Saturday, January 16, 2010


1/16/10 Monetization

Doug Noland: "I strongly believe years of massive U.S. current account deficits created a global financial backdrop that foments historic booms and busts. Our system’s Credit excesses were indeed the root cause of the imbalances that ensured financial crisis. And I have to admit that I have difficulty these days grasping how analysts could see it any other way. A big stock market recovery and resurgent optimism have emboldened views that should have been thoroughly discredited....Trillions of combined federal government debt issuance and Federal Reserve monetization have become this cycle’s ammo for battling “deflation.” I have stated my belief that this unprecedented inflation of government Credit is both delaying necessary economic adjustment and creating a very dangerous Bubble backdrop. I have argued that reducing our economy’s dependence on massive Credit expansion is fundamental to creating a more stable financial and economic environment. Comprehensive economic restructuring is essential for reducing Credit dependency and dramatically shrinking our current account deficits. But with the markets up and the economy rebounding, focus on structural problems and imbalances has been relegated to the “permabears” - who have apparently learned little during the past 25 years."

Diana Olick: "In order to get the second lien holder to drop the lien, the first lien holder generally negotiates some partial payment to the second lien holder. The second lien holder doesn't have to agree, but more and more are doing so.

That's all legal.

But here's what's not legal and what's apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say "on the side," I mean in cash, off the HUD settlement statements, so the first lien holder doesn't see it.
"They are pretty clear and pretty upfront about the fact that if the first lender knows they are getting paid, the first lender will kill the short sale," says Brandt. "So these second lenders are asking for the payments off the closing documents, off the HUD statement, usually in a cashiers check prior to closing. Once they receive that payment, they will allow the short sale to go through, which according to RESPA laws and the lawyers that we have spoken to on the topic is not legal."

The Federal Deposit Insurance Corp said that Town Community Bank and Trust of Antioch, Illinois, and St. Stephen State Bank of St. Stephen, Minnesota, had failed. Other banks agreed to assume the deposits at those failed institutions.

Barnes Banking Co of Kaysville, Utah, was also seized, and the FDIC created a bridge bank to protect depositors as they move their accounts to other institutions.

The agency did not give the causes of their collapses. The FDIC has said that the pace of bank failures will remain elevated this year because of extensive loan losses tied to home mortgages and commercial real estate.

Bloomberg: “China’s retail sales grew at the fastest pace in more than two decades in 2009 as government stimulus spurred demand for home appliances, cars and electronics in the world’s most populous nation. Retail sales in real terms, which are adjusted for inflation, posted their biggest gain since 1986… Rural consumption expanded around 15.5% from a year earlier, outpacing urban spending for the first time, Yao added.”

The holding company for MediaNews Group Inc. newspapers, including The Denver Post and San Jose Mercury News, says it plans to file for Chapter 11 bankruptcy protection.

“A record 3 million U.S. homes will be repossessed by lenders this year… according to a RealtyTrac Inc. forecast. Last year there were 2.82 million foreclosures… More than 4.5 million filings are expected this year, including default or auction notices and bank seizures, said Rick Sharga, senior vice president for the…the seller of default data and forecasts. There were 3.96 million filings in 2009.”

Friday, January 15, 2010

Nonperforming Loans

1/15/10 Nonperforming Loans

J.P. Morgan Chase & Co. on Friday said fourth-quarter commercial banking net income fell more than 50% from the year-ago period to $224 million. Provision for credit losses in commercial banking rose 160% to $494 million. J.P. Morgan said the increase was driven by continued weakness in the credit environment, particularly real estate-related segments. The net charge-off rate rose to 1.92% from 0.4%. Nonperforming loans in the fourth quarter were $2.8 billion, compared with $1.8 billion in the year-earlier quarter, the bank said.

The Empire State index rose to 15.9 in January from an upwardly revised 4.5 in December.

The rate of U.S. consumer inflation decelerated in December, the Labor Department said Friday. The consumer price index increased 0.1%, after a 0.4% rise in November. This is the slowest pace since July. Energy prices rose 0.2% after a 4.1% spike in November. Food prices rose 0.2% after a 0.1% gain in the prior month. The core CPI, excluding food and energy costs, was up 0.1% in December after remaining flat in November. Economists were expecting the CPI to rise 0.2% and the core rate to rise 0.1%.

The Dow adjusting for inflation needs to be around 15,000 just to equal 2000 purchasing power.

Shiseido Co Ltd , Japan's largest cosmetics company, has agreed to buy U.S.-based Bare Escentuals for $1.7 billion, as it looks to speed up its expansion and break into a new part of the North American market.

George Ure: "Port of Long Beach was down 13.6% for the fiscal year overall, and imports were down 10.1% the the FY, but down even more (-13.4%) in December. No recovery there.

The Port of Los Angeles was only down 4.41% compared with December 2008 and look at this! Exporters were up 40.23% for the month. Still, for the calendar year, Port of L.A. is down 14.02% overall. Damn, thought we might had something going there.

Up the coast, Seattle, Portland and Tacoma are still running numbers, but Oakland loaded inbound was up 17.9% in December. For the year they were down 8.2% on twenty-foot-equivalent units (TEU's). No surprise why Oakland doing well - they are close to many Asian ports. 5,230 maybe to Oakland from Tokyo while Los Angeles is closer to 5,440. Couple of hundred miles at 20 knots is 10-hours of operating costs inbound and another 10-hours outbound. Seattle is a little closer than LA to some ports, but 5,260-miles only gets about even with Victoria, B.C. or Port Angeles, WA., then there's the run down Puget Sound in the Vessel Traffic System which means a slowdown to pick up a pilot at Port Angeles and then there's fees for that (both ways) going to Tacoma or the POS. Toss in lots of recreational boaters, occasional fog and it's more workload in the wheelhouse."

China's foreign exchange reserves swelled to record levels in December, up 23% from a year ago to $2.4T. Chinese banks extended 379.8B yuan ($55.6B) in new loans, taking the annual total to an unprecedented 9.59T yuan, and stoking further fears of an asset price bubble.

Foreign Direct Investment in China more than doubles to $12.1B in December.

According to CMA, a unit of the CME Group that provide data on credit derivatives, California is ranked as No. 10 of the Top 10 default candidates among sovereign debtors, right behind Greece. No. 1 and 2 are Argentina and Venezuela.

“Hershey coming in as a standalone bidder is fraught with
difficulties given the size of the cash required to compete with
Kraft,” said Icap’s Smith. A bid “would almost certainly
require a massive rights issue,” he added.

Kraft has until Jan. 19 under U.K. law to raise its offer, and Hershey may conclude that a higher Kraft bid puts the maker of Dairy Milk chocolate and Creme Eggs out of its reach, the people said. Hershey will have another four days, until Jan. 23, to decide whether to enter the fray. In addition to financing the bid through loans and new Hershey shares, the company is also trying to raise cash by selling equity stakes to new investors, the people said.

The Reuters/University of Michigan consumer sentiment index rose to 72.8 from 72.5 in December. The consensus forecast of Wall Street economists surveyed by MarketWatch was for sentiment to rise to 75.0.

Wyoming natural gas production declined in 2009, 1st time since 1997.

The output of the nation's factories, mines and utilities rose a seasonally adjusted 0.6% in December, the sixth increase in a row following the worst downturn since the end of World War II, the Federal Reserve reported Friday. Colder-than-usual weather contributed to the gain in December, with utility production rising a seasonally adjusted 5.9%. The output of factories dropped 0.1% in November after a 0.9% gain in November, repeating the see-saw pattern of the past four months. Output of mines rose 0.2%. For all of 2009, output plunged 9.7%, the steepest yearly decline since output fell 13.7% in 1946.

American families were squeezed last year as their inflation-adjusted weekly wages fell 1.6 percent — the sharpest drop since 1990 — even as consumer prices rose only modestly. Over the year, real average hourly earnings decreased 1.3 percent.

The Dow Jones Industrial Average fell 100.9 points, or 0.9%, to 10,609.65, leaving the blue chips off nearly 0.1% from the week-ago close. The S&P 500 Index shed 12.43 points, or 1.1%, to 1,136.03, down 0.8% for the week. The Nasdaq Composite Index declined 28.75 points, or 0.2%, to 2,287.99, off 1.3% for the week.

The longest, ring-like solar eclipse of the millennium started on Friday, with astronomers saying the Maldives was the best place to view the phenomenon that will not happen again for over 1,000 years.

U.S. space agency NASA said on its website the eclipse was annular, meaning the moon will block most of the sun's middle, but not its edges, causing it to look like a ring.

This blockage will last for 11 minutes, 8 seconds, an annual duration NASA said would not be exceeded until December 23, 3043.

Thursday, January 14, 2010

Emergency Action

1/14/10 Emergency Action

U.S. foreclosure actions shattered all records in 2009 and will do so again this year, with unemployment and wage cuts overcoming programs to remedy failing home loans, RealtyTrac said on Thursday.

A record 2.8 million properties with a mortgage got a foreclosure notice last year, jumping 21 percent from 2008 and 120 percent from 2007, the Irvine, California-based real estate data company found.

The loan failure rate -- and thus the fallout for home prices and the economy -- would have been even worse without foreclosure prevention programs and loan processing delays caused by sheer volume, the company said.

First-time claims for state unemployment benefits rose in the latest week by the most in five weeks, the Labor Department reported Thursday. The number of initial claims in the week ending Jan. 8 rose 11,000 to 444,000. The consensus forecast of Wall Street economists was for claims to inch lower to 433,000. Claims in the previous week were revised to 433,000 down from 434,000. This is the highest level since the week ended Dec. 19. The four-week average of initial claims fell 9,000 to 440,750. Meanwhile, the number of Americans receiving state jobless benefits fell 211,000 to 4.60 million in the week ending Jan. 2. The four-week moving average of continuing claims fell 151,500 to 4.86 million.

Import prices were unchanged in December after four months of gains, the Labor Department reported Thursday. A decline in fuel prices offset gains in other sectors, the government said. Economists had expected import prices to be flat as imported oil prices had fallen in the month. Fuel import prices fell 1.4% in December after a 7.1% gain in November. Non-fuel import prices rose 0.4% for the fifth straight month. Export prices rose 0.6% in December. Excluding the farm sector, export prices were up 0.5%. For the year, export prices were up 3.4% after falling 2.9% in 2008.

U.S. retail sales fell a seasonally adjusted 0.3% in December on widespread weakness across different kinds of stores, the Commerce Department estimated Thursday. The decline was unexpected, as economists surveyed by MarketWatch were forecasting a 0.5% gain. Auto sales disappointed, dropping 0.8% in dollar terms despite an increase in unit sales reported by the automakers. Excluding auto sales, retail sales fell 0.2%. Sales for all of 2009 fell 6.2% compared with 2008 to $4.14 trillion. It was the largest decline on record, dating back to 1992. It was only the second decline on record; the other was the 0.5% drop in 2008.

January 6, 2010
Anchorage Daily News

Alaska will participate at 10 a.m. in the first-ever test of the Emergency Action Notification system designed to alert the entire nation in the event of an emergency.
The system has never been tested before and can only be activated by the president during a national emergency.

January 12, 2010
By Holly Deyo

"I received a disturbing email yesterday regarding massive amounts of grain shipping out of the U.S. to foreign countries. Granaries that long stood idle are going full-bore. Miles and miles of rail cars are filled and ready to transport our wheat, oats and corn reserves for shipment out of country."

"We are pursuing intensive dialogue with the Chinese on the subject of energy security, in which we have raised our concerns about Chinese efforts to lock up oil reserves with long-term contracts," David Shear, deputy assistant secretary of state for East Asian and Pacific affairs, told the House Armed Services Committee yesterday.

January 13, 2010

Watch This Commodity in 2010
by Guy Lerner

If there is one commodity that I believe will be worth watching in 2010, it will be natural gas. Natural gas has the technical characteristics of an asset poised for a secular trend change from down to up, and I believe the price action over the past 4 months has already confirmed that a trend change is underway."

Calgary — Apache Canada Ltd. has taken a majority ownership position in Kitimat LNG Inc.'s planned natural gas export facility.

In a major step forward for the $3-billion project, Apache said it will fund engineering and design costs and operate the facility when it is built – although a decision to construct won't likely come until 2011. The company is paying for a 51 per cent stake in the project, and reserved 51 per cent of the terminal's export capacity.

Apache is a major land holder in northeastern British Columbia, where technological advances have opened up vast new natural gas reservoirs in a pair of plays called the Horn River and the Montney.

“Development of the Kitimat LNG project has the potential to open new markets in the Asia-Pacific region for gas from Apache's Canadian operations, including the Horn River Basin in northeast British Columbia, where our net estimated resource potential exceeds 10 trillion cubic feet of gas,” G. Steven Farris, Apache's chairman and chief executive officer, said in a statement.

If it is built, the export terminal on the B.C. coast at Kitimat is expected to begin shipping 700-million cubic feet per day of natural gas to Asia in liquefied form, starting in 2014.

There's a dollar crisis on the horizon unless the U.S. drastically reins in its debt, warns the Committee on the Fiscal Future of the U.S., while the World Economic Forum reports the global deterioration of public finances is one of 2010's top threats and could push economies into full-fledged debt crises.

madhedgefundtrader: "Use this strength in the greenback to scale into core long positions in the currencies of countries that are major commodity exporters, boast rising trade and current account surpluses, and possess small consuming populations. I’m talking about the Canadian dollar (FXC), the Australian dollar (FXA), and the New Zealand dollar (BNZ), all of which will eventually hit parity with the greenback. Think of these as emerging markets where they speak English, best played through the local currencies.

If you’re looking for a risk controlled pairs trade, I vote for going long the Canadian dollar and short the Euro. For a sleeper, buy the Chinese Yuan ETF (CYB) for your back book. A major revaluation by the Middle Kingdom is just a matter of time."

Manhattan apartment rents dropped 9.4 percent in the fourth quarter of 2009 from a year earlier as Wall Street jobs vanished in the recession.

The median rent fell for all apartment sizes except two- bedrooms, which were little changed, according to a report today by broker Prudential Douglas Elliman Real Estate and appraiser Miller Samuel Inc. A separate tally by broker Citi-Habitats Inc. showed the average apartment price declined 7.3 percent for the year. The company didn’t report medians.

New York City lost 25,200 finance jobs in the 12 months ended Nov. 30 and the unemployment rate climbed to 10 percent, curbing tenants’ appetite for bigger and more expensive apartments. Joblessness also forced landlords across the U.S. to cut prices as the nationwide vacancy rate reached a record 8 percent in the fourth quarter, New York-based research firm Reis Inc. said Jan. 7.

The Commerce Department said Thursday that business inventories rose by 0.4 percent in November, double the 0.2 percent rise that economists had expected. It was the second consecutive rise in inventories after 13 months of declines. The hope is that businesses will begin restocking their depleted shelves, helping to support the economic recovery.

Global job crisis could get worse: IMF chief.

Working gas in storage was 2,852 Bcf as of Friday, January 8, 2010, according to EIA estimates. This represents a net decline of 266 Bcf from the previous week. Stocks were 103 Bcf higher than last year at this time and 121 Bcf above the
5-year average of 2,731 Bcf. In the East Region, stocks were 6 Bcf above the
5-year average following net withdrawals of 146 Bcf. Stocks in the Producing
Region were 62 Bcf above the 5-year average of 844 Bcf after a net withdrawal of
100 Bcf. Stocks in the West Region were 53 Bcf above the 5-year average after a
net drawdown of 20 Bcf. At 2,852 Bcf, total working gas is within the 5-year
historical range.

Natural gas stockpile levels fell more than expected last week, the government said Thursday.

The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states dropped by 266 billion cubic feet to about 2.85 trillion cubic feet for the week ended Jan. 8.

Analysts expected a draw of between 253 billion and 258 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The inventory level was 4.4 percent above the five-year average of about 2.73 trillion cubic feet, and 3.7 percent above last year's storage level of about 2.75 trillion cubic feet, according to the government data.

Bair blames the Federal Reserve for the financial crisis.

Feb. gold ends up $6.20 at $1,143 an ounce.

The Dow Jones industrial average added 29.78 points, or 0.28 percent, to 10,710.55. The Standard & Poor's 500 Index rose 2.78 points, or 0.24 percent, to 1,148.46. The Nasdaq Composite Index gained 8.84 points, or 0.38 percent, to 2,316.74.

Wednesday, January 13, 2010

Sell Signal

1/13/10 Sell Signal

Robert McHugh: "Stocks saw a key indicator generate a sell signal Tuesday, one that has produced declines within 2 weeks of its occurrence the past 5 times it happened over the past 3 years. Three of those times saw stock market declines of 1,000 points or greater in the Industrials."

Commission chairman Phil Angelides opening remarks:


"Nearly 7 million Americans have lost their jobs since the economic downturn began. Nearly 25 million Americans – or over 16% of our workforce – are unemployed, underemployed because they can’t find full time work, or have given up looking for work."

"Over 2 million families have lost their homes to foreclosure in the last three years and over 10 million have been in the foreclosure process during that same time period. In the Central Valley of California - from which Vice Chairman Thomas and I hail- alone, there have been over 100,000 foreclosures since 2006."

"And, U.S. households have seen over $13 trillion in wealth evaporate - with retirement accounts and life savings swept away as the markets declined."

"Let me conclude with this thought: There is much anger, and justifiably so, about what has transpired. The public’s trust in our financial system has been badly shaken. Many Americans who abided by the rules now find themselves out of work, devastated by foreclosures, uncertain of their future prospects. There is a hunger to see those who profited from irresponsibility take responsibility, for wrongdoers to be held accountable. Yet the most important task in front of us is shed light, not heat. For us to take stock of what has happened and give a true accounting so the important work of restoring faith in our economic system can begin. In the wake of the market crash of 1929, there was a whole generation of Americans who would not put their money at risk in what they considered to be the casino of the stock market. The Dow Jones Industrial Average did not regain its 1929 peak for 25 years. We can ill afford a similar prolonged lack of faith and trust."

Obama signed an executive order establishing a panel to be known as the Council of Governors, which will be made up of 10 state governors, to be selected by the president to serve two-year terms. Members will review matters involving the National Guard; homeland defense; civil support; and synchronization and integration of state and federal military activities in the United States, the White House said in a statement.

The statement said the White House would seek input from governors and governors' association in deciding which governors to appoint to the council, which will have no more than five governors from the same party.

The secretaries of defense and homeland security will also sit on the council, as will presidential assistants for homeland security and counterterrorism, intergovernmental affairs, the U.S. Northern Command commander, the commandant of the Coast Guard, and the chief of the National Guard Bureau.

The panel was set up under a provision of the Fiscal Year 2008 National Defense Authorization Act, the White House said.

Germany's economy contracted 5 percent in 2009 amid the global economic downturn, by far its worst performance since World War II, official data showed Wednesday.

Since the job market's peak in June 2007, there are approximately 50 percent fewer job openings for the 15.3 million U.S. citizens who are officially unemployed.

In June of 2007, there were 4.7 million job openings in the United States. In November 2009 that number had fallen to 2.4 million, reports the BLS.

The job openings rate, which reflects the number of job openings as a percentage of total employment, has been steady at 1.8 or 1.9 percent since last March. But, as the AP reports, the larger picture is actually much worse:
"There were nearly 6.4 unemployed workers, on average, for each available job at the end of November, according to Labor Department data released Tuesday. That's up from 6.1 in October and a record high.

Argentina funds held at the Federal Reserve have been "embargoed" by US District Judge Thomas Griesa.

The nation's economic decline led to the biggest drop in electric output since 1938, according to an industry trade group.

A new report released Tuesday from the Edison Electric Institute says output fell by 3.7% for its second year of declines in a row.

Iran received information days ago that Israeli and US intelligence intended to carry out terrorist acts in Tehran, the country's parliament speaker said on Wednesday.

Karl Miller: "Senior energy executive and institutional investor Karl W. Miller released the following statement regarding Natural Gas today, through his advisors.
Lest we forget, we constructed over 250,000 megawatts of natural gas fired generation in the U.S. ten years ago with efficient heat rates (energy conversion factors), and they will be used more often each year going forward, as we experience more extreme winters and summers.
Investors should also keep in mind, that during peak season and usage, the mainline pipeline systems in the U.S operate at or near maximum capacity, and "statistical natural gas in storage" is not always available, which is why we have massive price spikes at the "City Gates" or major consuming and producing areas. (Chicago, New York, Los Angeles, etc.)
While the NYMEX Natural Gas Futures Contract is a useful reference, what is more important is what is happening on the ground at the wellhead, compression station, storage facility, power plants and industrial consumers and the City gates.
Do not be fooled or lulled to sleep by looking at one static statistic that says we have massive excess natural gas in storage in perpetuity. This is not only not true, it is quite the opposite, we have massive infrastructure problems, lack of pipeline transmission and laterals to service power plants and industrial users, as evidenced by the major natural gas delivery curtailments this past two weeks across the country.
"Remember Mr. Miller's example of the wind farm in the desert, you can build the most efficient wind farm money can buy today, but if you don't have wind, and you don't have a transmission line and a massive renewable energy credit and federal tax credit, you have scrap value". Thus, natural gas in storage is not natural gas in the pipeline, nor at the demand center.
We have lost much of our executive expertise related to Natural Gas contracting, hedging, and risk management over the last ten to fifteen years in the U.S. Don't be misled by a natural gas producer announcing that they have hedged part of their production output as being something negative.
It is a very positive thing that we have producers and some semblance of a financial system that can actually still underwrite a long term contract or financial hedge, as that is a skillset and art that has been lost on the industry for quite some time, as well as a limited number of financial institutions that have the credit and capability to participate in that arena.
The say one never forgets how to ride a bike, but in Natural Gas case, industry veterans like Mr. Miller and a select few others have had to step in and not only teach the U.S. Government what the market is, but have had to drive many aspects of the industry recovery and recognition, which includes a tremendous amount of education for the general public, media and younger financial bankers and traders.
Finally, don't go to sleep looking at the NYMEX futures contract and believe you have a grip on where natural gas prices or the market structure is going. The Futures contract is purely for speculative purposes and true producers and physical participants hedge and trade via the over the counter natural gas swap market, physical delivery points and use the natural gas forward price curve beyond eighteen (18) months.
Natural Gas is back in the mainstream, it is here to stay, and it is not going away just because a weather forecaster says that next week, next month, or next year are going to be a degree cooler or hotter. Core commodities have staying power, and Natural Gas has been revived and a very big way."

The ABC Consumer Confidence index plummeted last week, falling from -41 to -47, sustaining "one of its steepest one-week drops in the last quarter century, following last week’s troubling jobs report with an all-hands retreat from what had been a tentative positive trend in consumer attitudes." At -47 the index is essentially at the average 2009 level of -48, and far below the average since 1985 of -12. As far as the US consumer is concerned, this recession is far from over.

Crude oil futures saw losses accelerate in morning trade Wednesday, after the Energy Information Administration reported bigger-than-expected increases in U.S. supplies of crude and distillate products, including heating oil. Analysts expected cold temperatures to boost energy demand and reduce inventories. Crude oil for February delivery recently fell $1.92, or 2.4%, to $78.87 a barrel. Crude oil supplies were up 3.7 million barrels in the week ended Jan. 8, the EIA said. Analysts polled by Dow Jones expected inventories to rise by 1 million barrels, while those surveyed by Platts expected a 1.9-million-barrel increase. U.S. distillate inventories were up 1.4 million barrels; analysts polled by Platts expected a drawdown of 1.7 million barrels.

The U.S. government ran a budget deficit of $91.8 billion in December, the Treasury Department reported Wednesday, marking the fifteenth straight month of shortfalls. The monthly number brings the deficit to $388.5 billion for the first quarter of fiscal 2010. Receipts were $219 billion in December, the Treasury reported, while outlays were $311 billion.

Economic conditions continue to improve "modestly" as 2009 came to a close, according to the Federal Reserve's latest snapshot report on the economy, nicknamed the Beige Book, released Wednesday. Ten of 12 Fed districts reported some increase in activity or improvement in conditions, up from eight in the previous survey in early December. The Christmas retail season was better than last year but still far below 2007, the report said. Service sector activity picked up in most districts. Manufacturing also held steady or increased. The labor market remained generally weak. Two important factors in assessing credit conditions - demand for loans and credit quality -- continued to deteriorate.

The Dow Jones industrials finished up 54 points to 10,681, their best close this year. The index briefly topped 10,700 for the first time since Sept. 26, 2008. The Nasdaq Composite Index was up 26 points to 2,308, and the Standard & Poor's 500 Index added 9 points to 1,146.

Tuesday, January 12, 2010

Trade Deficit

1/12/10 Trade Deficit

Seeking Alpha: "The jobless decade: December 1999 - 130.5M employed Americans. December 2009 - 130.9M. Considering the country grew by 30M people, a 400K gain in employment over 10 years looks pretty awful."

The U.S. trade deficit widened by 9.7% in November to $36.4 billion, the Commerce Department said Tuesday. The trade deficit was above the consensus forecast of Wall Street economists of a deficit of $34.8 billion. Exports rose for the seventh straight month, but imports rose at a faster pace in November. The government also revised the deficit in October to $33.2 billion from $32.9 billion. As a result the deficit for the year now totals $340.6 billion, down from $654.1 billion in the same period last year. The U.S. trade deficit with China narrowed to $20.2 billion in compared with $22.7 billion in October.

Cadbury on Tuesday said its 2009 performance was well ahead of market expectations as the U.K. chocolate maker reiterated its rejection of Kraft Foods' (KFT) takeover offer. Cadbury said that strong growth in the fourth quarter and the savings generated by its restructuring plan contributed to the performance, with revenue up 11%, or 5% after excluding the impact of currency fluctuations. The trading margin improved by 1.55 percentage points to 13.5% and Cadbury said the full year dividend is expected to grow by 10%. Cadbury said the offer from Kraft is worth around 12 times its 2009 earnings before interest, taxes depreciation and amortization and added that this is lower than any comparable deal in the sector. The company also noted that the shares of its peers have risen around 12% since the offer was made as markets have recovered.

China on Tuesday raised the proportion of deposits that banks must hold in reserve, in the clearest sign yet that it has started to tighten monetary policy with its economy roaring back to the brink of overheating.

The 0.5 percentage point increase in the reserve requirement ratio will take effect on January 18 and will apply to all banks apart from rural credit cooperatives, the People's Bank of China said on its website (

It was the first time that the central bank adjusted the ratio since it lowered the ratio in December 2008 as part of its loosening cycle at the time.

George Ure: " The US has been buying its own paper assets according to well informed reports around the net. About 80% of US bond offerings were bought by - our own government -- after briefly cycling the debt through the open market. Yeah, sure, that defines Ponzi scheme, but only until the whole international investment community begins to lose faith in the Almighty Dollar. Till then, it's been working fine. China raising it's reserve rate is like the Godfather clearing his throat at the negotiating table. It means sometime."

John Crudele of the NY Post says our true unemployment rate is closer to 22%.

Cargo volume at ports on the Atlantic, Pacific and Gulf coasts were higher in December than a year earlier, the first such gain in 28 months, according to the National Retail Federation and consulting firm Hackett Associates.

Robert McHugh: "Over the past 43 weeks, 80 percent of the price gains of this rally have come on 30 Mondays. What this tells us is that this is not a broad-based rally, rather it is a suspicious rally that looks to have sporadic deep pockets intervention behind it. If we are correct, and a myriad of technical charts and indicators we follow suggests we are, another massive stock market decline is coming again. Folks who again trust the Central Planners, who behave as sheep, who put all their eggs in the Wall Street basket without evidence of sound fundamental economic growth and prosperity at the household and small business level, are essentially playing craps at the casinos. This is a dangerous economic time for investors, regardless of whether the plunge starts soon or remains in the future."

John Hussman: "The next few months are likely to be extremely important. The present overvalued, overbought, overbullish, yields-rising conformation holds us back from accepting market risk here in any case. But the market is quite likely to clear this condition in one way or another over the next few months, most likely with an abrupt decline. Meanwhile, the next few months will also afford us better clarity with respect to the actual condition of the delinquency/foreclosure situation, as well as a look at the off-balance sheet entities that, per FASB rules, must now be disclosed on the balance sheet of financial institutions (where Freddie Mac has already warned the accounting change will significantly impair its solvency)."

Sam’s Club are closing around ten stores, which LA Times reports should total a loss of around 1,500 jobs. The Sam’s Club closures include Southland stores in Vista, La Quinta, and Irvine. The site also reports that stores in the Phoenix, Houston, and Sacramento markets are affected.
It’s not clear why so many California locations are affected, but a spokeswoman said that Sam’s Club stores are scheduled to close Jan. 22, which is due to bad “financial performance”.

The Federal Reserve confirmed on Tuesday that it will return $46.1 billion in profits for 2009 to the U.S. Treasury.

German retailer Metro posted a bigger-than-expected sales drop for the crucial fourth quarter on Tuesday and pointed to lingering concern about the economic situation.

"In 2010 we expect the macroeconomic conditions to remain challenging. Nevertheless, we see many opportunities for our strong formats," Chief Executive Eckhard Cordes said.

Gary Shapiro: "China is now the world’s top exporter, with the country’s customs agency releasing figures Sunday showing its 2009 exports exceeded $1.2 trillion. This past year, China also emerged as the world’s largest automobile market and the world’s biggest steel manufacturer....In the past few months, the United States has imposed anti-dumping duties on Chinese-made pipes and high tariffs to discourage the import of Chinese-made tires. Likewise, China has reciprocated with government regulations that would grant preference to technologies with intellectual property indigenous to China, excluding the U.S. technology industry at large from selling to the Chinese government. The Chinese government has also imposed tight Internet controls on its 300 million users, blocking popular U.S. sites such as YouTube and Facebook and making it exceedingly difficult for individuals to register their own Web sites."

Athletic footwear and apparel retailer, Foot Locker, expects to have opened 40 new stores and closed 200 stores during its fiscal 2009 year (ends 1/31/2010), which is 60 more store closures than the retailer had originally anticipated. This year's net closure of 160 stores follows 144 net closures in 2008 and 157 net closures in 2007.

Eric Beder, an analyst at Brean Murray, Carret & Co, said retailers may have trouble growing their bottom lines in the first half of 2010, since they will begin cycling cost-cutting measures taken in the wake of the financial crisis -- from cutting inventories and marketing budgets to closing stores and laying off workers.

But the biggest impact may be seen mid-year, when year-over-year sales comparisons get more difficult, he said.

"The second half is going to be the true, true test here," Beder said.

The invasion of Iraq in 2003 was a violation of international law, an independent inquiry in the Netherlands has found.

In a damning series of findings on the decision of the Dutch government to support Tony Blair and George Bush in the strategy of regime change in Iraq, the inquiry found the action had "no basis in international law".

The 551-page report, published today and chaired by former Dutch supreme court judge Willibrord Davids, said UN resolutions in the 1990s prior to the outbreak of war gave no authority to the invasion. "The Dutch government lent its political support to a war whose purpose was not consistent with Dutch government policy. The military action had no sound mandate in international law," it said.

The Treasury Department sold $10 billion in one-month bills on Tuesday at a rate of 0%, adding to a string of occasions in the last month when its sold the short-term securities with no yield at all. Investors offered to buy $72.2 billion in the securities.

Nearly two weeks into 2010, the Philadelphia Index is down more than 1%, while the Nasdaq is still up more than 1%, a role reversal that underscores growing concern on Wall Street about the strength of the chip momentum.

In fact, some major chip companies have seen their shares fall sharply since the start of the year.

China said it had successfully tested the nation's first land-based missile defense system, announcing the news late Monday in a brief dispatch by Xinhua, the official news agency. China did not notify US before anti-missile test: Pentagon.

Ten-yr debt yields fall to 3.72%.

Feb. gold futures close off $22 at $1,129.4/oz

The Dow Jones industrial average dropped 36.73 points, or 0.34 percent, to 10,627.26. The Standard & Poor's 500 Index fell 10.76 points, or 0.94 percent, to 1,136.22. The Nasdaq Composite Index slid 30.10 points, or 1.30 percent, to 2,282.31.

Monday, January 11, 2010

China's Trade

1/11/10 China's Trade

China's trade surplus plunged a record $100 billion, or 34%, to $196 billion from 2008's $296 billion.

Texas sales tax receipts for November sales were down 11.6 percent from a year earlier, state Comptroller Susan Combs said.

Chevron said on Saturday it had been forced to shut down 20,000 barrels per day (bpd) of crude oil production in Nigeria, a day after security sources said gunmen had attacked a pipeline operated by the U.S. firm.

Chevron Corp. said late Monday that it expects fourth-quarter profit to be lower than third-quarter earnings. Chevron reported a third-quarter net income of $3.83 billion, or $1.92 a share.

Ten-year Treasury yields rose to the most on record relative to two-year notes as stocks advanced and investors added to bets the Federal Reserve will keep interest rates on hold in the first half of the year.

The difference in yield, or spread, between the securities widened as the MSCI World Index advanced for a second day after a Chinese report yesterday showed exports climbed for the first time in 14 months and imports reached a record. The U.S. is scheduled to auction $10 billion of Treasury Inflation Protected Securities today, the first of four note and bond sales this week totaling $84 billion.

Mexico's three main oil exporting ports in the Gulf of Mexico remained closed on Sunday afternoon due to bad weather, the government said.

Dutch brewer Heineken NV said Monday it will buy the beer-making operations of Mexico's Femsa in an all-share deal that values the maker of Dos Equis, Tecate and Sol beers at $5.5 billion, excluding debt.

The Federal Reserve will ask a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

The U.S. Court of Appeals in Manhattan, after hearing arguments in the case today, will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News.

Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

"It's only going to get worse," is the sobering forecast of Gerald Celente, director of the Trends Research Institute. As discussed in a prior segment, Celente believes the "bailout bubble" is going to burst and the U.S. economy will slip back into recession, if not worse, in 2010.
Like all forecasters, Celente isn't always right but he has predicted a number of major events.

The US rig count for December 2009 was 1,172, up 65 from the 1,107 counted in November 2009 and down 610 from the 1,782 counted in December 2008. The Canadian rig count for December 2009 was 313, up 36 from the 277 counted in November 2009 and down 48 from the 361 counted in December 2008.

The worldwide rig count for December 2009 was 2,509, up 100 from the 2,409 counted in November 2009 and down 712 from the 3,221 counted in December 2008.

Politico: "While the Obama administration has stepped up talk of expanding sanctions on the regime’s Revolutionary Guards Corps, Iranian news reports and U.S. official sources say that Iran has recently returned a formal counter offer to swap low enriched uranium, or LEU, in exchange for nuclear fuel cells produced in the West.

The proposal comes as Iranian news reports say the foreign ministry has announced the halting of uranium enrichment for two months as a good-will gesture. Outside observers have not confirmed that claim."

Electronic Arts Inc., the world's top video game publisher, late Monday cut its 2010 fiscal year earnings and revenue forecasts due to issues affecting its business in North America and Europe during the December 2009 business quarter.

Alcoa kicked off the fourth-quarter earnings season with something Wall Street has been desperate to see: revenue growth.
But the company disappointed investors with earnings after one-time items of only a penny a share. Investors had expected 6 cents a share. Shares were down 4.8% to $16.62 after hours after rising 2.5% to $17.45 in regular trading.

The Dow Jones industrials closed up 46 points to 10,664. The Standard & Poor's 500 Index added 2 points to 1,147. The Nasdaq Composite Index , which had been down as many as 15 points shortly after 11 a.m. ET, reclaimed most of the loss but ended at 2,312, down 5 points.

Sunday, January 10, 2010


President Hugo Chavez threatened on Sunday to seize businesses that raise prices as a result of last week's devaluation of Venezuela's currency.
Economic analysts called the warning a futile attempt to control 25 percent inflation that is already the highest in Latin America and stands to be worsened by the weakening of the bolivar.