Saturday, November 21, 2009


11/21/09 Bubbles

Germany joins China in warning the U.S. on market bubbles.

“China is sending ‘strong signals’ that it’s concerned the rally in asset prices may be forming a bubble, according to Morgan Stanley Asia Chairman Stephen Roach. Liu Mingkang, China’s top banking regulator, said Nov. 15 the dollar’s decline and the U.S.’s decision to keep interest rates low have caused ‘huge’ speculation in foreign exchange trading and hurt global asset prices.”

Chief Executive of the Hong Kong Monetary Authority: “These economies could of course raise interest rates to contain inflation and increases in asset prices. But the fear is that once interest rates are raised the carry trade will become even more active, attracting even more fund inflows. Asian economies are therefore facing a dilemma.”

Doug Noland: "To be sure, the Fed has been accommodating Bubbles for many years now. And with each bursting Bubble came policy reflation and only larger Bubbles. The bursting of bigger Bubbles provoked only more aggressive reflations and Bubbles of historic dimensions. The inflationists fatefully disregarded Bubble dynamics earlier this decade when their aggressive post-tech Bubble policy course fomented a much more dangerous Wall Street/mortgage finance Bubble. They are content these days to make a similar mistake.... It is fundamental to Credit Bubble analysis to appreciate that the unfolding reflation is going to be altogether different than previous reflations. As I’ve repeatedly tried to explain, the epicenter of reflationary forces have shifted from the Core (U.S.) to the Periphery (China, Asia, and the “emerging” markets). The dollar and sophisticated Wall Street Credit instruments have been supplanted by non-dollar assets and markets as the inflationary asset class of choice. The underlying U.S. economic structure evolved during - and for – a Credit cycle era comprised of massive ongoing U.S. mortgage Credit expansion, resulting asset inflation, over-consumption and mal-investment. Accordingly, the U.S. economy is today especially poorly positioned for the new global reflationary backdrop....It is my thesis that there is no alternative than a major transformation of the underlying structure of the U.S. economy. In simplest terms, we must produce much more, consume much less and do it with a lot less Credit creation. The objective of current policymaking, however, is to quickly rejuvenate housing and asset prices with the intention of sustaining the legacy economic structure. Zero interest-rate policy is key to this strategy. The objective is to push savers out to the risk asset markets, as well as to transfer returns on savings from the savers to be used instead to recapitalize the banking/financial system. If this reflation is unsuccessful, the household sector will find itself with only greater exposure to risky assets.
No only is the current course of policymaking unjust, I believe it is flawed. The nation’s housing markets will remain rather impervious to low rates, while the household sector is punished with near zero returns on its savings. At the same time, monetary policy will continue to play a major role in dollar devaluation and higher consumer prices for energy and imports. Financial sector profits have already bounced back strongly, but there is little market incentive to direct new finance in a manner that would fund any semblance of economic transformation. The focus remains on financing the old structure. Indeed, I would argue that the current course of policymaking and market interventions only work to delay the unavoidable economic adjustment process."

Magnus Ekervik: "The 10-year bond has formed an almost perfect fractal of the price pattern that appeared before the 2008 crash in bond yields. The market is in the same position now as before the 2008 crash and if the pattern continues to play out bond yields will be cut in half in less than two months. Considering the bearish sentiment on bonds not many investors are prepared for sky rocketing bond prices and crashing yields at the moment, that's why I believe the pattern could be important. If the crash in bond yields materializes the US dollar will go up in a big way. Not many investors are expecting this either....The second chart that deserves attention is the Dow Jones Transportation Average. This index is also forming a replica of the 2008 price structure. The expanding wedge is a very rare pattern. It was seen in many individual stocks just before the 1929 market crash and it was seen in 2008 in Dow Jones Transportation Average moments before prices went into a waterfall decline. It is interesting to see the same pattern forming again at the end of 2009 together with high bullish sentiment on stocks. The pattern is clearer in 2009 probably because this turn is of higher degree than the turn of If the pattern of 2009 plays out in similar fashion as in 2008 the Dow Jones Transportation Average (and probably most other stock indexes) will fall more than 50% in less than one month, starting now.
Sounds impossible? Maybe it is, time will tell."

Commerce Bank of Southwest Florida in Fort Myers, Florida was closed by financial regulators on Friday, becoming the 124th bank to fail in 2009 and the 12th in the state of Florida. However, the holding company, Florida Commerce Bancorp, was not included in the closing of the bank or the resulting receivership. All deposit accounts, excluding certain brokered deposits, have been transferred to Central Bank of Stillwater, Minnesota.

Friday, November 20, 2009

Negative Rates

11/20/09 Negative Rates

Dell, which is battling a slump that's caused it to lose its ranking as the world's No. 2 personal computer maker, reported third-quarter earnings of 23 cents a share excluding one-time items. Last year this time, Dell earned 37 cents a share.

Sales for the most recent quarter fell to $12.9 billion, compared with $15.16 billion last year.

Rates turned negative on some bills maturing in January, according to Sarah Sobeck, a Treasury trader at primary dealer Jefferies & Co. The three-month bill rate was at 0.0051 percent, the least this year. Six-month bill rates dropped to the lowest since 1958. Treasury bills turned negative last December for the first time since the government began selling them in 1929 as investors scrambled to preserve principal and were willing to sacrifice returns in the months following the collapse of Lehman Brothers Holdings Inc.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the “systemic risk” of new asset bubbles is rising with the Fed keeping interest rates at record lows.

Treasury prices rallied again on Friday, sending yields on 2-year notes to the lowest this year, as investors step away from riskier assets to lock in profits as 2009 winds down amid increasing concerns that the U.S. economy won't rebound from the recession as quickly or strongly as markets had accounted for. Yields on 2-year notes, which move inversely to prices, fell 3 basis points to 0.68%.

Randall W. Forsyth: "What a two-year yield of 0.70% (where the note ended Thursday) means is that the market believes short-term rates won't rise much for a long time. The 12-month Treasury rate is just 0.25%, so the market implicitly expects the 12-month rate a year hence would be 1.15%, all else being equal. (The sum of 0.25% and 1.15% averages out to 0.70% over two years.)....What's incongruous is the confluence of miniscule short-term Treasury yields with the stock market sitting at its highest perch in the past 13-plus months. If the recovery and the bull market are for real, who would settle for such niggardly note yields? Especially if the Treasury is about to auction another $118 billion of notes next week?

Part of the reason relates to diminishing expectations of the Federal Reserve to raise interest rates any time soon. In a speech Wednesday, St. Louis Fed President James Bullard pointed out that the federal-funds rate target typically isn't raised for 2 ½-to-three years after the end of a recession....One in 10 mortgage borrowers were at least one payment behind schedule in the third quarter, according to the latest numbers released Thursday by the Mortgage Bankers Association. Add in the nearly 4.5% of mortgage borrowers who are actually in foreclosure and you find that one in seven American homeowners with mortgages are in serious trouble.

Given this level of debt distress, the likelihood of the Fed raising rates dwindles to insignificance until well into 2010 and perhaps beyond.

And this may be like the proverbial butterfly flapping its wings on the other side of the globe, but the opposition Labour Party in New Zealand this week withdrew its support for its central bank's policy of targeting inflation as its touchstone....that means the Fed will likely maintain a rock-bottom fed-funds target as long as the debt deflation exemplified by mortgage delinquencies foreclosures persists. That's the message of the two-year Treasury note. And it isn't a bullish one."

More than 14 percent of borrowers were in trouble on their mortgage during the third quarter, a new record, according to an industry survey released Thursday, which also suggests that the foreclosure rate is likely not to peak until next year as unemployment rates continue to rise.

Unemployment remains a big driver of the problem, according to the Mortgage Bankers Association, which conducts the survey. Those with delinquent loans now include a growing portion of people traditionally considered creditworthy and people whose mortgages are insured by the Federal Housing Administration.

"The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve," said Jay Brinkmann, the group's chief economist.

According to Bloomberg, Asian policy makers are studying capital controls to limit “hot money” inflows that may stoke asset bubbles and force their currencies to appreciate.

Officials from India, South Korea and Indonesia are among those expressing concern over overseas capital stoking stock and real estate prices. Indonesia’s central bank is “seriously” studying a limit on inflows to short-term bills, Senior Deputy Governor Darmin Nasution said yesterday. Taiwan last week banned international investors from placing funds in time deposits.

Global commodity demand will have a steady recovery in the first half next year, with China leading consumption, according to Macquarie Securities Group.

China, the world’s largest consumer of metals, accounted for about 50 percent of global commodity demand this year, up from about a third a year ago, analyst Jim Lennon said today at a conference in Hong Kong. Oil prices may reach $80 a barrel next year, oil economist Jan Stuart said at the same conference.

Bay Area home prices rose nearly 7 percent last month from September as foreclosures comprised a smaller percentage of sales and the higher-end market saw a modest increase in activity.

Analysts caution that while the numbers may show the housing market moving toward a more traditional model - with fewer distressed properties and bargain-basement buyers - they must be taken in the context of historic price declines.

The median price paid for all new and resale houses and condos rose to $390,000, up 6.8 percent in October from $365,000 in September, according to numbers crunched by MDA DataQuick, a San Diego real estate research firm.

The prices were up 4 percent from $375,000 in October 2008 and represented the first year-over-year gains in nearly two years.

However, last month's median price was still 41.4 percent below the $665,000 peak in June and July 2007.

"The median number is bouncing around a little bit because the pendulum is still swinging back to normal territory from a very unusual market where there have been abnormally high levels of distressed properties," said DataQuick analyst Andrew LePage.

Foreclosure resales made up 31.9 percent of all October resale activity in the nine-county Bay Area, according to DataQuick numbers. That was down from 32.3 percent in September and 44 percent in October 2008. Foreclosure resales peaked at 52 percent of Bay Area resales in February.

Higher-end counties, including Marin, San Francisco, Santa Clara and San Mateo, comprised 42.2 percent of October sales, up from 35.3 percent a year ago.

Consumers can send up to $200 anywhere in the U.S., or internationally, at a Wal-Mart MoneyCenter or customer service desk for $7. (It used to cost $11.) The transaction can be completed without a bank account or credit card, and Wal-Mart says funds are available in 10 minutes.

To send $200 from Los Angeles to Mexico, Western Union charges $14.99 for an immediate transfer and $9.99 for a next-day transfer, according to the company's website.

Valero Energy said it's shutting down its refinery in Delaware City, Del. in a move that will eliminate 550 jobs.

D.R. Horton Inc , the No. 2 U.S. homebuilder, reported a narrower fourth-quarter loss but missed analysts' expectations, sending its shares down almost 7 percent in premarket trading.

ZeroHedge: "Are the dominoes about to start falling? From Morgan Stanley's London desk:

Ukrainian Railway defaulted on a Barclays bond. They have another, government guaranteed obligation with DB. If DB accelerates the payment & IF it is then not paid, it will count as a government default."

David Rosenberg: “Money supply will increase, but money velocity will not. We are getting asked repeatedly these days how it is that the government debt creation we are about to see is not going to be inflationary. After all, aren’t we going to see a boom in the money supply? Well, we’re sure that the money supply is going to increase, but at the same time, we are going to see the turnover rate of that money, or what is called money velocity, decline.”

Ilya Spivak: "With the unemployment level set to continue climbing well into next year, there is little reason to expect shell-shocked Americans to resume borrowing in earnest any time soon. This suggests that the fear of runaway inflation that has fueled the breakneck rise in gold has been more than a little overstated and hints that a meaningful correction is likely in the months ahead as disappointing CPI figures undermine the premise behind current bullish momentum."

According to AMG Data, for the week ending Nov. 18, Equity Fund Inflows $2.8 Bil; Taxable Bond Fund Inflows $4.5 Bil
xETFs - Equity Fund Inflows $450 Mil; Taxable Bond Fund Inflows $3.8 Bil

San Francisco Mayor Gavin Newsom Thursday asked the heads of all city departments to trim their budgets by 20 percent, and prepare to cut an additional 10 percent, after his office projected a $522.2 million general fund deficit for the coming fiscal year.

The Dow Jones industrials were off a modest 14 points to 10,318. The Standard & Poor's 500 Index was down 4 points to 1,091, and the Nasdaq Composite Index was off 11 points to 2,146.

Thursday, November 19, 2009

More Layoffs

11/19/09 More Layoffs

The Federal Housing Administration, the agency that insures home purchases made with down payments as small as 3.5 percent, may create another lending crisis, Toll Brothers Inc. Chief Executive Officer Robert Toll said.

“Yesterday’s subprime is today’s FHA,” Toll said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” Toll Brothers is largest U.S. luxury homes builder.

The FHA’s insurance reserve ratio fell to 0.53 percent, the lowest level in history, and more steps are needed to shore up the agency that guarantees one of every five single family loans, Housing and Urban Development Secretary Shaun Donovan said Nov. 12.
While the insurance fund’s capital ratio is at an all-time low, Donovan said those who say FHA is the next subprime- mortgage crisis are “dead wrong.”

AOL Inc. said Thursday that it has told workers of a proposed restructuring plan that may include cutting about a third of its staff, according to a filing with the Securities and Exchange Commission. The Internet unit of Time Warner Inc. is slated to be spun off Dec. 9.

Sweden's central bank on Thursday announced the cancellation of an auction of loans in U.S. dollars scheduled for Dec. 8, citing a lack of demand for its recent dollar auctions. The facility for providing dollar loans, which was established in Oct. 2008, will be terminated, the Riksbank said. Financial market conditions have improved over the last six months, the bank said. "Access to credits in U.S. dollars has increased at the same time as the cost of these has decreased. This has contributed towards decreased interest in the Riksbank's U.S. dollar loans," the bank said. The Riksbank, however, said it was prepared to establish a new credit facility in dollars if needed.

Recovery still too timid to halt rising unemployment, says OECD Economic Outlook.

According to the National Retail Federation's

most recent survey found that on average, holiday shoppers plan to spend $139.91 on gift cards this year, a 5% drop from $147.33 last year. Total spending on gift cards is expected to reach $23.63 billion.

In another sign of the times, recipients can expect gift cards with lower monetary values. The average value per card this year will be $39.80, down from $40.54 last year, according to the survey, which polled 8,692 consumers from Nov. 3 to 10.

Daily Reckoning: " This year, “almost 47% of households in the US currently have zero or negative federal tax liability,” according to Mint. For a nation struggling financially that’s a mighty large group to exempt from pitching in. Still, that leaves another 53 percent of households to pick up the slack… or so one would think.

In actuality, that’s not how the tax cookie crumbles. Mint has put together a graphic showing that 5 percent of taxpayers are paying about 60.6 percent of all taxes. And, as lopsided as that already sounds, the tax situation is likely to get even worse as the nation continues to bury itself in debt."

Contrarian Questions: How many bearish on gold? How many bullish on the dollar and natural gas? How many believe interest rates in the U.S. will remain at record low levels? How many believe the U.S. government is too big to fail? How many believe Social Security and Medicare are safe for the next 5 years? How many believe the government can pay back the principal on the national debt?

C. Wright Mills: "Freedom is not merely the opportunity to do as one pleases; neither is it merely the opportunity to choose between set alternatives. Freedom is, first of all, the chance to formulate the available choices, to argue over them -- and then, the opportunity to choose."

In the can you believe this shit category? The Federal Reserve's lender of last resort authority would be limited to $4 trillion, according to a provision approved by a key congressional committee on Thursday. "It's good to tell the American people that while the lenders of last resort's authority is enormous it is limited," said Rep. Brad Sherman, D-Calif., the measure's sponsor.

Maybe castration is a viable alternative for Sherman.

The Philly Fed index improved to 16.7 from 11.5. The new orders improved to 14.8 and the shipments indexes rose to 15.7. The employment index increased to negative 0.5%, showing continued, but smaller job losses.

Job losses caused more Americans to fall behind on their mortgage payments in the third quarter, leading to a record 14.41% of loans in foreclosure or with at least one payment past due, the Mortgage Bankers Association's chief economist said on Thursday. The delinquency rate for mortgage loans on one- to four-unit residential properties rose to a seasonally adjusted 9.64% of all loans outstanding at the end of the third quarter, up from 9.24% in the second quarter and 6.99% a year ago, according to the MBA's quarterly delinquency survey. The delinquency rate includes loans at least one payment past due but not yet in foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 4.47%, up from 4.3% in the second quarter and 2.97% a year ago. Both delinquencies and foreclosures hit their highest levels in the history of the survey.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the “systemic risk” of new asset bubbles is rising with the Federal Reserve keeping interest rates at record lows.

“The Fed is trying to reflate the U.S. economy,” Gross wrote in his December investment outlook posted on the company’s Website today. “The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher- risk bonds or stocks.”

U.S. natural gas inventories rose 20 billion cubic feet in the week ended Nov. 13, the Energy Information Administration reported Thursday. That's largely in line with analysts' expectations. At 3,833 billion cubic feet, stocks were 347 billion cubic feet higher than last year at this time and 419 billion cubic feet above the five-year average. After the data, December natural gas futures lost 1% to $4.211 per million British thermal units.

Two bankruptcy reorganizations and the mass closing of stores and warehouses during the past decade could not save the parent company of the P&C Foods supermarkets chain.

Syracuse-based The Penn Traffic Co. has filed for bankruptcy for the third time in 10 years. This time, it plans to sell all or most of its assets, consisting mainly of 79 supermarkets in four states, by Jan. 10.

Penn Traffic made the announcement Wednesday afternoon, days after troubling flares were sent up to investors and customers in the form of missed loan payments and empty store shelves. The company made the filing in federal bankruptcy court in Wilmington, Del.

Penn Traffic plans to continue to operate its stores under court protection from its creditors while it seeks a buyer. It might already have a buyer in mind, considering it has locked in a date. “We intend to continue to work closely with our vendor partners to provide the fresh products and good value that our customers have come to expect from our stores,” said Gregory J. Young, Penn Traffic’s president and chief executive officer.

Microsoft Corp.said it sold twice as many copies of Windows 7 than previous versions of its operating system during the same time frame, the Wall Street Journal reported Thursday in its online edition. Windows 7, the latest version of Microsoft's operating system, has received favorable reviews and is considered to be better than its predecessor, Vista.

Applied Materials. plans to cut about 10-12 percent of its workforce.The company plans to cut 1,300 to 1,500 positions worldwide in the next 18 months and streamline its supply chain.

New Era Cap Co. plans to sharply reduce its manufacturing operations in the United States and will decide whether to keep or close its plant in Derby, sources familiar with the situation said.

New Era will cut its number of U.S. manufacturing plants from three to one, and will close one of its distribution centers, sources said.

When contacted for comment, New Era released a statment saying it will shut a production plant in Jackson, Ala., likely in the first quarter of next year.

New Era said it would meet with representatives of the Communications Workers of America to determine which one of its two other U.S. plants, in Derby and Demopolis, Ala., it will keep open. The one selected for closing is projected to be shut down in the second quarter of next year.

The Derby production plant has about 300 employees, including some now on layoff.

New Era also plans to close a distribution center in Mobile, Ala., in the second quarter of 2010.

"This is a very difficult decision for us but in the face of significantly reduced consumer demand, we feel we have no option but to restructure our manufacturing operations," the company said in its statement. "There is simply not enough consumer demand to support three manufacturing plants in the U.S."
New Era was founded locally in 1920. In 2006, it shifted its corporate headquarters to downtown Buffalo, into a site that also houses its flagship retail store.

The Dow Jones Industrial Average lost 93.87 points, or 0.9%, at 10,332.44. The S&P 500 Index dropped 14.9 points, or 1.3%, at 1,094.90, while the tech-laden Nasdaq Composite Index declined 36.32 points, or 1.7%, at 2,156.82.

A key congressional committee approved legislation on Thursday that would allow for government audits of Federal Reserve monetary policy as well as how much the central bank has lent and will lend to specific banks in response to the financial crisis, despite major opposition from the central bank. The measure, introduced by Rep. Ron Paul, R-Texas, has the support of 309 members of Congress. Better late than never!

Wednesday, November 18, 2009

Home Construction

11/18/09 Home Construction

The number of homes under construction last month fell 3.4 percent to 560,000, the lowest on records dating to 1970.
New construction of U.S. houses fell sharply in October to the lowest level in six months, the Commerce Department estimated Wednesday. Starts fell 10.6% in October to a seasonally adjusted 529,000 annualized units weaker than the 590,000 pace expected by economists surveyed by MarketWatch. This is the lowest level since April. Starts of new single-family homes fell by 6.8% to 476,000 in October, while starts of large apartment units fell 34.6% to 53,000. Building permits, a leading indicator of housing construction, fell 4% to a seasonally adjusted annual rate of 552,000. This is the lowest level of permits since May. That compared to analysts' forecasts for 580,000 units. Compared to the same period a year-ago, building permits fell 24.3 percent.

The inventory of total houses under construction dropped to a record low 560,000 units last month, the department said, while the total number of permits authorized but not yet started tumbled to an all-time low of 93,900 units.

Real average hourly earnings fell 0.1 percent from September to October 2009.

U.S. consumer prices rose a seasonally adjusted 0.3% in October as energy prices increased for the fifth time in six months to offset another rare decline in rents, the Labor Department reported. The consumer price index has fallen 0.2% in the past year. The core CPI - which excludes food and energy prices - rose 0.2% in October, led by higher prices for cars and trucks, due in part to the unwinding of the government's cash-for-clunkers deal. New car prices rose 1.6%, the most in 28 years. Used car prices increased 3.4%. The core CPI is up 1.7% in the past year.

Stocks are overvalued and the US economy is likely to fall back into a recession next year, well-known analyst Meredith Whitney told CNBC.

"I haven't been this bearish in a year," she said in a live interview.

Sol Palha: "Right now we have an extreme development in the natural gas market; natural gas prices have dropped to a multi year low and the oil to natural gas ratio and Gold to natural gas ratio are both trading in the extreme ranges. History illustrates that all extreme moves nearly always produce counter moves in the opposite direction which are just as strong if not stronger....The Oil to the natural gas ratio is now currently at 26 after spiking as high as 29.

The gold to the natural gas ratio is also at an extreme inflection point; we also have multiple trend lines in place here. For the past 3 years, the ratio has traded between the 220-260 ranges so this massive spike up to 400 is definitely a move into the extreme....We are in no way stating that Gold is not a good investment, what we are simply stating is that right now Natural gas could make for a better investment for those seeking a higher rate of return. In May 2008, we stated Gold made for a far better investment than oil when everyone was busy proclaiming oil was going to surge to the 160-200 ranges. We are in the midst of a commodity boom and thus at certain points in time certain commodities will provide a better rate of return than others and that's the point we are trying to make....if we adjust these prices for inflation, natural gas is almost being given away for free. From a long term perspective such extreme developments never last and there is always a turn around. Individuals simply want things to turn around over night and thus in most cases miss the opportunity because they cannot take the pain that goes with waiting. Patience always rewards handsomely, while haste always leads to waste.

Natural gas mounted a very strong short term move up, and so it would be normal for it consolidate and trade sideways before building up energy for the upward phase. From a long term perspective natural gas might have finally put in a multi decade bottom. Its one of the few hard assets that has virtually done nothing in the past 10 years and as such this is a very huge anomaly given that the dollar has shed almost 40% from its 2001 highs."

President Barack Obama’s approval rating has fallen below 50 percent for the first time in polling by Quinnipiac University as U.S. voter discontent grows over the war in Afghanistan.

Obama’s job approval rating fell to 48 percent in the Nov. 9-16 survey of registered voters nationwide by the Hamden, Connecticut-based university, with 42 percent polled saying they disapproved of the job he is doing.

“In politics, symbols matter, and this is not a good symbol for the White House,” Peter Brown, assistant director of the Quinnipiac University Polling Institute, said in a statement.

Improper payments by the U.S. government to people, firms and contractors rose sharply to $98 billion in fiscal 2009 and President Barack Obama plans new rules to clamp down, the White House said Tuesday.

Daily Reckoning: " Here’s a new abbreviation to add to our crisis vernacular: FAS 167

That’s short for Federal Accounting Standards revision 167, effective Jan. 1, 2010. In essence, it’s a new accounting rule that will force financials to bring bad, off-balance sheet assets onto their books… thus a potential trigger for more Wall Street carnage.

“FAS 167 will be a larger and larger issue for the financial markets in the coming months,” explains Dan Amoss, our resident CFA, “and an emerging story in the financial media.

“In short, the banks with large off-balance sheet variable interest rate entity exposures will have to hold more capital against these exposures. So they’re actively going to shrink the potential size of these VIEs, which are used to house things like credit card receivables.

“This coming consolidation of VIEs is likely one reason that banks have been hoarding cash and jacking rates on business credit cards — for creditworthy customers — up to 30% with no advance warning.

“This ultimately means slower formation of new credit, and in many cases — i.e., Citigroup — the outright shrinking of its balance sheet to a degree that starves a credit-addicted U.S. economy.”

Over half the mistakes were made in the Medicare and Medicaid programs, and although some of the deterioration reflected stricter measurement, it also showed the need for healthcare reform, Office of Management and Budget Director Peter Orszag told reporters.

Serious mortgage delinquencies are still rising in the nation – and have jumped above 10% in California, according to a report today from TransUnion.

Economic Disconnect: "Sad Times for the Silverdome
In an example of what happens with monster government run spending projects, the Pontiac Silverdome in Detroit today was sold at auction for $583,000. I did not miss a zero, I swear!:
Silverdome sale price disappoints
Pontiac officials wanted more than $583K for stadium
The Silverdome consumed $55 million dollars to build, and it sells for quite the discount."

Crude supplies dropped by 4.37 million barrels during the week ended Nov. 13, the API said late Tuesday. Analysts polled by Platts expected a rise of 1.2 million barrels.

U.S. crude oil production for October averaged 5.36 million barrels per day, standing at the highest level since 2005, the American Petroleum Institute reported Wednesday. "The October production figures continue to detail the industry's success story in the Gulf of Mexico, particularly the deep waters, as well as the way new technologies have helped bring on new production both offshore and onshore," said API Statistics Manager Ron Planting in a statement.

Crude inventories fell 900,000 barrels in the week ended Nov. 13, the Energy Information Administration reported. Analysts polled by Platts had expected a rise of 1.2 million barrels. Crude imports fell 0.9% to 8.58 million barrels a day, and total petroleum demand rose 1% to 18.5 million barrels a day, the EIA data showed. The data also showed a decline of 1.7 million barrels in gasoline stockpiles and a drop of 300,000 barrels in distillates, which include heating oil and diesel. After the data, December crude rose 1.2% to $80.14 a barrel.

Autodesk said its earnings and revenue both fell from the same period a year ago, and the company also gave a fourth-quarter outlook that could miss analysts' current sales forecasts.

Gold futures up $1.80 to end at $1,141.20 an ounce.

The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, hit another 2009 high on Wednesday helped by strong cargo demand.

The index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, rose 5.98 percent or 262 points to 4,643 points, exceeding the previous 2009 peak set on Tuesday and was at its highest since Sept. 23 last year.According to Reuters, Buoyant Chinese demand for iron ore and coal, growing port congestion in China and Australia and tight ship availability have helped drive a rally in recent sessions.

California's top fiscal analyst now thinks the state's gaping budget deficit will expand to nearly $21B next fiscal year, now that several provisions in this summer's plan are falling short on revenue projections.

Aetna said late Wednesday that it is cutting about 625 positions, or roughly 1.75% of its total workforce, and warned that it expects additional cuts in the future.

The Dow Jones Industrial Average lost 11 points, or 0.1%, to end at 10,426.The S&P 500 index fell 0.5 points to 1,109.80. The Nasdaq Composite fell 6 points, or 0.3%, at 2,197.

Tuesday, November 17, 2009

U.S. Debt

11/17/09 U.S. Debt

Our national debt now exceeds $12 trillion.

For the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That's up 58 percent from 3.96 percent a year ago.

U.S. wholesale prices rose a seasonally adjusted 0.3% on higher food and energy costs, the Labor Department reported Tuesday. Excluding volatile food and energy goods, the core producer price index fell 0.6%, the biggest decline in three years. Falling prices for light trucks and cars led the way lower. The producer price index has fallen 1.9% in the past year, while the core PPI has risen 0.7%. Inflation at the wholesale level was lower than forecast by economists surveyed by MarketWatch, who looked for a 0.5% increase in the headline PPI and a 0.1% gain in the core.

Home Depot reported fiscal third-quarter earnings fell 8.9% on 8% lower sales. For the quarter ended Nov. 1, net income was $689 million, or 41 cents a share, compared with $756 million, or 45 cents, in the year-earlier quarter. Sales declined to $16.36 billion from $17.78 billion. A survey of analysts by FactSet Research produced consensus estimates of 36 cents of profit on $16.36 billion of sales. Comparable-store sales for the quarter were down 6.9%, reflecting a drop of 7.1% at the U.S. stores. "There is still a great deal of pressure in the housing and home-improvement markets, though there are some positive signs of stabilization," Chairman and Chief Executive Frank Blake said in a statement on Tuesday. Home Depot now expects earnings from continuing operations for the year of $1.50 a share, up 9.5% from a year earlier. The retailer expects adjusted earnings of $1.55, a 13% drop from a year earlier.

Semitool is being acquired by Applied Materials for $11.00 per share in cash.

Target Corp.said Tuesday that its third-quarter profit jumped 18% to $436 million, or 58 cents a share, from $369 million, or 49 cents, a year earlier. Sales rose 1.4% to $14.8 billion while credit-card revenue declined 7.5% to $487 million. Same-store sales dropped 1.6%. Analysts, on average, estimated Target would earn 50 cents a share on sales of $14.8 billion, according to FactSet. For the fourth-quarter, the retailer said it's planning conservatively and remains cautious in light of the current and projected economic environment and expectations for a highly promotional holiday season.

George Ure: " The October figures from the Port of Long Beach: Inbound container traffic is down 22.4% compared with year ago levels when youi look at TEU's (twenty foot [container] equivalents. The good news - such as it is - has to be the export (outbound loaded) for October was down only 10.1%. And the shuffling of empties has slowed, too: Down 37.6%. Containers shipped through the Port of Los Angeles last month increased 10.9 percent compared to September, making October the strongest month yet for the Port this calendar year. Both containerized imports and exports reached their highest levels for 2009, with loaded outbound containers seeing an 11.8 percent rise over October 2008 volumes. Still, loaded inbound containers were 8.3 percent below October 2008 levels. Year to date in 2009, total TEU volume is at 5,606,798.65, 15.4 percent lower than the same 10-month period in 2008. Tracking by the Port’s fiscal year beginning July 2009, container volumes are 15.2 percent lower than 2008.... Oakland was down 6.7% in October and down 11.1% year-to-date. They'd been down YTD 6.4% last year....
Tacoma is reporting foreign container traffic down 19.3% for the month with domestic down 9.3%

The Port of Seattle was up actually up 6% for the month of October, but remains down 11.9% year to date."

"Trade volumes have begun to creep up," said Paul Bingham, managing director of the global commerce and transportation practice for IHS Global Insight. "You are seeing some strengths in the Chinese economy from the positive effects of their stimulus package. They are buying more, and not just raw materials but also finished goods in electronic equipment and automotive equipment."

The output of the nation's factories, mines and utilities rose 0.1% in October, less than expected by economists surveyed by MarketWatch. Capacity utilization -- a gauge of slack in the economy -- rose to 70.7% last month from 70.5% in September.

Net foreign purchases of long-term U.S. securities increased to $40.7 billion in September from $34.2 billion in August. Overall, foreign capital inflows into the U.S. rose to $133.5 billion in September, up sharply from $25.3 billion in August.

Chinese and U.S. regulators are negotiating a pact aimed at encouraging Chinese financial institutions to buy into small and medium-sized banks in the United States, bankers briefed on the plan said on Tuesday.

The latest chain to go the way of the irrelevant is Trans World Entertainment Corp (TWMC), which announced that it would be adding 125 f.y.e (for your entertainment) stores to the 2009 Store Closings list at the end of the holiday shopping season. This is just the latest downsizing move after the retail CD and DVD chain closed 101 stores last year and has operated for 11 consecutive quarters without turning a profit.

A new Panera restaurant has opened just about every five days. In a year when Americans started buying store brand vegetables instead of eating out, Panera added 80 locations to the 2009 Store Openings tally.
A new Edible Arrangements store was being added to the 2009 Store Openings list about once every three days.

The International Monetary Fund announced Monday it has sold two tons of gold to the central bank of the Indian Ocean island of Mauritius for nearly $72 million.
The sale came as gold prices surged Monday to an all-time high of $1,136.72 per ounce.
The sale to Mauritius "was conducted on the basis of market prices prevailing on November 11, 2009 with proceeds equivalent to U.S. 71.7 million dollars," the IMF said in a statement.

The National Association of Home Builders said its sentiment index held steady at 17 in November, but October's index was revised lower to 17 from the 18 previously reported.

Chocolate giant Hershey Co.has been holding executive-level talks with Italian chocolate maker Ferrero on a possible joint bid for Cadbury PLC, the Wall Street Journal reported late Tuesday in its online edition, citing people familiar with the matter. However, the discussions have yet to yield an offer and it is unclear at this point whether they will, the newspaper said. The talks have been in progress for several weeks, with Hershey executives more aggressive about pursuing a deal, the Journal said.

The Dow Jones Industrial Average finished at 10,437.42, up 30.46 points, or 0.3%. The S&P 500 Index added 1.02 points, or 0.1%, to 1,110.32. The Nasdaq Composite rose 5.64 points, or 0.3%, to 2,203.49.

ComScore's latest search rankings have Google and Microsoft gaining, and Yahoo slipping - again. Google grows to 65.4% from 64.9%; Bing goes to 9.9% from 9.4%; and Yahoo slips to 18% from 18.8%.

Steve Keen: "US Debt to GDP before the Great Depression: 170%

Current US debt to GDP: 300%

So the only way the roughly US$1 trillion of money that the Federal Reserve has injected into the banks will result in additional spending is if American families and businesses take out another US$8-10 trillion in loans....I’ve recently developed a genuinely monetary, credit-driven model of the economy, and one of its first insights is that Obama has been sold a pup on the right way to stimulate the economy: he would have got far more bang for his buck by giving the stimulus to the debtors rather than the creditors."

Monday, November 16, 2009

Significant Weaknesses

11/16/09 Significant Weaknesses

Fiorello LaGuardia: "An industry that cannot pay its workers a decent living wage has no right to exist. You cannot preach self-government and liberty to people in a starving land.

Only a well-fed, well-housed, well-schooled people can enjoy the blessings of liberty."

A Federal Reserve official said on Monday that the U.S. economy still faced "significant weaknesses" and urged policymakers to allow large financial institutions to fail if needed.

"We still have significant weaknesses to work through in the economy in the U.S. and coupled with a rapidly rising level ... (of) debt and enormous moral hazard issues, we have a great deal of work ahead of us," said Kansas City Fed President Thomas Hoenig.

Champion Enterprises Inc said Sunday it and its domestic operating subsidiaries have filed petitions for reorganization under Chapter 11 bankruptcy. Champion also said it has obtained a $40 million debtor-in-possession credit facility from some of its current lenders that will be available to fund post-petition operating expenses and to ensure that it meets obligations to employees, customers, and trade partners. The firm, which makes factory-built housing, said it made the move "to improve its capital structure and further strengthen its competitive position." The filing won't include Champion's operations in the U.K. and Canada.

U.S. retail sales rose 1.4% in October, more than analysts expected. A large downward revision to September's sales offset the upside surprise. Sales of durable goods, other than autos, were weak. Separately, manufacturing activity in the New York area expanded at a slower pace in November, the New York Federal Reserve Bank said Monday. The bank's Empire State Manufacturing index fell to 23.5 in November from 34.6 in October.
The August to September 2009 percent change was revised from -1.5 percent (±0.5%) to -2.3 percent (±0.3%).

Capital One Financial Corp.said the annualized net charge-off rate at its U.S. credit card business fell to 9.04% in October from 9.77% in the previous month. However, accounts that are at least 30 days delinquent rose to 5.72% from 5.38%, the company said in a regulatory filing.

Lowe's Cos Inc , the second-largest U.S. home improvement chain, posted a 30 percent drop in quarterly profit as consumers put off big renovations as the U.S. housing market remains sluggish, sending shares down 2.1 percent in premarket trading.

Rob Hanna: "Notable about Friday’s action was that volume was again light on the rally. This has often led to a short-term pullback in the past."

George Ure: "The only paper that I put my full faith in (since it hasn't been diluted over time) is Charmin."

Guy Lerner: "After 15 weeks of being neutral, the "smart money" indicator has turned towards a more bearish reading. The "dumb money" indicator remains in the extreme bullish zone. While not there yet, the indicators are heading in the direction that one would expect to see at a market top."

In an interview over the weekend, Sony CEO Howard Stringer said the consumer electronics industry continues to languish and that "we are waiting for a signal that hasn't arrived." Stringer noted a stronger yen and tougher competition from Korea and China had hurt the Japanese market, while in the U.S. he warned the recovery "will be neither a V nor a W, but an L."

Businesses slashed inventories for a 13th consecutive month in September although the pace of reductions slowed from the previous month. The economic rebound is expected to remain tentative until businesses switch to rebuilding their stockpiles.

The Commerce Department said Monday that businesses reduced inventories 0.4 percent in September. That's slightly better than the 0.7 percent drop economists expected and much improved from a 1.6 percent decline in August.

Sales also fell 0.3 percent in September, the first setback since May.

The Federal Reserve is proposing limits on fees and expiration dates on retail gift cards, the Fed announced Monday. The rules would limit fees for not using the card and would require that gift cards expire no earlier than five years. "The rules would protect consumers from certain unexpected costs and would require that gift card terms and conditions be clearly stated," the Fed said. The proposed rules come after the Fed came under fire for not doing more to protect consumers during the credit bubble.

More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.

Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department's inspector general for tax administration.

A new survey from shows that even in those markets where investor competition has returned and prices on the low end are beginning to stabilize, homeowners still owe far more on their mortgages than their homes are currently worth.

Las Vegas leads the way with 81.8 percent of borrowers underwater on their loans in the third quarter of this year, down barely one percent from the second quarter but still up 10 percent from the first quarter.

The bulk of underwater borrowers are in California, Florida, Arizona and Nevada. While home prices nationwide were down 8.5 percent in September from a year ago, prices in these states are still way down -- 34 percent in Las Vegas, 26 percent in Orlando, 23 percent in Phoenix and 11 percent in Los Angeles (National Association of Realtors). Again, that's from a year ago, but many of these cities have seen over 50 percent price declines from the peak of the market.

John Hussman: "The big picture is this. There is most probably a second wave of mortgage defaults in the immediate future as a result of Alt-A and Option-ARM resets. Yet our capacity to deal with these losses has already been strained by the first round that largely ended in March.....Since June of this year, outstanding bank credit (loans and leases) has plunged at the steepest rate observed in the available post-war history, while at the same time, bank cash reserves have soared (Prieur du Plessis offers a good overview here). This surge in reserves is a mirror image of the Fed's balance sheet, which has taken on over a trillion dollars in new assets – primarily mortgage backed securities. The problem here is that the underlying quality of agency paper continues to deteriorate, which means that Fannie Mae, Freddie Mac and other agencies will likely sustain major additional losses – eventually footed by the public – because they accepted a negligible fee from mortgage lenders in return for slapping the government's Good Housekeeping Seal of Approval on these garbage loans."

European shares advanced for a fourth consecutive session to hit a 13-month closing high on Monday, boosted by commodity stocks, which tracked stronger crude and metal prices.

Mae West: "When it comes to finances, remember that there are no withholding taxes on the wages of sin."

With the Dollar Index down 0.6% and back near 52-week lows, the CRB Commodity Index has advanced 2.8% this session. That's the best single-session percentage move since September, thanks to broad-based buying among commodities.

Gold shined as the price of the yellow metal made its way to a new record high of $1143.40 per ounce before it settled with a gain of 2.0% at $1139.20 per ounce. Silver was also stellar; it settled at $18.41 per ounce,up 5.9%.

Oil prices were up sharply, too. Crude contracts closed pit trade with oil priced 3.4% higher at $78.94 per barrel. Meanwhile, natural gas prices were pushed 5.0% higher to $4.61 each.

Goldman Sachs Group Inc. sold 158 condominiums in a foreclosed project outside Miami for about $113,000 each, roughly one-third the cost of land and construction.

The Dow Jones Industrial Average rallied 139.49 points, or 1.3%, to end at 10,406.96, its highest close since Oct. 2, 2008, according to FactSet Research. The S&P 500 index gained 15.82 points, or 1.5%, to 1,109.30, marking its first close above the key 1,100 level since October of last year. The Nasdaq Composite rose 29.97 points, or 1.4%, to 2,197.85, its highest close since Sept. 19, 2008.

Sunday, November 15, 2009

Asia Paciifc

11/15/09 Asia Pacific

Bloomberg: "Asia-Pacific leaders agreed to fight protectionism while refraining from mentioning currency distortions that contribute to such actions, backing China’s stance as critics increase calls for the yuan to strengthen.

The 21-member Asia-Pacific Economic Cooperation group said “structural reforms” were necessary to unwind global imbalances, without detailing specific changes, according to a statement after leaders including U.S. President Barack Obama and China’s Hu Jintao met in Singapore. They dropped language from an earlier draft on specific cuts in carbon emissions, a decision that resonates with China’s refusal to give targets.

The meeting concluded hours before Obama travels to China, where he aims to defuse tensions over U.S. duties on Chinese imports. The lack of any APEC commitment to ending currency controls by China, the region’s biggest economy without a floating exchange rate, signals that most of the region won’t join the U.S. in pressing for a stronger yuan.

“China’s got big issues of its own and certainly doesn’t want to move on the currency, and it’s concerned about some protectionist rumblings from the United States,” said Stephen Roach, Morgan Stanley’s Asia Chairman. “The ultimate verdict is that there’s no major breakthrough on any of these large global issues.”

Barry Ritholtz: "Jonathan J. Miller, the president of the appraisal firm Miller Samuel, estimated that two-thirds of the roughly 4,000 apartments for sale in Manhattan are priced too high for the current market."

The decline of the dollar and decisions in the U.S. not to raise interest rates have caused “huge” speculation in foreign exchange trading and seriously affected global asset prices, said Liu Mingkang, chairman of the China Banking Regulatory Commission.

“The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” he told reporters in Beijing today at the International Finance Forum.

Liu said this has “seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.”

His view echoes that of Donald Tsang, the chief executive of Hong Kong, who said the Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis.

“I’m scared and leaders should look out,” Tsang said in Singapore Nov. 13. “America is doing exactly what Japan did last time,” he said, adding that Japan’s zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown.

A “disconnection” exists between demand for crude oil and the current price, according to Exxon Mobil Corp. Chief Executive Officer Rex Tillerson.

Oil prices aren't reflecting demand fundamentals, just as they didn't when crude rose to a record above $147 a barrel in July 2008, Tillerson said Friday at an energy round table in Singapore as part of the Asia-Pacific Economic Cooperation meeting.

“There is clearly, and has been in my view for some time, somewhat of a disconnection in the fundamentals of supply and demand and the current day market price, and I can't really explain that to you,” Tillerson said.

Tillerson said the price of oil would probably be around $55 a barrel if the dollar hadn't depreciated against the euro during the last 18 months.

“You could say oil is about $20 to $25 a barrel higher simply it's priced in dollars and there's a weak dollar,” he said.

In the face of greatly increased demand for services, providers are likely to charge higher fees or take patients with better-paying private insurance over Medicaid recipients, "exacerbating existing access problems" in that program, according to the report from Richard S. Foster of the Centers for Medicare and Medicaid Services. In its most recent analysis of the House bill, the CBO noted that Medicare spending per beneficiary would have to grow at roughly half the rate it has over the past two decades to meet the measure's savings targets, a dramatic reduction that many budget and health policy experts consider unrealistic.

Because Thanksgiving Day doesn't really count, Friday, Nov. 27, officially begins the rest of Arnold Minicucci's life. It will also be the first day in 90 years — not counting holidays, Sundays or Mondays — that gentlemen from throughout Greater Waterbury, CT will not be able to purchase an article of clothing from a Minicucci. Minicucci, 84, plans to close his venerable men's apparel store for good — either on Wednesday, Nov. 26, or when he sells the last article of clothing in the rapidly emptying Bank Street emporium, whichever come first.

The recession apparently claimed another retail victim as the Target store in the Port Richey, Fla. area will close in January after 18 years in business, company officials announced.

After 42 years in business, the Value Village store in Renton, WA closes today.

SHAKER HEIGHTS, Ohio -- Specialty grocery Chandler & Rudd Co. built its business by catering to affluent customers and surprising them with imported delicacies they couldn't get anywhere else.
But owners Ruta and Fred Marino's reputation for exemplary customer service and incredible attention to detail ultimately couldn't compete with the larger chain supermarkets in an especially brutal recession.

On Nov. 2, after 145 storied years in the food business, the Marinos gathered their seven employees, handed out paychecks and told them it was over.

Courtesy of ZeroHedge: "Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult, including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That’s why it’s essential to remember that “being too far ahead of your time is indistinguishable from being wrong.”) Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian." Howard Marks, Oaktree

Exchange Rates

11/14/09 Exchange Rates failures number 123 in 2009. According to Bloomberg, Iberiabank Corp., the Louisiana- based lender that exited a federal government assistance program this year, purchased two banks as the U.S. economy’s expansion fails to halt financial-firm collapses.
Iberiabank added $2.5 billion in deposits and 34 branches by acquiring Florida-based lenders Orion Bank and Century Bank, the company said in a statement. The southern Florida deals will boost earnings in coming years, Iberiabank said.

Orion and Century “possess very strong deposit market- share positions in five very attractive Florida” areas, Iberiabank Chief Executive Officer Daryl Byrd said yesterday in the statement.

Banks are failing at the fastest pace in 17 years even as the U.S. economy shows signs of pulling out of the recession. The world’s largest economy grew at a 3.5 percent annual pace in the third quarter, the first gain in more than a year, according to the Commerce Department. The number of failed banks reached 179 in 1992.

Puru Saxena: "Over the past six years, American unfunded obligations increased by almost 50% from US$79 trillion to US$114.7 trillion! Alarmingly, over the same period, American government revenue rose by only 12%! Now, you do not have to be a genius to figure out that no entity can continue to increase its liabilities by more than four times the rate of its revenue. If this spending frenzy continues, commonsense dictates that at some point in the future, the solvency of the American government will come into question. When that happens, foreign capital will flee America, interest-rates will sky-rocket and we will witness an epic currency crisis."

John Mauldin: "Sadly, the private sector has shed over 300,000 jobs since 1999. Think about that. We have had a decade where there have been no new jobs added by the private sector. Real incomes are roughly where they were, and the stock market is down. Talk about a lost decade."

The FHA has just $3.6 billion in reserves to back up a $679 billion book.No worries. Obama will make a speech and tell us everything is safe and sound.

Controlling currency levels is a form of protectionism that policy makers must avoid “by all means,” said the incoming chair of the Asia-Pacific Economic Cooperation’s Business Advisory Council.

“Foreign-exchange rates are a crucial factor in global trade, and guiding them to benefit a certain country is protectionism,” said Gempachiro Aihara, who’s also the current co-chair of the APEC business group and counselor to Mitsui & Co. “We want policy makers to reject such policies.”

The United States and China sparred over exchange rates at a meeting of Asia Pacific leaders on Sunday, pointing to tricky talks ahead for President Barack Obama when he flies to China to address economic tensions.

The discord surfaced at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore when a reference to "market-oriented exchange rates" was cut from a communique issued at the end of two days of talks. An APEC delegation official said Washington and Beijing could not agree on the wording.

John Mauldin: "The Liscio Report notes that all states had negative year-over-year sales tax collections in October, and the weighted average decrease was 10.2%, down from a negative 7.2% in September. "According to CBO estimates, only 21% of [the stimulus] spending will occur in 2009; another 38% will come in 2010, and 22% in 2011. After that, its effect will dissipate quickly....."

The Asia-Pacific Economic Cooperation group faces “political” hurdles in its vision to form a region-wide free trade area, Singapore Prime Minister Lee Hsien Loong said.

The 21 APEC economies will step up efforts to achieve their “long-term” goal for the Free Trade Area of the Asia- Pacific, or FTAAP, leaders including China’s Hu Jintao and Japan’s Yukio Hatoyama said in discussions in Singapore today. U.S. President Barack Obama, who arrived in Singapore tonight, will meet his counterparts tomorrow.

“Political conditions need to be right before negotiations for a region-wide FTAAP could be launched,” according to a summary of Lee’s comments as he chaired the two- day gathering today. “There was consensus among the leaders that APEC economies should step up their efforts to realize this vision, by laying the necessary building blocks and exploring possible pathways.”

"Never has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," said Allen Sinai, head of Decision Economics Inc.

The Reuters/University of Michigan consumer confidence index for November, reported Friday, fell to 66.0 from 70.6 last month, the second straight decline. The index has crashed from nearly 100 in January 2007, though it's up from the 19-year low of 55.3 reached one year ago.
One statistic in the confidence survey is particularly telling, said Richard Curtin, the survey's director: A mere one in 10 consumers said their household income had risen in the last 12 months, the lowest reading in the survey's 63-year history.

Mike Burk: "The market appears to be at or near its short term high. The secondaries and breadth indicators did not confirm the recent highs so, if it continues to follow the cyclical pattern of the past several months, a decline for the next week or so is likely.

I expect the major indices to be lower on Friday November 20 than they were on Friday November 13."

Robert Prechter: "As the dollar advances from its lows, things denominated in dollars lose value against the dollar. As long as the dollar remains the global senior currency, assets will depreciate: not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything. Of course, this outlook presumes a deflationary environment and that's been our view for quite some time. But that's another conversation. The topic here is stocks down/gold up - or not.
The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:
"The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets."