Saturday, December 12, 2009

Volcker and Prechter

12/12/09 Volcker and Prechter

Bloomberg (Simon Kennedy and Michael Doermer): “Former Federal Reserve Chairman Paul Volcker said imbalances in the structure of the U.S. economy pose a bigger challenge than the financial crisis and will impede economic growth for some time. ‘We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export,’ Volcker… said… ‘It’s involved with the financial crisis but in a way it’s more difficult than the financial crisis because it reflects the basic structure of the economy… It’s likely that economic growth is going to be pretty sluggish for a while,” Volcker said…”

Deficits over the next 10 years will total $9 trillion, according to the nonpartisan Congressional Budget Office.

Doug Noland: "There were no big surprises in this quarter’s “flow of funds” data. I was somewhat surprised by non-financial debt growth below 3%. Watching weekly corporate and municipal debt issuance, I expected stronger debt expansion from these sectors. I view the continued contraction in mortgage and consumer debt as supporting the thesis of a very atypical reflation and recovery. Considering the degree of monetary and fiscal stimulus, the general financial and economic response continues to be disconcerting. There is as yet no indication that massive government pump-priming is fostering a self-reinforcing private-sector Credit recovery."

R.D. Bradshaw: "When a top French Bank warns the French people that a gigantic economic/monetary/deflationary collapse could be very close, thinking people must wake up and take notice. This happened on or about Nov 19th in an article by Ambrose Evans-Pritchard from the London Telegraph. I read this prediction with interest from the Society Generale Bank in France. But the importance of this assertion is not only because this bank is near the top in thinking in the European Union, it is most assuredly a leading Rothschild controlled bank with much insider knowledge of what is coming down the pike.

For my part, I certainly took it serious for a lot of good reasons. Perhaps I was motivated by some prejudice since I have long believed and suggested to subscribers at that another hard fall will likely come. Society bank's words seemed to add some credence to my standing prediction of almost a year ago. In my more recent assessment on the issue, I wrote to subscribers that there was a 10% chance that we could have a hard fall in Dec 2009. Well, today is Dec 11th and we haven't had a hard December fall yet.

But the possibilities must be on the table though they are diminishing daily for December with the passage of time. I certainly don't think it will happen in December. But one must cautiously keep that option in mind. And if the Rothschild Cabal chooses to by-pass Dec 2009 for its next hard hit (as now seems likely), then we must be open to such an event in 2010."

The bill to audit the Federal Reserve is included in the House financial reform legislation which passed Friday.

Byron King: " Keep an eye on tungsten. As I’ve mentioned before, tungsten is critical to machine tools and numerous other high-tech applications.

What we’re seeing globally — and what several top-level experts confirmed to me this week in London — is that there are some metals facing looming supply shortages. The days of a user just calling up the supply house and ordering off the shelf are ending. Tungsten is in one of those scenarios just now.

Several of the world’s largest non-Chinese tungsten mines got bought outright this year by tungsten users. The users understand that their supply chain is only as strong as the weakest link. And that weak link is the supply of ore in the ground plus the mine, mill and upgrading facility to obtain the basic raw material."

Robert Prechter: “I think we’re going to have another leg down, not just a correction. I think the bear market is not over. We had the first phase in 2008, we’ve had a partial recovery, a 52 percent retracement, by the way that’s the same amount the market retraced after the 1929 crash … I think 2010 is going to be a very down year.”

A U.S. court last year secretly froze more than $2 billion allegedly held for Iran in Citigroup Inc accounts, the Wall Street Journal reported on Saturday, citing legal documents.
The U.S. District Court for the Southern District of New York, acting in part on information provided by the U.S. Treasury Department, ordered Citibank to freeze the money in June 2008, the newspaper said.
The money is in accounts held by Luxembourg's Clearstream Banking AG , a subsidiary of Germany's Deutsche Boerse AG , the newspaper said.

Friday, December 11, 2009

Commodities and the Dollar

12/11/09 Commodities and the Dollar

U.S. retail sales rose a better-than-expected 1.3% in November for third monthly increase in the past four months, the Commerce Department estimated Friday. The sales gains were widespread across most kinds of retail outlets, including autos, gasoline, department stores and hardware stores. Only clothing- and furniture-store sales declined. The consensus forecast of Wall Street economists was for retail sales to rise 0.5%. Excluding autos, sales rose 1.2%, the biggest gain since January.

The U.S. Dollar Index has rallied back up to 76.60, an increase of 2 1/3 points from the recent low.

S&P's 62% nine-month gain is the second-biggest on record.

The International Energy Agency has revised up by 130,000 barrels a day its forecast for 2010 global oil demand, which is now expected to average 86.3 million barrels a day. In its monthly oil report released Friday, the IEA also left its forecast for this year's oil demand virtually unchanged at 84.9 million barrels a day, a decline of 1.6% year-on-year.

China's consumer prices rose for the first time in 10 months in November, as the government-stimulus-driven economic recovery fueled inflation. Official data released Friday showed the nation's consumer price index gained 0.6% in November from a year-ago, although producer prices declined 2.1% during the month. Data also showed an acceleration in other economic indicators, with monthly industrial production rising a better-than-expected 19.2% and retail sales climbing 15.8%. Urban fixed-asset investment, meanwhile, rose 32.1% in the first eleven months of the year. A FactSet Research survey showed economists had estimated a 0.4% increase in CPI, a 2.3% fall in PPI, an 18.2% acceleration in industrial output, a 16.5% jump in retail sales, and a 33% rise in January to November urban fixed-asset investments.

The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.

The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech. The primary cause: substantial pay raises and new salary rules.

"There's no way to justify this to the American people. It's ridiculous," says Rep. Jason Chaffetz, R-Utah, a first-term lawmaker who is on the House's federal workforce subcommittee.

Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid because the government employs skilled people such as scientists, physicians and lawyers. She says federal employees make 26% less than private workers for comparable jobs.

USA TODAY analyzed the Office of Personnel Management's database that tracks salaries of more than 2 million federal workers. Excluded from OPM's data: the White House, Congress, the Postal Service, intelligence agencies and uniformed military personnel.

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared with $40,331 in the private sector.

Sales of video games and consoles fell 7.6% last month compared with November 2008, despite the blockbuster release of Call of Duty: Modern Warfare 2, which sold a whopping 6 million copies in the U.S. alone, according to figures released this afternoon by NPD Group.

The game industry sold $2.7 billion of consoles and games in the U.S. last month, down from $2.9 billion a year earlier, according to NPD estimates. From January through November, sales of $14.1 billion were down 12% from the same time frame last year.

Randall W. Forsyth: "The media dutifully reported Thursday that the Fed's Flow of Funds data showed U.S. households' net worth rose by $2.67 trillion in the third quarter, largely as the result of the continued rebound in the stock market from the March lows.

But overlooked in that good news was a sharp, downward revision in households' net worth by $2.38 trillion in the second quarter. That was the result of a fuller accounting of the plunge in home prices during those months.

Also not widely noted is what the Fed considers to be "households" includes hedge funds, which probably are beyond the reach of 99% of Americans. Average individual investors actually have been dumping U.S. stocks and clamoring for low-yielding bonds, so it's questionable how much a lift they've gotten from the rally.

Households also continued to reduce their indebtedness for the fourth straight quarter while total U.S. debt shrank for the second consecutive quarter, even with the massive expansion of Treasury borrowing to fund the federal budget deficit. That's surely a good thing after the debt bubble.

Yet the contraction in household debt wasn't just because of Jane and John Q. Public's pledge to get their financial houses in order after having tapped their houses as automatic teller machines. Their debt also was extinguished in the rising tide of mortgage defaults and home foreclosures, not exactly a wealth-enhancing trend.

So, while the numbers on their wealth are turning up, Americans are becoming more pessimistic on the economy and their own financial conditions, according to a Bloomberg National poll. And they're enraged at Wall Street, which they blame for their plight, the Bloomberg poll also found.

That sort of public anger doesn't square with numbers showing households' net worth recovering from the collapse in housing and equity values, although it is consistent with official unemployment of 10% and "underemployment" of 17%.

Households -- which by the Fed's definition essentially takes in anything doesn't fit in another institutional category -- did enjoy a robust gain in wealth of $2.57 trillion in the third quarter, or at a 22.7% annual rate. Nevertheless, households' net worth is down $12 trillion, or 18%, from its peak two years ago.

But little of that gain appears to have been felt on Main Street. According to the Fed's numbers, households added only $36 billion in equities in the third quarter, down from an average of $430 billion in purchases in the two preceding quarters, Goldman Sachs' economists write in a research report. As noted, the Fed lumps in hedge funds along with non-profits into the "household" category, so it's not exactly folks like you and me."

For the week ended Dec. 9, AMG Data reported Equity Fund Outflows -$265 Mil; Taxable Bond Fund Inflows $1.1 Bil
xETFs - Equity Fund Outflows -$1.5 Bil; Taxable Bond Fund Inflows $439 Mil

Natural gas will begin flowing along a 7,000 kilometer natural-gas pipeline from eastern Turkmenistan to China next week, highlighting the countries' increased economic ties, RFE/RL's Turkmen Service reports.
The pipeline is expected to export 40 billion cubic meters of Turkmen gas to China per year, making China the second-largest importer of Turkmen gas after Russia.
Turkmen President Gurbanguly Berdymukhammedov told Chinese journalists during a nationwide broadcast on December 9 that the pipeline -- begun in 2007 and due to be inaugurated on December 14 -- is strategically important for the long-term partnership between Turkmenistan and China.
Berdymukhammedov also noted that bilateral trade has grown fortyfold since 2000, reaching almost $1.5 billion last year.

Record natural gas consumption in Reno area

By Steve Timko

NV Energy customers set a record for natural gas use in the 24 hours that ended Thursday at 7 a.m.

The region consumed 156,332 decatherms, almost 156 million cubic feet of natural gas, NV Energy spokesman Karl Walquist said.

The record was 155,194 decatherms Jan. 12, 2007.

The two natural gas pipelines that serve NV Energy's 149,000 customers in the Reno area had no problem meeting the demand, he said.

Overnight temperatures were lower Tuesday night and Wednesday morning than for the previous record.

The difference was that it became cold quicker, said Dawn Fishler, a National Weather Service meteorologist. At 9 p.m. Wednesday, the temperature at Reno-Tahoe International Airport was 2 degrees after being 6 degrees at 9 p.m. Tuesday.

"We got colder earlier in the night than we have the past few nights," Fishler said.

NV Energy gas customers range from Verdi to the Mount Rose Highway and north into both Cold Springs and Spanish Springs Valley, Walquist said.

Southwest Gas reported using 98,000 decatherms for its 91,000 customers in western Nevada, including Carson City, and Elko County in the same period that NV Energy set its record. It reported use of 102,000 decatherms the prior 24-hour period, but neither were records.

Dec. Reuters/UofM Consumer Sentiment: 73.4 vs. an expected 68.5, and a sharp step up from 67.4 in November's final reading. Expectations stepped up to 69.7, from previous 66.5.

As the New York Times notes, "one in eight Americans and one in four children" receive food stamps.

U.S. import prices rose 1.7 percent in November in their largest gain since June, driven higher by fuel costs, a government report showed on Friday.

Analysts polled by Reuters had expected a slimmer rise of 1 percent. October's gain was also revised up to 0.8 percent from the 0.7 percent previously reported.

"It's getting worse, not better."

That's how Jim Rogers responds to the recent talk of improvement from President Obama, Treasury Secretary Geithner and Fed Chairman Bernanke, among others.

"Papering over the problem is not going to solve America's problem," Rogers says. "The idea you can solve a problem of too much debt and too much consumption with more consumption and more debt defies belief. I cannot believe that grownups would stand there and say that."

History shows the only way to solve a financial crisis is "when people go bankrupt, you let them go bankrupt," Rogers say. "Then, competent people come in, take over the assets, reorganize and you start over."

But rather than "take the pain and reorganize and start over," as Sweden, South Korea and others have done, Rogers says America is "doing the Japanese model."

Businesses unexpectedly increased their inventories in October, halting a slide of 13 consecutive declines. The small gain, along with a fifth straight increase in sales, raised hopes that businesses will begin restocking their depleted shelves, helping support the economic recovery.

Businesses increased inventories 0.2 percent in October, the Commerce Department said Friday. That was better than the 0.3 percent drop economists had expected. Total business sales rose 1.1 percent.

The Dow Jones Industrial Average rose 70.36 points to 10,476.19. The S&P 500 Index climbed 4.95 points to 1,107.30. The Nasdaq Composite Index added 0.92 points to 2,191.81.

Three U.S. banks in Florida, Arizona and Kansas failed on Friday, bringing the year's tally to 133 and taking a $250 million bite out of the federal deposit-insurance fund as the credit crunch claims more victims.

Crude oil for January delivery ended down 67 cents, or 0.9%, at $69.87 a barrel on the New York Mercantile Exchange. The eight-session losing streak is the longest since October 2003. Crude ended the week down 7.4%, the biggest weekly loss in 11 weeks. Gold for December delivery fell $6.30, or 0.6%, to end at $1,119.40 an ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement since Nov. 13. The contract ended the week down 4.2%.

Thursday, December 10, 2009

Emergency Unemployment

12/10/09 Emergency Unemployment

"I am hereby extending [TARP per] the authority provided under the Act to October 3, 2010. This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats, as described above." Tim Geithner

ZeroHedge: "The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week. Look for this number to keep going into the stratosphere as the 6 month continuing claims cliff keeps getting hit by more and more people who are unemployed and keep looking not only for believable change, but actual jobs to go with it. "

The number of people filing claims for state unemployment benefits rose by 17,000 to a seasonally adjusted 474,000 in the week ending Dec. 5, while the total number of people claiming benefits of any kind topped 10 million, a sign of very sluggish hiring, the Labor Department reported Thursday. First-time claims - which measure new layoffs - rose for the first time in six weeks in the week after Thanksgiving. Economists surveyed by MarketWatch had expected initial claims to fall to about 450,000. The number of people collecting state benefits fell by 303,000 to a seasonally adjusted 5.16 million in the week ending Nov. 28.

The U.S. trade deficit narrowed by 7.6% in October to $32.9 billion, the Commerce Department said Thursday. Exports rose faster than imports in October. The narrowing of the trade gap was unexpected. Wall Street economists had forecast of a deficit of $37.0 billion. One critical factor in the lower deficit was a cut in crude oil imports. The deficit for the year now totals $304 billion, down sharply from $610.8 billion in the same period one year ago. The U.S. trade deficit with China continued to expand, widening to $22.7 billion in October compared with $22.1 billion in September. This is the highest level since last November. For the year, the deficit with China is now $188.5 billion.
In October, the goods and services deficit decreased $26.5 billion from October 2008. Exports were down $12.9 billion, or 8.6 percent,

Costco Wholesale Corp reported fiscal first-quarter net income was flat on 5.5% higher revenue and 3% higher same-store sales. For the quarter ended Nov. 22, net income was $266 million, or 60 cents a share, compared with $263 million, or 60 cents, in the year-earlier quarter. Shares outstanding rose 1% to 444.8 million. Net sales rose 5.5% to $16.92 billion from $16.04 billion. Revenue, which includes membership fees, rose a similar percentage to $17.3 billion from $16.4 billion. Same-store sales, reflecting sales from stores open at least a year, rose 3% in the quarter, Costco reported on Thursday. A survey of analysts by FactSet Research produced consensus estimates for the quarter of 60 cents of profit on $17.32 billion of revenue. The same-store sales reflected increases of 1% in the U.S. and 13% internationally, Costco said. Excluding the effect of stronger foreign currencies against the dollar plus lower gasoline prices, same-store sales rose 3%. That adjusted number reflects increases of 2% in the U.S. and 8% internationally.

Microsoft launched Windows 7 in late October to much fanfare. But, just like with previous Windows upgrades, complaints about bugs have already started rolling in.

A whopping 31% of clients have reported problems with upgrading to Windows 7, according to a recent survey of more than 100,000 customers conducted by consumer helpdesk firm iYogi.

"Most of the problems that customers have with Windows 7 have to do with installation, or application and data migration," said Vishal Dhar, co-founder of iYogi. "These are all fixable problems, but they're annoyances and they're time consuming."

George Ure: " A Rand report called "A Stability Police Force for the United States: Justification and Options for Creating U.S. Capabilities."

In this paper - which to those of us with a strong Constitutional bent and respect for posse comitatus is an exercise in 'thinking the unthinkable' - there's a sort of working conclusion that a new super police agency - a "Stability Police Force" it's called - run by either the military (MP) system or the U.S. Marshall's Service, are achievable options for the US central government to consider implementing. "

Politico: "In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.

“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year. "

"Ginnie is like an accelerant to a fire," said Anthony Sanders, professor of real estate finance at George Mason University.

Working natural gas in storage was 3,773 Bcf as of Friday, December 4, 2009, according to EIA estimates. This represents a net decline of 64 Bcf from the previous week. Stocks were 472 Bcf higher than last year at this time and 513 Bcf above the 5-year average of 3,260 Bcf. In the East Region, stocks were 191 Bcf above the 5-year average following net withdrawals of 31 Bcf. Stocks in the Producing Region were 241 Bcf above the 5-year average of 954 Bcf after a net withdrawal of 24 Bcf. Stocks in the West Region were 81 Bcf above the 5-year average after a net drawdown of 9 Bcf. At 3,773 Bcf, total working gas is above the 5-year historical range. After the data, natural gas for January delivery rose 6.7% to $5.227 per million thermal units.

Tyler Durden: "Since August 12 there has not been one positive fund flow into domestic equities, with the cumulative outflows now totalling $44 billion and rising, according to ICI."

Treasuries fell, with the gap in yields between 2- and 30-year securities near the widest margin since 1992, before today’s $13 billion bond auction.

The so-called yield curve has reached 366 basis points with the Federal Reserve’s target rate anchored at a record-low range of zero to 0.25 percent and the Treasury extending the average maturity of government debt being sold. The shift to longer- maturity debt has raised concern that investors will demand higher yields to offset the risk of inflation as government spending drives the deficit to a record $1.4 trillion.

“The market is continuing to worry about the massive amount of Treasury issuance that’s going to hit the market well into next year,” said Ian Lyngen, senior government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “In the very short term, part of it is going to be supply accommodation.”

Despite very low prices and slowed activity, oil and gas professionals predict vigorous growth in the coming years for the natural gas business, according to a new survey by consulting firm Deloitte LLP.

“The survey numbers are striking,” said Gary Adams, vice chairman and leader of Deloitte’s oil and gas practice. “The overwhelming majority of survey respondents, 84 percent, say the best days for the natural gas industry are still ahead of us, despite today’s low prices.”

Natural gas will be in greater demand and become more plentiful as Congress passes climate change legislation, which would make oil and coal less attractive.

Natural gas rises 8.2% to $5.298 per million BTU.

The United States federal government ran a deficit of $120.3 billion in November, the second month of the 2010 fiscal year, the Treasury Department reported Thursday. Receipts were $133.6 billion, the Treasury said, while outlays were $253.9 billion. The deficit was a little higher than a congressional estimate of $115 billion and marked the 14th consecutive monthly budget shortfall. A year ago in November the deficit was $125.2 billion.

Gold for December delivery rose $5.30, or 0.5%, to end at $1,125.70 an ounce on the Comex division of the New York Mercantile Exchange.

The Treasury Department sold $13 billion in 30-year bonds on Thursday at a yield of 4.52%, higher than traders had anticipated, indicating weak demand. Investors bid for 2.45 times the amount of debt offered, compared to an average of 2.58 times at the last four similar auctions. Indirect bidders, a group of investors that includes foreign central banks, bought 40.2% of the deal, compared to an average of 45% of recent sales.

The outstanding debt of U.S. companies, households and governments rose at the slowest rate on record in the third quarter, as households reduced debts for the fifth straight quarter. U.S. nonfinancial debt increased at a record-low 2.8% annual rate in the third quarter to $34.6 trillion, despite the 20.6% annualized increase in government debt. Private-sector debt fell at a 2.6% annual rate, as businesses and households each reduced their outstanding debt at record rates. Meanwhile, household net worth rose by $2.67 trillion to $53.4 trillion on large gains in the stock market and a small rebound in real estate values.

The Dow Jones Industrial Average rose 68.78 points, or 0.7%, to 10,405.83. The S&P 500 Index climbed 6.41 points, or 0.6%, to 1,102.35. The Nasdaq Composite Index added 7.13 points, or 0.3%, to 2,190.86.

Wednesday, December 09, 2009

Bloomberg Survey

12/9/09 Bloomberg Survey

-- Apple is going to begin ramping production on a to-be-announced tablet in February, implying a launch in late March or April, Oppenheimer analyst Yair Reiner said in a note to clients, citing "checks." The tablet's display will be a 10.1 inch multi-touch LCD screen, not an OLED screen as others have suggested, Reiner said.

Even as the economy inches forward, Americans have become gloomier because of worries about unemployment and the economy, according to a new Bloomberg survey. Almost half of those polled now feel less financially secure than when President Obama took office in January. Fewer than 1 in 3 think the economy will improve in the next six months.

We are now 17 straight days without sunspots.

The FDIC is publishing on its Web site a list of the eligible insured depository institutions that have opted out of the original Transaction Account Guarantee Program, scheduled to terminate on December 31, 2009.

S&P drops its outlook on Spain to Negative, saying it "now believes Spain will experience a more pronounced and persistent deterioration in its public finances, and a more prolonged period of economic weakness" vs. its peers. "In our opinion, reducing Spain's sizable fiscal and economic imbalances requires strong policy actions, which have not yet materialized."

The U.S. will grow at just 2% for much of 2010, but growth should accelerate to 3% in 2011, as low interest rates prevail and unemployment remains stuck in double digits, UCLA Anderson Forecast says. Survey sees unemployment peaking at 10.5% in Q1, and remaining at or above 10% for almost all of 2010.

Japan's economy grew 1.3% last quarter, less than initial estimate of 4.8%.

In November 2009, U.S. freight railroads originated 1,089,077 carloads, an average of 272,269 carloads per week. That’s down 8.2%, or 96,900 carloads, from November 2008’s 1,185,977 carloads (when the weekly average was 296,494 carloads) and down 17.4% from November 2007’s 1,318,023 total (a weekly average of 329,506 carloads).

The Obama administration is extending the $700 billion financial-rescue program until next October, Treasury Secretary Timothy Geithner said Wednesday.

Robert McHugh: "Stocks are approaching a typically Bearish seasonal time, from the last few days of December through the end of January. This new wrinkle for the "January Effect" is reason for caution. Measureable declines, several of which were significant, have started the last week of December, or in January, in 8 of the past 10 years, with a ninth top occurring in early February in 2007. If you include 2007, that is 9 out of the past 10 years."

An estimated 117,000 Californians haven't received their unemployment checks -- some for more than a month -- because of what state officials blame on an archaic computer system.

Treasury sells $21 bln in 10-year debt at 3.448%.

The Commerce Department said on Wednesday total wholesale inventories rose 0.3 percent, snapping a 13-month declining trend. September's figures were revised to show a 0.8 percent decline, previously reported as a 0.9 percent fall.

Dec. gold ends down 2% at $1,120.40 an ounce.

The Dow Jones industrial average ended up 51.08 points, or 0.50 percent, to 10,337.05. The Standard & Poor's 500 Index rose 3.95 points, or 0.36 percent, to 1,095.89. The Nasdaq Composite Index gained 10.74 points, or 0.49 percent, to 2,183.73.

Tuesday, December 08, 2009


12/8/09 Poison

Green Mountain Coffee Roasters Inc. definitively agreed to acquire Diedrich Coffee Inc., the Irvine, Calif., coffee roaster for $35 a share cash, or $290 million. In statements, the companies said that Green Mountain paid Peet's Coffee & Tea Inc. a deal-termination fee of $8.5 million.

3M Co's outlook for the current year came in below analysts' forecast.

TransUnion predicts that the rate of mortgage delinquencies – the ratio of borrowers who are 60 or more days behind on payments – will peak in early 2010 before falling towards the end of the year.

Bloomberg: " Federal Reserve Chairman Ben S. Bernanke is prescribing “poison” to the U.S. economy by keeping interest rates near zero and fueling a wave of speculative capital that may cause the next global crisis, former Morgan Stanley chief Asian economist Andy Xie said.

Bernanke is making decisions based on “marginal considerations” that will help short-term growth and employment, instead of focusing on the “soundness of the system,” Xie wrote in an e-mailed note today. The next worldwide crisis will probably strike in 2012, driven by inflation as the low cost of borrowing spurs increases in asset prices, he said.

“There is a Chinese saying that one could quench the thirst by drinking poison,” said Xie, who predicted in September 2006 that the U.S. economy would fall into a recession in 2008. “Bernanke seems to be prescribing exactly this to the U.S. economy. The slower Bernanke raises interest rates, the bigger the next crisis.”

The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC. "I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.

Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.

Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.

McDonald's Corp., the world's largest fast-food chain, said Tuesday that its U.S. sales fell in November, only the fourth time the monthly figure failed to rise in more than 6 1/2 years.

But the company continued its overseas sales growth, and overall sales edged up 0.7 percent during the month. A softening dollar has helped companies such as McDonald's that have a large international presence because overseas revenue tranlates back into more dollars.

Consol Energy Inc. expects to begin laying off workers at its Fola operations near Bickmore, W.Va., starting Feb. 7. The Pittsburgh-based coal and gas producer estimated that about 104 workers at the Little Eagle Coal Co. and 378 workers at the Fola Coal Co. may be affected. Consol cited the Ohio Valley Environmental Coalition's appeal of the company's approved mining permits for the idling.

Huffington Post: "Just how badly is President Obama's $75 billion foreclosure program working out? Consider these newly-released numbers: Out of every 100 homeowners who came to JPMorgan Chase for help under the program, just 15 have or will likely receive a permanent payment reduction.

What happened to the other 85? For every 100 trial plans initiated from April through September 2009 under the Home Affordable Modification Program:

* 29 borrowers did not make all required payments under their trial plan;
* 20 borrowers did not submit all documents required for underwriting;
* 31 borrowers submitted all required documents but the documents did not meet HAMP underwriting standards, due to such things as missing signatures or nonstandard formats;
* 4 borrowers were or are likely to be rejected for undisclosed reasons;
* 1 borrower will not or is not likely to get their payment lowered."

The president will call for increasing the investment in infrastructure through building and modernizing highways, railways, bridges and tunnels. He also will propose a new program that provides rebates for consumers who retrofit their homes to become more energy efficient.
The president also will call for using some of the $200 billion in Troubled Asset Relief Program to help pay down the $1.4 trillion budget deficit. So there are three parts: 1) apparentaly a tax credit for businesses to hire new employees, 2) more infrastructure investment, 3) and a cash-for-caulkers program.(Calculated Risk)

Mike Shedlock: "The best I can do is suggest the unemployment rate will be over 10% all the way through 2015 and never dip below 8% all the way out through the end of 2020....In the absence of a war outbreak in the Middle East or Pakistan -- and/or Congress going completely insane with more stimulus efforts -- I think oil prices are likely to drop, the dollar will strengthen or at least hold its own, and the best opportunities are likely to be on the short side," he writes. "2010 is highly likely to retrace most if not all of the ‘reflation' efforts of 2009. If things play out as I suspect, 2010 will be the year of the great retrace as the economic recovery disappoints."

Oct. Job Openings and Labor Turnover: Job openings unchanged at 2.5M, down 48% from the most recent peak in June 2007. Hires little changed at 4M, down 29% from the peak. Turnover remains low at 3.3%.

Kroger Co shares tumbled 13% after its third-quarter result and full-year outlook both fell short of Wall Street expectations.

Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index slipped to 46.8 in December from 47.9 in November.

Credit default swaps and collateralized debt obligations "took us right to the brink of disaster." Volcker said. "The most important financial innovation I've seen in the last 25 years is the automatic teller machine."

U.S. oil consumption is projected to average 18.7 million barrels a day this year, about 800,000 barrels a day, or 4.1%, lower than last year. Oil demand will rise 270,000 barrels a day next year from this year's level.

The Institute for Supply Management said its panel of purchasing and supply executives expects a 5.7 percent net increase in overall revenues for 2010, compared to a 10.7 percent decrease reported for 2009.

General Electric Co expects profit to remain flat at its hefty finance arm next year, as losses and impairments on loans peak.

The largest U.S. conglomerate believes its GE Capital finance unit is on track to hit its 2009 profit target of $2 billion to $2.5 billion set in March, company officials told investors on Tuesday. That would be down from about $8.63 billion in 2008.

The Dow Jones Industrial Average fell 104.14 points to 10,285.97. The S&P 500 Index shed 11.31 points to 1,091.94, while the Nasdaq Composite Index declined 16.62 points to 2,172.99.

Dec. gold falls $12.30 to $1,130.50/oz on Globex.

Oil futures climbed in electronic trading late Tuesday after the American Petroleum Institute crude-oil inventories last week dropped 5.815 million barrels. Analysts polled by Platts were anticipating a 600,000-barrel climb in crude-oil stocks. The API said distillate stocks gained 1.011 million barrels and gasoline stocks slipped 753,000 barrels. Analysts were expecting a decline of 400,000 barrels in distillates inventories and a rise of 1.8 million barrels in gasoline stocks. Crude oil futures edged up to $73.02 a barrel in electronic trading from the floor settlement of $72.62. Oil had ended the floor session 1.8% lower.

Monday, December 07, 2009


12/7/09 Default

Mike Burk: "For the past 2 weeks, I think, the market has been dominated by positive seasonal factors which have ended. If that theory is correct next week should be down.

I expect the major indices to be lower on Friday December 11 than they were on Friday December 4."

ZeroHedge: "Chicago Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties. The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default."

Tim Iacono: "Based on the last two recessions, we're still more than a year away from a sustained decline in the jobless rate."

RGE Monitor: "The Job Openings and Labor Turnover Survey (JOLTS) reports the job openings rate in September 2009 was little changed at 1.9%. The number of job openings has declined by 2.3 million, 48% below the peak of June 2007. The hires rate remained low at 3.1%, and the separation rate remained at a record low of 3.3% (BLS, 10/11/09). This implies job losses in recent months have slowed mostly due to fewer layoffs, while hiring is still subdued."

Mike Santoli: "Yet the signature feature of this bull run has been an unwillingness of investors, so far, to sell aggressively on pullbacks. Until that changes-or until people start getting too cheery-it's still too early to worry too much."

. Over 38% of unemployed workers have been jobless for six months or more, around 58% of the unemployed have been jobless for three months and close to 54% of the workers have lost their jobs permanently. (BLS, 12/04/09)

Rob Hanna: "Friday was the 2nd outside day in a row. Looking back to the inception of the SPY, other times there have been back to back outside days have typically been followed by rallies over the next few days."

John Hussman: "The likelihood of a second wave of credit losses may suppress inflation pressures while we work through the adjustments of the next two or three years. Over time, the increased supply of U.S. government liabilities (whether in the form of monetary base or Treasury securities) is likely to be met by a similar depreciation in their value. I continue to expect that we will observe an approximate doubling in the U.S. consumer price index over the coming decade....Suffice it to say that I do not anticipate a V-shaped recovery, and while the stock market may very well recover faster than the rest of the economy, I don't expect durable market gains until after the second wave of losses shakes out. On the subject of credit delinquencies, the latest report by Trepp (which provides independent research on commercial mortgage-backed securities) indicates that delinquencies on multifamily CMBS loans rose to 8.78 percent in November, up from 7.66 percent the previous month. Commercial delinquencies in retail, industrial and office loans increased as well. The largest jump in delinquencies was in the hotel sector, where the delinquency rate shot to 14.09 percent, from 8.67 percent in October. The data from the banking sector also shows no abatement. "

Central banks should allow financial stability to play a role in monetary policy as low interest rates spur banks to take on too much risk, according to a study by the Bank for International Settlements.

The risk of banks defaulting jumped by more in economies where interest rates remained low for an extended period before the recent financial crisis, the report by the Basel, Switzerland-based organization said.

“The main implication of these findings is that monetary policy is not fully neutral from a financial stability perspective,” wrote economist Leonardo Gambacorta. “It is important that monetary authorities learn how to factor in the effect of their policies on risk taking.”

79% of Americans Want an Audit of the Fed, Only 21% are in Favor of Confirming Bernanke, and Only 20% Think Geithner is Doing a Good Job

Green Mountain of Waterbury, Vt., owns the Keurig brewing system patent and is busy buying a handful of roasters that hold licenses to make the "K-Cup" cartridges for Keurig-style coffee makers.
Diedrich, a Southern California coffee company since the 1970s, is one of the last two license holders left that have not been acquired by Green Mountain. The other is Van Houtte of Montreal.
Peet's, the Emeryville roaster with a large chain of coffeehouses, covets Diedrich's license to make the cartridges, believing it would provide an entry into the home and office single-cup brewing market.
"Peet's wants in, and Green Mountain would like to keep Peet's out," said Kenneth Davids, editor of CoffeeReview. com.
The battle has been brewing for more than a month. On Nov. 2, Peet's announced a deal to acquire Diedrich in a cash and stock transaction for $26 a share, or $213 million. The deal allowed Diedrich to entertain higher offers. And that's exactly what happened.
Green Mountain and Peet's started trading bids. Green Mountain now has the higher, offering $35 a share in cash, or $290 million.

Minyanville: "The jobs report showed an expanding service sector, the ISM didn't? Friday’s employment report showed that the Service Sector added 58,000 jobs. This doesn't jive with the Nonmfg ISM data released last Thursday. Nonmfg ISM was expected to show a reading of 51, but came in at 48.7 reflecting a contraction in the Service Sector. The jobs component came in at 41.6 suggesting job losses."

According to the FT, "85% of UK loans made in past five years are in breach of loan agreements."

Bernanke: "Because deflation implies falling prices while the target price level rises, the failure to end deflation in a given year has the effect of increasing what I have called the price-level gap. The price-level gap is the difference between the actual price level and the price level that would have obtained if deflation had been avoided and the price stability objective achieved in the first place."

The Greek government recently raised the estimate for this year's general government deficit to 12.7% of GDP, more than six percentage points higher than previous official projections.

Volatility in US corporate profits is at an all-time high now and they most-closely fit the definition of boom and bust, Richard Bernstein, CEO of Richard Bernstein Capital Management, told CNBC Monday. Corporate profits are the most important metric to look at as an equity investor and in the US "they are booming and busting like they never have been in history," Bernstein said.

Looking all the way back to the 1930s, the amplitude between profit highs and lows is unprecedented, he added.

The most recent insider trading data from finviz indicates that insider sellling outpaces buying by a ratio of 82! In the most recent data set, $11.6 million in stock was purchased by insiders, while a whopping $957 million was sold.

James Grant, editor of Grant's Interest Rate Observer: "The world is losing faith, as well it might. It's not that the dollar is overvalued - the problem lies with its management. The greenback is a glorious old brand that's looking more and more like General Motors."

Havre, Great Falls, Big Sky, and anything above 7000ft is very cold...
Wind Chills 40-60 below zero also. Expected to last the next couple of days.

The one-tenth ounce American Eagle inventory at the mint has been depleted, almost instantaneously after the coin was made available for purchase. This occurred the day after the mint announced the release of fractional Eagle Gold Bullion Coins in one-half ounce, one-quarter ounce, and one-tenth ounce weights.

Crude falls 2% to end at $73.93 a barrel. Gold dropped $13.70 to $1155.

U.S. consumers' outstanding credit balance fell for the ninth month in a row in October, but the decline in debt this year hasn't been as steep as previously reported, the Federal Reserve said Monday. Outstanding balances of consumer credit fell by $3.51 billion, or 1.7% annualized, in October to $2.482 trillion. Revolving credit - mostly credit cards - fell by $6.95 billion, or 9.3% annualized, to $888.1 billion. Nonrevolving credit, such as auto loans or student loans, rose by $3.44 billion, or 2.6%, to $1.595 trillion.

The Dow Jones Industrial Average rose 1.21 points to 10,390.11. The S&P 500 Index fell 2.73 points to 1,103.25, while the Nasdaq Composite declined 4.74 points to 2,189.61.