stages of the second half of this credit cycle," Whitney wrote.
"I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010."

According to AMG Data, for the week ended Sept 30, Equity Fund Inflows $460 Mil; Taxable Bond Fund Inflows $4.5 Bil
xETFs - Equity Fund Outflows -$1.1 Bil; Taxable Bond Fund Inflows $3.1 Bil.

Two new surveys looking at Internet search engines show Microsoft's massive effort to rebrand and relaunch its 'Bing' portal is facing some growing pains.
September's poll from NetApplications found Bing fell to just 3.39 percent of the global search market, trailing the dominant Google and Yahoo.
A different survey from StatCounter says Bing received only 3.25 percent of the global search market in September.

In September, 89.92 percent of all Internet queries worldwide were carried out on Google, according to StatCounter.

Bill Bonner: "According to TrimTabs, only $2.5 billion has gone into equity mutual funds in the last six months. Bond funds have attracted 13 times as much money as equity funds, says a Morningstar report."
“US retail investors…have watched this rally from the sidelines,” the FT concludes.

San Francisco office rents fell 37 percent in the third quarter from a year earlier, the biggest decline since 2001, as financial and real estate firms cut jobs in the recession.
Rents for the highest-quality offices in the most-desired locations of the city’s central business district, known as Class A space, dropped to an average of $34.81 a square foot per year. That was down from $55.65 in the third quarter of 2008, the peak of the current market cycle, according to preliminary data from the Colliers International brokerage.
“We’ve lost about 5 percent of our job base year-over- year,” Ted Egan, chief economist for the city, said in an interview. “I can’t see any job growth in the office-using sectors.”

U.S. and foreign businesses slowed their demand in August for capital equipment to expand production, the Commerce Department reported Friday. Factory orders decreased 0.8% in August, slower than the 0.5% fall expected by economists surveyed by MarketWatch. Orders for durable goods decreased 2.6% in August, revised down from 2.4% estimated a week ago. This is the biggest drop since January. Orders for nondurable goods rose 0.8%. Core capital equipment orders fell 0.9% in August, revised up from 1.9% estimated a week ago, the government said.

Policy makers are likely to continue backing a weak dollar until the economy shows substantial improvement, Pimco's Bill Gross told CNBC.

Office vacancy rose and rents fell in downtown Seattle and Bellevue as well as in the suburban Eastside market in the third quarter, according to a Cushman & Wakefield report released Wednesday.
Downtown Seattle vacancy climbed to 18.5 percent, a nearly four percentage point increase over the second quarter. The jump reflects downsizing by tenants, vacant space at the former WaMu Center, and the addition of the Fifth & Yesler and 2201 Westlake office projects to the market, the firm said. Rents are dropping in tandem with vacancies.

U.S. consumer bankruptcies rose past 1 million through the first nine months of the year, the highest since 2005 changes to bankruptcy laws.
Personal bankruptcies totaled 1,046,449 for the period, according to the American Bankruptcy Institute and National Bankruptcy Research Center. For the first nine months of 2005, the figure was 1.35 million.

The International Olympic Committee announced it had chosen Rio de Janeiro as the city to host the 2016 Olympics.

David White: "ISM Services are reported Monday morning. If these come in less than expected, the market could really go down. Good chance they will."

Ending its worst week since mid-June, the Dow Jones Industrial Average fell 21.61 points, or 0.2%, to 9,487.67, leaving the blue chips with a loss of 1.8% for the week. The S&P 500 Index declined 4.64 points, or 0.5%, to 1,025.21, a 1.8% slide for the week. The Nasdaq Composite closed at 2,048.11, off 9.37 points, or 0.5%, leaving the technology-laden index off 2.1% from the week-ago close.

Thursday, October 01, 2009


10/1/09 Downdraft

Delinquency rates hit record highs on home-equity loans, home-equity lines of credit and bank cards for the quarter that ended July 31, the latest numbers available. The composite ratio, which tracks eight closed-end installment loan categories, also hit a high at 3.35% of all outstanding accounts, seasonally adjusted, compared with the first quarter's 3.23%. This is the sixth straight quarter that delinquencies have risen.

ZeroHedge: "The national sales tax is no longer idle talk. I guarantee that it is coming soon because Obama is running out of money and they're panicking about paying for the deficit. They just can't tax the rich enough to pay for it. Tomorrow starts the official vetting of the tax."

First-time claims for state unemployment benefits rose for the first time in four weeks, the Labor Department reported Thursday. The number of initial claims in the week ending Sept. 26 rose 17,000 to 551,000. It's the highest level since before the Labor Day holiday. The consensus forecast of Wall Street economists was for claims to fall inch up to 531,000. Claims in the previous week were revised to a decrease of 16000 to 534,000 compared with the initial estimate of a decrease of 21,000 to 530,000. The four-week average of initial claims fell 6,250 to 548,000. This is the lowest level since Jan. 24. Meanwhile, the number of Americans receiving state jobless benefits fell 70,000 to 6.09 million in the week ending Sept. 19. This is the lowest level since the week ended April 4. The four-week moving average of continuing claims fell 39,250 to 6.15 million, the lowest level since April 18.

Encouraged by government subsidies to buy cars, U.S. consumer spending soared 1.3% in August, the fastest increase since the post-9/11 shopping binge eight years ago, the Commerce Department estimated Thursday. After adjusting for inflation, real consumer spending rose 0.9%, also the biggest gain since October 2001. Personal incomes edged higher by 0.2%. After taxes and after adjusting for higher prices, real disposable incomes fell 0.2%, the third decline in a row. Consumer prices rose 0.3% in the month. Prices excluding food and energy rose 0.1%. In the past year, these so-called core prices are up 1.3%, the slowest core inflation rate since September 2001.

Rob Hanna: "After the SPX declined the last 2 days of a quarter 86% of instances were trading higher 2 days later and the average trade was 1.2%. This suggests a decent upside edge for the next couple of days." This is why the decline on October 1 is so significant. When one-sided statistics don't
hold up, there should be immense concern. The Dow dropped 203 points, the Nasdaq 65, and the S&P was down 27+ points.

Terra Industries Inc. said Thursday it's rejecting CF Industries Holdings Inc.'s unsolicited proposal dated Sept. 28. "Over the last nine months, our board has reviewed five proposals from CF -- and each time the board has unanimously determined that a combination of our companies lacks compelling industrial logic and runs counter to Terra's strategic objectives," said Terra President and CEO Michael Bennett.

At the pump, retail gas prices fell by a penny overnight to a new national average of $2.469 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gas is 13.8 cents cheaper than last month and $1.15 cheaper than the same time last year.

The unemployment rate in the 16-nation euro zone rose to 9.6% in August, up from 9.5% the previous month and the highest since March 1999, the statistics agency Eurostat reported Thursday. The agency said 165,000 persons joined the unemployment rolls in August, bringing the total number of unemployed to 3.224 million. The lowest unemployment rates were seen in the Netherlands (3.5%) and Austria (4.7%), while the highest were seen in Spain (18.9%) and Latvia (18.3%), Eurostat said. The rise was in line with forecasts.

Ford Sept. car sales down 5+%, Chrysler's down 42%, and GM's down 45%.

Expect China to float the yuan sooner rather than later, Jim Rogers says, and he suggests putting your investment dollars into an economy that's spending saved rather than borrowed money for stimulus: "China saved up huge reserves for a rainy day; now it's raining and they're spending those reserves."

In its World Economic Outlook, the IMF said it now expects the U.S. economy to grow 1.5 percent in 2010, up from its July forecast for 0.8 percent growth. It nudged down its 2009 forecast to a decline of 2.7 percent from its earlier estimate of a 2.6 percent slide.

Cisco has agreed to buy Norwegian videoconferencing company Tandberg for $3 billion, the latest in a series of bets taken on using video to drive demand for its core data transmission gear.

Barry Ritholtz: "As of August 2009, the nation had 1.3 million (1,256,000) fewer private- sector jobs than in December 1999. This is the first time since the Great Depression of the 1930s that America will have an absolute loss of jobs over the course of a decade...The “Harsh Arithmetic of the Employment Deficit” means that we will not likely return to 2007 employment levels until (ugh) 2017."

The Oil Drum: "The U.S. Energy Department reported this week that July imports of Canadian oil hit 2.1 million barrels a day, a 5.4-per-cent rise from June numbers. It was the highest on record since the United States began releasing country-specific numbers 36 years ago - and came as Saudi imports reached a 20-year low in June."

Bloomberg: "U.S. refiners may fail to meet financial requirements of their credit agreements later this year as slumping fuel demand erodes the profitability of making gasoline and diesel.

Independent refiners, which don't have oil and natural-gas wells to fall back on, are being pushed to the brink of violating performance covenants of their loans, said Scott Van Bergh, energy banking chief for the Americas at Bank of America Merrill Lynch in New York. Bankers and analysts say Western Refining Inc., Tesoro Corp. and Alon USA Energy Inc. are among those fuel makers at risk of failing to meet debt terms.

Violations of covenants, which often include ratios related to earnings in the past 12 months, could lead to higher fees or collateral requirements, according to Standard & Poor's. So- called crack spreads, the gap between oil costs and fuel prices, are narrowing as the recession cuts demand. Third-quarter profits at independent U.S. refiners dropped 85 percent from a year earlier, analyst estimates compiled by Bloomberg showed."

State insurance regulators have seized control of Golden State Mutual Life Insurance Co., a financially struggling company that has primarily served the African American community for the last 84 years.
The Los Angeles company, which has been losing money for six consecutive years, has agreed to immediately stop selling any new policies, state officials said Wednesday.

Shiller Sees 5 Years of Stagnant Home Prices.

The Institute for Supply Management says its index of manufacturing activity in September slipped to 52.6 from 52.9 in August. The index was forecast to come in at 54.

The worse-than-expected report is overshadowing a better reading on housing. The National Association of Realtors says pending home sales in August rose 6.4 percent from July to 103.8. Economists surveyed by Thomson Reuters expected the index would rise to 98.6.

Spending on U.S. construction projects increased 0.8% in August on higher outlays for homes, the Commerce Department said Thursday, but the increase in August merely offset a big downward revision to July's spending numbers. Spending fell 1.1% in July compared with the initial estimate of a 0.2% decline. Spending on private residential projects rose 4.7% in August. Public-sector spending fell 1.1%, the second straight decline.

Ford Motor Co. said Thursday that U.S. auto sales for September dropped 5.1% to 114,655 vehicles from 116,734 a year ago. Chrysler Group LLC, which is partnered with Fiat SPA (

Standard & Poor's said Thursday that third-quarter dividend increases reached an all-time low. Out of about 7,000 companies that report dividend information to S&P, only 191 companies increased their dividend in the third quarter, a 44.8% drop from a year ago.

10/1 Nat Gas Report :+ Working gas in storage was 3,589 Bcf as of Friday, September 25, 2009, according to EIA estimates. This represents a net increase of 64 Bcf from the previous week. Stocks were 491 Bcf higher than last year at this time and 481 Bcf above the 5-year average of 3,108 Bcf. In the East Region, stocks were 144 Bcf above the 5-year average following net injections of 38 Bcf. Stocks in the Producing Region were 266 Bcf above the 5-year average of 879 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 71 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,589 Bcf, total working gas is above the 5-year historical range.

Chris Vermeulen: "
Natural Gas - Weekly Timing Chart
Several weeks' back I pointed out that Natural Gas was extremely over sold and at 10 year lows which was a good point to start scaling into a position. This high risk setup has paid off well for those following actively trading the over bought and over sold conditions with me.
We now have a breakout and are waiting for a low risk entry point to buy more natural gas."

Wednesday, September 30, 2009

The Quarter's End

9/30/09 The Quarter's End

ADP said the U.S. lost 254,000 private-sector jobs in September.

Diamond Offshore Drilling Inc.said Wednesday it'll pay $490 million to Jurong Shipyard Pte Ltd for a construction contract for the new-build, 7,500-foot, dynamically positioned semi-submersible offshore drilling unit PetroRig II. The rig is to be renamed the Ocean Valor. The purchase of the rig from is expected to be completed on or about Oct. 1. "We were able to acquire this rig without waiting three years for construction and at a substantial discount from peak pricing of approximately $750 million," Diamond Offshore CEO Larry Dickerson said. "We believe there are multiple opportunities to employ this highly capable rig in our pursuit of future deepwater projects."

According to the Washington Post, in its effort to muster support for sterner action against Iran, the Obama administration will have to overcome China's reluctance to punish a country that is one of its top oil suppliers and a major beneficiary of its energy-related investments.

The chairman of Wal-Mart Stores Inc. warned Wednesday the global economic recovery will likely be lethargic, even as the retailing behemoth sees great growth potential in China and India.

"The world recovery is going to be led by Asia although it's going to be very challenging. I think this recovery is going to be a slow one," Robson Walton told a global CEO business conference here.

Walton said "sales have been tough" for Wal-Mart, the world's biggest retailer, even though it was benefiting from the economic downturn as more people shop at discounters for bargains including over-the-counter drugs and eat-at-home food.

For Christmas they will be offering 100 toys for $10 a piece.

The International Monetary Fund on Wednesday lowered its estimate for global write-downs for banks and other financial institutions to roughly $3.4 trillion but warned that loan losses could rise in the face of stubbornly high unemployment and associated delinquencies.

More companies in the Chicago area reported business worsened in September, according to the Chicago-NAPM. The Chicago purchasing managers index fell to 46.1% in September from 50.0% in August, the trade group said. Economists were expecting an increase to 52%. The new orders index backtracked to 46.3% from 52.5% in August. The employment index was essentially unchanged at 38.8%.

We invaded Iraq ---obviously not because of WMD and not because of a desire to bring democracy to the country. It was all about oil. That brings us to Iran, a country unlike ours that has never invaded another country. Iran has had inspection after inspection of its nuclear facilities utilized to provide power to its citizens. This week they invited scientists to inspect their facilities. The country does not have capacity at this time to build a nuclear bomb. Iran has the world's second largest oil reserves. They supply China with 10% of their

annual crude requirements and that percentage will continue to grow. If we invade Iran or get Israel to do invade it will be for oil--- to weaken China and to weaken the hold the mideast has on the oil market. If you think China and Russia will sit idly by, forget it.

In addition, any invasion would ramp up our economy into a war economy and boost GDP---naturally by increasing the debt limit. The gov't doesn't have a pot to pee in. They are busted. That makes the country busted. Too much debt and too little cash flow.

CIT Group Inc is nearing a plan that likely would hand the commercial lender over to its bondholders, sources familiar with the matter said on Tuesday.

CIT was preparing an exchange offer that would eliminate up to 40 percent of its more than $30 billion in outstanding debt, said the sources, who did not wish to be identified because they were not authorized to make public comments about the deal.

Gasoline inventories fell by 1.6 million barrels in the week ended Sept. 25, as demand rose 3.8% to 9.13 million barrels a day, the Energy Information Administration reported. Analysts surveyed by Platts had expected a buildup of 1.2 million barrels in gasoline inventories. After the data, November crude futures rose 33 cents, or 0.5%, to $67.04 a barrel. It was down 0.4% before the data. October gasoline futures gained nearly 2% to $1.7092 a gallon. The EIA also reported an increase of 2.8 million barrels in crude inventories and a buildup of 300,000 in distillate stockpiles, which include diesel and heating oil.

In July, major U.S. ports container volume was down 17% from July 2008’s volume, the 25th-straight month to register a year-over-year decline.
The report also projected total import cargo volume at major U.S. container ports to reach 12.5 million in 2009, which represents a 17.7% annual decline and the lowest level since 2003.

The IATA indicates that air freight volumes remains depressed and were 9.6% down on year earlier levels in August, and down over 20% in the first half of the year.

The Association of American Railroads (AAR) reported last week that for the first nine months of 2009, U.S. railroads cumulative total volume was down 17.3% from 2008.

The average contract mortgage rate on a 30 year mortgage is down to 4.94 percent, down from the previous week’s average mortgage rate of 4.97 percent. Discount points also decreased to 0.94, down from the prior week’s average discount points of 1.12.

The average contract mortgage rate for 15 year mortgages decreased to 4.34 percent this week, down from last week’s average contract mortgage interest rate of 4.41 percent. The average discount points decreased to 1.01 from 1.05 the prior week.

One year adjustable mortgage rates decreased to 6.40 percent this week, down from the previous week’s average contract mortgage rate of 6.52 percent. Discount points increased to 0.29 from 0.28.

More of the "new normal": Pimco's Bill Gross says that higher savings rates mean that expectations for total equity returns should be
around 5%. Yesterday he said Pimco has "exchanged our mortgages for the government's check" in getting into long-term Treasurys.

Steel prices in the U.S. rose 13 percent in September as inventories hit record lows after producers cut output, Purchasing Magazine said.

The average price of
hot-rolled steel sheet, the benchmark product used in cars and appliances, climbed to $535 a ton from $475 in August, Purchasing said today in a monthly update. Cold- rolled sheet increased 10 percent to $625 a ton from $568.

The Argentine government has borrowed about $500 million from a fund meant to ensure the sustainability of the country's social-security agency, Anses, according to two resolutions published Wednesday in the Official Bulletin.

In the first resolution, the government said it had issued 168-day Treasury notes on September 28 for ARS1.35 billion pesos ($351 million).

The notes mature on March 15, 2010, and will pay an interest rate of 14.3%.

The government also issued $150 million in dollar-denominated 180-day notes carrying an interest rate of 4%. The notes were issued on September 4 and mature on March 23, 2010.

In both cases, the notes will be traded in local markets.

The notes were sold to the Fondo de Garantia de Sustentabilidad, whose aim is to guarantee Anses's funding.

Fed's Kohn:" Lack of credit likely to constrain recovery."

Oil up 5.7%, topping $70 for first time in a week.

Costco has had a hiring freeze and now has begun cutting hours for some full-time
employees. Small businesses are feeling the pinch and this is an important part of Costco's business.

General Motors Co. Chief Executive Fritz Henderson said late Wednesday the automaker will begin winding down its Saturn brand and dealerships following the collapse of a deal to sell the brand to Penske Automotive Group Inc.

The Dow Jones Industrial Average fell 29.92 points, or 0.5%, to 9,776.82, leaving the blue chips up 2.3% for the month and ahead 15% for the quarter. The S&P 500 Index fell 3.53 points, or 0.3%, to end at 1,057.08, leaving it up 3.6% for September and 15% ahead for the quarter. The technology-heavy Nasdaq Composite lost 1.62 points, or less than 0.1%, to finish at 2,122.42, giving it a 5.6% monthly rise and 15.7% jump for the just-ended three-month period.

Tuesday, September 29, 2009


9/29/09 Deflation

Prices in Japan tumbled at a record pace in August, intensifying concerns that deflation could undermine the country's fragile economic recovery.

The country's key consumer price index, which excludes volatile fresh food prices, fell 2.4 percent from a year earlier amid rising unemployment and falling wages, the government said Tuesday. The figure marks the steepest decline since officials began compiling comparable data in 1971.Core CPI has now dropped for six straight months.

According to the WSJ, facing a Christmas without a new blockbuster gadget to excite shoppers, electronics retailers hope they can make up the difference by selling a greater number of smaller, cheaper items.

As they fight grim forecasts that sales this holiday season will be as bad as last year's, leading electronics sellers Best Buy Co., Wal-Mart Stores Inc., Sears Holdings Corp. and RadioShack Corp. are counting on merchandise such as $300 netbook computers, private-label speakers and electronic-book readers to appeal to customers who have put thrift at the top of the list.
"The frugality trend is still the overriding sentiment out there," said
The average consumer is expected to spend 15.4% less on Halloween compared with last year, according to a survey released today by the National Retail Federation.

Consumers are expected to spend an average of $56.31 on Halloween, compared with $66.54 in 2008.

Of the nearly one-third of respondents who said the economy would affect their Halloween plans, 88% said they would spend less overall, 46.5% said they would buy less candy, 16.8% said they would make their own costumes instead of buying new ones and 5.3% said they wouldn’t hand out candy.

CNOOC, one of China’s three energy majors, is trying to buy 6bn barrels of oil, equivalent to one in every six barrels of the proven reserves in Nigeria, sub-Saharan Africa’s biggest crude producer and a major supplier to the US.

The president of the World Bank said on Monday that America’s days as an unchallenged economic superpower might be numbered and that the dollar was likely to lose its favored position as the euro and the Chinese renminbi assume bigger roles.

The S&P/Case-Shiller home-price index fell 13.3 percent in July from a year earlier, the smallest drop in 17 months, the group said today in New York. Adjusted for seasonal variations, the gauge rose 1.2 percent from the prior month. David Blitzer of S&P cautioned that the expiration of the first-time home buyer tax credit and increased foreclosures could put more downward pressure on prices.

David Rosenberg: "This inventory has yet to hit the market, but it will. So pundits that get excited about two or three months of Case-Shiller data are spending too much time looking out the back window. More deflation is coming in residential real estate — this bear market in housing ain’t over yet. Remember, homes that are foreclosed typically go on to the market at discounts ranging between 10% and 50%."

Fannie Mae reported that the serious delinquency rate for conventional loans in its single-family guarantee business increased to 4.17 percent in July, up from 3.94 percent in June - and up from 1.45% in July 2008.
"Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans. These rates are based on conventional single-family mortgage loans and exclude reverse mortgages and non-Fannie Mae mortgage securities held in our portfolio."

People's Bank of China will stick with its accommodative monetary policy to support an economy it says still suffers from weak external demand.

Retail sales fell 2.2% from a year ago, Redbook says, in sharp contrast to the 0.9% gain reported earlier by the ICSC.

Rep. Ron Paul: "If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don't want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore."

Peterbilt Corp. is permanently closing its truck plant in Nashville.

The Tennessean quoted plant manager Larry Vessels who said the decision means the loss of about 390 jobs at the idled plant.

Peterbilt manufactures over-the-road commercial trucks and said it will consolidate work at its plant in Denton, Texas.

Peterbilt General Manager Bill Jackson called the move "a difficult, but necessary decision" because sales have dropped about 70 percent in the last 18 months.

Prime Minister Vladimir Putin told investors Tuesday that the government will reduce its role in the Russian economy and ownership of companies over the coming years to allow for better growth.

Bill Bonner: "There are 14.5 million officially unemployed people in the United States and 2.5 million job openings. In other words, for every six people looking for work, there is one job to fill — not counting those already employed who are looking for a new gig. And we hasten to add, these are Labor Department numbers… if the reality were twice as bad, it’d be no surprise."

The Conference Board, an industry group, said its index of consumer attitudes fell to 53.1 in September from a revised 54.5 in August. Reflecting Americans' worries about employment prospects, the index measuring jobs "hard to get," rose to 47.0 from 44.3. At the other end of the scale, the gauge of "jobs plentiful" fell to 3.4 from 4.3. That was the lowest since February 1983.

The poor outlook overall led consumers to evaluate their present situation as the worst since March. The present situation gauge fell to 22.7 from 25.4.

US chief executives are not ready to step up hiring or capital spending, though a majority expect sales to rise over the next six months, according to a Business Roundtable survey released Tuesday.The survey said 40 percent expect to cut U.S. jobs over the next six months, compared with 13 percent who expect to add them. Some 35 percent expect to lower U.S. capital spending, more than the 21 percent who plan to raise it.

Iran will soon tell the International Atomic Energy Agency when it can inspect the Islamic republic's recently revealed nuclear facility, the country's state-run Press TV reported.

"[FDIC] staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive."

GE's Immelt warns US recovery slowest in decades.

Ron Chernow: "You don't want too much fear in a market, because people will be blinded to some very good buying opportunities. You don't want too much complacency because people will be blinded to some risk."

"The most notable effect from the cash for clunkers program was to distort the path of consumer spending in the third and fourth quarters," the Citi economists add. "As a result of the surge in vehicle sales in August, real consumption is likely to have grown at a 2% annual rte in the third quarter, which would be the biggest gain in 2 ½ years.

"Half of that growth was due to the rise in motor vehicle sales. Now that the program is over, we estimate that vehicle sales plummeted back toward the 9 million unit range in September and will remain low through autumn. As a result, we expect real consumer spending to fall back noticeably in the fourth quarter." the Citi economists write. Neither gives a true picture of the trend in consumer spending, which they see improving in 2010.

But John Williams of Shadow Government Statistics contends the expiration of one-shot schemes will give way to new downlegs.

"The broad economic data remain deep in recession territory, even with the cash-for-clunkers program and the first-time homebuyers tax credit running their courses. The clunkers programs has expired, and given the closing period on home sales, so, too, has the bulk of the tax credit," he writes.

For the full fiscal year, Darden said it expects to earn $2.65 a share, compared to the current Wall Street estimate of $2.81.

The Dow Jones Industrial Average fell 47.16 points, or 0.5%, to 9,742.20. The S&P 500 Index dropped 2.37 points, or 0.2%, to 1,060.61, while the tech-laden Nasdaq Composite declined 6.7 points, or 0.3%, to 2,124.04.

Analysts expect an increase of 2.1 million barrels in U.S. inventories for the week ended Sept. 25 as refinery throughputs are expected to drop, according to a Platts survey of analysts.

Monday, September 28, 2009


9/28/09 Instability

Hyman Minsky: “Instability is an inherent and inescapable flaw of capitalism.” How much debt does it take to breed instability? What's the tipping point? They never ring a bell.
Better to be early than late. Remember the dotcom craze? Remember the no money down
real estate? Now we have the zero interest levels for government short-term treasury bills
When the music stops, where will you be invested?

Profits at China's oil producers, steel makers and other major industrial companies fell 10.6 percent in the first eight months of 2009 from the same period a year earlier, the National Bureau of Statistics said Sunday.

Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that's happened since the 1980s.The deficits — $10 billion in 2010 and $9 billion in 2011 — won't affect payments to retirees.

Mike Burk: "After 3 consecutive down days the market is a little oversold and seasonally the coming week has been modestly strong. There is still no sign of a developing top.
I expect the major indices to be higher on Friday October 2 than they were on Friday September 25."

Abbott Laboratories is close to announcing a deal to acquire Belgian conglomerate Solvay's pharmaceutical unit for $7.6 billion.

Seven South American nations on Saturday signed an agreement to create a Bank of the South with startup capital of $20 billion.

The yen rose to the highest level in eight months versus the dollar on prospects Japanese exporters are repatriating profits before the fiscal first half ends this week.

Sinochem Corp., China’s largest chemicals trader, offered to buy Australia’s
Nufarm Ltd. for A$2.8 billion ($2.4 billion) to gain a global distribution network for pesticides and herbicides.

Xerox Corp. said it's reached a deal to buy Dallas-based Affiliated Computer Services for $6.4 billion, or $63.11 a share, in a deal Xerox said will boost its presence in business process outsourcing. ACS closed Friday at $47.25 a share. Under the terms of the agreement, ACS shareholders will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. In addition, Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's Class B shareholder.

John Hussman: "Forbearance only works, however, if you're buying time to do something to restructure debt. Instead, we've celebrated bailouts and the easing of reporting requirements as if they are a substitute for restructuring. In my view, this is a mistake that will haunt us."

CF Industries Holdings Inc.has acquired about 7% of Terra Industries Inc. in the open market over the past two weeks. The Deerfield, Ill.-based fertilizer company said it bought nearly 7 million Terra shares for $247 million. CF Industries also said it sent a merger agreement to Terra, detailing the terms of its proposed business combination. Back in March, Terra rejected CF Industries' bid, saying in a letter that the proposal "substantially undervalues" the company and does not fit into its strategy.

China's energy officials worry about the prospect of tighter sanctions on a country that last year provided over 10 percent of its crude oil imports, and is only likely to become more important as Chinese reliance on foreign energy grows.
The world's No. 2 crude oil consumer has made longer-term investments with an eye to developing deposits in
Iran, which holds the world's second-largest crude oil reserves.

Barry Ritholtz: "Chasing short term profits regardless of cost is not “Rational Irrationality” — its short termism of the worst kind. And if it ultimately leads to your firm’s liquidation, how rational is that? That is the equivalent, IMO, of suggesting you can set the race track record on the straight away, ignoring the hairpin turn at the end. So what if you smash into the wall! You were, for a moment, winning!"

The U.S. Northeast may have the coldest winter in a decade because of a weak El Nino, a warming current in the Pacific Ocean, according to Matt Rogers, a forecaster at Commodity Weather Group. “Weak El Ninos are notorious for cold and snowy weather on the Eastern seaboard,” Rogers said. This could have a big impact on the price for heating oil and for natural gas.

The Dow Jones Industrial Average rose 124.17 points, or 1.3%, to 9,789.36. The S&P 500 Index jumped 18.6 points, or 1.8%, to 1,062.98. The Nasdaq Composite climbed 39.82 points, or 1.9%, to 2,130.74.

Natural gas for October delivery fell 25 cents, or 6%, to $3.73 per million British thermal units. The October contract expired on Monday. The new front-month November contract fell 11.8 cents to finish at $4.83 Btus.