Saturday, January 02, 2010

Happy New Year

1/1/10 Happy New Year

Doug Noland: "I will suggest that 2009 marked a historic inflection point in global finance. I have argued that years of policy mismanagement led to the breakdown in the dollar reserve "system" - that for more than 60 years worked (with varying success) in restraining global Credit expansion. This year saw key inflationary/reflationary biases move decidedly from the "Core" (U.S.) to the "Periphery" (notably China, Asia, Brazil, India and the "emerging" markets). Importantly, a discredited dollar and the prospect of ongoing U.S. policy-induced currency devaluation created a backdrop of extraordinary market accommodation for "Periphery" Credit systems.

To an extent never before imagined, economies around the globe could partake in aggressive fiscal and monetary stimulus, rapidly expand Credit, reflate markets and economies - and have little worry about currency vulnerability or an outflow of speculative finance (a far cry from the '90s). The world had changed, and global asset prices were revalued based on a backdrop of expected ongoing dollar devaluation and newfound resiliencies in Credit system and financial flows to ("undollar") "Periphery" economies and non-dollar asset classes.....It's my view that 2009 marked the onset of China's "terminal phase" of Credit Bubble excess. The China Bubble is enormous and it is historic. It's poised to make Japan's late-eighties Bubble era appear rather petite - and to perhaps even rival the scope of the U.S. Credit Bubble. Importantly, "terminal" phases of excess notoriously create acute financial and economic fragilities. They tend to foment perilous asset market distortions; distribute wealth poorly/inequitably; foster systemic malinvestment and structural impairment; and create a financial/economic structure dependent upon unrelenting Credit expansion and speculation. Only determined policymaking - with a willingness to pierce Bubbles and live with the consequences - can stem what evolves into powerful Bubble momentum and an expanding constituency supporting uninterrupted monetary accommodation.

Chinese foreign reserve holdings jumped almost 20% this year to a staggering $2.273 TN. Overall, official foreign reserves inflated almost $900bn during 2009 to a record $7.732 TN (5-year gain of 90%!). The Chinese, in particular, rummaged the world in search of commodities and resource assets. Global reflationary forces certainly fueled a spectacular 2009 for the traded commodities markets. The Goldman Sachs Commodities Index surged 50.3%. Gold jumped 24.2% and silver surged 49.4%. Crude oil jumped about 78% and gasoline surged around 93%. Copper gained 137%. The so-called "commodity currencies" posted big gains this year. The Brazilian real gained 32.7%, the South African rand 28.5%, the Australian dollar 27.6%, the New Zealand dollar 25.1%, the Norwegian krone 20.0%, and the Canadian dollar 15.9%.....Indeed, 2009 was a historic year of global, government-induced synchronized reflation and speculation in virtually all markets, everywhere. The greater the financial and economic fragilities, the more speculators could bank on an extended period of ultra-loose financial conditions."

New York State came perilously close to ending 2009 in the red, Gov. Paterson said Thursday.

For the first time ever, the state's main account - the general fund - ended the year with a deficit, the state controller reported.

Officials covered the $600 million gap with reserve funds, leaving the state with just $883.7 million in cash to start the new year, said Controller Thomas DiNapoli.

"Our state is spending beyond its means," Paterson said. "Our state is running out of money."

Paterson said the dire numbers justified his decision to withhold $750 million in payments to school districts and other entities this month.

If Paterson had not withheld the money, DiNapoli's figures indicate the state might have run out of cash two days ago.

Bloomberg (Stuart Wallace and Chanyaporn Chanjaroen): "Commodities posted the biggest annual gain in four decades, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the longest slump in the global economy since World War II. In 2009, the S&P GSCI Index of 24 raw materials rose 50%, the most since at least 1971, and commodities drew record investment of $60 billion this year, Barclays Capital estimated."

Colorado's minimum wage will drop slightly in the new year - the first decrease in any state's minimum wage since the federal minimum was adopted in 1938.

Thursday, December 31, 2009

Joseph Stiglitz

12/31/09 Joseph Stiglitz

The Labor Department said the number of Americans claiming first-time unemployment benefits fell 22,000 to 432,000 in the latest week, though analysts noted holiday and weather tend to cause big swings this time of year. Yields on 10-year notes, which move inversely to prices, rose 4 basis points to 3.83%, near the highest since August. Bond markets are expected to close at 2 p.m. Eastern time.
The four-week average of initial claims dropped 5,500 to 460,250. Meanwhile, the number of continuing claims in the week ended Dec. 19 declined 57,000 to 4.98 million. The four-week average of continuing claims fell 122,500 to 5.1 million. The gradual decline in continuing claims over the past few months suggest companies are no longer getting rid of workers, and may even be hiring. Yet year-end data tends to be especially volatile because of holidays, bad weather and other one-time factors, economists say.

The Dow Jones Industrial Average finished down 120.46 points, or 1.1%, to 10,428.05 on Thursday. The blue chip average still sported a 0.8% gain for December and a strong 18.8% advance for the year. The S&P 500 index fell 11.32 points, or 1%, to 1,115.10 Thursday. It rose 1.8% for the month, and is up 23.5% for 2009. The Nasdaq Composite fell 22.13 points, or 1%, to 2,269.15 Thursday. It gained 5.8% in December and is up 43.9% for the year. The decade, however, was a lost one for the major benchmarks. The Dow fell 9.3%, its second worst decade on record after the 1930s. The S&P slumped 24.1%, and the Nasdaq slumped 44.2% over the past 10 years.

The Chicago Institute for Supply Management revised lower its December business activity index to take into account seasonal factors, only a day after issuing its initial assessment. The December index was revised to 58.7 from Wednesday's reported 60.0. Readings from September to November were also revised lower.

Holiday shoppers, perhaps thwarted by snowstorms in the Northeast, went on an online spree this holiday, spending $27.1 billion between Nov. 1 and Christmas Eve, according to a report released today from ComScore.

The amount is a 5% uptick from 2008, when buyers spent $26.8 billion online during the same time period. Of course, last year represented a low bar, with sales down 3% from 2007.

This year's increase should not be taken as a sign of broader economic revival, cautioned ComScore Chairman Gian Fulgoni. For one thing, online sales continue to be less than 10% of overall retail spending.

Joseph Stiglitz: “The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.”

What were those 6 “harsh” lessons?

1. Markets are not self-correcting, and without adequate regulation, they are prone to excess.

2. There are many reasons for market failures. Too-big-to-fail financial institutions had perverse incentives: Privatized gains, socialized losses. .

3. When information is imperfect, markets often do not work well – and information imperfections are central in finance.

4. Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster

5. There is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked.

6. Not all innovation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are not properly aligned, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation."

Dec. 26 was the holiday season's second-biggest shopping day, with $7.9B spent, ShopperTrak said. "Although traffic was slightly off for the week compared to last year, consumers purchased more with fewer trips driving sales and assuredly pushing retailers into the black this holiday season."

A whopping 82 percent are optimistic about what the new year will bring for their families, according to the latest AP-GfK poll. That sunny outlook seems at odds with other findings.

Nearly two-thirds think their family finances will worsen or stay about the same next year. And fewer than half think the nation's economy will improve in 2010, even though Americans rated 2009 as a huge downer.

Fidelity Owns a Whopping 27.7% of UNG..#1 Institutional Holder.

Weekly gas-storage reports have fueled market price moves in recent weeks. The U.S. Energy Information Administration is expected to report that 147 billion cubic feet of gas were withdrawn from storage during the week ended Dec. 25, according to the average prediction of 16 analysts and traders in a Dow Jones Newswires survey. The storage estimate is slightly greater than last year's 144-bcf pull from storage and is well above the five-year-average draw of 120 bcf.
The National Weather Service is predicting colder-than-normal temperatures for much of the country from Jan. 4 through Jan. 8. In addition, colder temperatures are expected for Jan. 6-12 in the Southeast U.S. and much of the Midwest and Mid-Atlantic regions.

Fog on Thursday halted vessel traffic on the Houston Ship Channel, a key U.S. oil industry corridor, the Coast Guard said. Pilots decided to halt boarding ships inbound and outbound shortly after midnight CST (0600 GMT), and 10 vessels were waiting inbound and eight outbound at 7 a.m., a spokesman said. Weather forecasters expected the fog to lift by late morning, the Coast Guard spokesman said. Winter brings bouts of fog to the Texas Gulf of Mexico coast, often halting ships on the 53-mile (88-km) channel lined by a major complex of refineries and petrochemical plants.

RUSAL, the world's largest aluminum maker, plans to offer 1.6 billion shares at a range of HK$9.10 to HK$12.50 each, the announcement said, with a listing date of Jan. 27.

The IPO is a major achievement for the Russian company, which is trying to raise cash to repay $14.9 billion in debt, and a big step for Hong Kong, which is trying to attract more publicly listed companies from beyond Asia. claims to have received confirmation from a "source inside Apple" that the company will in fact be holding a media event on January 26th in San Francisco. According to the source, the "big" event will focus on the "mobility space", suggesting an iPhone, iPod touch, or, as many people expect, tablet announcement. Earlier this week, Cloned in China pointed to a Chinese-language article [Google translation] about a blog post apparently from former Google China president Kai-Fu Lee claiming that device will in fact be introduced in January at a price point of under $1000 and will carry a 10.1" multi-touch screen and offer an "amazing user interface", video conferencing capabilities, and e-book offerings in a package described as a "large iPhone". Lee also claims that Apple is expecting first-year sales of 10 million units, far above most observers' expectations at this time.

Crude oil at $80.00.

Freddie Mac: 30-yr mortgage rate edges up to 5.14%.

Commtrendz Commodities: "We expect the multi year low of sub $2.45/MMBtu reached in September of 2009 to be a significant low which is not likely to breach in the coming years. Even with the persistent bearish news of Natural Gas coming from North America, we expect Natural Gas to stay firm in 2010.
"We expect this current rally to target $6.90/MMBtu – $7.10MMBtu levels which are 38.2 % retracement of the multi year low reached in 2009.The MACD on monthly chart too seem to indicate a bottoming process. We expect Natural Gas to trade between $4.22/MMBtu – $4.50/MMBtu on the lower side to $9.20/MMBtu – $9.50/MMBtu (61.8 % of the low made in 2009) on the higher side in 2010."

U.S. natural gas inventories fall 124 bcf: EIA.versus five-year-average draw of 120 bcf.

The Dow Jones Industrial Average finished down 120.46 points, or 1.1%, to 10,428.05 on Thursday. The blue chip average still sported a 0.8% gain for December and a strong 18.8% advance for the year. The S&P 500 index fell 11.32 points, or 1%, to 1,115.10 Thursday. It rose 1.8% for the month, and is up 23.5% for 2009. The Nasdaq Composite fell 22.13 points, or 1%, to 2,269.15 Thursday. It gained 5.8% in December and is up 43.9% for the year. The decade, however, was a lost one for the major benchmarks. The Dow fell 9.3%, its second worst decade on record after the 1930s. The S&P slumped 24.1%, and the Nasdaq slumped 44.2% over the past 10 years.

Wednesday, December 30, 2009


12/30/09 Petroleum

The American Petroleum Institute reported an increase of 1.725 million barrels in U.S. inventories, while analysts expected a drop.Analysts polled by Platts expected a drop of 2.2 million barrels in commercial crude stocks. The API also reported that gasoline stocks fell 1.395 million barrels while distillate stocks fell 3.46 million barrels. Analysts surveyed by Platts expected gasoline stocks to increase by 900,000 barrels, and distillate fuels, which include diesel and heating oil, to fall 2.1 million barrels. The Energy Information Administration will release its more closely watched report on Wednesday.

Cliff Wachtel: "Fifty-seven percent of employers expect to see higher salaries for existing employees in 2010, down from 65 percent in 2009. Also, 29 percent plan to increase salaries in offers to new employees, down from 33 percent in 2009.

As to bonuses, medical coverage and matching 401k contributions, the survey found 37 percent of employers plan to cut benefits in 2010, up from 32 percent who trimmed in 2009.

OK, still, a lot better to have the job than not, right? Then came the stunner:

Many employers — 37 percent — said they plan to take advantage of the large labor pool and replace low-performing employees in 2010.

Now wait a minute! If 20% are planning to hire, mostly for lower compensation, and 37% plan on just replacing workers, more often than not at lower compensation packages, then what does that mean? I’m no statistician, but seems like we’ve got two possibilities here:

Sucks: If the 20% hiring are part of the 37% that are replacing, then we’ve got a net zero gain in jobs, and a drop in incomes and benefits – leaving less spending power than before. Remember that US GDP is about 70% consumer spending – so where does that leave GDP?

Really Sucks: If the 20% hiring are somehow distinct from the 37% replacing, then isn’t that somehow a 17% net decrease in jobs? With many of those still employed at lower wages? We assume those who have held on are not pressing for raises at this time.

Bad for growth, bad for the dollar, which has rallied recently on improved stimulus exit and interest rate expectations. That’s bad for Treasury Bond prices. That’s really bad, because when they drop, interest rates go up – the same rates that determine mortgage rates – which are about to be reset (higher) en masse in 2010 and 2011.

Guess what that does to housing and banking, the very industries which led us into the current crisis and up the current rally?"

The U.K.'s Takeover Panel said Wednesday that it has extended a deadline under which chocolate maker Cadbury can release material new information related to the takeover bid from Kraft. The Panel said the deadline has been extended to Jan. 15 from Jan. 12 to allow the release of Cadbury's detailed estimated trading results for 2009. The deadlines for the last day to send a revised offer and the date by which any offer must be declared unconditional remain unchanged at Jan. 19 and Feb. 2 respectively.

GMAC Financial might receive more government aid. General Motors has extended a December 31 deadline for bids for its Swedish car brand Saab, which will restart some production lines in January after a shutdown, Saab said on Wednesday.

Low prices are good news for homeowners, who can expect to pay 11% less on average for gas heat this winter than last and who have also seen electricity prices fall. But producers have been forced to slash budgets and sell assets as their revenues have dropped.

On Dec. 31st, the Blue Moon will dip into Earth's shadow for a partial lunar eclipse. The event is visible from Europe, Africa and Asia: map. At maximum eclipse, around 19:24 Universal Time, approximately 8% of the Moon will be darkly shadowed.

U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data. “Supply is a challenge and will continue to be a challenge next year,” said David Schnautz, an interest-rate strategist in Frankfurt at Commerzbank AG.

Bill Bonner: "We reported that the US government would need to roll over $2.5 trillion worth of debt next year. We probably erred. The number was right, but it was meant to be over the next two years. During the next two years also, worldwide, banks need to roll over $7 trillion. Whether it is over one year or two years, we’re talking big money."

The weeks after Christmas are very important for retailers, with the week after Christmas alone accounting for 15 percent of holiday season sales.

Weather forecast and natural gas: "In fact the combination of last week and the next 3 on our current weather-derived storage forecasts produce the greatest 4-week pull in the 15 years that either AGA or EIA has been reporting weekly storage changes. And this is not inclusive of shift in supply/demand as insinuated by the 64 draw we saw on Thursday, so the risk is higher. Additionally, this would tie 2000 for the largest DEC draw in the same since-1994 time frame."

On Nov 19, the terrorist bomber's father met with the CIA at the embassy in Nigeria and warned them about the potential dangers of his son's behavior. This reminds me of the CIA being warned in advance of 9/11.

Most recently the foreign minister of Yemen said that there are likely 200 to 300 terrorists in Yemen plotting future attacks.

More businesses in the Chicago region were expanding in December than at any time in the past 16 months, based on the latest data from the Chicago purchasing managers index. The business activity index rose to 60.0% from 56.1% in November, according to media reports.

EIA Petroleum Inventories: Crude -1.5M vs. consensus of -1.7M. Gasoline -0.4M vs. +0.4M. Distillate -2.1M vs. -2.1M. Utilization 80.3% vs. 80.1%.

Richard Russell: "I’m thinking that we’re on the path for fireworks in 2010. The reason I say that is because the federal deficits are running into the trillions of dollars. The roll-over of debt coming up in the next two years defies comprehension. For instance, in the next two years the U.S. must roll over $2.5 trillion. Worldwide, banks during the coming two years will have to roll over $7 trillion. On top of that commercial real estate in the U.S. has $750 billion to roll over.

Whether all this debt can be successfully rolled over is doubtful, but one thing is clear - interest rates will go up. This will have an immediate impact on housing. Nobody can negotiate a mortgage now - and worse, nobody has the money to buy a house for cash."

Art Cashin, director of floor operations at UBS Financial Services, shared his stock-market insights.

“Six out of the last 10 Januarys have been down and there is some feeling that people are taking more notice of tax strategies,” Cashin told CNBC.

“There wasn’t an awful lot of tax selling this year, although we had a very significant rally from March.”

Cashin said the markets are reminiscent of the rally in 2003.

“[The rally] ran from late February into year-end and it lasted a bit into January or so, and then we had a pullback after that,” he said. “So we’re still waiting to see. I’m stubbornly concerned that they are overvalued—there is a feeling that it’s 'Nasdaq 4,000.'”

In the last bond sale of the year, the Treasury Department sold $32 billion in 7-year notes at a yield of 3.345%.

The Treasury Department sold $5 billion in 36-day bills on Wednesday at a rate of 0%, the first time its sold the short-term securities under its cash management bill program with no yield at all since at least 2005.

The Dow Jones Industrial Average gained 3.1 points to close at 10,548.51, led by a 1.7% gain in shares of Alcoa Inc. (AA). The S&P 500 index rose 0.23 points to 1,126.42, lifted by a 0.5% gain in the information technology sector as semiconductor stocks rebounded from the previous session. The Nasdaq Composite rose 2.88 points, or 0.1%, to 2,291.28.

Tuesday, December 29, 2009

Eric Sprott

12/29/09 Eric Sprott

The Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize, according to hedge fund manager Eric Sprott.

The Toronto-based money manager, whose Sprott Hedge Fund returned 496 percent over the past nine years while the S&P 500 lost 32 percent, said the index’s 67 percent rally since March reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9.

“We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,” Sprott, chief executive officer of Sprott Asset Management LP, which oversees C$4.3 billion ($4.09 billion), said in an interview Dec. 18.

Brick-and-mortar retailers did just fine in online holiday sales, according to comScore. Wal-Mart (WMT) led online department stores with 81M uniques in November, up 62%. Target (TGT) pulled in 39M visitors (+43%), and 19M shoppers visited (+36%). Aggregate online spending rose 10% to $12.3B.

John Hussman: "Stocks remain overvalued, overbought, overbullish and face rising yield pressures - a combination that has typically been associated with increased risk of abrupt market losses."

Russia’s gas monopoly Gazprom and China National Petroleum Corporation (CNPC) signed an agreement on the supplies of Russian natural gas to China, an official at the Gazprom Information Department told Itar-Tass on Monday.

“On December 22-27, Gazprom’s delegation, led by Deputy CEO Alexander Medvedev, held this year’s final round of commercial talks with the CNPC relevant to arranging Russia’s gas supplies to China via the western and eastern routes,” the official said.

“Based on the results of the negotiations and in compliance with the previously reached agreements between Gazprom Export and a subsidiary of CNPC, PetroChina International, the sides signed the agreement on major terms and conditions for the supplies of natural gas from Russia to China,” the official said.

The agreement defines the basic commercial and technical parameters for Russia’s gas supplies to Chinese consumers, the official said.

The parties also agreed to promote their intensive cooperation in January-March 2010 in order to reach an understanding on other terms and conditions, which would subsequently lay the foundation for entering into contracts on gas supplies from Russia to China, the Information Department’ s official said.

Case-Shiller: U.S. home prices flat in October. Case-Shiller: Housing Recovery Still Weak, October Decline Of 7.3% Slightly Worse Than Forecast.

"The turnaround in home prices seen in the spring and summer has faded, with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis," said David Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement.

The Oil Drum: "A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses.

Goldman Sachs was one of the foreign banks, along with Citigroup, Merrill Lynch and Morgan Stanley, blamed by the state assets watchdog for providing "extremely complicated" and difficult to understand derivatives products.

...The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year."

Royal Dutch Shell Plc, Europe's largest oil company, expects the pressure on refining margins and costs to persist next year amid a challenging economic situation.

Dan Amoss: "With valuations high, long-term interest rates heading up, and credit stress still an issue, the environment for short selling is growing more favorable."

The consumer confidence index climbed to 52.9 in December from a revised 50.6 in November. Confidence had been expected to rise to 54.0 compared to November's original reading of 49.5, according to a MarketWatch survey of economists.

UK and Canadian 10 yr bond yields are rising to 13 month highs, and Australia and the US are back to 5 month highs. Mortgage rates today are at a 4 1/2 month high according to

Credit card charge-offs rose by about one-half percentage point in November to 10.56 percent, and is likely to continue to rise to a peak of between 12 percent and 13 percent in mid-2010, Moody's said in a statement.

Delinquencies, which measure the proportion of accounts for which a monthly payment is more than 30 days late, also increased to 6.2 percent in November, though early-stage delinquencies fell to 1.6 percent for the month, Moody's said.

As interest rates are set to rise, investors should position themselves away from bonds to avoid being caught in a severe fall in prices, Dan Deighan, founder of Deighan Financial Advisors, told CNBC Tuesday. There is going to be a meltdown in the bond market," Deighan said.

"It's time to get out of bonds," he added.

Trading for Jan natural gas contracts end at close today.

India's state-owned Oil and Natural Gas Corp. and Gas Authority of India Ltd. could take a 12.5-percent stake in a Chinese gas pipeline in the Bay of Bengal.

Government officials are said to be considering a $251 million investment for GAIL and ONGC Videsh, the overseas division of ONGC, for the 540-mile gas pipeline planned by the China Petroleum Corp.

CNCP is considering the pipeline in Myanmar to supply natural gas from offshore blocks in the Bay of Bengal, The Economic Times of India reported.

Daewoo recently doled out a $1.4 billion contract to develop pipelines and onshore infrastructure at the Myanmar fields.

CNPC is offering a 49.9 percent stake in the pipeline to developers of two gas fields in the region, the Times said.

The Treasury Department sold $42 billion in 5-year notes on Tuesday at a yield of 2.665%, the highest since July. Bidders offered $2.59 for each $1 of debt being sold, matching the average at the last four monthly sales. Indirect bidders, a class of investors that includes foreign central banks, bought 44% of the sale, compared to a recent average of 48.2%. Direct bidders, which include investors bidding for their own accounts, purchased another 13%, the highest since October 2008 and compared to an average of 4.6% in the last four sales. After the auction, yields on 10-year notes fell 1 basis point to 3.84%, hovering near a four-month high.

Feb. gold ends down 0.9% at $1,098.10 an ounce.

Jim Bianco submits: "The Federal Reserve owns 80% of AIG. With each passing day it looks like the Federal Reserve is adopting AIG Financial Product’s business practices. That is, when faced with a financial problem, they create complicated tools (like CDS). When critics says these new products will not work, tell them they do not know what they are talking about and create even more complicated tools to dazzle everyone. Once the tools are so complicated that no one understands them, you will be hailed as an expert with no peer. You might even be named TIME’s Person of the Year."

Bloomberg: "A link between the Northwest Airlines plane attack and Yemen is “extremely significant,” said Rohan Gunaratna, head of the Singapore-based International Center for Political Violence and Terrorism Research. “This demonstrates that Yemen could be used as a forward operating base to strike al-Qaeda’s most important enemy, the U.S.”

Yemen is struggling to subdue an insurgency by northern Shiite rebels that has drawn in its neighbor Saudi Arabia, a key U.S. ally, as well as a secessionist threat in the south where the government has little control outside major cities.

U.S. National Security Adviser James Jones told CNN on Dec. 5 that al-Qaeda is relocating to Yemen and Somalia in the face of pressure from U.S. and Pakistani forces on the Pakistan- Afghan border, posing “a threat to our national security.”

“Yemen is second only to Afghanistan and Pakistan in counterterrorism importance,” said Christopher Boucek, a Yemen expert at the Washington-based Carnegie Endowment for International Peace. “Potentially we are talking about a failed state right on the border of the world’s largest oil exporter.”

Tom Petruno:“But whatever additional federal money flows into Fannie and Freddie would almost certainly come at the expense of shareholders’ remaining stake. The government now owns 80% of both firms."

The Oil Drum: "It is quite possible that in the next decade, the increase in price (or the decreasing availability) of oil and financing, will offset the benefits of many types of trade. The pursuit of economic efficiency, through increasingly diverse and extensive global trade has glossed over two important facts which this post will examine: 1) higher oil prices in long distance transport must at some point exceed (economically or otherwise) the benefits achieved from some trade and 2) a complex global trade system is gradually but pervasively decreasing the ability for localities, regions and nations to be self sufficient – so many of our supply chain inputs are imported that continued increase in oil price/affordability will resurrect import substitution policies, not only for less developed countries, but for the US and rich nations as well."

Jim Dalrymple: "Gene Munster, senior research analyst at Piper Jaffray, said in a research note to clients on Monday that initial tablet successes will come from the confidence consumers have with Apple's mobile platform. It is widely expected that Apple will use an iPhone-like operating system on the tablet, enabling consumers to utilize existing apps."

The Dow ended down 1.67, the S&P off 1.58, and the Nasdaq down 2.68.

Monday, December 28, 2009


12/28/09 Israel

WSJ: Many investors realize that stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was, because most people forget about the effects of inflation. Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels.

A late boost from procrastinating consumers and an extra day of shopping between Thanksgiving and Christmas increased total retail sales, excluding automobiles and gas, 3.6% over the year-earlier period through Christmas Eve, according to MasterCard Inc.'s SpendingPulse unit.

Still, excluding the extra shopping day, the sales increase would have been closer to 1%, MasterCard said.

This is the first time a conference for all of Israel's heads of missions has been held.The country's 140 ambassadors and consul-generals are participating Is Israel close to invading Iran?

The number of oil and gas rigs fell to 1,178, down 15 rigs from the previous week, according to data from oil-field services company Baker Hughes Inc. The number of gas rigs was 751, a decrease of 22 rigs from last week, while the oil rig count was 416, an increase of 7 rigs. The number of miscellaneous rigs was unchanged at 11 rigs.
The number of gas rigs in use peaked at 1,606 in September 2008.

Joe Bastardi with Accuweather has been good on the weather. Here's his latest:
What is facing the major population centers of the Northern Hemisphere is unlike anything that we have seen since the global warming debate got to the absurd level it is now, which essentially has been there is no doubt about all this. For cold of a variety not seen in over 25 years in a large scale is about to engulf the major energy consuming areas of the northern Hemisphere. The first 15 days of the opening of the new year will be the coldest, population weighted, north of 30 north world wide in over 25 years in my opinion.

Bloomberg: “A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet.”

10-year Treasury bonds yield 3.83% and 30-year at 4.69%. Mortgage rates on the rise.

Only one sunspot. The cold weather continues. Natural gas up 30 cents and approaching $6.
“The sun is in the pits of the deepest solar minimum in almost 100 years,’’ said Madhulika Guhathakurta, lead program scientist for NASA’s Living With A Star program, whose focus is solar variability and its effects on the earth. Because of slightly decreased solar irradiance during the ongoing minimum cycle, the sun may be acting as a counterweight to the warming effects of greenhouse gases, according to recent research by Judith Lean of the Naval Research Lab and David Rindof NASA’s Goddard Institute for Space Studies.

Spain's budget deficit for the first 11 months of the year has ballooned to 6.79 percent of gross domestic product -- five times last year's figure -- due to dipping tax revenues and the mounting costs of combating the economic crisis, the government said Monday.

China will start building storage facilities across the country for natural gas to avoid a reoccurrence of this winter's supply shortages at Chinese cities, Xinhua cited a top energy official as saying.

The Chicago Federal Reserve Bank said on Monday its Midwest manufacturing index rose in November to the highest in nearly a year in a broad-based expansion that covered all of the major industry sectors.

The index climbed 1.2 percent to a seasonally adjusted 84.2 -- the highest since December 2008 -- from an upwardly revised 83.2 in October. The October reading was originally reported at 82.9.

The Treasury sold $44 billion of 2-year notes at a high yield of 1.089 percent. The bid-to-cover ratio was 2.91, well above the recent average of 2.8. Still to come: A $42 billion 5-year auction on Tuesday and a $32 billion 7-year auction on Thursday.

The Dow Jones Industrial Average gained 26.98 points, or 0.3%, to finish at 10,547.08, its highest closing level since October of 2008. The S&P 500 index rose 1.30 points, or 0.1%, to 1,127.78, also its highest close since October of last year. The Nasdaq Composite gained 5.39 points, or 0.2%, to 2,291.08, its highest close since September 2008.

Sunday, December 27, 2009

Property Values

12/27/09 Property Values

BusinessWeek: China's premier on Sunday rejected foreign pressure to let its currency rise and complained that trade protectionism by other governments was holding back the country's development.

The complaint by Premier Wen Jiabao, China's top economic official, came as the plunge in consumer demand caused by the global crisis is aggravating disputes between China and trading partners including the United States and Europe over access to markets for tires, shoes and other goods.

A key irritant is Beijing's currency controls, which Washington and other governments say keep its yuan undervalued, giving China's exporters an unfair price advantage and swelling its politically volatile trade surplus.

"The basic stability of the renminbi is conducive to international society," Wen told the official Xinhua News Agency in an interview. "We absolutely reject all pressure on us to raise its value."

“Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize” them, Wen said today in an online interview with the official Xinhua News Agency. China will “absolutely not yield” to pressure on the yuan, he said.

Mike Burk: "The market is overbought, but, at this time of the year, that is irrelevant.

Since 1886 the Dow Jones Industrial Average (DJIA) has had an average gain of slightly over 1% during the last 4 trading days of the year accounting for a little over one seventh of its average annual gain of 6.9%."

Stephen Roach, chairman of Morgan Stanley Asia, forecasts a "multiyear retrenchment" on the part of the American consumer. And why Larry Fink, CEO of BlackRock Inc., believes "the economy will take three to four to five years to get back to normal."

Freddie Mac whispers that 30-year rates could climb to 6% in 2010.

Earthfiles: "NASA Reports Earth Close to
Unexpected Interstellar Cloud, a “Local Fluff.”
“The Voyagers (spacecraft launched in 1975) are not actually
inside the Local Fluff. But they are getting close and can sense what
the cloud is like as they approach it. ...There could be interesting
times ahead!” - Merav Opher, Ph.D., NASA Heliophysicist

NASA reports “the Fluff is held at bay just beyond the edge of the solar system by the sun's magnetic field, which is inflated by solar wind into a magnetic bubble more than 10 billion kilometers wide. Called the heliosphere, this bubble acts as a shield that helps protect the inner solar system from galactic cosmic rays and interstellar clouds. The two Voyagers are located in the outermost layer of the heliosphere, or heliosheath, where the solar wind is slowed by the pressure of interstellar gas. The fact that the Fluff is strongly magnetized means that other clouds in the galactic neighborhood could be, too. Eventually, the solar system will run into some of the Fluff, and its strong magnetic fields could compress the heliosphere even more than it is compressed now. Additional compression could allow more cosmic rays to reach the inner solar system, possibly affecting terrestrial climate and the ability of astronauts to travel safely through space.”

Bruised by the health care debate and worried about what 2010 will bring, moderate Senate Democrats are urging the White House to give up now on any effort to pass a cap-and-trade bill next year.

“I am communicating that in every way I know how,” says Sen. Mary Landrieu (D-La.), one of at least half a dozen Democrats who've told the White House or their own leaders that it's time to jettison the centerpiece of their party's plan to curb global warming.

Tom Armistead: "Property values would never have become so inflated if the spending power fueled by the ability to secure mortgages by fraud had not propelled them upwards. Nor would they have plunged so rapidly if the inevitable foreclosures had not glutted the market with distress sales.

Synthetic securities exacerbated the problem. Not content with creating toxic waste, the investment banks went on to duplicate it, as if by using a photocopy machine to create bogus bonds. Briefly, CDS referencing subprime RMBS were bundled together in synthetic CDOs. CDS are in point of fact insurance transactions, and should be regulated as such, with a requirement of insurable interest on the part of the buyer. Otherwise, problems arise with moral hazard, similar to permitting an arsonist to buy fire insurance on his neighbors house.

Synthetic CDOs in effect were collections of insurance policies that were not backed by insurable interest, and were instead designed and contrived to duplicate losses for the benefit of those who held the CDS protection."