Saturday, March 27, 2010


3/27/10 Swaps

Doug Noland: "Markets have a dangerous proclivity for accommodating Bubbles. And I
see ample evidence of such dynamics throughout currency, debt, and
equities markets - at home and abroad. And I would argue that the
reinstatement of King Dollar is not, as some had expected, impinging
global reflation. Indeed, rather than restraining reflationary forces,
dollar strength may today be reinforcing them. I would argue that the
dollar’s newfound muscle has not yet impinged Credit systems overseas,
especially overheated Credit in the “periphery.” Meanwhile, it has
helped underpin “core” U.S. debt markets generally, which has played a
prominent role in the ongoing reflation of the world’s largest economy
and stock market...I believe U.S. reflation will be in jeopardy when a jump in yields
occurs simultaneously with increasing risk premiums and waning Credit
availability. And I wouldn’t be surprised if such a scenario unfolds
in response to renewed dollar weakness. Considering the backdrop, call
me a King Dollar skeptic. I wouldn’t be at all surprised if the
prevailing sanguine view regarding U.S. policymaking and structural
debt issues proves rather ephemeral. At the end of the day, the
soundness of our currency will be determined by the health and
sustainability of our economic structure and the size of our debt
load. A restoration, albeit temporary, of King Dollar doesn’t appear
constructive for either."

Four banks in Georgia, Florida and
Arizona were shut down by regulators, bringing the total for the
year to 41 as smaller lenders are pressured by bad loans tied to
commercial real estate.
The banks seized yesterday had total assets of $1.24
billion and deposits of $1.1 billion, according statements from
the Federal Deposit Insurance Corp. Regulators have seized 181
U.S. lenders since the start of 2009.
“You’re going to continue to see smaller institutions fail
because they have no access to capital and they have too much
concentration in residential construction and commercial real
estate,” said Paul J. Miller, an analyst at FBR Capital Markets
in Arlington, Virginia.
U.S. lenders are collapsing at the fastest pace in 17 years
amid losses on loans made at the height of the market. The
number of banks on the FDIC’s “problem” list climbed to the
highest level since 1992 in the fourth quarter. FDIC Chairman Sheila Bair said on Feb. 23 that the pace of failures will
exceed last year’s total of 140.

The CRB index declined 1.9% (down 5.7% y-t-d).
The Goldman Sachs Commodities Index (GSCI) fell 1.6% (down 2.2%
Gold was little changed at $1,108 (up 1% y-t-d).
Silver slipped 0.6% to $16.93 (up 0.5% y-t-d). April Crude declined 83
cents to $80.14 (up 1% y-t-d). April Gasoline declined 2.0% (up 7.7%
y-t-d), and April Natural Gas sank 7.2% (down 30.6%
May Copper gained 1.3% (up 2% y-t-d).
May Wheat sank 3.9% (down 14% y-t-d),
and May Corn dropped 4.7% (down 14% y-t-d).
Year-to-date, the Dollar Index has gained 4.8%. The S&P Homebuilding index jumped 7.1% this week, increasing y-t-d
gains to 25.1%. The regional bank index added 0.4%, increasing 2010
gains to 27.4%. The Morgan Stanley Retail index rose 2.7%, boosting
its rise so far this year to 17.0%. The Morgan Stanley Retail index
enjoys a one-year gain of 87.4%.

John Ing: "The United States alone must borrow nearly $2 trillion in 2012 to bridge its projected budget deficit and to refinance existing debt. This time, no one is too big to fail. By transferring the debt from its banking sector to the public sector, the United States only forestalls the inevitable as Greece found when it transferred its Olympian sized debt onto its own books. There is no easy way out. US debt today stands at 85 percent of GDP, compared with 115 percent for Greece, 59 percent for Spain, or 66 percent for Ireland. Yet the explosion of public debt continues as the White House projects that gross federal debt in public hands will exceed 100 percent of GDP in only two years. The US is in a much sorrier state than the other European ailing nations.
Obama's whopping $3.8 trillion budget will produce a $1.4 trillion deficit this year and trillions more over the next few years. The non partisan Congressional Budget Office (CBO) reveals that President Obama's fiscal 2011 budget would add almost $10 trillion to the national debt over the next decade. But to pay for those deficits, the US government must borrow one out every three dollars with the majority coming from foreigners. Other than a drop in the greenback, the consequence of depending on foreigners has so far been fairly benign. However as America's deficits balloon, its national security, sovereignty and even control over their currency will disappear. How long can America count on the market's tolerance? Very scary was reports that Russia almost caused the failure of mortgage giants, Fannie and Freddie last year when they dumped their positions."

A new CNN / Opinion Research Poll out this afternoon of 953 registered voters nationally finds Obama tied at 47% with any Republican candidate. Gee, if only Wendell Willkiewas still around.
The same poll also finds a clear majority of Americans now believe that Obama is a one-term president.

Barry Ritholtz:"
China Bubble?
>1. Great investment debacles generally start out with a compelling growth story (The China Dream)
>>2. Blind faith in the competence of the authorities The Communist Party of China We Trust)
>>3. General increase in investment (Chinese investment Boom)
>>4. Corruption (rampant in China)
>>5. Easy money (Money supply grew by nearly 30%, interest rates maintained well below nominal growth rates).
>>6. Fixed currency regimes (Chinese currency, the renminbi, is pegged to the U.S. dollar)
>>7. Rampant credit growth (new bank lending increased by nearly RMB 10 trillion, a sum equivalent to 29% of GDP)
>>8. Moral hazard (China’s leading banks, among the world’s largest by market value, are seen as too big to fail)
>>9. Precarious financial structures (Chinese banks are particularly reluctant to report problematic loans).
>>10. Strong credit growth and rapidly rising property prices (a widespread belief that the property prices can only go up)"

Royal Dutch Shell has quietly expanded its position in an emerging natural gas field in South Texas as part of a broader bid to become a bigger player in the North American gas business in coming years, the company's top U.S. executive said on Friday.

CNBC, working with the Congressional Budget Office, found that the 10-year outlook for the nation's deficit has deteriorated by almost $8 trillion. In effect, every man, woman and child in the United States has taken on an extra $25,000 in debt, CNBC has learned. Comparing the CBO's outlook in 2008 to the current forecast, CNBC found that what was once a projected $247 billion surplus for the years 2009 through 2018, is now an estimated $7.4 trillion deficit.

What caused it? According to the CBO, 57 percent of the increase was caused by the decline in revenues, of which a vast majority resulted from the agency’s outlook for the economy.

Tim W. Wood: "On March 18th both the Industrials and the Transports closed at new recovery highs. The averages declined into March 19th, and on March 22nd the Industrials closed at yet another new recovery high. On March 23rd another recovery high was made by the Industrials, but the Transports continued to lag. In doing so, another non-confirmation has been put into motion and is noted by a small blue line on the chart below. Again, this non-confirmation is only a warning and it is what develops from here that is important. If the averages begin to break down from this point and it becomes much more apparent that this non-confirmation is going to stand, then at that time it will serve to give more merit to any such downturn. On the other hand, if this short-term non-confirmation is invalidated, then that will serve to reconfirm the ongoing bear market rally...Based on the data at hand today, I think that the 2007 high most likely marked THE bull market top. If so, then based upon the normal statistical relationships between bull and bear markets, this bear market would be expected to run some 33 to 37 percent of the duration of the preceding bull market. With the bull market having lasted some 33 years in duration, a typical bear market relationship would last some 10 to 12 years and not a mere 17 months as was seen into the March 2009 low.."

ZeroHedge: "The issuance of UST debt is dwarfing Libor-related issuance. For example, we expect UST net issuance to be $1.7Tr and net issuance of MBS to be zero. Thus, the relative issuance of UST’s vs. Libor-based products mainly accounts for the inversion in swap spreads. This is a first sign of stress leading to higher UST yields and is not to be missed.... is there currently a massive P&L hit to some or all of the Big 5 US banks as a result of this very much unexpected inversion? While surely the full $154 trillion or so amount is not applicable to the 7Y+ inversion, the OCC as of its most recent report does indicate that there is $27 Trillion in Interest Rate swaps outsanding with a maturity greater than 5 years....And when looking at IR holdings by bank, it would seem that JPM, Goldman, Bofa, and Citi are most impacted. While JPM, GS, BofA, Citi and Wells have about $131 billion in IR swaps among them, more relevantly, JPM, Goldman and BofA have $9, $7 and $5 trillion in >5 year IR swaps. This is very troubling.."

Friday, March 26, 2010


3/26/10 Mortgages

RadioShack Corp.
is considering a sale of the company that could fetch more than $3
billion, according to a Friday report in the New York Post that cited
investment bankers close to the situation. With the help of J.P. Morgan,
the Fort Worth, Texas electronics chain is pitching itself as a growth
story after years of cost cuttings that included thousands of layoffs,
the newspaper said. One potential buyer is Best Buy,
which has experimented with smaller retail formats to sell smartphones
and other wireless gadgets, the paper said. "They've reached a point
where they can't just keep building RadioShack stores," according to
one banker. Shares of RadioShack closed Thursday at $21.80.

The White House plans to announce on Friday that it will require
lenders to lower the mortgage payments of some unemployed workers and
encourage lenders to eliminate some principal debt of homeowners who
owe more than their home is worth, sources familiar with the plan said
on Thursday.

Earlier this week, the UK Telegraph reported:
Oil reserves 'exaggerated by one third'. The world's oil reserves have been exaggerated by up to
a third, according to Sir David King, the Government's former chief
scientist, who has warned of shortages and price spikes within years.

JPMorgan Chase & Co., Lehman
Brothers Holdings Inc. and UBS AG were among more than a dozen
Wall Street firms involved in a conspiracy to pay below-market
interest rates to U.S. state and local governments on
investments, according to documents filed in a U.S. Justice
Department criminal antitrust case.

A magnitude 6.2 earthquake
struck the copper mining region of Chile on Friday, according to the
U.S. Geological Survey. The quake struck Chile's Atacama region at
10:52 local and Eastern Time at a depth of about 22 miles and about 375
miles north of Santiago. There were no immediate reports of injury or
damage. Copper for May delivery rose 1.1% to $3.42 a pound in recent

The renminbi exchange rate has once again become a target of the United States
Congress. China-bashing, it seems, is back in fashion in the US.
But this latest round of disparagement
appears stranger than the last. When the US Congress pressed China for
a large currency revaluation in 2004-2005, China's current-account
surplus was accelerating. Now China's current-account surplus is
shrinking significantly due to the global recession caused by the US
financial meltdown.
China's total annual surplus (excluding
Hong Kong) now stands at $200 billion, down by roughly one-third from
2008. In GDP terms, it fell even more as GDP grew by 8.7 percent in

Delinquencies on
mortgages rose to nearly 14 percent in late 2009, led by a sharp
increase in seriously overdue home loans held by the most credit-worthy
borrowers, U.S. banking regulators said on Thursday. The percentage of current and performing
mortgages fell to 86.4 percent at the end of the fourth quarter of
2009, down 0.9 percent from the previous three months, marking a
decline for the seventh consecutive quarter, the report by the Office
of the Comptroller of the Currency and the Office of Thrift Supervision
It was also down 3.9 percent from a year earlier.
decline was attributable to a 21.1 percent jump in mortgages 90 or more
days past due, to 4.7 percent of all mortgages in the portfolio at the
end of 2009.
The increase in
seriously delinquent mortgages was most pronounced among prime
borrowers, with an increase of 16.5 percent in seriously delinquent
mortgages during the fourth quarter.

Unemployment benefits are set to expire for at least a week on April 5,
as Congress plans to break for two weeks without agreeing on an
extension of the program.
Last week, the House approved a $9 billion measure containing
one-month extensions of unemployment insurance, COBRA health benefits
and federal flood insurance. Senate Democrats hoped to have their
chamber approve the same bill Thursday. But Republicans refused,
complaining that the bill is not offset with spending cuts elsewhere.
They said the same thing in early March, when Sen. Jim Bunning
(R-Ky.) brought the chamber to a halt for five days over another
extension that wasn't offset.

House Bill Extends U.S. Ethanol Tax Breaks to 2016.

China's central bank may "soon" raise its reserve ratio requirement
for the third time this year to further drain liquidity, citing

Japan's core
consumer prices fell 1.2 percent in February from a year earlier,
marking a full year of grinding deflation and suggesting the Bank of
Japan may need to ease monetary policy again in the next few months.

China may resume 'managed' Yuan float, avoid sharp gain, PBOC's Fan says.

According to Bloomberg:“The market doesn’t care that ‘France
and Germany are saying they have the framework to a plan to support
Greece including the IMF,’ said John Curran, a Toronto-based senior
vice president at CanadianForex Ltd. ‘It’s like ‘Yeah, OK, great, I
have a plan for winning the lottery, too.’ Show us something that
“Trichet, in an interview on France’s
Public Senat television, said, ‘If the IMF or any other authority
exercises any responsibility instead of the euro group, instead of the
governments, this would clearly be very, very bad.’”

Chinese Firm Buys Marriott in Downtown L.A. Shenzhen New World Group Co. buys the 469-room hotel out of foreclosure
for an estimated $60 million, about half of what it sold for in 2007.
Shenzhen plans to invest $13 million in upgrades.

Under an accord announced late on Thursday, Athens would receive
coordinated bilateral loans from other countries that use the euro and
help from the International Monetary Fund if it faced severe

The Dow Jones Industrial Average up 9.15 points at 10,850.36, leaving it 1% higher than the week-ago finish. The S&P 500 Index added nearly 1 point to 1,166.59, leaving it up 0.6% for the week, while the Nasdaq Composite Index fell 2.28 points to 2,395.13, a level that translates into a weekly rise of 0.9%.

Thursday, March 25, 2010

Social Security

3/25/10 Social Security

The number of people applying
for unemployment benefits fell 14,000 in the week ended March 20 to a
seasonally adjusted 442,000, the Labor Department said Thursday.
Economists surveyed by MarketWatch predicted claims would drop to
450,000, but the latest figures reflect annual revisions to the data
that put claims 10,000 lower than they would have been under the old
methodology, a Labor official said. The four-week average -- a better
gauge of employment trends than the volatile weekly number - declined
by 11,000 to 453,750. In the week of March 6, about 5.7 million jobless
workers were receiving extended federal benefits, down 345,000 from the
week before.

The Treasury's auction Wednesday of $42
billion in 5-year notes was surprisingly weak, and saw a
larger-than-usual amount going to Wall Street's dealers. The
participation by indirect bidders, usually foreign central banks, was
only 40 percent, compared to an average 49 percent.
the same time, the 10-year swaps rate moved to less than zero for the
first time Tuesday, which some see as a sign of stress in the market.
The selloff in the 10-year Treasury Wednesday pushed its yield higher,
to 3.8 percent. Swaps are used by corporations to manage cash flows on
their debt by turning long term liabilities into short term floating
rate liabilities.

The Energy Department on Thursday is expected to report a build of 9
billion to 13 billion cubic feet of natural gas storage inventories for
the week ended March 19, according to a survey of analysts by Platts,
the energy information arm of McGraw-Hill Cos.

"State personal income declined an average 1.7 percent in 2009, according to estimates released today by the U.S. Bureau of Economic Analysis. The annual percentage change in state personal income ranged from -4.8 percent in Nevada to 2.1 percent in West Virginia (one of six states with a personal income gain in 2009). Inflation, as measured by the national price index for personal consumption expenditures, fell to 0.2 percent in 2009 down from 3.3 percent in 2008. Per capita personal income (personal income divided by population) fell 2.6 percent nationally in 2009 after rising 2.0 percent in 2008.

there's the talk about a constitutional amendment in South Carolina to nullify Obamacare...a hearing there this morning.

This year, the social security system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.
Stephen C. Goss, chief actuary of the Social Security Administration,
said that while the Congressional projection would probably be borne
out, the change would have no effect on benefits in 2010 and retirees
would keep receiving their checks as usual. The problem, he said, is that payments have risen more than expected
during the downturn, because jobs disappeared and people applied for
benefits sooner than they had planned. At the same time, the program’s
revenue has fallen sharply, because there are fewer paychecks to tax.

Zhu Min, a deputy governor of the People's
Bank of China, reaffirmed the central bank's intention to refine its
exchange-rate regime but gave no clue as to when it might drop the
yuan's 20-month-old peg to the dollar.
should, China would, continue to improve its managed floating exchange
rate regime based on market demand referenced to a basket of
currencies," Zhu said.
"We should and we could," he told the Credit Suisse Asian Investment Conference.

At the request of senators drafting a climate change bill, BP,
ConocoPhillips and Shell proposed language that essentially would block
federal oversight of the technology that's key to the current natural
gas drilling boom.

BofA, under pressure from Massachusetts prosecutors, will reduce
mortgage- loan balances as much as 30% for thousands of troubled

The U.S. has backed away from pursuing a number of tough measures
against Iran in order to win support from Russia and China for a new
U.N. Security Council resolution on sanctions.

The owner of the Northwest's tallest building missed a mortgage payment
this month, evidence of the troubles facing downtown Seattle office

South Africa cuts rates by 50 basis points to 6.5%.

Industry experts estimate that less than half of short-sale offers have
been accepted, and many real-estate agents have avoided showing these
properties altogether. Ultimately, most of the homes go into

The Service Employees International Union (SEIU), is promoting a plan that will centralize all retirement plans for American workers,
including private 401(k) plans, under one new "retirement system" for
the United States.
In effect, government pensions for everyone, not unlike the European system and regardless of personal choice.

Up To 19,000 Job cuts Projected For New York City.

Bill Bonner: " It could be that this period will correct the whole, extraordinary
surge in Anglo-Saxon power that began in the 17th century. English
speakers have been on a roll since Sir Francis Drake defeated the
combined armada of Spain and France in 1588. Soon after England began
putting together her empire…and then, the industrial revolution turned
Britain and America into economic powerhouses.In addition to reducing asset prices and de-leveraging the economy,
The Great Correction could be reducing the relative power and influence
of the English speaking peoples. We don’t know…but that’s the way it

Schlumberger Ltd. plans to acquire Geoservices, a French-based company
specializing in energy services, in a deal valued at $1.1 billion,
including debt.

"While management believes that
the company will have sufficient liquidity to satisfy its needs through
the second quarter of 2011, no guarantee can be given that it will be
able to pay all of its operating expenses and debt service obligations
thereafter, and its liquidity may run out prior to the second quarter
of 2011," Ambac said in the filing.

Senate Democrats prevail, so far, in keeping the package of healthcare
'fixes' intact. But the House will need to vote on it again to address
small adjustments in the part dealing with student loans.

A natural gas cartel for major producers would create stability in the
energy sector, the Russian prime minister said during a meeting with
Qatari officials.

Natural gas for April delivery fell 11.1 cents, or 2.7 percent, to
$3.994 per million Btu at 9:53 a.m. on the New York Mercantile
Exchange. The contract earlier reached $3.978, the lowest since Sept.
28. The futures have declined 28 percent this year. Milder-than-normal weather will cover most of the eastern two-thirds of
the country from March 30 through April 8, according to MDA Federal
Inc.’s EarthSat Energy Weather, based in Rockville, Maryland.

IBD: "You must buy a policy that covers ambulatory patient services,
emergency services, hospitalization, maternity and newborn care, mental
health and substance use disorder services, including behavioral health
treatment; prescription drugs; rehabilitative and habilitative services
and devices; laboratory services; preventive and wellness services;
chronic disease management; and pediatric services, including oral and
vision care.
You're a single guy without children? Tough, your
policy must cover pediatric services. You're a woman who can't have
children? Tough, your policy must cover maternity services. You're a
teetotaler? Tough, your policy must cover substance abuse treatment.
(Add your own violation of personal freedom here.) (Section 1302)."

Natural gas futures slumped on Thursday after the Energy Information
Administration reported said U.S. natural gas supplies rose by 11
million cubic feet in the latest week. Natural gas for May delivery was
down 12 cents, or 2.9%, at $4.03 per million British thermal units.

The long-term average for the cyclically adjusted PE is about 16X. Obviously, that's only an average. Stocks have spent vast periods above the average and vast periods below it, usually in multi-decade cycles. We've just descended from the longest period of extreme
overvaluation in history, suggesting (to us, anyway) that the next
multi-decade cycle is likely to be below the average. At today's level, 1160 on the S&P, stocks are trading at a 21X CAPE, about 30% above the long-term average

the Dow Jones Industrial Average finished up 5.06 points at 10,841.21. The S&P 500 Index fell 1.99 points to 1,165.73. The Nasdaq Composite Index declined 1.35 points to 2,397.41.

Wednesday, March 24, 2010

Durable Goods

3/24/10 Durable Goods

"The job losses over the past three years have been across a wide range of
industries and from coast to coast. And if you've lost your job, in all
likelihood you will remain unemployed for longer than in any period
since the Great Depression."
- Mark Zandi

Demand for U.S.-made durable goods rose a seasonally adjusted 0.5% to $178.1
billion in February, the third straight increase in a key
forward-looking indicator, according to Commerce Department data
released Wednesday. New orders for machinery and civilian aircraft were
strong in February, while new orders for autos, defense goods and
electronics declined. The 0.5% increase in durable goods orders was
weaker than the 1.7% gain expected by economists surveyed by
MarketWatch. However, January's orders were revised higher, from a 2.6%
gain to 3.9%. December's orders were also revised higher.

New industrial orders in the
16-nation euro zone fell 2% in January, the European Union statistics
agency Eurostat reported Wednesday. New orders rose 7% compared to the
same month last year. Economist shad forecast a 1.9% monthly rise and a
14.1% annual increase.

Jas Jain: "You must remind your readers that the Inflation rate in the US for the past 21 months is zero and is -1.47% for the past 19 months. We might have a negative inflation rate for a 2-year period, Jul'08-Jul'10. Lot of volatility sometimes hides the real trend. 3M and 6M rates on headline and core CPI are extremely low right now. Double Dip --> Deflation --> Depression is the sequence to look for over the next 12-18 months."

U.S. mortgage applications fell for a second straight week, with demand for home loan refinancing
sinking to its lowest level, according to the Mortgage Bankers
Association. Demand for purchase loans edged higher but activity was
down from a year earlier, further evidence of a slowing housing market.

Portugal’s sovereign debt rating was downgraded on Wednesday in a
blow to government efforts to improve the international credibility of
the country’s public finances.
Fitch Ratings cut the rating on
Portugal’s long-term government debt by one notch from AA to AA-minus,
citing concern over the potential impact of the global crisis on
economic growth and government debt.

John Mauldin believes the stock market could shed 40% in the near
future (SPX). John is the president of Millennium Wave Advisors, LLC, a
Dallas, Texas based investment advisor, with $600 million in assets
under management.
John worries that the velocity of money, an
indicator of how many times a dollar is reused in the economy, is
collapsing. This ratio, which is defined by the GDP divided by the
money supply, bottomed at 1.15 in 1946. It then reached a mean of 1.65
in the fifties, sixties, and seventies, and peaked at a breathtaking
2.2 times in 1997, near the top of the Dotcom bubble. It has been
retreating ever since, has recently accelerated down to the 100 year
mean, but still has much farther to fall to get to the bottom of the
100 year range.

Fiat seen cutting 5,000 jobs.

China Daily: "US Likely to Label China 'Currency Manipulator'. The
US Treasury Department is highly likely to label China a currency
manipulator in a report due out in mid-April, but the move will be
"more symbolic than substantive" to win mid-term Congressional
elections in the fall, former US trade representative Susan Schwab told
China Daily on Tuesday. If that were the case, it will be
the first time in 16 years. By declaring China a currency manipulator,
the US could slap additional tariffs on imports from the country. Some
Chinese experts strongly doubt the US will do so as it will provoke
Beijing and jeopardize its most important trade relationship, while
others believe that even if China were declared a currency manipulator,
Washington will not follow up with punitive measures."There is a high possibility, definitely (that China will be labeled as
a manipulator), but it is very important to remember the decision is
largely symbolic and does not force any actions, other than
consultations," she said. Schwab said "a significant growing
number" of Democrats are increasingly pushing protectionist solutions,
which she said was unfortunate."

The yuan may strengthen by between 3%
and 5% this year against the U.S. dollar, starting in April, citing a
forecast by China International Capital Corp. The Chinese
currency may strengthen "gradually," instead of through a one-step
revaluation, citing the forecast by the Beijing-based investment bank.

Daniel Dicker: "In my top stock recommendations for 2010, I made natural gas my No. 1
sector play in energy. If you only had one stock to add to your
portfolio, I believed then it had to be in natural gas. I believe I'm right about that recommendation still. Nothing makes more
sense to me than the story on natural gas. It is domestic, cheap and
plentiful. It's got undeniable advantages to crude, coal and certainly
any alternative you can name."

Sales of new homes in the U.S. fell slightly in February - the fourth straight
monthly drop - to yet another record low.
New-home sales slipped 2.2% to an annual pace of 308,000, seasonally
adjusted, which is the lowest rate since the government began tracking
the data in 1963, according to the Commerce Department. Economists
surveyed by MarketWatch forecast annualized sales of 318,000. Sales for
January were revised to a seasonally adjusted annual rate of 315,000,
up from 309,000 as previously reported. The median price of a new home
sold shot up 6.1% to $220,500 in February from January's revised level
of $207,900.

The Dow Jones Industrial Average fell 52.68 points, or 0.5%, to 10,836.15. The S&P 500 Index dropped 6.45 points, or 0.6%, to 1,167.72. The Nasdaq Composite Index fell 16.48 points, or 0.7%, to 2,398.76.

Tuesday, March 23, 2010


3/23/10 Housing

John Hussman: "Allowing dead assets to stay on the books as
if they are alive is precisely what created insolvent zombie banks in
Japan, which continued to operate for over a decade at public expense,
even while lending activity stagnated. On this front, the growing gap
between delinquencies and foreclosures is notable. It's not at all
clear how this growing gap will be resolved."

Twelve state attorneys general, all of whom are Republican, have already filed suits to block the health care bill on the grounds that its requirement that everyone have health insurance
is unconstitutional. Four state legislatures have already passed laws
blocking the bill.
Senior White House adviser David Axelrod dismissed the lawsuits, saying the Obama administration is very confident the health care bill "will withstand those legal challenges.

House Democrats unhappy with the Senate bill have been continually
reassured that the compromise package will be approved by the more
conservative Senate.
Senate Majority Leader Harry Reid,
D-Nevada, presented a letter to House Democrats on Saturday stating
that their Senate counterparts "believe that health insurance reform
cannot wait and must not be obstructed."

European Central Bank President
Jean-Claude Trichet spoke out against offering low- interest loans for
which the Greek government has pressed. Trichet’s
demand for stringent terms and German Chancellor Angela Merkel’s push
for sanctions against nations that breach deficit limits heightened the
chance that Greece will leave a March 25-26 summit empty-handed.

Sallie Mae Says Lending Policy Changes Will Cost 2,500 Jobs.

of homes in or near foreclosure last month hit the highest percentage
of total sales since July 2008, indicating a trend that is closely
correlated with falling home prices, according to a survey released on
Monday. Distressed properties made up 48.1 percent
of home purchases in February, according to the Campbell/Inside
Mortgage Finance Monthly Survey of Real Estate Market Conditions.The
survey, which polls more than 1,500 real estate agents, found
distressed sales were as low as 37 percent in November.

Resales of U.S. homes and
condos fell 0.6% in February to a seasonally adjusted annual rate of
5.02 million, the lowest level in eight months, raising doubts about
the durability of the housing recovery, the National Association of
Realtors reported Tuesday. Sales of existing homes have fallen three
consecutive months after rising steadily through the fall in response
to a federal subsidy for first-time home buyers. The tax credit has
been restored and expanded to repeat buyers, but there has been no
increase in sales yet. Inventories of sales on the market jumped in
February, rising 312,000 to 3.59 million, the highest since September.

(Bloomberg) -- The 10-year U.S. swap spread turned
negative for the first time on record amid rising demand for
higher-yielding assets such as corporate and emerging market
The gap between the rate to exchange floating- for fixed-
interest payments and comparable maturity Treasury yields for 10
years, known as the swap spread, narrowed to as low as negative
0.44 basis point, the lowest since at least 1988, when Bloomberg
began collecting the data. The spread narrowed 3.38 basis points
to negative 0.38 basis point at 12:40 p.m. in New York.
A negative swap spread means the Treasury yield is higher
than the swap rate, which typically is greater given the
floating payments are based on interest rates that contain
credit risk, such as the London interbank offered rate, or
Libor. The 30-year swap spread turned negative for the first
time in August 2008, after the collapse of Lehman Brothers
Holdings Inc. triggered a surge of hedging in swaps. The difference narrowed to negative 18.56 basis points today.
“It’s hedge-related activity related to new corporate
issuance,” said Christian Cooper, an interest-rate strategist
at Royal Bank of Canada in New York, one of 18 primary dealers
that trade with the Federal Reserve. “As more and more
institutions receive, then swap rates will go lower.”

Saks Inc.said Tuesday it plans to close its Saks Fifth Avenue stores at Pioneer
Place Mall in Portland, Oregon. Saks will close the men's store in
April and shut the main store in July. About 100 employees will be
affected by the move.

Blockbuster closed 253 stores in January and planned to close another 150 in April with more than 500 of its 3500 stores to close in 2010.

school districts have given preliminary layoff notices to more than 500
teachers and other certificated employees because severe budget
shortfalls are projected, according to the San Mateo County Office of
That's 10 percent of the certificated work force
spanning kindergarten to 12th grade countywide, the education office
said Monday.

Brown University will lay off approximately 60 staff members in June,
administrators announced to employees via e-mail message Monday
morning. This figure does not include the 139 staff members who have
opted for voluntary early retirement packages.

Oil futures fell slightly in electronic trade late Tuesday after the American Petroleum Institute reported a rise in crude-oil inventory. Oil fell 0.3% to $81.68 from the $81.91 close. The industry group said oil stockpiles rose by 7.5 million barrels. Analysts polled by Platts expect a commercial-crude-inventory increase of 1.67 million barrels for the week ended March 19. Oil seesawed for much of the session, but managed to finish slightly higher on Tuesday, taking cues from stock and currency markets, both of which also had a volatile day.

The Dow Jones Industrial Average [: $indu] rose 102.94 points, or 1%, to 10,888.83. The S&P 500 Index added 8.36 points, or 0.7%, to 1,174.17. The Nasdaq Composite Index climbed 19.84 points, or 0.8%, to 2,415.24.

Monday, March 22, 2010

Another Up Monday

3/22/10 Another Up Monday

Royal Dutch Shell and PetroChina convinced Arrow Energy to accept an
increased $3.1 billion bid, giving resource-hungry China its first bite
of Australia's burgeoning coal-seam gas industry.
The offer,
which needs approval from Australian regulators and Arrow shareholders,
highlights the growing importance of coal seam gas (CSG) as a key
source of energy in the United States and a major target for
multinationals in Australia since 2008.
In addition to A$4.70 a
share in cash, Arrow investors will retain ownership of some domestic
and international assets which will be spun out into a new entity to be
called Dart Energy.

The bond market is saying that it’s
safer to lend to Warren Buffett than Barack Obama.
Two-year notes sold by the billionaire’s Berkshire Hathaway
Inc. in February yield 3.5 basis points less than Treasuries of
similar maturity, according to data compiled by Bloomberg.
Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt
also traded at lower yields in recent weeks, a situation former
Lehman Brothers Holdings Inc. chief fixed-income strategist Jack
Malvey calls an “exceedingly rare” event in the history of the
bond market.

Berkshire Hathaway's McLane Co. will buy Kahn Ventures Inc., a wholesale distributor of distilled spirits, wine and beer in Georgia and North Carolina. The deal is subject to usual closing conditions, including a waiting period under the Hart-Scott-Rodino Act. Financial terms were not disclosed.

The Dow Jones Industrial Average rose 43.76 points to 10,785.74. The S&P 500 Index climbed 5.9 points to 1,165.8. The Nasdaq Composite Index gained 20.99 points to 2,395.4.

Sunday, March 21, 2010

Health Care

3/21/10 Health Care

China's trade balance could turn to a deficit in March, commerce
minister Chen Deming said on Sunday, adding that adjustments to the
yuan's value would not by itself resolve global trade imbalances.
speaking at the China High Level Development Forum, said that in the
three years from 2005 to 2008, the yuan had appreciated by more than 20
percent while the trade surplus increased.

The chairman of the House Democratic Caucus just told ABC that the
party has the 216 votes to pass a sweeping health care bill later

Advanced economies face “acute”
challenges in tackling high public debt, and unwinding existing
stimulus measures will not come close to bringing deficits back
to prudent levels, said John Lipsky, first deputy managing
director of the International Monetary Fund.
All G7 countries, except Canada and Germany, will have
debt-to-GDP ratios close to or exceeding 100 percent by 2014,
Lipsky said in a speech today at the China Development Forum in
Beijing. Already this year, the average ratio in advanced
economies is expected to reach the levels seen in 1950, after
World War II, he said. The government debt ratio in some
emerging market nations had also reached a “worrisome level.”

“The potential risk is that a lot of liquidity goes to the asset
market. So you see asset bubbles in commodities, stocks and real
estate, not only in China, but everywhere.” Bank of China Vice
President Zhu Min, Bloomberg News, September 10, 2009

Novell rejects Elliott Associates' $1.8B bid to take it private, calling it "inadequate," and saying it "undervalues
the company's franchise and growth prospects." Some have questioned
whether Novell is really worth that much, but others say it could be worth even more considering its $1.82 billion in assets.

Mike Burk: "All of the major indices hit new highs last Wednesday and Thursday, but the pattern could have been better. The secondaries were weaker than the blue chips, new highs fell sharply on Thursday and Friday and new lows increased a little. Perhaps the market is relaxing after its thrust to new highs across the board or, possibly, this is the beginning of a topping pattern that will unfold over the next 4 - 6 weeks.
I expect the major averages to be lower on Friday March 26 than they were on Friday March 19."