Saturday, February 20, 2010

Bank Closures

2/20/10 Bank Closings

La Jolla Bank in the San Diego area was among four banks shuttered by authorities Friday, bringing the total to 20 financial institutions closed since the beginning of the year.

La Jolla's deposits will be taken over by OneWest Bank of Pasadena, Calif., the Federal Deposit Insurance Corp. said.

La Jolla had $3.6 billion in total assets and $2.8 billion in deposits. OneWest has entered into a loss-share transaction on $3.3 billion of La Jolla's assets, the FDIC said. The FDIC was appointed as receiver by the Office of Thrift Supervision, which closed La Jolla Bank.

Other banks closed Friday included George Washington Savings Bank of Orland Park, Ill., which was shuttered by the Illinois Department of Financial Professional Regulation's banking division. Again, the FDIC was appointed as receiver for the bank, whose deposits will be taken over by FirstMerit Bank of Akron, Ohio. George Washington Savings had $412.8 million in total assets.

La Coste National Bank of La Coste, Texas, will be taken over by Community National Bank of Hondo, Texas. The sole branch of La Coste National had $53.9 million in assets.

in 2010, the Federal Deposit Insurance Corp. said in a press release issued late Friday. The FDIC entered into a purchase and assumption agreement with privately held Mutual of Omaha Bank. Mutual of Omaha will assume all the deposits of Marco. Marco Community had $119.6 million in assets and $117.1 million in deposits as of Dec. 31. Mutual of Omaha entered into a loss-share agreement on $104.8 million of Marco's assets, the FDIC said. Marco depositors can access their money via checks or debit cards Friday night and over the weekend, the agency added.

Germany's finance ministry has sketched out a plan in which countries using the euro currency will provide aid worth between 20 billion and 25 billion euros ($27-$33.7 billion) for Greece, a magazine reported on Saturday.

Citing "initial considerations" by the ministry, German weekly Der Spiegel said the share of financial aid for Greece would be calculated according to the proportion of capital each country holds in the European Central Bank.

Bloomberg (Kathleen M. Howley): “A record number of Americans were in danger of losing their homes in the fourth quarter… Loans in foreclosure rose to 4.58% of all mortgages, while those more than 90 days overdue… climbed to 5.09%...”

Doug Noland: "So the Bernanke Fed has apparently devised a new rate target – the rate it will pay banks on excess reserve holdings. We’ll have to wait for additional details, as well as to see how this new monetary regime works in practice. From what I’ve read so far, it has the appearance of a handy expedient; a tool similar in form to the fed funds target rate - but without the baggage of an implied policy of managing the rate through the addition or, more importantly, removal of Fed liquidity. The Fed hopes to have the luxury of raising the rate it pays on reserves held at the Federal Reserve, without forcing the system-wide overnight funds rate higher. The Fed would today certainly prefer to separate the tasks of raising rates and removing system liquidity and, once apart, implement respective “tightenings” at varying paces (rates up very slowly… liquidity removal even slower).
Certainly not without justification, the markets came to the recognition that yesterday’s increase in the discount rate did not signal any imminent tightening of financial conditions. It will be interesting to see if the markets eventually end up calling a bluff on Fed “exit” policies more generally."

Steven Pearlstein, Wash. Post: "But the more I look into it, the more I'm beginning to think there is a fairly simple way to meet President Obama's short-term pledge of reducing carbon emissions in the United States by 17 percent over the next decade.

The silver bullet: Decommission about two-thirds of the electric-generating capacity fueled by cheap and plentiful coal, and replace it with power generated from cheap and plentiful natural gas, which emits half as much carbon for each megawatt of electricity."

IBD: "The Department of Energy expects shale gas to account for 50% of natural gas production by 2020 if not sooner."

CitiBank: "Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change," Citigroup said on statements received by customers all over the country.

What's going on? It seems that this is something of an error. The seven day notice policy only applies to customers in Texas, Ira Stoll reports at The Future of Capitalism. It was accidentally included on customer statements nationwide.

"Whatever the explanation, it doesn't exactly inspire confidence in Citi," Stoll writes. "But it's hard to believe a bank would be sending out a notice like that on its statements."

If Greece fails to comply with all of the demands from the rest of the EU, and then experiences a genuine liquidity crisis in April and May, the most obvious next step for the region is to push Greece into the arms of the IMF. The IMF would then provide a program of financial support, with appropriate amounts of conditionality, to give Greece a couple of years to implement the appropriate fiscal adjustment. - JP Morgan

The number of rigs drilling for natural gas in the United States rose by two this week to an 11½-month high of 893, according to a report Friday by oil services firm Baker Hughes in Houston.
It was the eighth straight weekly gain and puts the gas rig count at its highest level since March 6, 2009, when there were 916 gas rigs operating.
The U.S. natural gas drilling rig count has rebounded 34 per cent after bottoming at 665 on July 17, its lowest level since May 3, 2002, when there were 640 active gas rigs.
But the rig count is still well off its recent peak above 1,600 in September 2008, and still stands at 125 rigs, or 12 per cent, below the same week last year.

The Fed

2/19/10 The Fed

The Federal Reserve announced late Thursday that it was raising its discount rate in order to push banks to borrow from the private market for short-term credit. In a statement, the Fed said it would raise its discount, or primary credit rate, to 0.75% from 0.50% effective on Friday. Fed chairman Ben Bernanke signaled last week that the Fed was mulling the move. Fed watchers had expected the move to come at the next Fed meeting in March. Today's action shows a sense of urgency on the part of the Fed officials. The Fed said the move is intended to "normalize" their operations as the financial crisis winds down. The change is not a tightening and does not signal any change in monetary policy, the Fed said.

With shelter costs dropping sharply, U.S. core consumer prices fell a seasonally adjusted 0.1% in January, the first decline since 1982, the Labor Department estimated Friday. Core prices, which exclude food and energy costs, are considered a good indicator of underlying inflationary pressures. Prices fell for hotel fares, home ownership costs, new cars, airfares and clothing. Overall, the consumer price index rose a seasonally adjusted 0.2% in January for the fifth straight month. Higher energy and medical costs more than offset the largest decline in services prices since 1982. Inflation was weaker than expected by economists, who were forecasting a 0.3% increase in the overall CPI and a 0.1% gain in the core CPI.

Oil services firm Schlumberger Ltd. is in advanced talks to acquire Smith International Inc., The Wall Street Journal reported Friday, citing people familiar with the negotiations. A deal combine two of the world's biggest oil services companies, with Schlumberger's revenue nearly doubling that of its nearest competitor following a deal, the report said. Smith currently has a capitalization fo $7.5 billion, and a typical 20% deal premium would take the transaction to the $9 billion range, the report added.

Although Schlumberger and Smith are both part of the diverse oil-field services sector, they compete directly in relatively few businesses. Smith is best known as a manufacturer of drill bits and related equipment, while Schlumberger makes most of its money finding and evaluating oil reservoirs, drilling wells, and pumping out the oil.
Those differences could help ease pressure from antitrust regulators.

Take a hard look at America's balance sheet and "you have to be concerned," says Charles Ortel, managing director of Newport Value Partners.

Total gross U.S. debt is now $50 trillion or 12 times the nation's total gross income, according to Ortel, whose debt calculation excludes unfunded mandates such as Social Security and Medicaid but does include corporate debt which he says are "potentially eligible for bailouts."

Furthermore, Ortel says the Federal Reserve overestimates U.S. household net worth, because most of the "asset" side of the ledger is based on real estate valuations he says are overinflated.

"A strict, hard look at the national net worth statement will tell you that our assets are lower than you think and our debt is higher than you think," he says.

The foreclosure wave is likely to swamp many smaller community banks across the country, and many well-known properties, including Washington's Mayflower Hotel and the Boulevard at the Capital Centre in Largo, are at risk, industry analysts say.

Population-weighted, from the Plains east, this winter will likely beat the 2000-2001 winter season to become the coldest winter since 1983-1984, according to Joe Bastardi, a senior meteorologist at, with the weather in the last 10-15 days of this month probably cold enough to officially make this winter the coldest in a quarter century, he said.

Robert Pollin: "Unemployment in the United States stands officially at 9.7 percent. This represents 14.8 million people out of work. By a broader official measure that includes people employed fewer hours than they would like and those discouraged from looking for work, the unemployment rate is 16.5 percent, or about 25 million people in a total labor force of about 153 million. We have not seen comparable unemployment rates since 1983, twenty-seven years ago, and before that, not since the 1930s Depression."

ZeroHedge: "The Federal Reserve's balance just hit another record high, at $2.29 trillion, jumping by a whopping $54 billion sequentially (the biggest weekly increase since mid-November). Securities held outright: $1,967 billion (an increase of $60.9 billion MoM, resulting from $56 billion increase in MBS and $5 nillion in Agency Debt), or a huge $53.6 billion increase sequentially. The fed is now 95% complete with its purchases of MBS, and 96% complete with purchases of Agencies. The Fed has completed $167.2 billion of its $175 billion agency debt purchase program through February 17. The Fed's MBS total is now $1.188 trillion, and by the end of the first quarter of 2010, the Fed will have purchased $1.25 trillion."

WSJ: “Our budget deficit is a problem, but it’s not the core issue.

“Our shadow government, the financial industrial complex, is our potential Greece. High unemployment lingers, higher interest rates are on the horizon and U.S. aid to the mortgage markets is coming to an end. Government guarantees in the markets will be withdrawn leaving them exposed to the whims of confidence.

“Amid that uncertain state, Wall Street is chugging along as if the last few years were merely a blip. At Citigroup Inc., the financial innovators are readying a new, complex derivative that would act as kind of financial crisis insurance. Citigroup believes the derivative, dubbed CLX, won’t put Citi or taxpayers at risk, but they concede the contracts aren’t foolproof, a story we’ve heard before.”

Bernanke last month invited the Government Accountability Office to conduct a “full review” of the central bank’s actions tied to the bailout that swelled to $182.3 billion. “In light of your professed commitments and your apparent desire to cooperate with this committee’s investigation, I am writing to request that you voluntarily produce to this committee all records and communications in the possession of the Federal Reserve” regarding the rescue, Issa wrote. Issa is seeking to widen the probe into what he’s called a “backdoor bailout” of banks that got funds from AIG after its rescue and efforts by the Federal Reserve Bank of New York to withhold details from the public about the payments. Treasury Secretary Timothy Geithner, who ran the New York Fed when AIG was bailed out in 2008, testified last month that the payments were necessary and that subordinates made disclosure decisions.

The Telegraph: "Britain is at risk of a Govenment deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country."

Thursday, February 18, 2010

Yield Curve

2/18/10 Yield Curve

The number of people filing initial claims for state unemployment benefits rose by 31,000 to a seasonally adjusted 473,000 last week, the Labor Department reported Thursday, a sign that labor markets remain very weak. The four-week average of initial claims fell by 1,500 to 467,500, about 20,000 more than at the first of the year. The number of people continuing to claim state unemployment benefits was unchanged in the week ending Feb. 6 at 4.56 million. All told, in raw numbers not seasonally adjusted, 11.8 million people were collecting some type of unemployment benefits in the week of Jan. 30, up 281,000 from the previous week's 11.5 million.

U.S. wholesale prices rose a seasonally adjusted 1.4% in January on double-digit increases in gasoline and home heating oil, the Labor Department estimated Thursday. Core prices of finished goods - which exclude food and energy goods - rose 0.3% in January, led by higher prices for light trucks and other capital goods. The 1.4% increase in the producer price index was higher than the 0.9% gain expected by economists surveyed by MarketWatch. The core rate of 0.3% was also higher than the 0.1% gain expected. The producer price index is up 4.6% in the past year, the largest year-over-year gain since the financial crisis began in late 2008. The core PPI is up 1% in the past year.

Walmart Stores Inc. said Thursday its fiscal fourth-quarter profit was $4.6 billion, or $1.22 a share, compared to $3.8 billion, or 97 cents a share, in the year-ago period. On an adjusted basis, the Bentonville, Ark., retailer said it earned $1.17 a share. Analysts polled by FactSet Research were looking for earnings of $1.12 a share, on average. Net sales in the quarter rose 4.6% to $112.8 billion. For 2011, Walmart forecast earnings from continuing operations to be in the range of $3.90 to $4 a share. For the first quarter, earnings from continuing operations are expected to be 81 cents to 85 cents a share. Wall Street is looking for first-quarter earnings of 85 cents a share and 2011 earnings of $3.98 a share. Shares of Walmart slipped nearly 2% premarket to $53.15.

The world's largest retailer acknowledged that its U.S. operations will still grapple with weak sales, predicting same-store sales excluding fuel will be flat, within a range of up 1 percent to down 1 percent in the current first quarter.

"U.S. sales will be more challenging in the first quarter, as Walmart U.S. cycles through strong year-over-year comparisons and deflation," Wal-Mart Chief Executive Mike Duke said. "We remain focused on growing top-line sales, and expect improvement in the United States as the year progresses."

George Ure: "Over three months we've seen finished goods up 3.64% which annualizes to what? Oh, 15.36% annual inflation at the finished goods level based on the latest running three-month numbers. The Producer Price Index for Crude Materials for Further Processing climbed 9.6 percent in January. For the 3-month period ending in January, crude material prices rose 16.1 percent, accelerating from an 8.5-percent increase for the 3 months ended October 2009."

The CIA admits that it hired Iranians in the 1950’s to pose as Communists and stage bombings in Iran in order to turn the country against its democratically-elected president

Thousands of UFOs have been spotted in the last 20 years around the UK, according to newly released documents.

Gold futures fell sharply on Thursday after the International Monetary Fund announced plans to sell 191.3 tons of gold on the open market. The sale, announced late Wednesday, is part of a total of 403.3 metric tons designated for sale last September. Gold futures for April delivery dropped $18.50, or 1.6%, to $1,101.60 an ounce in electronic trading on Globex. "The IMF announcement came in the after-market session and saw gold fall more than $5 an ounce in a matter of minutes, and follow-through offers have been generated overnight, with gold testing below $1,100 an ounce, as a result of the weaker euro/dollar cross," said James Moore, an analyst at, in a note to clients. The euro was down 0.3% to $1.3563.

Matt Taibbi: “The nation’s six largest banks set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007.” The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its “performance” was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?

The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.”

Hewlett-Packard (HPQ) will launch a new keyless tablet computer called Slate to compete with Apple’s iPad (WSJ)

By Robert Powell, MarketWatch

BOSTON (MarketWatch) -- A train wreck waiting to happen. That's the only way to describe the mess that state pension systems are in right now, according to a report published today by the Pew Center on the States. According to Pew, there's a $1 trillion gap between the $3.35 trillion in pension, health care and other retirement benefits states promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay them.

Health insurance premium increases of up to 39% aren't an exception but a worrisome sign of the times, the Obama administration said in a report Thursday.

Proposed premium increases by Anthem Blue Cross for Californians purchasing their own coverage set off a wave of criticism and forced the company last week to announce a postponement. Now, the Health and Human Services Department says similar pressure on premiums is being felt in at least six other states.

"This shocking increase isn't unique," said the report, being presented by Secretary Kathleen Sebelius at a news conference Thursday. "Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue."

With his drive for health care overhaul bogged down, President Barack Obama has seized on the Anthem premium increases as Exhibit A to make his case for sweeping change before a bipartisan White House summit next week. California officials say 700,000 households face increases averaging 25% overall and as high as 39% for some.

The HHS report found that those numbers are in line with increases sought by insurers in other states—at a time of robust profit growth for the companies and a lack of competition in most states.

Manufacturing activity expanded in February for the sixth straight month in the Philadelphia area, according to a monthly survey of manufacturing companies released Thursday by the Federal Reserve Bank of Philadelphia. The Philly Fed index rose to 17.6 in February from 15.2 in January, in line with expectations. Details of the report were strong. The new orders index jumped to 22.7 in February from 3.2 in January. The shipments index rose to 19.7 in February from 11 in January. The employment index rose to 7.4 in February from 6.1 in January.

Leading U.S. economic indicators rose 0.3% in January, the 10th straight monthly gain and further evidence of a continuing spring thaw in the U.S. economy, according to the Conference Board. The index was expected to increase 0.2% based on a survey of economists by MarketWatch. The coincident index edged up 0.2% in January, the fourth gain in the past seven months.

The Energy Department is expected to report a decline of 188 billion to 192 billion cubic feet of natural gas storage inventories for the week ended Feb. 12, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

U.S. natural gas storage levels are expected to fall by 190 billion cubic feet when weekly data from the U.S. Energy Information Administration is released early Thursday, according to a Reuters poll.

In the weekly survey of 23 industry traders and analysts, withdrawal estimates for the week ended Feb. 12 ranged from 150 bcf to 208 bcf.

Stocks fell an adjusted 44 bcf for the same week last year. The five-year average drop for that week is 129 bcf.

Oil and Gas Journal: "The US Department of Energy’s Energy Information Administration may be underestimating natural gas demand with much of the US South and Northeast enveloped in yet another round of cold weather that boosted gas and electricity demand in January through early February, said Adam Sieminski, chief energy economist, Deutsche Bank, Washington, DC.

The March natural gas contract climbed 10.4¢ to $5.40/MMbtu Feb. 11 on the New York Mercantile Exchange, “the largest 1-day gain since the beginning of the month,” on “a drop in jobless claims, indicating industrial demand, which accounts for 29% of US [gas] consumption, is likely improving, and cold temperatures across the US likely resulting in higher residential demand,” said analysts at Pritchard Capital Partners LLC in New Orleans.

On the US spot market that same day, gas at Henry Hub, La., gained 3¢ to $5.51/MMbtu. Gas prices continued rising to $5.47/MMbtu in the Feb. 12 session on NYMEX and to $5.55/MMbtu at Henry Hub as continued snowfall buried parts of the Northeastern US and the Mid-Atlantic states.

Meanwhile, EIA reported January heating degree-days in the South Census Region—where 60% of households use electricity as the primary space heating fuel—were 13% higher in January than a year ago. Consequently, residential electricity sales in the South region also increased by about 12% to an average of 2,250 Gw-hr/day, “and a good part of this electricity was generated with natural gas,” Sieminski said.
He noted that EIA estimated gas consumption by the entire US electric power sector jumped by more than 8% in January from the administrations preliminary estimate during that month. EIA’s short-term energy outlook published in the week ended Feb. 12 estimated a new record for gas consumption by the electric power sector for January. “However, the EIA is reluctant to give up on its view that an increase in coal-fired generation capacity and higher natural gas prices through the remainder of the year should reduce the share of natural gas-fired generation in the baseload power mix in 2010.” Sieminski said.
Data indicate a mini-spike in electric utility gas use during January before dropping off in February and March. Similarly, residential use in the EIA forecast is shown lower in this year’s first quarter than the similar period in 2009.
“Could the EIA be underestimating gas demand?” Sieminski asked. “News reports this week show a severe and very unusual winter snowstorm across the South from Dallas, Tex., to Atlanta, Ga. This appears to be the same type of weather pattern that caused the unusual rise in electric utility gas use in January. Other parts of the US are also getting hit hard with cold, windy weather that boosts gas use in home heating. March might also be exceptionally cold across a large section of the central US.”

Natural gas inventories down 190 bcf -- EIA. Still, the report also showed underground storage in the lower 48 states remained 1.3% higher than year-ago levels and 2.7% above the five-year average. EIA expects total natural gas consumption to increase 0.4 percent to 62.5 billion cubic feet per day (Bcf/d) in 2010 and another 0.4 percent in 2011. Current 2010 futures market prices between $5.50 and $6.70 per MMBtu

But "on the energy side, a big rise in crude inventories was offset by a big drop in distillate supplies," Fuentes said.

The Energy Information Administration said U.S. crude stockpiles rose by 3.1 million barrels in the week ended Feb. 12. Analysts polled by Platts had expected a buildup of 1.65 million barrels.

The EIA also said gasoline supplies rose by 1.62 million barrels, more than the 1.5 million barrels forecast in the Platts survey.

However, distillates fell by 2.94 million barrels on the week, far greater than the 1.6 million barrels that analysts had projected.

The difference in yield between Treasury 2- and 10-year notes, known as the yield curve, steepened to a record as reports showed that Philadelphia region manufacturing and U.S. leading indicators rose.

The Treasury Department said it will sell $126 billion in notes and bonds next week: $8 billion in 30-year Treasury Inflation Protected Securities, or TIPS, $44 billion in 2-year debt, $42 billion in 5-year notes and $32 billion in 7-year securities. The sales will be on successive days starting Feb. 22. The producer price index increased more than forecast last month, the Labor Department said.

“The curve will continue to steepen as long as we are in the mindset of short-term rates kept low by the Fed and varying degrees of economic growth and inflation, which is dragging the long end down,” said Kevin Giddis, head of fixed-income sales, trading and research at brokerage firm Morgan Keegan Inc. in Memphis, Tennessee.

The yield curve increased to 2.93 percentage points, beating the record high of 2.90 percentage points set Jan. 11.

The Dow Jones Industrial Average rose 83.66 points, or 0.8%, to 10,392.9. The S&P 500 Index gained 7.24 points, or 0.7%, to 1,106.75. The Nasdaq Composite Index advanced 15.42 points, or 0.7%, to 2,241.71.


2/17/10 Volume

New construction of U.S. houses rebounded in January, the Commerce Department estimated Wednesday. Starts rose 2.8% in January to a seasonally adjusted 591,000 annualized units. This was in line with forecasts of economists surveyed by MarketWatch. This is the highest level of starts since July. Starts in December were also revised up to 575,000 from the previous estimate of 557,000. Starts of new single-family homes rose by 1.5% to 484,000 in January, while starts of large apartment units rose 9.2% to 107,000. Building permits, a leading indicator of housing construction, fell 4.9% to a seasonally adjusted annual rate of 621,000.

Led by higher prices for oil and gas, the prices of goods imported into the United States jumped 1.4% in January, the sixth straight increase, the Labor Department estimated Wednesday. Fuel prices rose 5.3% in January, including an 18.8% increase in natural gas prices. Petroleum prices rose 4.8%. Prices of nonfuel imports rose 0.4% for the fifth time in the past six months, led by prices of industrial materials. Prices of imported capital goods and autos fell 0.1%. In the past 12 months, import prices have risen 11.5%. Prices of goods exported from the United States rose 0.8% in January, and are up 3.4% in the past year.

Humana Inc said Wednesday that it intends to reduce its workforce by approximately 1,400 jobs, or 5%, in 2010 by cutting 2,500 positions while adding 1,100 additional jobs in areas of growth such as medical-cost containment capabilities, pharmacy management, and specialty products. The reduction will come primarily from attrition, process efficiencies, outsourcing, and position eliminations.

Walgreen Co., the Deerfield, Ill., drugstore operator, definitively agreed to acquire Duane Reade Holdings Inc., operator of a chain of 257 New-York-area drugstores, from affiliates of Oak Hill Capital Partners. The deal price is nearly $1.08 billion, including assumption of debt. In a Wednesday statement, Walgreen called the deal "a compelling strategic acquisition."

Deere lifted its profit forecast for fiscal 2010 to around $1.3 billion and said it expects equipment sales to rise between 6% and 8%.

Rob Hanna: "Tuesday was a 90% Up Volume day on the NYSE. At the same time volume declined from Friday’s levels and was below normal. It’s rare to see volume decline on a day when breadth is so overwhelmingly positive – especially when the market is in a long-term uptrend. Going back to 1970 I was only able to identify 6 other instances." " Buried deep in the 10-K that the company filed late Friday was an interesting disclosure: Google’s headcount actually shrunk in 2009 for the first time since the company has been public (and most likely for the first time ever, given Google’s growth spurt)."

Nearly 600,000 Canadians were working in jobs supported by the natural gas industry in 2008, providing a substantial impact to the nation's economy, according to a new study released today by IHS Global Insight. The study, titled "The Contributions of the Natural Gas Industry to the Canadian National and Provincial Economies," is unique in that it specifically calculated the number of jobs supported by the natural gas industry, numbers usually found only in combination with oil industry employment figures.

China's move to unload US debt is likely to continue in the long term while the "euro scare" may last a while, legendary investor Jim Rogers told Wednesday.

The latest government forecasts predict cooler weather will dominate the eastern two-thirds of the U.S., with the exception of Maine, until at least March. The lowest temperatures are likely to be in the mid-Atlantic states, according to the U.S. Climate Prediction Center in Camp Springs, Maryland.

The Northeast consumes four-fifths of the nation’s home heating oil, and the fuel rose today partly on speculation the cold will boost demand. Heating oil for March delivery was up 0.12 cent, or 0.06 percent, at $1.9975 a gallon in electronic trading on the New York Mercantile Exchange at 3:04 p.m. Singapore time.

“It is beginning to look quite likely that the extensive snow that currently covers the northern two-thirds of the country will enhance the probability of winter cold lingering well into March,” said Jim Rouiller, a senior energy meteorologist at Planalytics Inc.

. MDA EarthSat, a Rockville, Md. private forecaster, was predicting significantly below-normal temperatures across much of the Midwest, Southeast and South Central region from Feb. 22 to March 3. Temperatures were expected to be as low as eight to 14 degrees below normal in some areas.

The National Weather Service was expecting colder-than-normal temperatures across the eastern two-thirds of the U.S. during that time period. The unusually cold weather was expected to spark substantial demand for natural gas for heating.

"With an arctic source region and deep snowcover to go along with a stormy pattern, the threat of this being colder and more widespread next week and the week after is where this forecast is heading," wrote Joe Bastardi, a forecaster with, in a note to clients Wednesday.

Ron Paul: "The Greek government is the latest to come close to default on their massive public debt. Greece has insufficient funds in their treasury to make even the minimum payments that are now coming due. Their debt level is about 120 percent of their gross domestic product and their public sector absorbs what amounts to 40 percent of GDP. Any talk of cutting costs and spending is met with violent protests from the many Greeks heavily dependent on government payments. Mounting fears of default have sent shockwaves through their creditors and all of the eurozone countries.
But there have been statements made by the European Central Bank to calm fears and give assurances that Greece will get the aid it needs. Details of agreements are not Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit."

All ships US and European will be blocked into Iran Sea Port. This will halt all shipments of oil & gas. Minimum 1-3 Months before any oil or gas are allowed into the area. This area counts for 85% of all shipments that go to US and Euro.

The U.S. government ran a budget deficit of $43 billion in January, the Treasury Department reported Wednesday. It was the 16th straight month in which the government posted a deficit, but the number was down from the year-ago number of $63 billion. January's outlays of $248 billion were the second-largest January total on record. Receipts were $205 billion in January.

Several Federal Reserve policymakers want to begin selling securities relatively soon as a way to cut back their massive supply of cash to the financial system, the central bank said Wednesday.

The Federal Reserve should sell its U.S. mortgage-backed securities holdings sooner rather than later as the economic recovery gathers steam in order to extricate itself from fiscal policy, a senior central bank official said.

The Federal Reserve predicts unemployment will stay high over the next two years because recession-scarred Americans are likely to stay cautious making for only a moderate-paced economic recovery.

Tuesday, February 16, 2010

General Growth Properties

2/16/10 General Growth Properties

Manufacturing activity in the New York expanded at a faster pace in February, the New York Federal Reserve Bank said Tuesday. The bank's Empire State Manufacturing index rose to 24.9 in February from 15.9 in January. The index had plunged in December but has now rebounded to the highest level since October. The details of the report were mixed. New orders slowed to 8.8 in February from 20.5 in the prior month. Shipments inched lower. However, inventories were flat in February after 17 straight negative monthly readings. Employment was positive for the second straight month.

Simon Property Group Inc Tuesday said it has made an offer to acquire General Growth Properties Inc, the real estate investment trust that filed for bankruptcy last year, in a deal valued at over $10 billion, including about $9 billion in cash. The offer includes a consideration to creditors totaling roughly $7 billion, Simon said. Shareholders of mall operator General Growth would receive more than $9 a share, including $6 a share in cash, Simon said.

Japan plans to introduce around-the-clock commodities trading due to a drop-off in volume, according to a report Tuesday. Total trading volumes at Japan's four domestic commodity exchanges sank by two-thirds in the 2003-2008 period, while overall global commodity trading volumes rose more than threefold, helped by new index-linked commodities instruments, the Nikkei business daily reported. In response, the nation's Ministry of Economy, Trade and Industry has drafted a "revitalization plan" that would, among other things, allow the Tokyo Commodity Exchange to stay open 24 hours during the trading week, the report said.

“If a big non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it — not save it. It’s called euthanasia, not a rescue.”

Paul Volcker said on CNN.

Goldman Sachs Group Inc. Chief Economist Jim O’Neill said China may be poised to let its currency strengthen as much as 5 percent to slow the world’s fastest growing major economy.
“I have a strong opinion that they’re close to moving the exchange rate,” O’Neill said in a telephone interview from London after China’s central bank told lenders on Feb. 12 to set aside larger reserves. “Something’s brewing. It could happen anytime.”

International demand for long-term U.S. financial assets grew in December at a slower pace than a month earlier, as China sold U.S. government securities, a U.S. Treasury Department report showed.

Net buying of long-term equities, notes and bonds totaled $63.3 billion for the month, compared with net purchases of $126.4 billion in November, the Treasury said in Washington. Including short-term securities such as bills and stock swaps, foreigners purchased a net $60.9 billion in December, compared with net buying of $30.7 billion the previous month.

China cut its holdings of U.S. government debt in December to the lowest level since February 2009 and Japan was a net buyer for the six month in the past seven. As the financial crisis eased, some central banks that poured money into Treasuries have been investing reserves elsewhere, economists said.

In December China sold $34.2 billion of debt ($38.8 billion in Bills sold offset by $4.6 billion in Bonds purchased), lowering its total holdings $755.4 billion, the lowest since February 2009, and for the first time in many years relinquishing the top US debt holder spot to Japan, which bought $11.5 billion (mostly in Bonds, selling $1.4 billion Bills) bringing its total to $768.8 billion.

Peter Terzakian: "Due to its northern latitude, over 40% of natural gas demand in North America is related to fluctuations in the weather, especially over winter. Colder weather means more furnaces get fired up more often. The relationship is very tight and every incremental heating degree-day (HDD) in the United States requires an extra 1.6 billion cubic feet (Bcf) of natural gas consumption.

So it’s heartwarming for natural gas producers to see HDDs rack up an average 225 per week for the first six-weeks of the year, when the five-year average is around 200. As well, with spring around the corner, the average number of degree days in a week declines by a rate of about 25 per week, so the added cold makes a big difference to heating oil and natural gas consumption in the heavily populated regions of the Northeastern US.

Think of HDDs this way: raising the temperature of US households by one degree Fahrenheit, for one day, requires the same amount of natural gas that can be ultimately recovered from one Barnett Shale well (~1.6 Bcf). In other words, Snowmageddon has resulted in extra gas demand that notionally requires the drilling and completely draining the equivalent of 25 Barnett wells a day! That’s an interesting sense of scale; in reality, a Barnett Well is produced out over 20 years, not one day."

U.S. home builders were a bit more confident that the housing market is recovering, according to a monthly survey released Tuesday by the National Association of Home Builders. The NAHB/Wells Fargo housing market index rose two points to 17 in February after falling in December and January. The increase to the highest level since November was in line with expectations of economists surveyed by MarketWatch. Two of the three components of the home builders' index improved in February. The index for current sales rose from 15 to 17, the index for expected sales rose from 26 to 27, and the index for traffic of prospective buyers was steady at 12.

Capital One Financial's U.S. credit-card defaults rose in January, in a sign that consumers continue to remain under stress, it said in a regulatory filing.

The Dow Jones Industrial Average gained 169.67 points, or 1.7%, to 10,268.81. The S&P 500 Index rose 19.36 points, or 1.8%, to 1,094.87. The Nasdaq Composite Index climbed 30.66 points, or 1.4%, to 2,214.19.

Crude oil for March delivery finished up $2.88, or 3.9%, at $77.01 a barrel at the New York Mercantile Exchange. Gold for April delivery finished up $29.80, or 2.7%, at $1,119.80 an ounce at the New York Mercantile Exchange.

Ford Motor Co. will lay off about 900 workers as it cuts a production shift at a plant that makes the Mustang, The Associated Press reported Tuesday.

General Growth Properties Inc. said a $10 billion takeover offer from rival Simon Property Group Inc. is too low and it will invite others to make bids as it considers options for emerging from bankruptcy.

Monday, February 15, 2010


2/15/10 Greece

Mike Burk: "Since Monday the secondaries have led the way upward, new highs have picked up a little and new lows have remained low. These are reasons to think last Monday's lows will be the lows for this correction.

I expect the major averages to be higher on Friday February 19 than they were on Friday February 12."

John Mauldin: " Greece basically lied about its finances in order to gain admission to the union. It never complied with the fiscal discipline that was required for entrance.

With the high exchange rate, however, came the consequence of higher labor costs relative to, above all, Germany. While reviewing some economic facts about Greece, I came across the factoid that Greek workers had the second highest level of actual hours worked. But even with that, Greece was running a trade deficit that is currently 12.7% of its GDP.

And with the onset of the current recession, their fiscal deficit went from bad to worse. Their total debt is now €254 billion, and they need to finance another €64 billion this year, €30 billion of it in the next few months.

Bottom line, without some help or a bailout, they simply will not be able to borrow that money. And since a lot of that money is for "rollover" debt, that means a potential for default if they cannot borrow it.

European leaders said today that Greece will not be allowed to fail, hinting of a bailout. But there are a lot of "buts" and conditions.....The dire predicament is the one where Greece cuts its budgets and more or less willingly enters into a rather long and deep recession/depression. The disastrous predicament is where they do not make the cuts and are allowed to default. That means the government is plunged into a situation where it has to cut the entire deficit to what it can get in the form of taxes and fees, immediately. As in right now. And defaulting on the interest on the current bonds wouldn't be enough, although it would help.

Why not just let Greece go under? Part of the argument has to do with moral hazard. If Germany bails out Greece, Ireland, which is actually making such cuts to its budget, can legitimately ask, "Why not us?" And will Portugal be next? And Spain is too big for even Germany to bail out. At almost 20% unemployment, Spain has severe problems. Its banks are in bad shape, with large amounts of overvalued real estate on their books (sound familiar?) and a government fiscal deficit of almost 10%. While Spanish authorities say they can work this out, deficits will remain high.

The fear is one of contagion. Some argue that Greece is only 2.7% of European GDP. But Bear Stearns held less than 2% of US banking assets, and look what happened."

Spanish National Intelligence Agency (CNI) is investigating whether the Spanish economy and the euro have fallen victim to a concerted attack by speculators and foreign media (El Pais)

Greek FinMin unveils tax reform, wage policy, outlawing of cash: "From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards" (Reuters)

Yara International ASA, the largest fertilizer maker, agreed to buy Terra Industries Inc. for $4.1 billion to benefit from lower U.S. fuel costs.

The company will pay $41.10 for each Terra share, raising the cash with a $2.5 billion rights offer, Oslo-based Yara said in a statement today. The price is 24 percent more than Terra’s Feb. 12 close of $33.25 in New York. Yara fell as much as 7.1 percent today in Oslo, the most in almost eight months.

Buying Sioux City, Iowa-based Terra will give Yara six North American plants making nitrogen-based fertilizer. The price of natural-gas, used to produce the crop nutrient, has declined 64 percent in the past two years

April gold climbs $10 to $1,100/oz on Globex..