Saturday, October 31, 2009

More Failed Banks

10/31/09 More Failed Banks

U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation's banking industry are being crippled by bad loans. 153 branches closed this weekend and will reopen under other names/ownerships on Monday.
The move brought the total number of failed banks in 2009 to 115 -- their highest annual level since 1992 -- with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.
1307 branches have been reorganized this year alone, which compares with 3914 since IndyMac went down in May of last year.

The chief executive officers of 28 of the largest U.S. banks have been summoned to meet with supervisors at Federal Reserve banks to discuss new rules on compensation, said a person familiar with the matter.
The Fed this month said it will review the largest banks to ensure compensation doesn’t create incentives for the kinds of risky investments that brought the global financial system to the edge of collapse, prompting bailouts of firms including Bank of America Corp. and Citigroup Inc.
By summoning bank chiefs, the Fed is sending a message that it wants the pay reviews taken seriously, said Kevin Petrasic, an attorney at Washington law firm Paul Hastings and a former special counsel at the Office of Thrift Supervision.
“It starts with the CEO,” Petrasic said. “It is not subtle at all to tell the most highly compensated people in the organization, ‘Okay we are starting with you.’”

Maybe we should start with the Administration. If they hadn't pissed away hundreds of billions of dollars on bank and brokerage bailouts we wouldn't need a pay czar or for that matter 30 other czars. Just keep making speeches, playing golf, making fund raisers, and inviting donors to the big house at 1600. Look busy while jobs are lost, plants close, homes are foreclosed, banks charge creditcard holders 30% interest, commercial real estate is crashing, and the number on food stamps rises every day to historic levels. The depression is here.

Ron Paul: "“I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954.”

Doug Noland: "We remain trapped in the same old Bubble-inciting paradigm of activist central banking and government intervention....Our federal government issued about $1.9 TN of additional debt over the past year....The Newest Abnormal is about massive synchronized global government Credit expansion and extreme monetary looseness. The Newest Abnormal sees massive “private” Credit expansions in China, India, Brazil, and the “developing” markets. The Newest Abnormal is fueling historic Credit and economic Bubbles in China....It was a Newest Abnormal kind of week. For months now, unprecedented global government intervention has spurred a stampede back into risk assets. Buoyant risk markets then sparked a run of bullish optimism. Not surprisingly, everyone ended up on the same crowded side of the reflation trade. This week, global equities, emerging market bonds, commodities, and most currencies were rocked by heavy selling pressure. Those borrowing in yen to leverage higher-yielding currencies in, for example, New Zealand or Sweden, had their heads handed to them. The reflation bet definitely had some air kicked out of it. And many believing, with two months to go, that they had great years in the bag are now recalling that sick 2008 feeling. It’s a reasonable bet that heightened uncertainty and market volatility have returned and will be sticking around a while."

According to the Commerce Dept, U.S. households’ annualized mortgage payments fell by more than $10 billion in the third quarter from the second, a decline of about 1.5%. In all, they had fallen an annualized $35.7 billion from their peak in the first quarter of 2008. The data reflect two trends. For one, with the Federal Reserve holding short-term interest rates near zero, the wave of pain wrought by payment resets on floating-rate mortgage loans may have largely passed. Beyond that, an increasing share of mortgage holders has stopped making payments on loans.

On Friday the VIX rose 24% to 30+. Are investors frightened or is it just halloween making them nervous? ZeroHedge notes "The implied correlation reading between all asset classes has hit a 6 month high at 65.50, a jump which mimics the surge in the VIX. High implied correlation readings are indicative of crash risk expectations."

Year-over-year business investment in computer equipment was down 16% in the quarter while investment was off 9% in software and 15% in communications hardware.

Americans are paying more for gasoline than they did last year as the holidays approached — billions of dollars that could go to books, clothes and Barbie dolls instead being spent at the pump.
Gas averaged nearly $2.70 a gallon Friday, the highest of the year — adding bad news to an already fragile economy and making it even less likely that people will spend their way out of the recession.

Bill Bonner: "The problem is too much debt, not too little spending. Leveraging up the public sector doesn’t help. Even government debts must be paid – if not by the borrower, then by the lender. The feds are smooching more ardently than any debt lover in history; next, we get to see who dies…or at least who defaults."

Brian Pretti: "As of September month end, total government employment accounted for 17+% of total US employment....As of now, unfortunately for the US economy as a whole, government employees outnumber US manufacturing sector employees literally just shy of two to one. Now is the rhythm of government payrolls important enough for you? Do not be surprised if government payroll trends become a further drag on the headline numbers ahead."

CIT's pre-packaged bankrutpcy filing expected this weekend.

LA Times: " Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.
Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many."

ZeroHedge: "The FNM "seriously delinquent" rate has gone parabolic, increasing by roughly 5% sequentially and just under 300% YoY."

Friday, October 30, 2009

The Decline

10/30/09 The Decine

The U.S. employment cost index, a broad measure of wage and benefit costs in private industry, rose at the smallest annual rate on record in the third quarter, the Labor Department reported Friday. On a year-on-year basis, the employment cost index rose 1.5%, the smallest gain since the government began tracking the information in 1982. Wages increased 1.5% over the prior year and benefits costs rose 1.6%, both record lows. In the three months ended September, employment costs increased 0.4%, the same rate as in the prior quarter. Benefit costs rose 0.4% in the third quarter, while wages and salaries rose 0.4.

U.S. consumer spending fell sharply in September after the government's cash-for-clunkers program ended, the Commerce Department estimated Friday. Real (inflation-adjusted) consumer spending dropped a seasonally adjusted 0.6% in September after a 1% gain in August. Real disposable incomes fell a seasonally adjusted 0.1%, the fourth decline in a row. In current-dollar terms (not inflation-adjusted), spending fell 0.5% in September. Current-dollar incomes were flat. With spending falling faster than incomes, the personal savings rate rose to 3.3% of disposable income from 2.8% in August.

Government spending increased at 7.9 percent in the third quarter! Then again, the money spent is accomplished with taxpayer funds and trillions of dollars of added debt.

The time to hold gold is now as faster inflation and increased purchases through exchange-traded funds and by central banks boost demand amid stagnant mine output, Paul Tudor Jones’s Tudor Investment Corp. said.

“I have never been a gold bug,” Jones, whose company manages about $11.6 billion out of Greenwich, Connecticut, told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else in life, has its time and place. And now is that time.” Tudor's econometric model has determined that gold is 20% undervalued over the next 24 months.

Tudor writes, "As deflation recedes to the background, market participants will start expecting a removal of policy accommodation. If the markets begin to price early, fast and large tightening before inflationary expectations are allowed to take hold, then curves could bear-flatten significantly from current historically high levels."

The yen rose, set for its first weekly gain in three, after the Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency stimulus spending.

The yen advanced most against the New Zealand and Canadian dollars as investors sold higher-yielding currencies and traders said Japanese exporters purchased the currency following its recent slide. The dollar headed for a fourth monthly loss against the euro, the longest stretch of declines since 2004.

Saudi Arabia's giant oil company plans to drop West Texas Intermediate, a type of light U.S. crude, as its benchmark for North American crude pricing. Saudi Aramco will switch to a new measure known as the Argus Sour Crude Index for its U.S. sales next year, abandoning WTI.

The WTI price measure has dominated North American oil trading – and conversation – for decades. It is based on oil sales in Cushing, Okla., and is one of two globally watched markers of crude. The other is Brent, which is based on sales in the North Sea.

There are several important technical reasons for the move by Saudi Arabia, the world's biggest crude exporter. However, the shift also speaks to the slow, but dramatic, reshaping of the global energy landscape, as emerging countries take an increasingly prominent role in the oil trade.

The US government has issued a new report that recommends blocking access to popular websites during a pandemic outbreak in order to preserve internet bandwidth for investors, day traders and securities clearing house operations. The concern is that a pandemic would cause too many people to stay at home and download YouTube videos and porn, hogging all the internet bandwidth and blocking throughput for investment activities, thereby causing a stock market meltdown.
This isn't an April Fool's joke. It's all based on a public report issued by the Government Accounting Office (GAO), available from their website at

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 jobless for 27 weeks or more.

George Ure: "America has 154 million workers but only 18.465 million are actually goods producers. That means for everyone one person who actually makes something we've got 8.3 people who are providing services, education, and government to them which seems like a screwy ratio, unless, of course, the agenda is to ship all manufacturing and goods producing to the cheapest possible country and then report "corporate profits" on the labor rate differentials and bid population against population...but that's been the game since telecommunications got cheap enough to make it all work."

For the week ended Oct. 28, AMG Data reported

Equity Fund Outflows -$1.8 Bil; Taxable Bond Fund Inflows $4.9 Bil
xETFs - Equity Fund Outflows -$682 Mil; Taxable Bond Fund Inflows $3.8 Bil

Average vacancy in the country's warehouses, factories and other industrial properties reached 10.5% in the third quarter, the highest this decade, led in part by wide open spaces in the Inland Empire.

It was the eighth consecutive quarter of rising industrial vacancy, according to real estate brokerage Colliers International. The net loss of rented space was most pronounced in the Los Angeles Basin, Chicago and San Jose/Silicon Valley markets

Chevron posted a 51 percent drop in quarterly profit on Friday, hit by the steep decline in oil and natural gas prices and the anemic margins for refineries.

Sony posted a loss for the fourth consecutive quarter, hit by sluggish cellphone sales and as it cut prices of its PlayStation 3 game gear, but trimmed its full year loss forecast close to market expectations.

Eurozone jobless at 9.7%, highest since 1999.

Jonathan Allen: "It runs more pages than War and Peace, has nearly five times as many words as the Torah, and its tables of contents alone run far longer than this story.

The House health care bill unveiled Thursday clocks in at 1,990 pages and about 400,000 words. With an estimated 10-year cost of $894 billion, that comes out to about $2.24 million per word. .

And for some members, that may not be enough.

A “robust” public option can’t be found in the bill. Neither can the word “doctor” – save for a few references to degrees. No “cost curve” is bent. No “blue pill” is dispensed.

“Death” and “taxes” are both in there, but “death panel” is not.

The text defines dozens of words and phrases, including “family” (“an individual and . . . the individual’s dependents”), “health insurance coverage,” “exchange-eligible individual” and “Indian.”

Consumer sentiment improved in late October, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index jumped to 70.6 in late October from 69.4 earlier in the month. Sentiment is still below the 73.5 level set in September.

Manufacturing activity improved markedly in the Chicago region in October. The Chicago purchasing managers index rose to 54.2% from 46.1% in September, according to a survey of corporate purchasing managers released Friday. The employment index continued to decline at a steady rate.

YRC Worldwide Inc. reported another loss in the third quarter, but the struggling trucking company also extended a lending agreement to October 2010.

Defaults by small and medium-sized U.S. businesses on the loans, leases and lines of credit they use to finance capital equipment investment rose in September as lenders remained reluctant to extend fresh financing, PayNet reported on Friday.

It seems the financial crisis isn't all doom and gloom: one in four people are glad the world's economy slumped like it did, because it helped them realize their priorities in life, according to a global survey.

Market research firm Synovate polled around 11,400 people across the world and found more than half had permanently changed their attitudes towards money over the last 12 months.

Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.”

U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc. The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.

Crude oil for December delivery finished down $2.87, or 3.6%, to finish at $77 a barrel. That's still 9% higher than where oil prices stood at the end of September. Gold for December finished down $6.70, or 0.6%, at $1,040.40 an ounce on the Comex division of the New York Mercantile Exchange. The precious metal still gained 3.8% for the month of October.

The Dow Jones Industrial Average fell 249.85 points, or 2.5%, to end at 9,712.73, leaving it off 2.6% for the week and effectively flat for October. The hit was the worst single-day point drop for the blue chips since April 20. The S&P 500 declined 29.92 points, or 2.8%, to 1,036.19, a weekly loss of 4% and a 2% monthly decline. The Nasdaq Composite dumped 52.44 points, or 2.5%, to 2,045.11, down 5.1% from the week-ago close and off 3.6% for the month.

Thursday, October 29, 2009

The Rally

10/29/09 The Rally

Shell, Europe's largest oil company by market value, said on Thursday it was cutting 5,000 jobs, after net profit dropped 73 percent in the third quarter to $2.99 billion.

Italy's Eni said it was cutting its production forecast for the year due eto lower gas demand, and project deferrals aimed at saving cash, as it unveiled a 58 percent drop in net profit.

Exxon Mobil Corp said Thursday its third-quarter earnings fell 68% to $4.73 billion, or 98 cents a share, from $14.83 billion, or $2.85 a share in the year-ago period. Excluding a one-time gain $1.45 billion, Exxon Mobil earned $2.58 a share in the year-ago period.

The U.S. economy expanded at a 3.5% annual pace in the third quarter, as massive government stimulus dragged the economy out of the longest and deepest recession since the 1930s, the Commerce Department estimated Thursday. It was the first increase in real gross domestic product in a year and it was the strongest growth in two years. The 3.5% increase matched estimates of economists surveyed by MarketWatch. In the past year, the economy has contracted 2.3%. The economy shrank 0.7% annualized in the second quarter and 6.4% in the first quarter. Growth was broad-based in the third quarter, with final U.S. sales rising at a 3% annual pace, the fastest in more than three years. Third-quarter growth was due to higher consumer spending, a slowdown in the reduction of inventories, an increase in residential investments, and robust government spending.

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11 percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from the second-quarter change.

First-time claims for state unemployment benefits inched lower in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending Oct. 24 fell 1,000 to 531,000. The consensus forecast of Wall Street economists was for claims to fall to 524,000. The four-week average of initial claims fell 6,000 to 526,250, the lowest level since early January. Meanwhile, the number of Americans receiving state jobless benefits fell 148,000 to 5.80 million in the week ending Oct 17. This is the lowest level since late March. The four-week moving average of continuing claims fell 78,750 to 5.96 million, the lowest level since mid-April.

Procter & Gamble Co.said Thursday its fiscal first-quarter earnings slipped 1% to $3.31 billion, or $1.06 a share, from $3.35 billion, or $1.03 a share, in the year-ago period. The number of shares outstanding in the quarter fell to 3.1 billion from 3.2 billion last year. Earnings from continuing operations in the latest period were 97 cents a share. Analysts polled FactSet Research were looking for earnings of 95 cents a share, on average. Revenue fell 6% to $19.8 billion, while organic sales edged up 2%. Wall Street expected sales of $19.8 billion.

Two-thirds of U.S. adults plan to spend less this holiday season and 6 percent say they still are carrying debt from last year's holiday purchases, according a new Consumer Reports Holiday Shopping Poll released on Thursday.

1,578 jewelry retailers, wholesalers and manufacturers fail in US from Jan-Sept'09.

Housing vacancy rates climbed in the third quarter, with vacancy rate for rental units climbing to a record 11.1% from 10.6% in the second quarter, the Commerce Department reported Thursday. The number of vacant units for rent rose to a record 4.59 million from 4.41 million the previous quarter. Vacancy rates for homes usually occupied by the owner rose to 2.6% from 2.5%. The number of vacant housing units for sale rose to 1.99 million from 1.92 million. The homeownership rate rose slightly to 67.6% from 67.4%.

Working natural gas in storage was 3,759 Bcf as of Friday, October 23, 2009, according to EIA estimates. This represents a net increase of 25 Bcf from the previous week. Stocks were 373 Bcf higher than last year at this time and 414 Bcf above the 5-year average of 3,345 Bcf. In the East Region, stocks were 109 Bcf above the 5-year average following net injections of 17 Bcf. Stocks in the Producing Region were 237 Bcf above the 5-year average of 951 Bcf after a net injection of 1 Bcf. Stocks in the West Region were 67 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,759 Bcf, total working gas is above the 5-year historical range.

Colgate-Palmolive Co. said Thursday third-quarter net income grew 18% from a year ago as it raised prices, grew volumes, and cut costs.

Nintendo on Thursday warned that full-year profits would be far below its previous forecast and unveiled a new version of its bestselling handheld videogames console in an attempt to recapture consumer interest.

A lack of “software titles which consistently drove hardware sales” for its Wii home console, the impact of cutting the Wii’s price, and the rise in the yen drove Nintendo’s profits down 52 per cent in first-half net profit to Y65.9bn. Nintendo cut its full year net profit forecast by 23 per cent to Y230bn. Inc on Wednesday announced the launch of "PayPhrase," a shortcut for making purchases on the Web, as the online retailer prepares for a rush of holiday season shopping.

To use PayPhrase, consumers set up a unique phrase and a 4-digit PIN that links to their account where a shipping address and payment information is stored.

When shoppers make a purchase on or other participating websites, they will be able to enter their PayPhrase and PIN, see an order confirmation and check out in seconds. There is no need to sign in or enter credit card information on multiple sites. the general manager of PayPhrase said.

December gold futures on Thursday closed $16.60 an ounce, or 1.6%, higher at $1,047.10 an ounce, breaking five straight days of losses. December silver rose to $16.655 an ounce from $16.24 an ounce. December copper climbed to $3.0295 a pound from $2.9305 a pound.

BMC Software raised its full-year earnings forecast, excluding one-time items, to a range of $2.55 to $2.65 a share.

The Dow Jones Industrial Average advanced 199.89 points, or 2.1%, to 9,962.58, its greatest single-day point and percent gain since July 15. The S&P 500 Index rose 23.47 points, or 2.3%, to 1,066.10, snapping a four-day losing streak and leaving it slightly up for the not-yet-ended month. The Nasdaq Composite rose 37.94 points, or 1.8%, to 2,097.55.

Crude oil for December delivery finished up $2.41, or 3.1%, to $79.87 a barrel, after rising as high as $80.46. It last traded above $80 a barrel on Oct.23.

Wednesday, October 28, 2009

New Home Sales

10/28/09 New Home Sales

ConocoPhillips said Wednesday that its third-quarter net income dropped 71% to $1.5 billion, or $1.00 a share, from $5.2 billion, or $3.39 a share, in the year-ago period.

Orders for U.S.-made durable goods rose in September, rising 1.0% on stronger demand for machinery, defense and capital goods, the Commerce Department reported Wednesday. Excluding the 1.1% increase in transportation goods, orders rose 0.9%. The increase was in line with the forecast of economists surveyed by MarketWatch. It was the fourth increase in total orders in the past six months. Shipments rose 0.8% in September, but were down 0.8% excluding transportation goods. Inventories fell 1.0%, the ninth consecutive monthly decline. The figures for August were unrevised at -2.6%. Unfilled manufacturers’ orders fell by -0.4% and marks at least 12 straight consecutive negative reports.

Over 1500 NYSE, NASDAQ, and ASE stocks just made fresh 20-day lows.

Larry Connors: "We haven’t used stops in our short-term trading with equities and ETFs in years and we’ve had positive results every year going back a number of years. It can be done - protection can be done different ways. Careful position sizing is one way for the best protection - it’s a form of insurance. If you are using proper position sizing, no matter what happens, a trader wants to get to the point where “There is no way one position could blow me out here.”

U.S. Senate leaders moved closer to an agreement replacing an expiring $8,000 tax credit for first- time homebuyers with a smaller one that would expand access to so-called step-up purchasers, two people familiar with the matter said.

The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.

The details:
Income eligibility for first-time home buyers stays at $75,000 for individuals and $150,000 for couples.
For move-up buyers, income eligibility is $125,000 for individuals and $250,000 for couples.
There is a minimum 5 year residency requirement in their current home for move-up home buyers.
The tax credit is the lesser of $7,290 or 10% of the purchase price.
The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)
Expect bill to be signed by Friday.

Clusterstock: "Want more proof America's health care needs drastic improvement? Or that politics needs cleaning up? How about cutting spending?

Here it is: thanks to those and other short-comings, the U.S. is now just ninth in the world according to a new study of international prosperity."

Three pieces of an emergency repair to the Bay Bridge's cantilever section made over Labor Day weekend snapped and crashed onto the upper deck of the span late Tuesday afternoon, striking three vehicles and forcing the indefinite closure of the region's busiest bridge.

Bay Bridge closed after repair falls apart.

Gov. Arnold Schwarzenegger decreed last month that no parks would be shuttered, but the $14.2 million he cut out of the state parks budget means many of the 278 parks in California will be open only on weekends and almost all will have to endure partial closures. Most of the closures begin next week.

India, the world’s second-largest rice grower, may import up to 3 million metric tons next year as the government secures supplies in case the nation faces another year of drought, triggering a price surge, a trader said today.

The weakest monsoon in India since 1972 may slash rice output by about 18 percent to 81 million tons in the marketing year that began Oct. 1, below forecast demand of 89 million tons, according to the United Nations Food and Agriculture Organization.

Japanese automakers are experiencing a production boom in China with Toyota, Honda and Nissan setting records for September — the latest signs of an emerging recovery for Japan's auto industry. Honda Motor Co.'s production set a record for the company in both China and Asia overall for September, although total overseas production has been declining for a year.

Microsoft is killing its MSN Direct subscription service that provided real-time traffic information, plus weather, stock quotes and local gas prices to car GPS navigators. But not for a while -- the company said the service would shut off Jan. 1, 2012.

On the vast tarmac that marks the Port of Hueneme, a couple of dozen Volvos sit waiting to be trucked to a dealership. There are no bananas coming in this day, no construction equipment, no cars.
Business at the 130-acre port is way down since the boom times ended. Hueneme lost $1.3 million during the fiscal year that ended June 30, down from a profit of $1 million in 2008. It has been even harder hit than its massive siblings, the ports of Los Angeles and Long Beach, where profits dropped 40% during the fiscal year and container traffic was down 21%.

The dollar is likely to continue depreciating and the "new normal" will see consumers shedding debt in an attempt to balance their books, Pimco's Bill Gross told CNBC.

"Goldman was not a disinterested party in AIG’s bailout. AIG’s bailout—and the way the payouts were handled for its trading counterparties—hugely benefited Goldman Sachs. Goldman received a cash payment worth more than $10 billion from the U.S. Treasury—via AIG—during a system?wide liquidity crunch. Under the circumstances, I cannot think of any scenario that would have provided a more certain and stable outcome for Goldman Sachs." Janet Tavakoli

Walgreen: "The Federal government has been considering proposals to reform the U.S. health care system. These proposals may increase government involvement in health care, increase regulation of pharmacy services, result in changes to pharmacy reimbursement rates, and otherwise change the way we do business. The effect of these proposals could have an impact on our results of operations."

Russia, which has now surpassed Saudi Arabia as the world's largest oil producer, expects to top record 2009 output next year due to production from new oil fields, the deputy energy minister said Tuesday.

Buffett says, “it’s infuriating to people to see their friends losing their jobs… having their homes foreclosed… And, nobody going to jail. It was one thing in Enron. At least you had (Jeffrey) Skilling and Ken Lay, or WorldCom or those things. Society at least felt there was a little bit of vengeance taking place. (Laughs.) But here nobody’s going to jail. In fact, a lot of them are walking off with tons of money which they got, in many cases, with preferential tax terms. So the American public’s exasperation of this is very understandable…”

Panera Bread Co rose almost 10% to $60 as the company reported third-quarter net income of 61 cents a share compared with 45 cents in the year-earlier quarter. The latest adjusted earnings were 65 cents a share. Revenue rose 6.3% to $335 million. A survey of analysts by FactSet Research produced a consensus estimate of 58 cents profit on $333.8 million in sales. Panera expects to earn 85 cents to 87 cents in the fourth quarter; FactSet's survey is looking for 85 cents.

Visa Inc's fiscal fourth-quarter net income came in at $514 million, or 69 cents per class A common share. That compares to a net loss of $356 million, or 45 cents a share, a year earlier. Revenue was $1.9 billion, up 10%. On an adjusted basis, which includes restructuring and purchase amortization, net for the latest quarter was 74 cents a share. The company was expected to make 72 cents a share, according to Thomson Reuters. The payment processor also said that its board signed off on a $1 billion share repurchase program.

Norges Bank raised its key interest rate a quarter point from a record low and signaled steeper increases than it previously forecast over the next three years as inflation accelerates and unemployment remains low.

The Oslo-based bank raised the overnight deposit rate to 1.5 percent, becoming the first European central bank to reverse its easing cycle since the credit crisis started to abate. Nineteen of 20 economists surveyed by Bloomberg had predicted the move, while one had expected a half-point increase.

U.S. Sept new-home sales down 3.6% to 402,000 pace. Sept. new-home sales down 7.8% yr-on-yr.

Sept. new-home inventories lowest since Nov. '82. The decline in new-home sales to a seasonally adjusted annual rate of 402,000 was well below the 438,000 pace expected by economists surveyed by MarketWatch. New-home sales in August were revised to a 417,000 level compared with the previous estimate of 429,000. This is the first decline in new home sales after five consecutive monthly gains. The supply of homes on the market fell to 251,000 in September. Median sales prices have fallen 9.1% in the past year to $204,800.

The Honda 2010 Civic GX is powered by natural gas.

The U.S. Commerce Department imposed preliminary duties of as much as 12 percent on $269 million of imports of steel grating and wire strand from China.

Nielsen reported a 50% plunge in CNBC vierwership in October year over year. Specially, CNBC has experienced a massive 52% decline in overall viewers during business day hours (5 am - 7 pm), and a not much better 49% drop in its demo (25-54) in the month of October as compared to last year.

Unemployment worsened in 371 of the 372 metro areas tracked by the Dept. of Labor, with 13 areas now above 15%.

EIA Petroleum Inventories: Crude +0.8M vs. +1.7M consensus. Gasoline +1.6M vs. -1.1M. Distillate -2.1M vs. -700K. Capacity 81.8% vs. 81.2%. Dec crude -1.5% to $78.30.

Douglas J. O'Bryon: "There are currently over 15,100,000 Americans unemployed, and according to the Plain Dealer on 9/23/09, roughly 5,000,000 have been unemployed over 6 months - the highest number since data was first collected in 1948 – plus there are currently six unemployed people for every single available job.

While normal 26-week unemployment compensation programs have been extended to 79 weeks in many states, over 1,500,000 people are expected to exhaust their benefits by year’s end, with the first big wave of 540,000 falling out of the program at the end of September,according to the nonprofit National Employment Law Project.

In May 2008, the number of people using food stamps was 27,000,000. In December 2008, the number surpassed 30,000,000 for the first time. According to the U.S. Department of Agriculture, in August 2009 there were 34,000,000 Americans on food stamps and in September there were over 35,000,000, a jump of over 1,000,000 in one month.

As of September 2009, a full 12% of the total U.S. population was on some form of Food Stamp assistance, the highest since records began in 1969."

The brother of Afghan President Hamid Karzai has been getting regular payments from the Central Intelligence Agency, The New York Times reported on Tuesday, citing current and former U.S. officials.

Ahmed Wali Karzai is a suspected player in Afghanistan's opium trade and has been paid by the CIA over the past eight years for services that included helping to recruit an Afghan paramilitary force that operates at the CIA's direction in and around the southern city of Kandahar, the newspaper reported.

Google said its new Google Maps Navigation product will provide real-time, turn-by-turn directions directly within cell phones that are based on the new version of its Android software.

The navigation product, which features speech recognition and a visual display that incorporates Google's online archive of street photographs, marks the latest step by Google to challenge Apple Inc's iPhone and Microsoft Corp's Windows Mobile software with its Android smartphone software.

It also represents a direct competitive threat to companies like Garmin and TomTom which sell specialized hardware navigation devices. TomTom also makes a software navigation app for the iPhone that sells for $99.99 in the U.S.

The 1050 line marks the 50-day moving average for the S&P 500.

U.S. Airways to layoff 1000 workers and American Airlines to layoff 700.

December gold futures fell $4.90 an ounce, or 0.5%, to $1,030.5 an ounce on Wednesday by the close of floor trading in New York, the lowest settlement for the contract since Oct. 5 Silver for December delivery fell to $16.24 an ounce, down 30 cents, or 1.8%. December copper sank 7 cents, or 2.2%, to $2.9305 a pound.

The "real yield" on Treasury Inflation-Protected Securities - the amount above inflation they pay out - has dropped below 1% on five-year TIPS, as the sector overall has gained 9% YTD. That's a steep price for peace of mind, says Brett Arends; you're better off with 20-year terms or longer, with real yields of 2.2% or more.

Annaly Salvos:"Delinquencies are rising, but foreclosure starts are not. As of September 2009, 90+deterioration more than doubled actual foreclosure starts. LPS has dubbed this “shadow foreclosure inventory.” Higher unemployment begets delinquencies and defaults, but foreclosures aren’t flowing through due to modification efforts and various moratoria. Depending on the success of programs like HAMP, more than a few of these loans are still destined for foreclosure.

The Dow Jones Industrial Average fell 119.48 points, or 1.2%, to 9,762.69. The S&P 500 Index declined 20.78 points, or 2%, to 1,042.63, with the broad market gauge losing its gains for October. The Nasdaq Composite lost 56.48 points, or 2.7%, to 2,059.61.

In November, Costco will begin accepting food stamps.

Bill Gross: “Almost all assets appear to be overvalued on a long-term basis”.

Tuesday, October 27, 2009

Consumer Lack of Confidence

10/27/09 Consumer Lack of Confidence

Jeremy Grantham: "The recent rally has been very speculative, favoring risky assets over the past few months. I’m sorry if you missed investing at the market’s March lows, but don’t compound the damage to your portfolio by chasing gains in risky assets. We’re at the beginning of a seven-year period of lean returns. You should only be buying the highest-quality blue-chip com­panies, where valuations are most attractive....Corporate ex-financials profit margins remain above average and, if I am right about the coming seven lean years, we will soon enough look back nostalgically at such high profits. Price/earnings ratios, adjusted for even normal margins, are also significantly above fair value after the rally. Fair value on the S&P is now about 860 (fair value has declined steadily as the accounting smoke clears from the wreckage and there are still, perhaps, some smoldering embers). This places today’s market (October 19) at almost 25% overpriced, and on a seven-year horizon would move our normal forecast of 5.7% real down by more than 3% a year. Doesn’t it seem odd that we would be measurably overpriced once again, given that we face a seven-year future that almost everyone agrees will be tougher than normal?

Price … does matter eventually, and what will stop this market (my blind guess is in the first few months of next year) is a combination of two factors. First, the disappointing economic and financial data that will begin to show the intractably long-term nature of some of our problems, particularly pressure on profit margins as the quick fix of short-term labor cuts fades away. Second, the slow gravitational pull of value as US stocks reach +30-35% overpricing in the face of an extended difficult environment....Unlike the really tough bears, though, I see no need for a new low. I think the history books will be happy enough with the 666 of last February."

Barry Ritholtz: "In September 2009, single family home sale prices look like this:

21% less than $100k
49% $100K to $250k
22% $250 to $500K
5.6% $500k to $750K
1.3% $750k to $1m
1.3% $1M and up

Less than 10% of the homes sold in the US were > $500k. We know the high end has collapsed, but we are not disucssing multi-million dollar homes, mind you, but over $500k as a mere 8.2% of sales. I was surprised. (I wish we had data going back decades, which we could then normalize for inflation).
In September, 70% of transacted homes were priced under $250,000.
Home prices fell less than they had been in August, according to Case Shiller. The Index shows a 7th consecutive months of improved readings in these statistics, beginning in early 2009.
By improved, prices continue to slide year over year, but at a slower rate. Monthly prices show modest gains.
Year over year, the 10-City and 20-City Composite Home Price Indices declined 10.6% and 11.3%, respectively, in August. The indices gained 1.3% and 1.2% from July.

Note that Goldman Sachs estimates that the US Government interventions and bailouts have pushed housing prices 5% higher."

With inflation pressures building, the Reserve Bank of India takes the first step toward withdrawing its record fiscal stimulus, ordering lenders to keep 25% of their cash in government bonds, up from 24%. "We will start to see G-20 economies exiting now, starting with the emerging ones and then the advanced countries," economist Mridul Saggar said.

"Refining margins in the third quarter continued to suffer from a combination of weak demand for refined products and high inventories," said Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer. Valero said it's looking forward to an upturn in fundamentals and demand in 2010.

Paccar said Tuesday that third-quarter earnings were $13 million, or 4 cents a share, compared to $299 million, or 82 cents a share, in the same period a year ago. Sales fell to $1.76 billion from $3.68 billion. If there were green shoots that had staying power, the truck business would not be in the doldrums.

On a week-over-week basis, retail sales climbed 0.1%. "The retail sales recovery continues with its fifth consecutive weekly increase," said Michael Niemira, ICSC's chief economist. He sees October sales to be flat and said retailers could likely beat that estimate

Johnson Controls said it expects to post fiscal 2010 earnings of $1.35 to $1.45 a share on revenue of about $31 billion.

"We expect improvement in our overall fourth quarter results mainly as a result of increased demand for flat-rolled products in North America, driven primarily by automotive markets and continued strength in tin mill markets," U.S. Steel said. "However, we expect to report an overall operating loss in the fourth quarter due primarily to continued low operating rates and idled facility carrying costs for our flat-rolled and tubular segments."

A former Marine Corps captain with combat experience in Iraq, Hoh had also served in uniform at the Pentagon, and as a civilian in Iraq and at the State Department. By July, he was the senior U.S. civilian in Zabul province, a Taliban hotbed.

But last month, in a move that has sent ripples all the way to the White House, Hoh, 36, became the first U.S. official known to resign in protest over the Afghan war, which he had come to believe simply fueled the insurgency.

"I have lost understanding of and confidence in the strategic purposes of the United States' presence in Afghanistan," he wrote Sept. 10 in a four-page letter to the department's head of personnel. "I have doubts and reservations about our current strategy and planned future strategy, but my resignation is based not upon how we are pursuing this war, but why and to what end."

BP PLC, Europe's second-largest oil company, reported a 34 percent fall in third-quarter profit to $5.3 billion — better than markets expected — as oil and gas prices fell from record levels a year earlier.

ZeroHedge: "Must read, and word of the day is, as always, Collateral: the NY Fed's secret choice to rape America by taking no haircut on AIG toxic crap "Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public." (Bloomberg)

Lending to companies in Eurozone falls for first time on record (BBC)

GameStop Corp. plans to hire about 15,000 seasonal part-time workers between now and Dec. 24 at its 4,300 U.S. stores. The Grapevine, Texas-based video-game retailer said the hirings will increase the company's total headcount by about 46%. GameStop said these numbers are consistent with seasonal hiring in 2008 and 2007.

The market value of U.S. homes in 20 major cities rose by 1.2% compared with July, the fourth monthly increase in a row, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. In August prices rose in 17 of 20 cities. In the past year, prices are down 11.3% in the 20 cities. Prices are down 29.3% from the peak. Prices in all 20 cities were lower in August 2009 than in August 2008. The figures are not seasonally adjusted.

Chris Mayer: "Years 2010 and 2011 face big resets in so-called Alt-A and Option ARM loans. What this means is more write-downs and more losses for banks and others who hold these mortgages."

Consumer confidence unexpectedly declined this month, with an index falling to 47.7 from a revised 53.4 last month. Analysts surveyed by MarketWatch predicted the index would remain near 53.2.

The index component that evaluates consumers' judgment of the present situation dipped to 20.7 in October, the lowest since the 17.5 measured in February 1983. It stood at 23 in September.

"Consumers' assessment of the present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment," said Lynn Franco, director of the Conference Board Consumer Research Center. The expectation index, which measures consumers' outlook over the next few months, declined to 65.7 from 73.7 last month. Similarly, the percentage of those expecting the job market to improve edged lower to 16.3% from 18%.
The dollar index traded at 76.316, compared to 75.890 earlier in the session and up from 76.100 in late trading on Monday.

US military says 8 American troops killed in bomb attacks in southern Afghanistan.

The rally in U.S. stocks and riskier bonds is nearing an end and investors will have to settle for more muted returns, Bill Gross, managing director of bond-fund giant Pimco, wrote in a commentary published Tuesday. "The six-month rally in risk assets -- while still continuously supported by Fed and Treasury policymakers -- is likely at its pinnacle," said Gross, manager of Pimco's flagship Total Return Fund (PTTAX). The risk of investing in stocks, high-yield bonds and distressed mortgages "outweigh the rewards," he said. Going forward, he added, investors can expect 4%-5% returns from their portfolios -- well-below historical average.

President Barack Obama intends to sign the fiscal 2010 defense budget, approving about $680 billion in spending to purchase supplies, pay troop salaries and maintain oversea bases, the White House said Tuesday. Obama will sign the 2010 National Defense Authorization Act on Wednesday afternoon during a ceremony at the White House Rose Garden.

The Senate moved closer Tuesday to approving an extension of unemployment benefits by an extra 20 weeks. The Senate agreed on an 87-13 vote to bring the measure to a final vote. The House has approved a similar extension. Usually, unemployment benefits are available for 26 weeks. A private group has estimated that as many as 1.5 million people will exhaust their benefits by the end of the year. A total of 9.3 million people are now claiming benefits, including 3.9 million collecting extended federal benefits. In September, more than 5.4 million people had been jobless for longer than six months.

The Dow Jones Industrial Average rose 14.21 points, or 0.1%, to 9,882.17. The S&P 500 Index fell 3.53 points, or 0.3%, to 1,063.41. The Nasdaq Composite fell 25.76 points, or 1.2%, to 2,116.09.

Railroad operator Norfolk Southern Corp.on Tuesday reported a third-quarter profit of $303 million, or 81 cents a share, down from $520 million, or $1.37 a share, a year ago. Revenue dropped 29% to $2.1 billion.

Crude for December delivery ended up 87 cents, or 1%, at $79.55 a barrel on the New York Mercantile Exchange. Data due after the close and on Wednesday is expected to show a build of 900,000 barrels in U.S. commercial crude stocks for the week ended Oct. 23, according to analysts polled by Platts. They also project a decline of 1 million barrels in gasoline stocks and a drop of 1.1 million barrels in distillate inventories.

December gold futures Tuesday settled $7.40, or 0.7%, lower at $1,035.40 an ounce by the close of floor trading in New York, the lowest close for the contract since Oct. 5. Weighing on gold, the U.S. dollar rebounded and investors cashed out of double-digit profits since the end of August. Silver for December delivery fell 56 cents, or 3.2%, to $16.54 an ounce. December copper slid a penny to $2.999 a pound.

Monday, October 26, 2009

Rising Risk Concerns

10/26/09 Rising Risk Concerns

Alarm bells are ringing for liner firms as one of the most accurate gauges of the container index fell for the first time in more than four months Friday. The China Containerised Freight Index, operated by the Shanghai Shipping Index, dropped for the first time since early June today. Despite lines reporting increased volumes and some being successful with rate increases this news will be a hammer blow for the industry. The CCFI takes data from the leading 20 lines operating out of China. Its numbers have been consistently in line with the fortunes of the container sector over the years, especially since China accounts for one in two boxes moved. With container shipping often a precursor of the world economy, the drop in the CCFI has some analysts suggesting the global economy could be in for a nasty double dip recession.

Gas prices jumped $0.1782 over the past two weeks to $2.66/gallon, the first increase in Trilby Lundberg's survey in two months.

“Bank of America and Countrywide Home Loans destroyed mortgage documents, and “recreate” them by “insert(ing) data as they see fit,” to cover up their own failure to keep records – or their fraud – according to a federal RICO class action.

“To cover up the servicing mistakes and fraud and misrepresentation in the servicing of a consumer escrow, Defendants ‘recreate’ letters, insert data as they see fit, and fail to produce the entire HUD complaint form. This way, a consumer is left in the dark about the fraud that occurred to them,” the complaint states.

The QQQQ closed at a 5-day low for the 1st time in at least 10 days.

German consumer confidence for November fell slightly for the first time in more than a year due to worries about job losses, a forward-looking survey by the GfK market research group said Monday.

Mike Burk: "Cyclically the market should be hitting a short term low late next week, just as we enter a seasonally strong period.

I expect the major indices to be higher on Friday October 30 than they were on Friday October 23."

John Hussman: "In recent months, rate of foreclosures in recent months has lagged the rate of delinquencies, indicating that banks have been reluctant to foreclose, and prompting some observers to assume that banks are now more lenient and the foreclosures will simply be averted. Indeed the FDIC has encouraged this sort of “forbearance” – which typically involves a deferral or small reduction in home payments, generally lasting about 6 months. The problem is that the majority of these deferrals ultimately end in foreclosure. This is particularly likely to be true given prevailing weakness in employment conditions. Indeed, the Office of Thrift Supervision recently reported that more than 50% of mortgages modified in the first half of 2008 have already missed at least two months of payments so far in 2009....rumors of the death of the mortgage crisis appear to be greatly exaggerated. "

Most investors follow the same strategy of borrowing in dollars and investing in assets across the world and when the greenback's downward trend will reverse, there may be a crash in global assets, Nouriel Roubini, Chairman, RGE Monitor, told CNBC Monday. "There is a wall of liquidity…chasing assets," Roubini told "Squawk Box."

"Now we are in the mother of all carry trades," he added.

The dollar should remain the principal currency in China's $2.27 trillion stockpile of foreign exchange reserves, but the share of the euro and yen should increase, according to an opinion piece in Monday's Financial News, a paper published by the People's Bank of China.

The dollar fell to a 14-month low as word of the report spread before recouping some of its losses after the author, Zhou Hai, told Reuters he was only expressing a personal opinion.

China bought a record 64.55 million tons of iron ore in September, up 30 percent from August; imports of copper rose 23 percent. China's September coal imports increase 7% from August.

Nouriel Roubini: " In my view, rising commodity prices are not justified by the fundamentals.

There’s a huge bubble, because we have zero rates in the U.S. , zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before. t’s going to go crashing down, in an ugly way. That’s the basics of the argument."

Telecommunications services provider FairPoint Communications filed for Chapter 11 bankruptcy protection Monday after agreeing on a deal with key lenders that will help lower its debt by about 62 percent.

FairPoint, based in Charlotte, N.C., owns and operates phone companies in 18 states with a total of 1.65 million lines. Its largest holdings by far are in Maine, New Hampshire and Vermont, where it bought Verizon Communications Inc.'s land lines and Internet network for $2.3 billion in 2008.

Tim Wood: "From a value perspective, history shows that the dividend yield and the P/E will be roughly at par at true bear market bottoms. As an example, I show that the yield on the S&P at the 1932 low was 10.5 with a P/E just under 10. At the 1942 low the yield was 8.71 with a P/E of 7.3. At the 1974 bear market bottom I show the yield on the S&P to have been at 5.9 with a P/E of 7.24. Even at the 1982 low the yield was 6.2 with a P/E of 6.9. At the March 2009 low I show the yield on the S&P to have been at 3.58 with a P/E of 24, which has historically been considered overvalued. At present, I show the yield on the S&P to be 1.99 with a P/E of 144.83. Yes, that is right. The current P/E, based on Generally Accepted Accounting Principle, is one hundred forty four. The historical P/E ratios at the previous lows were also calculated using Generally Accepted Accounting Principles, so these numbers are consistent. If you are seeing any other number showing much lower P/E’s it is because it is a George Orwellian phony bologna calculation. If the S&P were to trade with a GAAP P/E of 20, which has historically been considered overvalued, it would be at 150. If the S&P were to trade with a P/E of 15, which has historically been considered to be fair value, it would trade at 113. My point here is that at the March low the P/E and the yield were no where near par and thus the market did not reach levels in which true secular bear market bottoms are made. Plus, with the spread between the current P/E and the yield at an historic 142, the market is grossly overvalued. This will ultimately be corrected with the Phase II and Phase III declines."

A broad gauge of U.S. national economic activity rose above the level that typifies recessions, the Chicago Federal Reserve reported Monday. The national activity index -- composed of 85 separate indicators -- rose to negative 0.63 over the past three months from negative 0.96 in the three months ending in August. It's the first time the three-month average has been above the negative 0.70 level since early in the recession. For September, the index slipped to negative 0.81 from negative 0.65 in August. In September, production and income indicators were positive for the third straight month, but the other three main categories -- employment, sales and consumption -- remained negative.

Atlanta Fed: “Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing.”

Caterpillar Inc. said Monday it will cut 2,500 jobs, but that it will also bring back 550 employees that had already been laid off by the end of 2010. The company did not specify which locations are affected by the realignment. Caterpillar reiterated its 2009 outlook of $1.10 to $1.30 a share in profit and $32 billion to $33 billion in sales.

China may face an economic slowdown in the middle of next year because the nation’s growth model is unsustainable, said Stephen Roach, chairman of Morgan Stanley Asia. “While the government is ensuring economic growth, we are also concerned about overcapacity in some industries,” Xiong Bilin, deputy director of the National Development and Reform Commission’s industry department, said Oct. 19. The commission is China ’s top economic planning agency.

Earthfiles: "While our sun remains the quietest it's been in a century,
cosmic rays reaching Earth are rising dramatically."

The value of the euro has risen by 79% in nine years since euro hit 0.84 in Oct. 2000.

"A decline in the value of the dollar is necessary in order compensate for the fact that the US economy will remain rather weak, will be a drag on the global economy. China will emerge as the motor replacing the US consumer and, of course, it’s a smaller motor because the Chinese economy is much smaller. So the world economy will have less of a motor, so it will move forward slower than it has in the last 25 years. But China will be the engine driving it forward and the US will be actually a drag that’s being pulled along through a gradual decline in the value of the dollar." - George Soros

The U.S. Standard & Poor’s 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.

Declines are likely because banks will need to sell more shares to raise capital, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloomberg’s Tokyo office. A 40 percent tumble from the S&P 500’s price at the end of last week of 1,079.60 would take the gauge to 647.76, below its March low.

10-year U.S. Treasury yield 3.56%.

The Dow finished at 9,867.96, off 104.22 points, or 1.1%. The S&P 500 shed 12.65 points, or 1.2%, to 1,066.95, and the Nasdaq Composite declined 12.62 points, or 0.6%, to 2,141.85.

Crude oil futures closed lower on Monday as the U.S. dollar rebounded off a 14-month low against the euro and U.S. stocks tumbled. Oil for December delivery fell $1.82, or 2.3%, to $78.68 a barrel after earlier reaching a high of $81.59. The bounce in the U.S. dollar, adding to lingering concerns about ample oil supply, offset a report suggesting the U.S. economy has already emerged from recession. Natural gas fell 27 cents, or 5.7%, to $4.513 per million British thermal units, in line with an earlier loss. Forecasts for warm weather in the Northeast and Midwest weighed on natural gas. November heating oil and gasline futures also fell.

December gold futures Monday fell $13.60, or 1.3%, to $1,042.8 an ounce at the close of floor trading in New York, giving up earlier gains as the U.S. dollar rebounded. December silver fell 63 cents, or 3.5%, to $17.095 an ounce. Copper for December delivery lost 2 cents, or 0.8%, to $3.011 a pound.

Sunday, October 25, 2009

No Credit Check

10/25/09 No Credit Check

In another sign that the commercial real-estate market may be struggling as much as the residential side, Capmark Financial Group Inc., one of the nation's largest commercial lenders, likely will file for bankruptcy this weekend, according to a media report Saturday.

Capmark, formerly GMAC LLC's commercial real-estate arm, recently reported a second-quarter loss of $1.6 billion and signaled it may seek bankruptcy protection. The company will file this weekend, The Wall Street Journal reported in its online edition, citing an unnamed source.

An investor group comprised of KKR & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners bought the company from GMAC in 2006. The group owned about 75% of the company, while GMAC and its employees owned the rest, according to the report, citing data through March 31.

"Stock Market Crisis Over" was the big headline in the October 25, 1929, edition of the New York Daily Investment News. Eighty years later, current headlines proclaim that the recession is over.

"Third-quarter growth is expected to not only turn positive, but to do decisively," wrote Nigel Gault and Brian Bethune, economists for IHS Global Insight. "The deepest and longest recession since the 1930s is over." Artificially low interest rates, the building of inventories after the clunker program, and other non-recurring stimuli do not offset the continuing negative numbers at the ports, in air cargo, at the railroads, and the trucking industry. Taking on trillions of dollars of new debt does not equate with sustainable growth.

In fact, I believe the more growth in GDP for the 3rd quarter, the worse the decline will be in the presnt and the future. No jobs were created. Hours worked declined. House prices declined. Foreclosures rose. The commercial real estate market is falling off a cliff. I strongly recommend the notion that cash is king.

Trade-ins from the Cash for Clunkers program are piling up and auto recyclers are seeking more time to meet the deadline for disposing of all those vehicles. The so-called cash-for-clunkers program offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan boosted sales by about 700,000 vehicles, according to a Transportation Department estimate.

In 2008, consumers loaded $8.7 billion on prepaid cards that carry Visa, MasterCard, American Express and Discover logos and can be used anywhere, up from about $4 billion the year before, according to Mercator Advisory Group, a research firm that focuses on the payments industry. No credit check necessary. Maybe the U.S Treasury and the Fed should purchase prepaid cards. They could never pass a credit check. They can't pay down the principal and the debt continues to rise. When will the creditors forclose?