Saturday, December 05, 2009


12/5/09 Bubbles

Regulators on Friday shut down Ohio's AmTrust Bank, the fourth-largest bank to fail this year. They also closed five others, bringing to 130 the number of U.S. banks to be brought down so far in 2009 by recession and mountains of bad debt.

The Federal Deposit Insurance Corp. took over AmTrust Bank, based in Cleveland, with about $12 billion in assets and $8 billion in deposits. Its failure is expected to cost the federal deposit insurance fund an estimated $2 billion.

The 3-month T-Bill is yielding .04%. If that is not irrational exuberance what is? You have a top-heavy debt structure of $12+ trillion and unfunded liabilities of at least $60 trillion with no hope of repaying our debts looking out at least 10 years. Reality cannot be seen for miles and miles.

BHP Billiton and Rio Tinto on Saturday signed a $116 billion iron ore joint venture agreement to combine their Western Australian iron ore operations.

The agreement brings together two of the world's three largest iron ore producers, and has upset major customers in China. However, it still faces substantial hurdles, in particular approval by the European Commission, due to concerns about excessive dominance of the iron ore market.

The long-awaited deal was originally outlined in June, but formalized on Saturday in binding agreements signed by both companies just ahead of an agreed deadline.

In a joint statement, the companies said they anticipated completion of the deal in the second half of 2010. The statement did not mention any payment from BHP to Rio Tinto, which has the larger iron ore production, but earlier a figure of $5.8 billion had been proposed.

Under the plan, each company will each end up with 50 percent stakes in the combined Western Australian iron ore assets, but will continue to market the ore separately.

Bloomberg: “Former U.S. Treasury Undersecretary Timothy Adams said financial markets will be unstable next year as nations seek to withdraw emergency policies undertaken during the global recession. My biggest concern is that ‘we are simply creating new bubbles,’ Adams… ‘2010 is a year of volatility, as capital sloshes around the global markets in the search of yield as exit strategies are put in place at different times and at different magnitudes.’”

Even as the nation’s debt increased by $1.15 trillion this year to $6.95 trillion in October, the government’s interest expense under Geithner dropped 15%, the biggest decrease since before 1989.

That's what zero interest rates can do.

Doug Noland: "Dangerously, the Fed adheres steadfastly to its old policy approach - only implementing it more radically. Our central bank balloons its balance sheet with mortgage-backed securities, while pegging interest rates all the way down to zero. Worse yet, the Fed has signaled that the markets can bank on near zero percent for a protracted period. Global dynamics have changed, yet the Fed has locked itself into a precarious policy approach. Dr. Bernanke testifies that U.S. asset prices don’t appear overvalued. Meanwhile, price distortions and Bubble dynamics engulf the world....For months now, I have posited the emergence of a Global Government Finance Bubble. Global Liquidity Excess and Market Perceptions of Implicit Government Backing are, once again, playing an instrumental role in fostering Ponzi Dynamics. The Fed and most observers are seemingly oblivious to Bubble risk here at home. Yet the Treasury and agency markets are the epitome of dangerously distorted Bubble markets. Unprecedented global imbalances, ballooning central bank balance sheets, pegged ultra-low rates, and unwieldy speculative financial flows foment liquidity excesses and market price distortions – especially in the enormous U.S. Treasury and agency markets. At the same time, the markets perceive an Implicit Guarantee: That China, Japan, “emerging” Asia and the Middle East can be counted on to support Treasury prices and ensure dollar weakness doesn’t turn disorderly. Moreover, markets perceive that Federal Reserve rate and monetization policies will continue to underpin U.S. corporate, municipal and household debts....While perhaps not obvious from an asset price perspective, there are unmistakable Bubble and Ponzi Dynamics at work. The entire U.S. financial and economic recovery rests on a flimsy foundation of a highly distorted Treasury and agency market Bubble. I am the first to appreciate that Bubbles notoriously survive longer and grow larger than we Bubble analysts would expect. At the same time, the world has moved up the Bubble analysis learning curve. I find it disconcerting that many that recognize the unfolding Bubble landscape still believe they have plenty of time to profit and then get out before the bust. I also sense the more sophisticated players are following developments with an increasing degree of angst."

Marc Bustin: "Since natural gas prices have taken a major dive, so has the rig count. The rig count is how many rigs are actually drilling. Currently in North America, we're probably at a 35% to 40% usage of the rigs. This is way down, and the implication is important for the gas price.

Low gas prices means, suddenly we're drilling a lot fewer gas wells. No one wants to drill anymore.

Currently, in order to maintain U.S. production, we have to add between 17, 18, 19 Bcf (billion cubic feet) additional gas per day. At the current rate of drilling, we're adding 9 Bcf a day production, so there's obviously a shortfall.

And a shortfall means eventually the price of gas has to start going up.

Right now, there are a huge number of drillable wells - prospects all ready to be drilled. As soon as the natural gas price gets up above a certain level, these wells will suddenly become economic, and people will start developing them.

So it's not like we are going to find new "stuff," we're just going to start producing the "stuff" we already know exists. In my opinion, gas will be $6 or $7 next year. Prices will then soften down to $4 or $5 at the end of next year."

Chevron Corp. and Tokyo Electric Power Co. signed an agreement for the delivery of 4.1 million tons a year of liquefied natural gas for up to 20 years from the Wheatstone natural gas project in Australia. Tokyo Electric may also buy 15 percent of Chevron’s equity share in licenses over Wheatstone, Chevron


Hershey Co., exploring its options for a possible bid for Cadbury Plc, has been in contact with Nestle SA, said two people familiar with the talks. An agreement between Hershey and Nestle may not be reached, and Hershey would prefer to bid alone, said the people, who declined to be identified because the talks are private. Any offer would challenge an unsolicited $10.2 billion-pound ($17 billion) bid from Kraft Foods.

Tim Wood: "Given the still fragile state of the economy, the ongoing credit crisis, continued stream of foreclosures, business failures, bankruptcies, etc., it is far too early to say that the real estate market has made a lasting low. Just as the charts were used to identify the top, they can be used to identify the bottom, and at this time we do not, in my opinion, have sufficient data to say that housing has bottomed and with the fundamentals as bleak as they are I would argue that the data there is pretty much the same."

Sen. Jim Bunning's remarks in Bernanke's confirmation hearing:

* “…you put the printing presses into overdrive to fund the government’s spending and hand out cheap money to your masters on Wall Street, which they use to rake in record profits while ordinary Americans and small businesses can’t even get loans for their everyday needs.”

* “…you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.”

* “Because you bowed to pressure from the banks and refused to resolve them or force them to clean up their balance sheets and clean out the management, you have created zombie banks that are only enriching their traders and executives. You are repeating the mistakes of Japan in the 1990s on a much larger scale, while sowing the seeds for the next bubble.”

* “From monetary policy to regulation, consumer protection, transparency, and independence, your time as Fed Chairman has been a failure.”

Business Week: "With funding still scarce, demand down, and temp workers readily available, small companies aren't ready to expand payroll."

Part-time employment dropped in November, and, at the same time, the average duration of unemployment hit a new high.

Venezuela escalated its intervention in the banking sector Friday, with government officials shutting down three small banks following the closure of four others earlier this week.

President Barack Obama has altered his plans to attend the climate change conference in Copenhagen next week in a move many see as an attempt to add momentum to negotiations following renewed pledges by China and India to reduce carbon emissions.
The president was scheduled to attend the international climate summit on Dec. 9, but will attend instead on Dec. 18, the final day of the conference, the White House announced Friday.

Friday, December 04, 2009


12/4/09 Jobs

The U.S. labor market improved markedly in November, with the unemployment rate falling back to 10% and job losses shrinking to the lowest level in nearly two years, the Labor Department reported Friday. Nonfarm payrolls dropped by a seasonally adjusted 11,000 in November, the fewest since December 2007. Payroll losses in September and October were revised lower by a total of 159,000. The report was much better than expected by economists surveyed by MarketWatch, who were looking for 100,000 fewer jobs and a steady 10.2% unemployment rate. Avg. hourly earnings $18.74 vs. $18.72 prior. Overall workweek 33.2 hours vs. 33 prior. In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs. Revisions added 159,000 from payroll figures previously reported for October and September. The October reading was revised to show a 111,000 drop in jobs compared with an initially reported 190,000 decline.
The number of temporary workers increased 52,000 in November, the biggest since October 2004 and the fourth straight rise. Much of that increase could be attributed to holiday hiring for retail. Service industries, which include banks, insurance companies, restaurants and retailers, added 58,000 workers.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- fell to 17.2 percent from 17.5 percent.
30,000 jobs were created by the CES Birth Death model which has 'estimated' 1.179-million jobs into existence since February. If your unemployment benefits ran out, remember you were not counted on
the unemployment roles.
Among the unemployed, the number of job losers and persons who completed temporary jobs fell by 463,000 in November. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The percentage of unemployed persons jobless for 27 weeks or more increased by 2.7 percentage points to 38.3 percent.

ZeroHedge: "The one number consistently forgotten is the exhaustion transfer as more and more jobless no longer qualify for traditional 6 month unemployment insurance (being unemployed for more than half a year will do that to you). Nonetheless, combining the two data series presents a much uglier picture: adding the 3.859 on Emergency Unemployment Compensation to those on current benefits yields a total of 9.3 million who are suckling at Uncle Obama's teat! Furthermore, the series has ticked higher recently even as initial claims have continued declining. The combined number is a mere 175k off the all time high in this cumulative data series of 9.5 million recorded in late July. Additionally, at the market bottom in March the combined number was just under 7 million, meaning that as the market has rallied over 60%, the economy has lost 2.5 million workers! And don't forget that over the past 6 months an additional set of workers has rolled off the even extended EUC insurance benefits, which according to some estimates could be higher than 1 million (cumulatively) over the past 6 months. As this data is lost somewhere in the limbo of U-6, we can only extrapolate what the attached chart would look like if it captured not just those who collect the weekly $400 or so from Zimbabwe Ben, but also those who no longer are eligible. "

Congressman Kucinich: "America is in the fight of its life and that fight is not in Afghanistan -- it's here ... We are deeply in debt. Our GDP is down. Our manufacturing is down. Our savings are down. The value of the dollar is down. Our trade deficit is up. Business failures are up. Bankruptcies are up."

According to AMG Data, for the week ended Dec. 2, Equity Fund Inflows $3 Bil; Taxable Bond Fund Inflows $4.5 Bil
xETFs - Equity Fund Outflows -$659 Mil; Taxable Bond Fund Inflows $3.4 Bil

Kraft Foods posted its offer document to Cadbury shareholders on Friday, triggering a 9.8 billion pound ($16.3 billion) takeover fight for the British chocolate maker. The bid is unchanged from its indicated offer worth 300 pence in cash and 0.2589 new Kraft share for each Cadbury share, according to an advertisement in the Wall Street Journal. U.K.'s business secretary, Peter Mandelson, warns Kraft: "If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population ... and from the British government."

Walter Bagehot: "At particular times a great deal of stupid people have a great deal of stupid money... At intervals, from causes which are not to be the present purpose, the money of these people – the blind capital, as we call it, of the country – is particularly large and craving; it seeks for someone to devour it, and there is a 'plethora'; it finds someone and there is 'speculation'; it is devoured and there is 'panic'."

Don’t look now but the fuel switching from coal to natural gas for electricity generation is starting. According to a recent report by Reuters, electrical plants in the U.K. are increasingly relying on natural gas to generate the base load power instead of coal.

This is obviously being driven by the current surplus of natural gas, which has taken away the arbitrage opportunities and kept prices within a range that makes it economic to use the more environmentally friendly fuel.

China Petroleum & Chemical Corporation (Sinopec) has entered into an agreement to purchase 2 million tons of liquefied natural gas per annum from the Papua New Guinea Liquefied Natural Gas (PNG LNG) Project, operated by Exxon Mobil Corporation subsidiary Esso Highlands Limited, for a period of 20 years, Esso Highlands and Sinopec subsidiary Unipec Asia announced December 3.
The agreement will supply an LNG terminal that will be built by Sinopec in Qingdao, Shandong province, the announcement said. The terminal's capacity is expected to be 3 million tons per annum in its first phase and 5-6 million tons per year in its second phase, said Sinopec Senior Vice President Wang Zhigang.

AT&T and UPS have expressed interest in converting their fleets to CNG, and the Fed-Ex package delivery service reportedly already has natural-gas vehicles in its fleet. “We need to find a way to get from Kansas to Utah driving a natural-gas vehicle,” to attract truckers and other commercial travelers, she declared.
The only consumer-oriented car that rolls off U.S. assembly lines ready to burn natural gas is the Honda CGX. And while production is rising, Swalnick said, it is still relatively limited.

Orders for U.S. factory goods expanded in October for the six month out of the last seven, the Commerce Department reported Friday. Factory orders increased 0.6% in October, above the flat reading expected by economists surveyed by MarketWatch. Analysts had expected a weak report after an advanced report last week that orders for durable-goods decreased 0.6% in October. But the more complete data showed that overall factory orders rose led by 1.6% jump in nondurable-goods orders. Core capital equipment orders fell 3.4% in October, revised down from a 2.9% fall estimated a week ago, the government said. Inventories rose 0.4% in October, the first gain following 13 straight declines.

David Goldman: "A senior executive of one of the world’s largest shipping companies told me recently that there has been no pickup whatever in business, and that shippers continue to lose money hand over fist. The Baltic Dry Index of freighter costs confirms this dour view. If there's a recovery underway, how come no one is shipping anything?"

Abercrombie, Macy’s report drop in business in Nov as discounts failed to persuade shoppers.

Dennis Wholey: "Expecting the world to treat you fairly because you are a good person is a little like expecting the bull not to attack you because you are a vegetarian."

Houston residents are bracing for the earliest snowfall ever today as a storm bears down on Texas and Louisiana, threatening to disrupt travel and holiday shopping.

Canadian employers added more than five times as many jobs as expected in November, led by education, manufacturing and finance, a sign of an accelerating economic recovery.

Employment rose by 79,100 last month, the most in more than a year, Statistics Canada said today in Ottawa. The jobless rate fell to 8.5 percent from October’s 8.6 percent. The median forecast of economists surveyed by Bloomberg was for a 15,000 increase in jobs and an unemployment rate of 8.6 percent.

John Mauldin: "I'm in the double-dip recession camp," says John Mauldin of Millennium Wave Investments, who fears the Obama administration is "going to massively increase taxes…in 2011, in a weak economy. I think that's the absolutely dumbest thing we're going to do as a country."

The Gas Exporting Countries Forum meeting next week will discuss ways of stabilizing natural-gas prices, said Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah.

Natural gas futures for delivery at the Henry Hub in Louisiana have fallen 19 percent this year to $4.566 a million British thermal units on the New York Mercantile Exchange. Prices sank as low as $2.409 in September.

“Limiting the supplies in most of the contracts is impossible because they are long-term contracts,” al-Attiyah told reporters in Cairo today. “But we are going to see and discuss how to stabilize the gas price. Gas should have a premium, it is a clean fuel, it’s a choice fuel.”

European utilities such as E.ON AG and GDF Suez SA buy most of their gas under supply contracts linked to the cost of crude- oil products that are valid for as long as 30 years. The accords have take-or-pay clauses requiring them to take minimal volumes, even when demand drops, or pay a penalty.

On the Comex division of the New York Mercantile Exchange, gold for December delivery fell $48.60 to end at $1,168.80 an ounce. Friday's losses erased gold's weekly gain. The benchmark contract ended the week down 0.5%, falling for the first week in five. The U.S. dollar rose sharply after an upbeat U.S. jobs report.

At one point during the session, stocks rallied briskly, with the Dow, the S&P 500 and the Nasdaq climbing to their highest levels in 15 months. The Dow rose as high as 10,516.70, while the S&P 500 climbed as high as 1,119.13, and the Nasdaq jumped as high as 2,214.39.

Falling commodity prices weighed on natural resource companies, sending the S&P materials index down 1.2 percent and the S&P energy index down 0.8 percent.

The U.S. dollar index , which measures the greenback against a basket of six other major currencies, jumped 1.5 percent on the upbeat jobs data.

In contrast, U.S. crude oil futures fell 99 cents to settle at $75.47 a barrel.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 7 to 3, while on the Nasdaq, about 10 stocks rose for every three that fell.

Two Georgia bank failures brought the U.S. bank failure tally to 126, according to the Federal Deposit Insurance Corporation. Regulators closed the First Security National Bank of Norcross, Ga., and Atlanta's Buckhead Community Bank. State Bank and Trust Co. of Macon, Ga. will assume the deposits of both banks.

Thursday, December 03, 2009


12/3/09 Unemployment

In a sign of improving labor markets, new claims for state unemployment benefits dropped for a fifth straight week, the Labor Department reported Thursday. But a large increase in the number of people collecting checks indicates hiring remained sluggish. The number of Americans filing for state unemployment benefits fell by a seasonally adjusted 5,000 to 457,000 in the week ending Nov. 28. It's the fewest initial claims since September 2008. Claims in the previous week were revised lower by 4,000 to 462,000. Economists surveyed by MarketWatch had expected initial claims to rise to about 480,000. The total number of people claiming benefits rose by 527,000 to 9.61 million, as a new program for extended benefits kicked in.

Comcast and General Electric said that they will form a joint venture that will be 51% owned by Comcast and 49% owned by GE. The joint venture will consist of the NBC Universal businesses and Comcast's cable networks, regional sports networks and certain digital properties and unconsolidated investments. GE will contribute to the joint venture NBCU's businesses valued at $30 billion. Comcast will contribute its cable networks and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments. As part of the deal, GE will acquire Vivendi's (FR:VIV) 20% interest in NBC Universal for $5.8 billion. "This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain," said GE CEO Jeff Immelt.

Costco Wholesale Corp.reported on Thursday that for November, comparable-store sales rose 6% as total sales advanced 9% to $6.04 billion from $5.55 billion in the year-earlier month. A survey of analysts by Thomson Reuters produced a consensus estimate of comparable sales up 8.1%. The comparable-store sales reflected increases of 2% in the U.S. and 21% overseas, Costco said. Gasoline-price inflation helped the current year's sales and hurt the year-earlier numbers. Excluding the effect of gasoline prices and the effect of stronger foreign currency relative to the U.S. dollar, comparable-store sales rose 2%. On this basis, U.S. sales were flat and international sales were up 7%.

Productivity increased 8.1 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 2.5 percent (seasonally adjusted annual rates, revised). In manufacturing, productivity increased 13.4 percent while unit labor costs fell 6.1 percent.

George Ure: "Before you get carried away with productivity, try to remember that if everyone is fired then productivity shoots skyward until there's no one working and productivity reaches 100%."

E-commerce sales grew 5% YoY on Cyber Monday—first Monday after Thanksgiving.

Japan shares jump nearly 4 percent to five-week high on weakening yen.

Elizabeth Warren: "Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.

America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.

America without a strong middle class? Unthinkable, but the once-solid foundation is shaking."

Henry Hub's NG spot prices up 8% 12/02. Up on 12/03 as well

Harley-Davidson Inc. said Thursday it plans to take about $200 million in charges by 2012 to eliminate 950 jobs at its York, Pa. motorcycle operations, but it will keep its presence there. The Milwaukee-based motorcycle brand will cut the work force at the site to 1,000 hourly workers. The move on York comes on top of an earlier restructuring for Harley announced on Oct. 15, including the sale of its Buell brand.

The service sectors of the U.S. economy contracted in November after two months of expansion, the Institute for Supply Management said Thursday. The ISM's non-manufacturing index fell to 48.7% from 50.6% in October. Six of 18 industries were expanding in November, the ISM said. The employment index rose to 41.6% from 41.1%. The new orders index fell to 55.1% from 55.6%. The production index dropped sharply to 49.6% from 55.2%.

Working gas in storage was 3,837 Bcf as of Friday, November 27, 2009, according to EIA estimates. This represents a net increase of 2 Bcf from the previous week. Stocks were 470 Bcf higher than last year at this time and 487 Bcf above the 5-year average of 3,350 Bcf. In the East Region, stocks were 168 Bcf above the 5-year average following net withdrawals of 7 Bcf. Stocks in the Producing Region were 243 Bcf above the 5-year average of 976 Bcf after a net injection of 8 Bcf. Stocks in the West Region were 76 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,837 Bcf, total working gas is above the 5-year historical range.

Freddie Mac said Thursday that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% with an average 0.7 point for the week ending Dec. 3 from 4.78% last week. The new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%.

Paul Ausick: "Due to both the abundance of shale gas and the relative ease with which it can now be extracted, energy companies are looking at replacing coal-fired power plants with natural gas-burning plants. Natural gas emits less than half the carbon dioxide of coal and has the additional benefit of being very easy to start up and shut down."

The Dow Jones Industrial Average ended at 10,366.15, off 86.53 points. The S&P 500 Index fell 9.32 points to 1,099.92, while the Nasdaq Composite declined 11.89 points to 2,173.14.

Wednesday, December 02, 2009

The Consumer

12/2/09 The Consumer

Fitch Ratings on Wednesday said late payments on credit cards rose again in November and are close to setting record highs as consumers continue to struggle to pay off debt in a weak job market. Payments that are late by at least 60 days rose to 4.41% in November. Late-stage delinquencies are 31% higher than a year ago and just below the record high of 4.45% set in June, the ratings agency said. "Credit-card delinquencies are on the rise again and cardholder defaults will retest recent highs as we head into the new year," said Michael Dean, managing director at Fitch. "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets."

The latest ADP Employment Change Report indicated that 169,000 private payrolls were shed in November. Though that figure is down from the 203,000 job losses reported in October, it is worse than the 150,000 job losses that had been widely expected.
Goods-producing jobs fell by 88,000 in November, including 44,000 in manufacturing and 44,000 in construction. Services-producing jobs fell by 81,000.

Randall W. Forsyth: "

Employers announced 50,349 job cuts in November, 9.6% fewer than October’s 55,679, and down 72% from November 2008’s paroxysm of firings that followed the Lehman collapse, Challenger’s data are not seasonally adjusted.

Which mainly proves that after employers slashed workforces to the bone, there’s hardly anybody left to sack.

Consensus forecasts for the official employment report from the Labor Department call for a cut of 100,000 in non-farm payrolls while the jobless rate is expected to remain unchanged at 10.2%....But Trim Tabs’ estimate of based on tax receipts is for a much larger drop of 255,000 in payrolls. These tax data don’t count the phantom jobs assumed by government statisticians resulting from the start-ups of small businesses. Nobody pays phantom taxes on these phantom jobs."

Wells Fargo & Co. will close 122 bank branches in California following its takeover of Wachovia Corp., the Los Angeles Times reported Wednesday, citing comments from the bank. Most of the branches to be closed will be smaller Wachovia offices that are near existing Wells Fargo branches, the newspaper reported.

The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 74.384 in early action. On Tuesday, it fell to 74.328, its lowest level since August 2008.

The Oil Drum: " Peak oil consumption for the US was and remains 21.7 mbpd in August 2005, nearly 3 mbpd above current levels."

Gold hit record highs at $1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices, with funds lengthening positions due to expectations for a fresh leg of dollar weakness and more central bank buying.

Wal-Mart Stores is cutting prices on popular video games by $10 each and offering a $50 gift card with the purchase of a Nintendo Wii video game console as the retailer tries to lure shoppers to its U.S. stores ahead of the Christmas holiday.

Wednesday morning (12.2.09), marked a Full Moon.

ZeroHedge: "The S&P, in "real" terms (represented in ounces of gold) is now back to April levels, and receding fast."

The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -12.

Black Friday weekend sales rose 1.6% while total U.S. foot traffic declined 1.1%, according to mall-traffic tracker ShopperTrak. Sales on Black Friday itself rose 0.5% to $10.66 billion. They rose 0.9% to $6.12 billion on Saturday followed by a 5.2% increase to $3.73 billion on Sunday. Traffic for the weekend declined after Black Friday traffic slipped 2.5%, followed by a 3.2% decrease on Saturday and flat traffic on Sunday. Still the declining traffic improved from the year-earlier rate, which saw traffic tumble 19%, the largest three-day drop on record, according to ShopperTrak.

LA Times: "Twitter was just the beginning. After dreaming up the innovative communication medium, Jack Dorsey is looking to revolutionize another core aspect of society -- money.

On Tuesday, Dorsey announced his new start-up, Square, which will let anyone with a cellphone or iPod become a merchant and accept credit card payments.

Square is a small plastic device that plugs into a gadget's headphone jack. Buyers swipe their credit cards through the machine, which then transmits the payment data to an application running on a connected iPhone or iPod Touch. (Android and Blackberry apps are in development, and computer software will be available later.)

You don't have to have the Square gadget or app to pay. You just need a credit card and an e-mail address to receive a receipt."

Brian Durrant: “Consider a country. For the top 20% of the population real incomes have increased by 60% since 1970. But for the other four-fifths real income has fallen by more than 10%. Am I talking about Guatemala or Bolivia? These sorts of inequalities have in the past provoked resentment sometimes articulated through revolutionary movements and social unrest. But I am not talking about a tiny Latin American state; these figures apply to the US. How can this be? Middle class America is surely better off compared to 1970; if you look at higher car ownership, better housing, more white goods and gadgets. The answer is debt. No wonder the politicians are frightened of it contracting!”

Crude stockpiles rose 2.1 million barrels in the week ended Nov. 27, the Energy Information Administration reported. Gasoline inventories increased 4 million barrels and distillate inventories, which include heating oil and diesel, fell 1.2 million barrels. Total petroleum demand fell 2.6%, with gasoline demand down 1.6% to 8.94 million barrels a day.

The Australian Competition and Consumer Commission (ACCC) said on Wednesday, Caltex's planned purchase by Mobil's 302 service stations was likely to substantially lessen competition across a range of retail fuel markets in Australia.

The commission said it had identified 53 Mobil stations which, if acquired by Caltex, would have reduce competition for petrol, diesel and automative liquid petroleum gas markets, leading to higher prices.

Retailers' November sales have been mixed, with online, electronics and jewelry sector showing gains while apparel, luxury, and department stores got off to a slow start of the holiday season, according to MasterCard Advisors' SpendingPulse, which estimated U.S. retail sales across all payment forms including cash and check. Electronics sales for November were up 6.6%. Online sales were strong, posting a 12% increase as traffic jumped 18%. The luxury sector excluding jewelry declined 7.3%, its first drop since August after gains in both September and October. Jewelry was a bright spot, showing a 4.6% gain, the third straight monthly gain and the first time the three-month average moved to positive territory since July 2008. Apparel sales in November slowed overall. They declined 5.7% within the specialty apparel segment, MasterCard data showed.

The U.S. economy "improved modestly" in late October and November, with moderate gains in consumer spending, manufacturing and housing offsetting "dismal" conditions in commercial real estate, the Federal Reserve said Wednesday in its Beige Book report on the economy. Eight of 12 Fed regions reported the economy had picked up since mid-October, while conditions were little changed or mixed in the four bank regions stretching from Ohio and Pennsylvania to the south. Labor markets remained weak, "with further layoffs, sluggish hiring and high levels of unemployment." Business contacts told the Fed that there was little or no upward pressure on wages or consumer prices.

The Dow Jones industrial average declined 18.90 points, or 0.18 percent, to end at 10,452.68. The Standard & Poor's 500 Index inched up just 0.38 of a point, or 0.03 percent, to finish at 1,109.24. The Nasdaq Composite Index gained 9.22 points, or 0.42 percent, to close at 2,185.03.

Tuesday, December 01, 2009

Extended Market Valuation

12/1/09 Extended Market Valuation

John Hussman: "In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the “typical post-war recovery” scenario, we are observing an increasing number of internal divergences and non-confirmations in market action."

Chain-store sales for the week ended Nov. 28 rose 3.1% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales fell 0.1%. "Electronics and online shopping were the big winners during the launch of the post-Thanksgiving holiday season," said Michael Niemira, ICSC's chief economist. "But even as retailers opened their doors on Thanksgiving Day, consumers fell behind last year in their holiday shopping completion rate as consumers reported an average 42.2% of their shopping completed through the end of November compared with 48.3% during the comparable week of 2008. This has negative implications for reported sales in November, but positive implications for December sales." ICSC forecast November sales will be up by 3% to 4%, the second time it's lowered the November outlook.

North Korea has apparently raised the value of its currency by 100-fold, in what would be the first such move in 17 years, according to South Korea's Yonhap news agency.

The Reserve Bank of Australia raised its policy cash rate by 25 basis points to 3.75% Tuesday, as widely expected, saying that the economy is in "a gradual recovery." The RBA, currently the only major industrialized economy on a tightening cycle, had raised it policy rate by the same quarter percentage point at its October and November meetings.

The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.

“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.

Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.

"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.

A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.

More people were late with their auto loan payments in the third quarter as job losses continued, but amid rising delinquencies there are positive signs for the economy in certain states. The auto delinquency rate — the rate at which payments fell behind 60 days or more — edged up in the July-to-September quarter to 0.81 percent, from 0.80 in the same period last year, according to credit reporting agency TransUnion.

US commercial mortgage default rate hits 3.4%. Rate climbs to 16-year high in third quarter.

Marla Singer: "Buried in the depths of page 26 of the Office of the Special Inspector General for the Troubled Asset Relief Program's (SIGTARP's) November 17, 2009 report "Factors Affecting Efforts to Limit Payments to AIG Counterparties" hidden in footnotes 33 and 34 is something of a mystery. It might be the beginning of an interconnected financial chain involving Dubai, the Federal Reserve, AIG, Basel I, Eastern Europe and even Switzerland and which, even if it doesn't worry you, probably should. Or it might be nothing at all."

China’s manufacturing grew last month at the fastest pace since April 2004- HSBC survey.

Davidowitz predicts "the noise will be taken out" about "strong" Black Friday sales in the coming weeks and a sobering reality will settle in: "People will look at stores closing and a rash of bankruptcies after Christmas. People will start to look at this and say ‘wow, this is terrible,'" he says.

According to the WSJ, the U.S. government is out with its latest natural-gas production report and gas production in the Lower 48 states fell by 1.4 billion cubic feet a day in September compared to August.

The data, which comes from the Energy Information Administration, suggest that the sharp drop in U.S. drilling activity is finally starting to result in lower production. That, in turn, could ease the glut of gas that has kept prices under $5 per million British thermal units.

This is a dollop of good news for companies like Chesapeake Energy and Devon Energy. Ironically, they have been betting on a turnaround in gas prices to justify (and pay for) increased drilling.

Video game console leader Nintendo says that U.S. sales of its Wii gaming system dropped 30% year-over-year to 550,000 for the week ending Nov. 28, according to numbers reported by Bloomberg. Nintendo cut the price of the Wii by $50 to $200 recently, while Microsoft (MSFT) dropped the price of its Xbox 360, and Sony (SNE) chopped the price of its PlayStation 3 console.

GM’s sales in China may have topped those in the US for the first time last month. Edmunds has estimated the domestic sales of the No.1 American car company fell just over 1% in November to 155,000 units.

Signed sales contracts on existing homes in the United States rose for the ninth straight month in October, a real estate industry group reported Tuesday. The pending home sales index rose a seasonally adjusted 3.7% in October from September, the National Association of Realtors reported. The index is up 31.8% compared with last October. The index rose 6% in September. The index tracks sales contracts on pre-owned homes. Typically, it takes a month or two after the contract is signed for the sale to close. At that point, the sale is booked in the NAR's existing-home sales report.

Outlays for U.S. construction projects were flat in October, the Commerce Department reported Tuesday, as a gain in spending on housing was offset by a drop in spending on public works. Outlays in September were revised to a 1.6% drop, the largest since January, from the earlier estimate of a 0.8% gain. Construction spending has not risen since April. Outlays are down 14.4% compared with a year earlier.

The ISM manufacturing index fell to 53.6% from 55.7% in October. Readings over 50% indicate more firms said they were growing than said they were contracting.The new orders index rose to 60.3% from 58.5% in October. The production index fell to 59.9% from 63.3% in October. The employment index fell to 50.8% from 53.1% in October. The inventories index fell to 41.3% from 46.9% n October.

You can look at the Arca Natural Gas Index which is within 8% of its yearly high and then see the

disconnect with the price of natural gas itself.

Euro rises to buy $1.51 highest since August 2008.

Charles Plosser, the president of the Philadelphia Federal Reserve Bank, became the first top central bank official to call for higher interest rates in this cycle. In a speech on Tuesday, Plosser said the Fed had to start raising interest rates sooner rather than later and had to begin withdrawing excess cash from the financial system. If the Fed does not act soon "the inflation rate is likely to rise to levels that most would consider unacceptable," he warned. Plosser will not be a voting member of the Fed interest-rate committee until 2011.

Individual investors moved assets back into cash in November, after three months of increasing holdings of stocks and bonds, according to a new survey by the American Association of Individual Investors. The proportion of holdings in cash rose about 8 percentage points to 27% of assets last month. Investors decreased both equity and fixed-income holdings, with stock holdings falling about 2 percentage point to 57% of assets. Bond holdings dropped 6 points to 18%. Cash holdings in October fell to the lowest since July 2007, as Americans became more willing to invest in higher-returning assets as the economy improved.

Gold futures ended at a new high of $1,199.10 an ounce Tuesday, briefly topping $1,200 in intraday trading, as the dollar weakened and as Barrick Gold Corp. eliminated all of its gold hedges, showing confidence in a rising gold price.

U.S. retail gasoline demand last week rose 3.1 percent from the previous week as Thanksgiving holiday traffic boosted demand, according to a MasterCard SpendingPulse report released on Tuesday. "Gasoline consumption increased sharply due to holiday traffic," said Michael McNamara, vice president of research and analysis at MasterCard Advisors. Gasoline demand averaged 9.357 million barrels per day during the week ending Nov. 27, unchanged from the same period a year ago, according to the weekly report. The four-week moving average of U.S. gasoline consumption climbed 0.7 percent year-over-year. Year-to-date, gasoline consumption is up 0.6 percent for 2009 compared with the same period in 2008. The national average retail prices for gasoline were unchanged at $2.62.

U.S. copper futures closed at a 15-month high on Tuesday, as the dollar extended its slump and economic sentiment improved from positive manufacturing data in the U.S. and in China, the world's top copper consumer.

The American Petroleum Institute said late Tuesday U.S. crude oil inventories rose by 2.9 million barrels last week.

The Dow Jones Industrial Average ended at 10,471.58, up 126.74 points, or 1.2%. The S&P 500 Index rose 13.23 points, or 1.2%, to 1,108.86. The Nasdaq Composite gained 31.31 points, or 1.5%, to 2,175.81.

Monday, November 30, 2009

No Guarantee

11/30/09 No Guarantee

John Hussman: "In part, the market's increasing propensity toward speculation reflects the increasing lack of fiscal and monetary discipline from our leaders. Policy makers who seek quick fixes and could care less about long-term consequences undoubtedly encourage investors to embrace the same value system."

Dubai's government said Monday it doesn't guarantee the debt of Dubai World, its sprawling conglomerate, according to remarks by an official cited in the media. Abdulrahman al-Saleh, director general of Dubai's department of finance, said creditors need to take part of the responsibility and that Dubai World is not part of the government, according to media reports. "The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government," Saleh said in an interview on Dubai Television, according to reports.

Rob Hanna: "Friday’s selloff was marked by extremely negative breadth. Around 97% of the volume was to the downside on the NYSE. In the past, days that have been SO negative have often led to bounces over the short-term."

More businesses in the Chicago region were expanding in November, according to the Chicago purchasing managers index released Monday by the NAPM-Chicago. The business activity index rose to 56.1% in November from 54.2% in October. It's the highest since August 2008.

Thailand's natural gas demand is expected to rise 10.6 percent in 2010 to 3.95 billion cubic feet per day due mainly to growing demand from petrochemical plants, PTT PTT.BK, the country's sole gas supplier, said on Monday. Domestic gas consumption in 2009 should grow by around 3.3 percent to 3.57 billion cubic feet per day, Permsak Shevawattananon, senior executive vice president for PTT's gas business, told reporters.

"The main growth driver next year will come from petrochemical plants," Permsak said, adding PTT's sixth gas separation plant and an ethane plant should come onstream in early 2010 if a dispute at the country's biggest industrial estate was resolved.

Rejecting safety warnings from crash investigators and pilots, federal aviation regulators have decided to allow more than 130 Boeing Co. 777 jetliners to continue flying long-distance international trips through early 2011 with suspect parts that have caused engines in extremely rare instances to ice up and basically shut down in midair.

Unite, Britain's biggest union, said on Monday it had written to Kraft chief executive Irene Rosenfeld about the 10 billion pound ($16.5 billion) cash-and-shares bid.
Unite asked for commitments there would be no compulsory redundancies and protection for employment terms and pensions.

The Dow Jones Industrial Average rose 34.92 points, or 0.3%, at 10,344.84, leaving it up 6.5% for November. The S&P 500 Index climbed 4.14 points, or 0.4%, at 1,095.63, up 5.7% from the month-ago close. The Nasdaq Composite gained 6.16 points, or 0.3%, to 2,144.60, leaving it with an advance of 4.9% for the month.

December gold futures rose $6.90, or 0.6%, to end at $1,181.10 an ounce on the Comex division of the New York Mercantile Exchange. It had climbed to a record high near $1,188 an ounce last week. Gold has only seen three losing sessions in November and has risen 13%, the biggest monthly gain since November 2008. Futures soared 14% in that month, the biggest gain since 1999.

Sunday, November 29, 2009


11/29/09 Shoppers

"I personally feel that there's a palpable difference, that it's changed," said Don Calvert, an international trade specialist at the Commerce Department, who was out by a Washington D.C. Filene's store a couple of blocks from the White House. "There are fewer people in clothing stores. There are even fewer people at electronics stores."
More shoppers spent time online at the start of the 2009 holiday season. They spent 35 percent more on Black Friday web purchases than a year earlier, with the average order value reaching $170.19, according to online retail analytics company Coremetrics. Those shoppers bought an average of 5.4 items per order, up from 4.6 items last year, Coremetrics said.

According to Bloomberg, India, the world’s top recipient of migrant remittances, is examining the effect Dubai’s attempt to delay debt repayments may have on Asia’s third-largest economy, central bank Governor Duvvuri Subbarao

said. About 4.5 million Indians live and work in the Gulf region and remit more than $10 billion annually, according to government data. The turmoil may affect remittances, said Thomas Issac, finance minister of the southern state of Kerala, which accounted for about a quarter India’s migrant labor in 2005. Remittances from the Middle East account for about 25 percent of Kerala’s economy, Issac said. India received $52 billion of remittances last year, according to the World Bank, making it the world’s largest recipient of money from migrant workers. China got $49 billion.

Black Friday retail sales rose a scant 0.5% to $10.66B according to early readings from ShopperTrak, but online sales outperformed, up 35% from a year ago.

There are 239 counties in the United States where at least a quarter of the population receives food stamps, according to an analysis of local data collected by The New York Times.

The counties are as big as the Bronx and Philadelphia and as small as Owsley County in Kentucky, a patch of Appalachian distress where half of the 4,600 residents receive food stamps.

In more than 750 counties, the program helps feed one in three blacks. In more than 800 counties, it helps feed one in three children. In the Mississippi River cities of St. Louis, Memphis and New Orleans, half of the children or more receive food stamps. Even in Peoria, Ill. — Everytown, U.S.A. — nearly 40 percent of children receive aid.

The United Arab Emirates' central bank set up a facility on Sunday to support liquidity in the banking system.

Under the $75 billion Treasury program, companies that agree to lower payments for troubled borrowers collect $1,000 initially from the government for each loan, followed by $1,000 annually for up to three years.

The government support, which is provided from the $700 billion financial bailout program, is aimed at providing cash incentives for mortgage providers to accept smaller mortgage payments rather than foreclosing on homes.

The program has come under heavy criticism for failing to do enough to attack a tidal wave of foreclosures. Analysts said the foreclosure crisis is likely to persist well into next year as high unemployment pushes more people out of their homes.

Rising foreclosures depress home prices and threaten the sustainability of the fledgling economic recovery.

A report last week from the Mortgage Bankers Association found that 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter.

Mike Burk: "The market is nearing a short term cyclical low. Recently the market has been rallying early in the month and historically early December has been strong.

I expect the major indices to be higher on Friday December 4 than they were on Friday November 27."

Alan Abelson: "In the latest survey of advisory services by Investors Intelligence, no fewer than 50.6% of those cockeyed seers were bulls, versus a scant 17.6% bears. Last time we saw numbers like that was before the market crashed back in '07."

On so-called Cyber Monday, 96.5 million people plan to shop, up from 85 million a year ago. Nine in 10 retailers also will have special deals and promotions for Cyber Monday, the survey said. In addition, a majority of the planned shopping is to be done from home, with 14% done from work. At some point during the holiday season, an estimated 69 million Americans will shop from work, a survey said last week.

More Americans hit the stores during Black Friday and the rest of the holiday-shopping weekend, but they spent less, the National Retail Federation said Sunday. Its survey found that 195 million shoppers visited stores and Web sites, up from 172 million last year, but the average ticket was about $343, down from about $373 a year ago. For the weekend, the total spending figure is estimated at $41.2 billion.