Saturday, April 10, 2010


4/10/10 Money

A plane carrying Polish
president Lech Kacynzski and his wife has crashed in Western Russia,
and the governor of the region said there are no survivors, according
to media reports. The plane crashed near Smolensk airport, about 275
miles west of Moscow.

Halliburton said on Friday it agreed to buy Boots & Coots , a
company that provides pressure control services for oil and gas wells,
in a stock and cash deal worth about $240 million.
said Boots & Coots shareholders will receive about $3 for each
share of Boots & Coots they hold. That $3 consists of $1.73 in cash
and $1.27 in Halliburton stock, according to the statement from

China posted its first trade
deficit in six years in March even as the yuan stayed pegged to
the dollar, aiding government efforts to play down the
currency’s role in global economic imbalances.
The $7.24 billion shortfall, reported by the customs bureau
on its Web site today, compared with a median forecast for a
$390 million deficit in a Bloomberg News survey of 26 economists.
Imports surged 66 percent from a year earlier as exports gained
24 percent.

Doug Noland: "How about a few days of hearings examining issues specific to
total mortgage Credit having almost doubled in just six years, to end
2007 at $14.5 TN. More specifically, how was it possible that the vast
majority of this Credit was perceived - in the marketplace; by the
rating agencies; by the regulators - as “money good”? A more
conceptual analytic focus would get us much closer to appreciating key
Credit system dynamics than a piecemeal grilling of policymakers and
executives from Citi, AIG, Lehman, Bear Stearns, the GSEs and the like....The misperception of mortgage Credit “moneyness” was the root
cause of the crisis. The market perceived that Trillions of
mortgage-related securities were a safe and liquid store of nominal
value. This created the insatiable market demand for these debt
securities that Wall Street so capably exploited. Supply and demand
dynamics no longer applied, as Trillions of mortgage Credit was
supplied at lower yields and easier terms. And greater mortgage Credit
excess inflated home prices and economic output, further buttressing
the perception that mortgage debt was Good Money. The markets’ fateful
misconception – and a momentous breakdown in the market pricing
mechanism - can be traced directly to Washington....Throughout the risk markets, prices are buoyed by confidence that
the Fed will restart monetization operations in the event of any market
liquidity disruption. Hedge funds and other speculators are thriving
once again as they successfully exploit Washington’s inflationary
policymaking. Washington further disrupts the market pricing mechanism
with its ongoing massive fiscal stimulus, ultra-low interest rates, and
liquidity backstop operations....Importantly, you don’t want to allow distortions in money
perceptions to establish a foothold. Such distortions are always and
everywhere the lifeblood of Bubbles. Above all, you certainly don’t
want to finance a massive inflation of non-productive debt with
“money.” This only ensures a problematic widening gulf between
perceptions of safety and liquidity and the actual deteriorating
underlying soundness of these financial claims. And when the inflation
of this money is also distorting market perceptions for Credit and
asset prices throughout the entire system, inflationism is really
playing with fire. Money Not Good."

Improvements in the spread between the New Zealand debt and comparable
U.S. Debt, is driving investors into the Kiwi. Speculation that the
Reserve Bank of New Zealand will raise its benchmark rate sometime
after June is also providing some support. Traders seem to have
shrugged off the recent International Monetary Fund Report calling the
NZD USD overpriced. Support is also coming from a government report
which said the New Zealand budget cash deficit was narrower than its

Auto sales in China continued their ascent in March, rising 56% from
a year earlier to a new monthly record of 1.74 million vehicles, data
from a semiofficial industry group showed Friday.
The previous
record was in January, when sales more than doubled to 1.66 million
vehicles—showing government incentives aimed at boosting demand remain
effective more than a year after they were initially introduced.

From Robert Selna at the San Francisco Chronicle: Office vacancy rate rises in San Francisco The 13 million square feet of available space in the first quarter of 2010 translates to a 17.7 percent office vacancy rate, up from 14.7 percent a year ago and nearly one percentage point from the previous quarter ending in December, according to data released Friday by the real estate firm Jones Lang LaSalle.
...Boston's commercial district has a vacancy rate of 18.4 percent and Chicago's is 16.3 percent, according to Jones Lang LaSalle.

This week the Unofficial Problem Bank List stands at 682 institutions with assets of $364 billion compared with 683 institutions with assets of $361 billion last week.

Virtually all U.S. silver production is going toward the manufacturing of Silver Eagles. - Casey's Gold & Resource Report

Patrick Chovanec: "China’s exports are up just over 20% from last year, but that’s just barely back to the level they were at before the global financial crisis struck. With Chinese exporters already struggling, China’s leaders have been reluctant to hit them with a “double whammy” in the form of a less competitive currency. If exports continue their recovery, though, that will give the Chinese a lot more comfort in moving towards a more flexible exchange rate."

From Leucadia's 2009 Letter: "Out of prudence we take a pessimistic view as to when this recession will end. To think otherwise would be a gamble that we are unwilling to make."

Stiglitz said an International Monetary Fund rescue of Greece would be a "sad" chapter in the history of the European Union.

James Rickards: "Real debt cannot be repaid through any feasible combination of growth and taxes. We will soon arrive at the point where it cannot be rolled over. Debt includes contingent liabilities as well as bonds. In the U.S., this means social security, healthcare and housing obligations estimated at over $60 trillion. That does not include unfunded pension obligations of the states whose plans use fanciful 8% growth assumptions to limit contributions. Pension debt grows exponentially; a toxic brew of increased benefits, contribution shortfalls and anemic performance.
Even what we call money is debt. Paper money is a contract between citizen and government. As with any contract, it pays to read the fine print. Embossed on each U.S. bill is the phrase “Federal Reserve Note.” Give the Fed credit for full disclosure; these notes are liabilities. If the Fed’s mortgage assets were marked-to-market the Fed itself would be insolvent. In short, it’s all debt....The global financial system is a rope of sand....You cannot tax your way to solvency in a world of low growth and compound interest. "

Friday, April 09, 2010


4/9/10 Risk

The Pragmatic Capitalist: "UBS called the bottom of the recent downturn tothe exact day on February 9th (see here).
They’ve been bullish since then, but are now warning of extreme risks
in the market. According to their Risk Appetite Indicator, risks are
surging as the market advances and investors turn increasingly complacent:
“Our Risk Appetite Indicator edged
higher last week, moving up to 1.21 from 1.15. After briefly dipping
into negative territory in early February, the indicator has risen 5
out of the last 6 weeks (with one week unchanged) and is nearing the
+1.30 level, which we define as extreme risk seeking territory. Last
week, each component ticked marginally higher as the MSCI AC World
index was up 1.9%.”

Major banks masked their risk levels in the past five quarters by
temporarily lowering their debt just before reporting it to the public,
according to data from the New York Fed.

Canada's job market improved in
March less than expected, with the economy adding 18,000 jobs, the
government said Friday. That's fewer than what some economists
anticipated, according to RBS Capital Markets. The gains were the
smallest this year, "suggesting some moderation in economic growth from
the robust pace projected in January," said Action Economics.

Apple launched a war with Google over mobile advertising revenues on Thursday as it announced its own iAd network for the iPhone.

Jeff Rubin, a former CIBC chief economist and author of a book on oil
and globalisation, says: “Triple-digit oil prices are going to threaten
a world recovery.”

Roubini: "Cities, townships and local authorities are subject to
court-adjudicated debt workouts under Chapter 9 of the U.S. Bankruptcy
Code. States are sovereign under the 10th Amendment to the
Constitution, putting them above bankruptcy. Even so, the
constitutional balanced budget amendments in 49 of the 50 states are

Bill Bonner: "Nearly 7,000 people go bankrupt every day – a record number. And in
March, M3, the broadest measure of the money supply, recorded its
biggest drop ever.
And get this. Peak to trough, December ’07 to February ’10, 8.3
million jobs were lost. As we reported yesterday, take away the
statistical tricks and the number of people with real jobs actually
fell last month – despite reports of an additional 163,000 new jobs in

Wal-Mart Stores Inc. is cutting prices on thousands of products in an aggressive
campaign to reinforce its reputation as a discount leader, as the
company seeks to reverse months of slowing U.S. sales.

EconomicDisconnect: "Many consumers are spending their mortgage payments! It’s beginning to
make sense in the most disturbing way. As homeowners face staggering
payments on houses that have negative equity, a large number are simply
deciding not to pay their mortgage bill, resigned to the fact that
eventually they will lose their house."

The west coast manager of real estate owned, Senior Vice
President Ken Gaitan, stated that Bank of America, which currently
forecloses on 7,500 homes a month nationally, will increase that number
to 45,000 homes per month by December of 2010.
After his surprising statement, two questioners from the audience asked questions to verify the numbers.
Bank of America is projecting a 600% increase in its already large number of monthly foreclosures.

There were 158,141 U.S. bankruptcy petitions filed last month — a
35% increase over February's figure, according to data compiled by
Automated Access to Court Records (AACER). This was a 19% increase over
the number in October 2009, the last record-high month. In the first quarter of 2010, the rate of personal bankruptcy
filings in a dozen states increased by double-digit percentages over
2009's monthly averages. "What is surprising is that there are still
hefty increases in states like Arizona, California and Florida," says
AACER president Mike Bickford, referring to the fact that it might seem
that the worst would be over in states hard-hit by the housing bubble.
"Intuitively, you would think there might be some leveling off in these
states, but that is not the case.

In really bad times, people who are evicted from their
houses will not rent.

Instead, they will move in with friends or family
for some time.

As the Wall Street Journal explained last October:
Driving the change [i.e. large numbers of rental
>vacancies and lower rents] is the troubled employment market, which is
>closely tied to rentals. With unemployment at 9.8% — a 26-year high —
>more would-be renters are doubling up or moving in with family and
>friends during periods of job loss. Landlords have been particularly
>battered because unemployment has been higher among workers under 35
>years old, who are more likely to rent. Nationally, effective rents
>have fallen by 2.7% over the past year, to around $972.
As Zack’s Investment Research writes:
A smaller percentage of Americans owned their own homes
in the 4th quarter of 2009 than at any time since 2000. In the 4th
quarter 67.2% of Americans owned their own home, down from 67.6% in the
third quarter and two full percentage points below the peak set in the
fourth quarter of 2004.

The Chinese Ministry of Finance was unable to sell all of its planned
issuance of 91- and 273- day bills. The bond failures were attributed
to increasing concerns of monetary tightening which, of course, would
impact short-term rates and make investors skittish about locking up
capital. If China has difficulty selling bills, what's the outlook for the U.S.?

Casey's General Stores (CASY +22.1%) soars as Canadian convenience store operator Couche-Tard launches a hostile offer to buy the company for $36 a share, a 14% premium over Thursday's closing price.

Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.

Sovereign Debt Crisis at 'Boiling Point', Warns Bank for International Settlements.

Total wholesale inventories increased 0.6 percent, the Commerce
Department said, from an upwardly revised 0.1 percent gain in January.
Wholesale inventories in January were previously reported to have
slipped 0.1 percent.

Euro zone officials agreed on Friday on the terms of a possible
financial rescue for Greece as a credit ratings agency downgraded
Athens' debt by two notches citing a worsening economy and rising
borrowing costs.
Deputy finance ministers and central bankers of
the 16 countries sharing the European single currency decided that any
emergency loans would be made on terms almost identical to standard IMF
bailouts if Greece needed them, an EU source said.

Gold futures settled at a fresh four-month high Friday as prices
overcame a wobbly start to rally on rekindled concerns about the global
economic recovery. Gold for June delivery, the most active contract,
added $9, or 0.8%, to end at $1,161.90 an ounce on Comex, the highest
for a most-active contract since early December. A Fitch Ratings
downgrade of Greece's credit ratings gave markets a decisive upward

Iran's president unveiled a new generation of centrifuges used to
enrich uranium Friday, defying international warnings against
continuing its sensitive nuclear work.

Fitch Ratings cut oil refining company Sunoco Inc's senior
unsecured debt rating to the lowest rung of investment grade on Friday,
partly reflecting declining demand for gasoline, the agency said.

Regulators on Friday closed Beach First National Bank of Myrtle Beach, S.C.,
bringing the total number of failed banks so far this year to 42. Beach
First National had about $585.1 million in assets and $516 million in
deposits as of Dec. 31. Bank of North Carolina in Thomasville, N.C.
will assume all of its deposits and assets.

The Dow industrials added 70.28
points, or 0.6%, to end at 10,997.35, up 0.6% for the week. The
blue-chip index had traveled above the 11,000 milestone just minutes
ahead of the market's close. The S&P 500 Index
rose 7.93 points, or 0.7%, to 1,194.37, a weekly rise of 1.4%, while
the Nadaq Composite Index gained 17.24 points, or 0.7%, to 2,454.05, up
2.1% from the prior week's close.

Thursday, April 08, 2010


4/8/10 Unemployment

The number of people applying
for unemployment benefits rose 18,000 to a seasonally adjusted 460,000
in the week ended April 3, the Labor Department reported Thursday.
Economists surveyed by MarketWatch had expected a result of 442,000.
The four-week average of initial claims -- a better gauge of employment
trends than the volatile weekly number - rose 2,250 to 450,250. For the
week ended March 27, continuing claims fell 131,000 to 4.55 million.
The four-week average of these ongoing claims declined 36,000 to 4.65
million, the lowest level since January 2009. In the week ended March
20, about 5.8 million jobless workers, not seasonally adjusted, were
receiving extended federal benefits, down 223,000 from the prior week.
Altogether, 11.1 million people were collecting some type of
unemployment benefits in the week ended March 20, down about 373,000
from the prior week. A Labor Department official said interpretation of
the data around this time period is clouded by events such as Easter
that make it difficult to properly adjust for seasonal factors.

George Ure: " Tax Freedom Day will arrive on April 9 this year, the 99th day of 2010, according to the Tax Foundation's annual calculation using the latest government data on income and taxes. Americans will work well over three months of the year—from January 1 to April 9—before they have earned enough money to pay this year's tax obligations at the federal, state and local levels. This year's Tax Freedom Day is one day later than in 2009, but more than two weeks earlier than in 2007. The shift toward a lower tax burden since 2007 has been driven by three factors: (1) The recession has reduced tax collections even faster than it has reduced income; (2) President Obama and the Congress have enacted large but temporary income tax cuts for 2009 and 2010, just as President Bush did in 2008; and (3) Two significant taxes were repealed for 2010 as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of
the income tax. Despite all these tax reductions, Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined." 27% of your work year goes to government.

U.S. natural gas storage is expected to increase by 29 to 33 billion
cubic feet in the week ended April 2, analysts polled by Platts said.
The Energy Information Administration releases its report on natural
gas storage Thursday at 10:30 a.m. Eastern. Natural gas's most active
contract has gained 3.9% so far this month, following a 31% decline in
the first quarter of the year. Natural gas for May delivery, the most
traded contract, was down 8 cents, or 1.9%, to settle at $4.02 per
million British thermal units Wednesday.

Natural gas storage increases by 33 bln cubic feet. Increase in nat gas storage within expectations. Natural gas holds on to losses, at $3.90/mln Btus.

Baker Hughes reported that the international rig count for March
2010 was 1,074, up 6 from the 1,068 counted in February 2010, and up 62
from the 1,012 counted in March 2009. The international offshore rig
count for March 2010 was 295, down 6 from the 301 counted in February
2010 and up 14 from the 281 counted in March 2009.
The U.S. rig count for March 2010 was 1,419, up 69 from the 1,350
counted in February 2010 and up 314 from the 1,105 counted in March
2009. The Canadian rig count for March 2010 was 386, down 178 from the
564 counted in February 2010 and up 190 from the 196 counted in March
The worldwide rig count for March 2010 was 2,879, down 103 from the
2,982 counted in February 2010 and up 566 from the 2,313 counted in
March 2009.

Contrarian: "Higher prices of milk, fruits and pulses pushed food inflation to
17.70 per cent for the week ended March 27, fueling expectations that
Reserve Bank of India may further tighten rates in its annual monetary
policy on April 20.
Food inflation in the previous week stood at 16.35 per cent. With
prices of essential items rising and fears of food inflation spreading
to manufactured goods, the overall inflation for March, data for which
is expected next week, is likely to cross the double digit mark."

Wealth, Income, and Power by Professor G. William Domhoff at the University of California at Santa Cruz: "In
the United States, wealth is highly concentrated in a relatively few
hands. As of 2007, the top 1% of households (the upper class) owned
34.6% of all privately held wealth, and the next 19% (the managerial,
professional, and small business stratum) had 50.5%, which means that
just 20% of the people owned a remarkable 85%, leaving only 15% of the
wealth for the bottom 80% (wage and salary workers). In terms of
financial wealth (total net worth minus the value of one's home), the
top 1% of households had an even greater share: 42.7%."

Mish: "If the top 20% have 84% of the wealth (and recall that 10%
have 85% to 90% of the stocks, bonds, trust funds, and business
equity), that means that the United States is a power pyramid. It's
tough for the bottom 80% -- maybe even the bottom 90% -- to get
organized and exercise much power."

Russell Napier: “For 120 years, the US borrowed money to kill people [in wars]. Now, it’s borrowing money to keep them alive."

ZeroHedge: "Panic in Greece as total freefall envelops both the bond and the stock
market. The 10 Year is now at an absolute record 447 bps spread to
bunds, or in the mid 7's in absolute terms. The stock market has
tumbled by about 5% and Greek CDS have surged to a record."

Early Easter boosts March retail sales (Reuters) as consumer buy trinkets with money saved from not paying mortgage or credit cards.

The 30-year fixed-rate mortgage
average rose to 5.21% with an average 0.6 point for the week ending
April 8, the highest since August 2009.

A team led by Yuri Oganessian of the Joint Institute for Nuclear
Research in Dubna, Russia, reports smashing together calcium-48 — an
isotope with 20 protons and 28 neutrons — and berkelium-249, which has
97 protons and 152 neutrons. The collisions spit out either three or
four neutrons, creating two different isotopes of an element with 117

Costco Wholesale Corp. said Thursday that
sales at stores open at least a year rose 10 percent in March, buoyed
by strong growth overseas.
warehouse club operator said its international sales at store open at
least a year grew 28 percent, with U.S. results up 5 percent.
higher gasoline prices and a weaker dollar, sales at stores open at
least a year increased 3 percent in March with overseas up 7 percent
and U.S. results up 2 percent.

The Dow Jones Industrial Average gained 29.55 points to 10,927.07. The S&P 500 Index added 3.99 points to 1,186.44. The Nasdaq Composite Index rose 5.65 points to 2,436.81.

Wednesday, April 07, 2010


4/7/10 Consumers

Consumer borrowing fell again in February, reflecting weakness in credit cards and auto loans. Analysts said the sharp reduction showed that the weak economy is still making consumers hesitant to take on more debt.

The Federal Reserve said Wednesday that borrowing declined by $11.5 billion in February, surprisingly weaker than the small $500 million gain that economists had expected. The February decline was the 12th decrease in the past 13 months as consumers slash borrowing in the face of a deep economic recession and high unemployment.

Analysts said consumer borrowing is being held back by lingering fears about job security with unemployment still near 10 percent and a move by banks to tighten credit standards following the severe financial crisis of the past two years.

Christopher Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York, said the job worries were a bigger factor holding back borrowing than the tighter lending standards.

Japan Airlines Corp. plans to slash its personnel by 16,500, or roughly one-third of its existing workforce, during the current fiscal year, according to a report Wednesday.

Toyota Motor Corp.plans to keep its sales-incentive program in the U.S. going through
this month and next in the wake of major safety recalls, according to a
report Wednesday.

A 7.8-magnitude earthquake
struck Northern Sumatra, Indonesia, early Wednesday morning, according
to the U.S. Geological Survey. The earthquake struck 325 miles west of
Kuala Lumpur, Malaysia, according to the USGS, and 880 miles northwest
of the Indonesian capital Jakarta. In addition, the National Oceanic
and Atmospheric Administration reported that a local tsunami watch is
in effect for the region.

The Federal Reserve is considering allowing maturing Treasury bonds
to roll off its portfolio as an alternative way to drain reserves from
the banking system, according to minutes from its March meeting.
move would mark a shift from the current policy of reinvesting the
proceeds from government debt into new Treasury bonds as the old ones
come due.

CKE Restaurants Inc
rose 8% to $11.99 in pre market trades on Wednesday after the company
said it received an alternative takeover proposal to acquire all the
outstanding shares of the company. The company did not name the new
buyer or the price. The offer came after CKE shareholder Porter Orlin,
a New York-based investment manager, said it was dissatisfied with a
going-private offer of $11.05 a share from private equity firm Thomas
Lee Partners LP. Under CKE's merger agreement with Thomas H. Lee, it
has until 12:01 p.m. on April 27 to conclude discussions with the new
buyer. CKE Restaurants manages a total of 3,141 franchised, licensed or
company-operated restaurants in 42 states and in 16 countries,
including 1,224 Carl's Jr. restaurants and 1,905 Hardee's restaurants.

Vacancy rates at US shopping centers and malls rose to the highest
levels in at least 10 years in the first quarter, accompanied by a drop
in rents that wiped out years of growth. Is there an end in sight?

Time is running out for home buyers seeking tax credits of up to
$8,000, with purchase contracts needing to be signed by the end of this
month and loans closed by the end of June.

Tens of thousands of loans have been hitting the "notice of trustee sale" bin, and that means they are coming to foreclosure.
actual foreclosure numbers have been down recently because of all the
modification efforts, but as we see more loans not qualifying for
modifications and more loans defaulting on modifications, the
foreclosure numbers rise.

M1 for February 2010 is estimated at 1.7103 trillion versus the February 2009 M1 of 1.5621 trillion which means that the M1 inflation rate is 9.487%. The unadjusted 12-month inflation rate for goods and services gobbled up by consumers is a weak 2.1%.

Dams have dried up in southwest China, Thai fishermen have almost
completely stopped their fishery activities on the Mekong River, and
nearly half of northern Vietnam's farmland is under threat because of a
regional drought.
The region is facing water shortages and low
water levels along the Mekong River -- particularly the tributaries
that feed into it -- after a shorter-than-usual monsoon season last
year and light rainfall in the dry season, affecting millions of
people, livestock and hectares of land, and generating losses in the
millions of dollars, officials from various countries and the United
Nations say.
"This is a regional drought. It's not just
restricted to one area. We expect it to go on now for maybe another two
to three weeks before the rainy season starts, and then the water
levels on the river will hopefully start to rise," said Jeremy Bird,
chief executive officer of the Mekong River Commission, which was
formed in 1995 by Thailand, Vietnam, Laos and Cambodia to oversee
sustainable development along the waterway.

Moody’s Investors Service lowered Los Angeles’ bond rating effective Wednesday -- and warned that the city risks further downgrades.Moody’s cut L.A.’s general-obligation bond debt rating to Aa3 from Aa2.

Apple's iPad tablet computer costs as little as $259.60 to build, according to analysis by the research firm iSuppli.

Los Angeles Mayor Antonio Villaraigosa called for shutting down
“nonessential” city services two days a week, after Controller Wendy
Greuel said the municipality’s cash may run out next month.

China is considering allowing the yuan
to trade against the Russian ruble, South Korean won and Malaysian
ringgit to promote its use in cross-border trade, an official at
the China Foreign Exchange Trade System said. The People’s Bank of
China is investigating the possibility of offering new foreign-exchange
pairs, said an official at the Shanghai-based interbank exchange, a
subsidiary of the central bank.

The price of copper passed $8,000 a ton for the first time in 20 months yesterday.

ZeroHedge: "As Social Security taxes increased over time, so did the benefits.
Essentially, previous generations paid into the system when taxes were
low and retired when the benefits were high. A retiree’s maximum tax
loss from Social Security in 1940 was $923 in today’s dollars. Compare
this to the current maximum of $13,243."

The euro hit a fresh one-week low against the dollar on Wednesday as
concerns over Greece's fiscal problems escalated, while the Australian
dollar stayed buoyed on expectations of higher interest rates.

Thailand's prime minister
declared a state of emergency in the capital city of Bangkok and some
surrounding areas after protesters broke into a parliamentary compound,
escalating a weeks-long protest over claims that the country's current
leadership is illegitimate, according to report by Agency
France-Presse. Prime Minister Abhisit Vejjajiva announced the emergency
measures during a nationally-televised press conference after
supporters of the ousted premier Thaksin Shinawatra stormed the
parliament building.

The Midwest Manufacturing Index fell 0.8% to
82.6, paring back a 2% gain in January. Compared to a year ago, the
index was -0.5% in the midwest, and +2% nationwide.

Nearly two-thirds of Americans think the time is right to buy a house, and that prices will be the same or higher over the
coming year, according to a Fannie Mae survey. The 64% of respondents
that said it's a good time to buy is just shy of the 66% that said the
same thing in 2003, as the housing market took flight.

Eurozone growth came to an unexpected halt in Q4 on weak consumer and investment spending. Eurostat had previously pegged Q4 growth at 0.1%, but in its final estimate said output was unchanged from Q3, while output in seven of 16 member nations actually fell.

The Energy Information
Administration reported Wednesday an increase in crude-oil stockpiles
by 2 million barrels in the week ending April 2, while analysts polled
by Platts expected an increase of 1.5 million barrels.

Yields on the current 10-year notes declined 6 basis points to 3.89%. The
euro fell to $1.3368 from $1.3398 in late New York trading on Tuesday.
The dollar index rose to 81.465, from 81.379 Tuesday.

The Treasury Department sold
$21 billion in 10-year notes on Wednesday at a yield of 3.900%, the
highest level since last June. Bidders offered to buy 3.72 times the
amount of debt sold, the highest ever, according to RBS, and above the
average of 3.02 times at the last four comparable sales. Indirect
bidders, a group of investors that includes foreign central banks,
bought 43.1%, versus 36.6% of the last four on average. Direct bidders,
which include domestic money managers, purchased another 16.3%,
compared to an average of 12.2% recently.

Young adults in the United States are being squeezed out of the
labor force as older workers either delay retirement or seek jobs to
rebuild nest eggs destroyed by the recession, a study showed on
The size of the labor force fell 6.3 percent for young
workers, but increased 8.5 percent for workers 55 years and older
between December 2007 and January 2010, according to the study by the
Washington-based Economic Policy Institute (EPI).

Fed's Hoenig: 1% fed funds rate could happen soon.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified
for enough credits, deductions and exemptions to eliminate their
liability. That's according to projections by the Tax Policy Center, a Washington research organization.

The Dow Jones industrials finished down 72 points to 10,898 after dropping as many as 124 points by 3:15 p.m. ET. The decline was the Dow's biggest since Feb. 23, when the index fell 101 points.
The Standard & Poor's 500 Index was off 7 points to 1,182, and the Nasdaq Composite Index was off 6 points to 2,431.

Tuesday, April 06, 2010

The Yuan

4/6/10 The Yuan

The United States on Monday reiterated its call for China's currency to
be market-based, as lawmakers warned they would act if there was no
movement from China on revaluing the yuan.

Australia's central bank raised its key cash rate by 25 basis points to
a 14-month high of 4.25 percent on Tuesday and flagged further moves
ahead as the resource-rich nation rides a tide of Asian demand.

George Ure: "A 5:30 AM check of the USGS Earthquake Site (here) showed that as of this morning there had been 140 quakes listed...just so far today and yesterday had an amazing547 quakes listed, the vast majority guess where?"

About 39.4 million Americans, the most ever, received food stamps in January, the government said.

U.S. Feb. job openings decline to 2.72 million.

Treasury Secretary Timothy Geithner said he was confident that China
would see that it is in its own interest to make its currency more
flexible, and said global economic recovery "looks quite strong now."
Geithner, in an interview on Tuesday with India's NDTV, said it was "China's choice" whether or not it revalues the yuan.
I said before and I'll say it again, but I want to make sure I am
repeating myself, I am confident that China will decide it's in their
interest to resume the move to a more flexible exchange rate, that they
began some years ago and suspended in the midst of the crisis," he said
in India's capital.

CA Inc. plans to cut roughly 1,000 positions as part of a cost-cutting
program, the software company said in a regulatory filing with the
Securities and Exchange Commission.

A Stanford University study commissioned by Gov. Arnold
Schwarzenegger says California's public pension funds are underfunded
by as much as $500 billion.

estimated shortfall applies to the retirement systems for California
state and local government workers, teachers and University of
California employees.

The most profitable supertanker
market in more than a year is heading for a 35 percent slump as
oil refineries from Japan to the U.K. shut for maintenance and
leave a surplus of vessels.
Shipping costs will fall to an average of $28,758 a day
this quarter from $44,576 on April 1, according to the median
estimate in a Bloomberg survey of 13 analysts, traders and
shipbrokers. Rates to hire the ships, each bigger than the
Chrysler Building, averaged $49,908 a day in the first quarter,
the most since the last three months of 2008.

China says firmer yuan not key to U.S. trade imbalance.

The Dow Jones Industrial Average fell 3.56 points to 10,969.99. The S&P 500 index rose 2.0 points, or 0.2%, to 1,189.44. The financials sector led the gains on the broad index, rising 1%. The technology-heavy Nasdaq Composite rose 7.28 points, or 0.3%, to 2,436.81.

Monday, April 05, 2010

10-year Treasury Bond

4/5/10 10-year Treasury Bond

John Mauldin: " So, either we have a slow-growth economy for 5-6 years, or we hit the wall all at once. Think depression if it's the latter. Either way, it's a tough investment environment."

Mike Burk: "Most of the breadth indicators deteriorated last week and the secondaries underperformed the blue chips.
I expect the major averages to be lower on Friday April 9 than they were on Thursday April 1.
Last weeks negative forecast was a miss."

The U.S. office vacancy rate rose to 17.2 percent, a level unseen since
1994, as the market lost about 11.6 million net square feet of occupied
space during the first quarter, according to the report released on
Monday. The U.S. vacancy rate inched up 0.2 percentage points from a
quarter earlier and was 2 percent higher than a year ago.

Rob Hanna: "Unscheduled Fed meetings have been typically been surprises where the
announcement came out of the blue - and the time of day was not
consistent. Monday is the first unscheduled Fed meeting that I can
recall that has been announced beforehand. While behavior may fall in
line with other scheduled Fed meetings, I believe it would be dangerous
to make any assumptions in this unique case.
Traders should be aware that news will likely hit in the afternoon that may affect the market."

There will be a review and determination by the Board of Governors of the advance and discount rates to be charged by Federal Reserve Banks.

John Hussman: "The first crucial observation is that high risk
market conditions like we observe at present come with an "unpleasant
skew." If you look at overvalued, overbought, overbullish, hostile
yield conditions of the past, you'll find that the most likely market
outcome, in terms of raw probability, is a continued tendency for the
market to achieve successive but slight marginal new highs. While this
movement tends to be fairly muted in terms of overall progress, it can
be somewhat excruciating for investors in a defensive position, because
the market tends to pull back by a only a few percent, followed by
bursts that recover that lost ground and achieve minor but widely
celebrated new highs. That is the "unpleasant" part.
"skew" part is that although the raw probability tends to favor slight
successive new highs, the remaining probability tends to feature nearly
vertical drops, typically well over 10% over a period of weeks.
Frankly, I thought we had begun that process in the decline from the
January highs, but much like we observed in early 2007, that initial
decline was quickly recovered and followed by a restoration of
overvalued, overbought, overbullish, hostile yield conditions.
Eventually, of course, the outcome for investors was very bad, but that
in no way rescued us from discomfort as the market approached its final
peak in 2007. I suspect something similar is at work at present, but we
will take our evidence as it comes.
and now, it does not matter which "data set" we live in - whether we
are presently in a temporary lull prior to a second wave of credit
difficulties, or whether we are in a typical post-war recovery, the
present set of conditions would hold us to a defensive investment

The Energy Department is preparing to make sweeping revisions to
its U.S. natural-gas production data after finding it has been
overstating output, raising new questions about the government's
collection of energy information.
The monthly gas-production
data, known as the 914 report, is used by the industry and analysts as
guide for everything from making capital investments to predicting
future natural-gas prices and stock recommendations.
But the
Energy Information Administration, the statistical unit of the Energy
Department, has uncovered a fundamental problem in the way it collects
the data from producers across the country—it surveys only large
producers and extrapolates its findings across the industry. That means it
doesn’t reflect swings in production from hundreds of smaller
The EIA plans to change its methodology this month,
resulting in “significant” downward revisions in some areas, according
to Gary Long, the acting director of the 914 form, who led the review.

CEOs have increased spending about 9% on the personal use of
corporate jets over the last year, says a study by the Corporate

A close look at how much Iranian money has been frozen to date in the
U.S. under existing sanctions shows that the total amount is
surprisingly small.

Economists Carmen Reinhart of the University of Maryland and Kenneth
Rogoff of Harvard University have recently shown that a 90 percent
debt-to-GDP ratio usually touches off a crisis.
This year, the debt will reach 63 percent of GDP, a ratio that has
ignited crises in smaller wealthy nations. Fiscal crises gripped
Canada, Denmark, Sweden, Finland and Ireland when their debts were
below where the United States is shortly headed.
Japan's debt is much higher, but most of it is held domestically,
and Japan's economy has been weak for 20 years. "I really don't think
we want to be like Japan," said UC Berkeley economist Alan Auerbach.

Apple Inc., trying to revive demand
for tablet-style computers with its iPad, said it sold more than
300,000 of the devices on the first day of their debut weekend.
The number includes preorders, sales at Apple stores and
deliveries to channel partners, the company said in a statement
today. Users downloaded more than 1 million iPad applications
from Apple’s site and bought more than 250,000 electronic books
from its online store during the first day.

USGS reports at 3:40 PM Pacific on Sunday, April
4, 2010, 30 miles southeast of Mexicali, Mexico, a 7.2 quake hit about
6 miles down. Mexicali's population is nearly a million. Reuters is
reporting that “some people were trapped in elevators, retaining walls
collapsed in some places and electricity was out in several parts of
Baja California state. ... Some buildings in Tijuana, about 135 miles
from the epicenter, were badly damaged. The quake was felt about 200
miles northwest in Los Angeles.”211 quakes worldwide on the USGS site since the Sunday 7.2 Baja event and 202 aftershocks.

Enticed by an expanded tax
credit, home buyers came back into the market in February, the National
Association of Realtors said Monday, reporting an 8.2% increase in its
pending home sales index. The index had fallen 7.8% in January and was
down 20% from the peak in October. Following February's surprise
increase, the pending home sales index is up 17.3% compared with a year
earlier. Economists were looking for a decline or a smaller increase in
the index in February, in part because of extreme weather in the
eastern half of the nation. However, the index showed sales contracts
increased about 9% in the Northeast and South, and about 22% in the
Midwest. Sales contracts declined about 5% in the West.

U.S. March ISM services index 55.4% vs 53.0 Feb.

Reggie Middleton: "Let's not mince words here. Greece is going to
effectively default on its debt, one way or another, and it is probably
going to do it relatively soon."

ZeroHedge: "At this point one has to be an immaculate idiot (read Chairman of the
Fed) not to see, that what the Fed is doing with the pursuit of the
same catastrophic monetary policy which failed the first time around,
and will fail now, is pushing us straight into the abyss, from where
America just barely managed to crawl out in 2009 via $3 trillion in
additional public debt issuance to date (a number which will likely hit
$10 trillion within the next 5 years, to result in a debt-GDP ratio of
approximately 200% when including the GSEs). It has gotten so bad that
even Fed governors are begging Bernanke to stop the madness before it
is too late: a first sign of internal mutiny. Alas, just like when
everyone ignored Michael Burry, who laughed into the face of
conventional groupthink in the mid-2000's (which by definition is
always wrong, and will be this time around as well), so will Wall
Street and its proxy, Washington D.C., ignore that which is all too
obvious until it is once again too late. Hopefully by then intelligent
and very rich life on Mars will be discovered, cause there will be no
one left to bail out not just the US, but the world."

Pickens says a typical trash truck consumes as much fuel each year as 325 automobiles.
According to the national trade group Natural Gas Vehicles for America,
natural gas-fueled automobiles emit 20 to 30 percent less greenhouse
gas than diesel and gasoline-powered vehicles, as well as fewer
particulates and other pollutants.
But CNG vehicles are more expensive - a natural-gas-fueled truck comes at a $50,000 premium over a conventional truck.
And so Pickens and Natural Gas Vehicles for America are lobbying for
legislation now in Congress that would provide federal tax credits up
to $32,000 per vehicle, an incentive to buy in.

10-year Treasury bonds yielding 4% and 30-year at 4.84%. Just the tip of the iceberg.
Thanks to Bernanke this has been a no-brainer.

Today produced a spike in the 10 year UST-Bund spreads to over 90 bps, a level unmatched since mid-2006.

The Dow Jones Industrial Average rose 46.48 points, or 0.4%, to 10,973.55. The S&P 500 Index climbed 9.34 points, or 0.8%, to 1,187.44. The Nasdaq Composite Index gained 26.95 points, or 1.1%, to 2,429.53.

LA's controller Wendy Greuel just announced that she expects LA's general fund to be "out of money" by May 10, and that LA will likely deplete all reserve funds by the end of Q2.

ZeroHedge: "The just completed 3 Month and 6 Month Bill auctions were the weakest ones conducted so far in 2010. Out of 14 auctions conducted so far across both maturities this year, the 3 Month closed at the highest rate seen since December, at 0.175%, coupled with the lowest Bid To Cover over the same period, coming in at 3 month low of 3.6.The same is true for the 6 Month: the closing high rate of 0.265% was the highest in 2010, combined with the weakest Bid To Cover YTD, at 3.63. Direct bidders once again came in to save the day."

Sunday, April 04, 2010

Happy Easter

4/4/10 Happy Easter

More Americans filed for bankruptcy protection in March than during any month since the federal personal bankruptcy law was tightened in October 2005, a new report says, a result of high unemployment and the housing crash.
Federal courts reported over 158,000 bankruptcy filings in March, or
6,900 a day, a rise of 35 percent from February, according to a report
to be released on Friday by Automated Access to Court Electronic
Records, a data collection company known as Aacer. Filings were up 19
percent over March 2009. The previous record over the last five years
was 133,000 in October.
Bloomberg: “China’s central bank said new asset bubbles are emerging
in some parts of the world and some sectors and these bubbles may burst
unless ‘supported by economic fundamentals.’ The rapid increase in
asset prices has been pushed up mainly by excessively loose monetary
policies pursued by governments around the world, the People’s Bank of
China said…”

Bloomberg (Michael B. Marois and Paul Dobson): “The People’s Bank of
China said the U.S. dollar will have only a limited rebound in 2010
because of the nation’s high fiscal deficit and low interest rates.
The greenback may see a ‘technical rebound’ from last year’s declines,
though the appreciation may not be ‘too big,’ the central bank said in
its 2009 international financial markets report…”

“If you can manipulate news, a judge can manipulate the law. A smart lawyer can keep a killer out of jail, a smart
accountant can keep a thief from paying taxes, a smart reporter could
ruin your reputation- unfairly.” Mario Cuomo

China is expected to post its first monthly trade deficit in six years.

politicians are insecure and intimidated men. They advance politically
only as they placate, appease, bribe, seduce, bamboozle or otherwise
manage to manipulate the demanding and threatening elements in their constituencies.” Walter Lippmann

China’s Premier Wen Jiabao said
one country can’t be blamed for imbalances in trade
relationships, a comment that comes amid pressure on the
Asian nation to allow its currency to appreciate.
Trade problems “can’t be blamed on one side,” visiting
Japanese Finance Minister Naoto Kan quoted Wen as saying
“I didn’t tell him what to do” about China’s currency,
Kan told reporters today in Beijing after the meeting. “I
told him I expect China to make a wise judgment.”

"When it comes to controlling human beings, there is
no better instrument than lies. Because you see, humans live by
beliefs. And beliefs can be manipulated. The power to manipulate
beliefs is the only thing that counts."
Michael Ende

Gallup: Underemployment In The U.S. Rises to 20.3% in March

Robert Reich
Apr 2, 2010 12:24PM
The Fed has finally came clean. It now admits it
bailed out Bear Stearns – taking on tens of billions of dollars of the
bank’s bad loans – in order to smooth Bear Stearns’ takeover by JPMorgan Chase. The secret Fed bailout came months before Congress authorized
the government to spend up to $700 billion of taxpayer dollars bailing
out the banks, even months before Lehman Brothers collapsed. The Fed
also took on billions of dollars worth of AIG securities, also before
the official government-sanctioned bailout. The losses from those deals still total tens of billions, and
taxpayers are ultimately on the hook. But the public never knew. There
was no congressional oversight. It was all done behind closed doors. And the New York Fed – then run by Tim Geithner – was very much in the
center of the action.