Saturday, May 08, 2010

Leverage Wipes Out

5/8/10 Leverage Wipes Out

Napoleon: "Consider the 2 levels for moving men – interest and fear."

Warren Buffett: "When you combine ignorance and leverage, you get some pretty interesting results."

Four U.S. banks were closed by regulators Friday, bringing the number of bank failures in the year to date to 68. Bonifay, Fla.-based The Bank of Bonifay, Champlin, Minn.-based Access Bank, Mesa, Ariz.-based Towne Bank of Arizona and San Diego, Calif.-based 1st Pacific Bank were all closed, the Federal Deposit Insurance Corp. said. The four failures will cost the deposit-insurance fund $213.7 million, the FDIC said.

Wells Fargo & Co. is being investigated by "certain government entities" over the mortgage lending practices of its affiliates, the bank said in a Securities and Exchange Commission filing Friday. The bank is currently the focus of several lawsuits alleging it steered customers into more costly mortgage products and that documents contained misleading statements. Wells Fargo said it is cooperating fully with the investigations.

Harrods Ltd., the London luxury department-store owner, has been sold to Qatar Holding LLC by Mohamed Al-Fayed, who is retiring.

“After 25 years as chairman of Harrods, Mohamed Al Fayed has decided to retire and spend more time with his children and grandchildren,” said Ken Costa, head of Lazard International in an e-mailed statement today. Lazard & Co. advised the Al Fayed family trust on the transaction.

The fee was about 1.5 billion pounds ($2.2 billion), the British Broadcasting Corp. reported earlier, without saying where it got the information. The fee was not disclosed by the parties.

European leaders agreed to set up an emergency fund to halt the spread of Greece’s fiscal woes, seeking to prevent a sovereign debt crisis from shattering confidence in the 11-year-old euro.

Jolted into action by the sliding currency and soaring bond yields in Portugal and Spain, leaders of the 16 euro countries said the workings of the financial backstop will be hammered out before Asian markets open late tomorrow European time.

“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters early today after the leaders met in Brussels.

ZeroHedge: "Our sense is that at this point the ECB's action is "too little, too late" as contagion fear has already crept deep within the fabric of various overt and shadow funding/liquidity mechanisms. Additionally, the world is now convinced that Europe can only deal with problems retroactively, and who knows how big and unfixable the next problem will be: the ECB, which has lost most of its credibility after "inviting" the IMF to do a heavy part of the bailout, is about to become the laughing stock of global central banks. Trichet is seen merely as a powerless bureaucrat, caught between Merkel's electoral struggles and Bernanke's demands for contagion interception and implicit Fed supremacy over Europe."

Robert McHugh: "The Wilshire 5000 Index, which is really about 6,000 stocks, is essentially the entire U.S. listed stock market. This index tells us the U.S. stock market has lost $1.0 trillion of value over the past two weeks. All the gains over the past 5 months have been wiped out in the past two weeks. It took just two weeks to destroy months of gains. The big picture patterns have been warning in spades that something is very wrong with all major stock markets and economies globally. We are now starting to see the details and news unfurl which technical analysis showed the markets knew was coming. And it is not over. More danger lies ahead. That does not mean a bounce cannot occur from time to time, but patterns are warning that there are serious risks to economies and global stock markets, dangers that could wipe out 80 percent of more of the value of stocks over the next several years....Gold is beginning to replace fiat currencies around the globe as the world's reserve currency....The yield curve is flattening again, which is often a sign of a coming economic slowdown. European countries are going to have to raise taxes and cut spending, a plan of austerity which will reduce aggregate demand globally, and exacerbate a worldwide economic slowdown."

Doug Noland: "Through the teachings of Keynes, Friedman, Bernanke and others we have been taught flawed analysis and educated in the wrong lessons from the terrible experience of the Great Depression. The doctrine of inflating Credit, while disregarding speculation and Bubble dynamics, is fraught with myriad dangers. And, well, we're now 20 months into Dr. Bernanke's - and global central bankers' - experimental "helicopter money" and "government printing press" assault on the Credit crisis. Not for a moment have I expected such overzealous inflationism to do anything other than exacerbate financial and economic fragility.
The financial world would be a safer place today had Trillions of additional dollars (and euros, yen, etc.) of liquidity not been unleashed upon the markets. After all, ultra-loose financial conditions accommodated 20 months of historic deficit spending in Greece, periphery Europe, here at home and all about. Massive government borrowing likely fomented heightened trading activity and speculation in sovereign Credit default swap markets around the world. Clearly, synchronized fiscal and monetary stimulus incited speculative excess throughout global securities markets....The financial world would be a safer place today had electronic "frequent trading" not proliferated throughout the government policy-induced stock market reflation. And financial stability was similarly not bolstered by near-zero rates having enticed over $1 TN of money market assets out to the global risk markets. The revival of bullish expectations, the revitalization of speculative excess and the unprecedented flow of finance into the riskier assets - in the face of latent financial and economic fragility - has set the stage for another round of financial tumult - further investor disappointment and disillusionment...In short order yesterday, the yen melted up, Treasuries melted up, risk spreads widened dramatically and 2008-style deleveraging returned in full force."

BIS: "Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability."

European air traffic faced growing disruption Saturday as an ash cloud from an Iceland volcano threatened to close airports as far east as Spain's Barcelona or Marseille in France, controllers warned.

BP crews Friday positioned a 100-ton, four-story containment dome over the major leak site of an out-of-control oil well, an effort that offered the most immediate hope of corralling a spill that already has closed Gulf of Mexico fishing and threatens the environment onshore.

Friday, May 07, 2010


5/7/10 Fear

The American economy added 290,000 jobs in April, which was much better than expected despite temporary hiring for the 2010 U.S. Census. Excluding Census workers, 224,000 nonfarm jobs were created, with the unemployment rate edging up to 9.9% from 9.7%, the Labor Department reported Friday. Economists surveyed by MarketWatch expected the economy to add 185,000 jobs, with the jobless rate holding steady at 9.7%. The data for February was also revised to show a 39,000 increase in nonfarm jobs, compared to an originally reported decline of 14,000. Job gains in March were also revised up to 230,000 from 162,000. Meanwhile, the average workweek in April rose 0.1 hour to 34.1 hours for all nonfarm workers. Average hourly earnings ticked up 1 cent to $22.47.

Manufacturers added the most workers to payrolls since August 1998, employment at service-providers rose the most since November 2006 and construction companies hired for a second straight month. The gain in overall employment in April was the biggest since March 2006.

The April gain included 66,000 temporary workers hired by the government to help conduct the 2010 census and a 231,000 rise in private payrolls.

The Labor Pool increased substantially: plus 805,000, a gain of 0.3%. This accounts for essentially all of the unemployment gains.

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up over the month, reaching 6.7 million. In April, 45.9 percent of unemployed persons had been jobless for 27 weeks or more.

George Ure: "Next, we go on to the CES Birth/Death Model which purports to accurately estimate how many jobs were created in various industries. For example...this morning's report says there were 188,000 jobs estimated into existence. 73-thousand in leisure and hospitality, which pardon me for saying this, sounds a little suspect for April, don'tcha think? Up 63-thousands in business services? Maybe...but doesn't smell right."

ZeroHedge: "Fake +290K Payrolls "Added", Real Number Is 36K After Census And Birth-Death, Unemployment Goes Back To 9.9%, Underemployment At 17.1%"

The cost of insuring against losses on European bank bonds soared to a record, surpassing levels triggered by the collapse of Lehman Brothers Holdings Inc., as the sovereign debt crisis deepened.

The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers soared as much as 40 basis points to 223, according to JPMorgan Chase & Co. The index closed at 212 basis points March 9, 2009. Swaps on Greece, Portugal, Spain and Italy rose to or near all-time high levels.

Greece is just the "tip of the iceberg" for the problem of accumulating debt, and it must be solved by raising taxes and cutting spending, if not default will follow, Roubini said.

"My concern is eventually, not this year, it may spread to Japan and in the US," he said.

"In my view there's going to be a restructuring of the debt in Greece," Roubini added.

Robert McHugh: "It is highly likely that Catastrophic Supercycle degree wave (C ) down has started."

After a delay caused by fumes and a risk of fire, a crew in the Gulf of Mexico began lowering a 100-ton box over the blown-out oil well on the seafloor.

European commission's spring forecasts put UK budget deficit this year at 12% of GDP – the highest in the European Union and worse than Treasury estimates.

According to Independent Strategy, the countries in the ‘contagion area’ of the Eurozone (namely Spain, Portugal, Greece, Ireland and unexpectedly, Belgium) account for about one-fifth of Eurozone GDP.

Crude-oil futures widened their losses Friday as investors were sidelined, fearing the worst for prices is yet to come. Crude for June delivery retreated $2.36, or 3.1%, to $74.76 a barrel on the New York Mercantile Exchange.

Nokia Corp. said it was suing Apple for patent infringement involving the iPhone and iPad 3G products.

Jim Rogers: "As I've been saying to you all before, 2010 and 2011 are going to be years of currency turmoil not just in Europe but all over the world and Greece is bankrupt," he said.

"We can paper it over for a while, just as we papered over some of the problems in the US and the UK but the problems are going to come back," said Rogers.

The "only way" out of the current fiscal crisis in Europe is for the European Central Bank to buy sovereign debt in the secondary market, said John Makin, an economist at the American Enterprise Institute.

The Dow Jones Industrials Average fell 140 points to 10,380.43 on Friday, while the Nasdaq Composite declined 64 points to 2265.64 and the S&P 500 lost 17.27 points to 1,110.88.
For the week, the Dow industrials fell 5.7%, the S&P 500 lost 6.4%, it worst drop since March 2009, and the Nasdaq dropped 8%.

The CBOE Volatility Index, better known as the U.S. stock market's fear gauge, rose 26% on Friday to 41.43, as equities slid on continued fears that Greece's debt troubles will spread through the euro zone. For the week, the VIX skyrocketed 88%, bringing its year-to-date gain to 91%. The Dow Jones Industrial Average finished the week with a loss of 5.7%. Its weekly point loss was the worst since October 2008.

U.S. consumers increased their debt in March for the second month in the past three, the Federal Reserve reported Friday. Total seasonally adjusted consumer debt rose $1.95 billion, or at about a 1.0% annual rate, in March to $2.451 trillion. The increase was unexpected. Economists surveyed by MarketWatch expected consumer credit to decline by $4.5 billion in March. On a year-on-year basis, consumer credit is down 3.4%. The increase in January was led by non-revolving debt, such as auto loans, personal loans and student loans, which rose $5.1 billion or 3.9%. Credit-card debt fell $3.2 billion, or 4.5%, to $852.6 billion. This is the record 18h straight monthly drop in credit card debt. Since the collapse of Lehman Brothers in September 2008, credit card debt is down 12.6%, while nonrevolving debt is down 0.3%.

In the first 4 business days of May alone, the UST has redeemed $144 billion in Bills.

Thursday, May 06, 2010

High Anxiety

5/6/10 High Anxiety

With major cost-cutting efforts now in the past, the productivity of U.S. nonfarm businesses slowed in the first quarter from 6.3% to a still-healthy 3.6%, the Labor Department estimated Thursday. Output increased 4.4% while hours worked rose 0.8% in the first quarter. Unit labor costs fell 1.6%, a sign that disinflationary pressures are still strong. In the past four quarters, nonfarm productivity has increased 6.3%, the fastest increase in 48 years.
Unit labor costs in nonfarm businesses fell 1.6 percent in the first quarter of 2010, as the 3.6 percent increase in productivity outpaced a 1.9 percent gain in hourly compensation. Unit labor costs fell 3.7 percent over the last four quarters, as the 6.3 percent increase in productivity outpaced a 2.3 percent rise in hourly compensation.

The Dow Jones Industrial Average plunged 976 points to 9900, on track for its third 200-point decline in the past eight days. The euro traded near 14-month lows and key short-term credit markets began to show signs of stress.

The S&P 500 index was trading at 1077 down 89 points.

At a meeting in Lisbon European Central Bank leaders failed to douse any concerns about the spread of the debt crisis beyond Greece and Moody's Investors Service issued a report that talked about real threats of contagion among Europe's banks. Riots in Greece added to people's anxiety.

The number of first-time applications for state unemployment benefits fell by 7,000 last week to a seasonally adjusted 444,000, the Labor Department reported Thursday. The four-week average of new claims fell by 4,750 to 458,500. The number of people receiving state benefits fell by 59,000 to a seasonally adjusted 4.59 million in the week ending April 24. A total of 10.4 million people (not seasonally adjusted) were receiving some kind of unemployment benefits in the week of April 17, about 16,000 higher than the previous week.

Six out of nine retailers who posted sales results at stores open at least a year came in short of analyst expectations, according to a tally by Thomson Reuters. An additional 19 store chains were due to report.

"Nobody has told American consumers that the recession is over although some officials have rosy predictions of growing consumer spending," consumer trend expert Britt Beemer said in a note. "We're seeing a lot of people on the edge of financial distress."

The European Central Bank expects the euro zone's economy to grow at a moderate pace in 2010 but the outlook is subject to significant uncertainty, bank President Jean-Claude Trichet said. Asian stocks plunged Thursday as fears Greece's debt crisis will spread to other European countries and undermine the global recovery continued to rattle markets.

Shanghai new home prices in April rose 16% from a month earlier to a record average $3,358 per square meter, citing a property data service. Sales increased 28% for the month to 1.02 million square meters as supply jumped 76% to 1.23 million square meters, citing Shanghai Uwin Real Estate Information Service.

President Obama has issued a National Day of Prayer proclamation but will not hold an interfaith observance at the White House, as President Bush did. The administration is appealing a ruling last month that the official day of prayer is unconstitutional.

Britain votes today in an election that polls show may produce no parliamentary majority for the first time since 1974, leaving the fate of Prime Minister Gordon Brown and Conservative David Cameron with the Liberal Democrats.

Four polls released last night showed the Conservatives winning the popular vote and the most seats, while short of a majority. The outcome will turn on the almost two in five voters who polls showed were undecided in the final days and about 150 swing districts out of a total 650.

Rob Hanna: "What struck me most about Wednesday’s action was the fact that the market closed above it’s open but still down on the day. This little pattern can be bullish under the right circumstances. It will often signal a reversal after there has been a move down."

Working gas in storage was 1,995 Bcf as of Friday, April 30, 2010, according to EIA estimates. This represents a net increase of 83 Bcf from the previous week. Stocks were 97 Bcf higher than last year at this time and 315 Bcf above the 5-year average of 1,680 Bcf. In the East Region, stocks were 142 Bcf above the 5-year average following net injections of 38 Bcf. Stocks in the Producing Region were 97 Bcf above the 5-year average of 663 Bcf after a net injection of 33 Bcf. Stocks in the West Region were 77 Bcf above the 5-year average after a net addition of 12 Bcf. At 1,995 Bcf, total working gas is above the 5-year historical range.

Analysts polled by Platts had expected an increase between 80 to 84 billion cubic feet.

Gold for June delivery rose $22.20 to $1,197.30 an ounce, homing in its December record high past $1,1220 an ounce. The euro fell to a new 14-month low, below $1.26 as the US. dollar index soared to 84.80. Crude oil for June delivery, the most active contract, declined $2.25, or 2.7%, to $77.75 a barrel. The VIX took off from 24 and rocketed to 40.

Major stock market indices in Brazil, Mexico, Argentina and Chile fell in Thursday's session as worries over Europe's financial troubles weighed on the emerging markets.

Senators could vote as soon as Thursday on a highly charged amendment that would boost the government's ability to audit the Federal Reserve.

The United States will try to boost exports to China - rather than limit imports from the country - to reduce its huge trade deficit, US Secretary of Commerce Gary Locke has said. Locke will lead a trade mission to China from May 15 to 21, ahead of the second US-China Strategic and Economic Dialogue (SAED) scheduled for May 23.

The mission will be "focusing on promoting US exports for a broad range of new energy technologies, including clean energy, energy efficiency, and electricity transmission, distribution and storage," Locke told China Daily in an email interview.

"China is our second-largest trading partner, our largest source of imports and the largest export market for American goods outside of North America.

"We believe increasing our exports to China - not limiting our imports from China - is the best way to address the trade deficit," he said. "To accomplish this goal, we are actively promoting the export of American goods and services." The trade deficit with China reached $227 billion last year, compared with the record $268 billion in 2008.

Problems with Greek debt are about to spread to other countries and could infect the US, Pimco's Mohamed El-Erian told CNBC.

Thirty-year bonds fall most in 14 months to 4.19%. At the beginning of the year I believed the flattening of the yield curve could prove the number one risk/return trade.

The Nasdaq Composite Index fell as much as 114 points to 2,286. It was the first time the Nasdaq surrendered more than 100 points in a session since December 1, 2008.

The Dow closed down 347.8 points, or 3.2%, to 10,520. The Dow Jones Industrial Average had its biggest intraday loss since the market crash of 1987.

The Standard & Poor's 500 Index fell 38 points, or 3.2%, to 1,128. The Nasdaq Composite Index was down 83 points, or 3.4%, to 2,320.

An exit poll released as balloting ended in Britain's general election Thursday night indicated the Conservative Party would win the most seats but would fall short of the 326 seats needed for an outright majority in the House of Commons. The poll, conducted for Sky News, the BBC and ITV News, indicated the Conservatives would win 307 seats, with Prime Minister Gordon Brown's Labour party second at 255 seats and the Liberal Democrats at 59. Actual results will begin to pour in later Thursday evening and in the early hours of Friday morning.

Wednesday, May 05, 2010


5/5/10 Euro

Companies in the U.S. private sector added 32,000 jobs in April, according to the ADP employment report released Wednesday. The increase in ADP employment was in line with expectations. The private sector has now added jobs for three straight months based on revised data. The ADP report comes two days before the Labor Department reports on nonfarm payroll growth for April. Economists are expecting a sizable 185,000 increase in nonfarm payrolls. The ADP report does not include federal workers or temporary census workers. Joel Prakken, chairman of Macroeconomic Advisers LLC that prepares the report, described the increases are "grudging." The goods producing sector has not turned the corner, he said in a television interview.

Barry Ritholtz: "The service sector was the main driver of job gains as it added 50k jobs with half coming from small businesses. Manufacturing also helped by adding 29k jobs. Construction though shed 49k jobs and the sector has now lost 2.16mm jobs since the high in Jan ‘07. The financial services sector payrolls fell by 14k. Bottom line, as has been seen from the initial claims data, net firings have ended but the pace of hiring, while improved, still remains muted. Friday’s government payroll report will include public sector census workers and the estimated total job gain is 189k, 100k of which is expected to be private sector jobs."

Devon Energy said its board of directors authorized the repurchase of up to $3.5 billion of the company's common stock. Total natural gas production fell to 226.5 billion cubic feet, from 244.5 billion cubic feet.

The Huffington Post tells the story in Fed Privately Lobbying Against Audit---courtesy of Mike Shedlock

The Federal Reserve is privately lobbying against a bipartisan Senate amendment that would open the central bank to an audit by the Government Accountability Office, according to documents distributed to Senate offices by a Fed official.

In order to obtain the documents, HuffPost agreed not to reveal the name of the Federal Reserve official who did the specific lobbying in question.

"As I mentioned, we believe that the bipartisan Corker-Merkley provision in the Dodd Bill is quite strong and addresses issues of transparency and disclosure without impinging on the independence of monetary policy," the official goes on.

Merkley teamed with Sen. Bob Corker (R-Tenn.) on an audit provision, but Merkley himself says he'd prefer to go further. "I appreciate Representative [Alan] Grayson's concerns over accountability at the Federal Reserve. I have been a strong proponent of Fed reform and voted against the re-confirmation of Ben Bernanke because the Fed has been so lax in using its regulatory powers," Merkley said in a statement to HuffPost, responding to an analysis from Rep. Alan Grayson (D-Fla.) showing that the Senate bill did not meaningfully expand transparency.

The Fed argument is a replay of a tactic that the bank tried in the House. Instead of outright opposition, the Fed backed an amendment in the lower chamber from Rep. Mel Watt (D-N.C.), which the bank said would expand transparency but not interfere with monetary policy. It became clear, however, that the amendment would not expand transparency and was an attempt to defeat the audit in general. The Watt amendment was soundly defeated.

The Corker-Merkley amendment is the Senate version of the Watt amendment and the Fed is once again arguing that the broader amendment will impinge on the independence of monetary policy.

"The Sanders amendment, however, would directly interfere with monetary policy," argues the Fed official. "The amendment removes the current statutory protection for core monetary policy activities from GAO audit and would permit the GAO to audit monetary policy decisions and the decisionmaking process itself."

Last year, the Fed brought on Enron's former top lobbyist, Linda Robertson, to help fend off the audit. "Robertson would help the Fed manage relations with lawmakers seeking greater oversight of a central bank that has used emergency powers to prevent Wall Street's demise," Bloomberg reported.

Portugal’s credit rating could be cut by Moody’s (Bloomberg).

George Ure: "Year to date, I count 622 branches as being reorg'ed or close versus 159 in the same period of of 2009. So, we could say without bending truth more than our leaders that "On a branch basis, bank failures are running 3.9-times the 2009 rate...).

Of course, the PR Department of the bankster coalition I'm sure would argue that just counting institutions, the run rate is only 2.2 times 2009'[s rate."

BP Stopped One Leak From Gulf Well, Coast Guard Says.

Air travel in Ireland and northern Scotland was disrupted again early May 4 as ash from the Icelandic volcano closed airports and caused flight cancellations. prompting the closure of airports.

All flights going in and out of Ireland have been grounded since 8am CET this morning, while airspace over the Outer Hebrides was closed during Monday night. The Irish ban is expected to extend until at least 2pm. [Note: Irish airspace reopened earlier than expected, at 1 pm.]

Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates climbed to the highest in five months relative to U.S. Treasuries as Europe’s worsening government finances led investors to shun all but the safest assets.

Here is the Homegrown "Revolution" That Could Save Us From an Oil Crisis. Shale oil and natural gas has long been lauded as a potential savior for the U.S. energy market, but many don't realize just how substantial reserves of these materials are. What we have in the United States was either too costly or too difficult to acquire before, and now we have the tools capable of extracting the wealth of resources beneath our collective feet, according to Continental Resources.

James Stewart: "As the SEC itself said, “Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.” The essence of the alleged fraud is that Goldman let the short seller choose some of the underlying subprime mortgages, failed to disclose that, and instead promoted the idea that an independent third party chose those securities. This is the material fact at the heart of the SEC’s case."

The euro fell below $1.29 on Wednesday, the lowest since March 2009. The dollar index rose to 84.164, compared to 83.262 late Tuesday.

Oil dropped below $80 a barrel.

The current European debt crisis likely will not end until the euro collapses as a currency and takes the entire European Union with it, said Dennis Gartman, hedge fund manager and author of "The Gartman Letter." "I think the whole thing will go down to defeat, the whole thing will eventually unravel," Gartman said in an interview with

Growth in the U.S. service sector was flat in April, but activity remained at the highest rate in four years, according to the Institute for Supply Management. The ISM non-manufacturing index stayed at 55.4% in April. Readings over 50% indicate more firms believe business is getting better instead of worse. Economists surveyed by MarketWatch were looking for the index to rise to 56%. In April, 14 of 18 industries were growing. Yet the new orders index fell to 58.2% in April from 62.3% in March. And the employment index dipped to 49.5% in April from 49.8% in March.

A larger-than-expected increase in crude-oil inventories dented crude-oil futures on Wednesday, which briefly dipped below $80 immediately after the release but have since modestly trimmed some of their losses. Crude for June delivery, the most active contract, recently retreated $2.42, or 2.9%, to $80.36 a barrel. The EIA showed an increase of 2.755 million barrels of oil, whereas expectations hovered around 1.5 million barrels. Gasoline stockpiles rose 1.2 million barrels, compared to a forecast ofo 200,000 barrels.

The Dow Jones Industrial Average fell 59.94 points, or 0.6%, to 10,866.83, after slumping as low as 10,814.76. The S&P 500 index lost 7.7 points, or 0.7%, to end at 1,165.87, while the Nasdaq Composite fell 21.96 points, or 1%, to 2,402.29.

Tuesday, May 04, 2010

Dollar Rallies

5/4/10 Dollar Rallies

Volcanic plume shuts down Scottish and Irish airspace... and it's heading for England

By Daily Mail Reporter
Last updated at 11:32 PM on 3rd May 2010

Scotland closes airspace around Outer Hebrides this evening
Irish airspace to be closed from 7am to 1pm tomorrow
Iceland Met Office: Ash is not as severe as last time
Iceland's troublesome volcano is set to cause more misery for air passengers as ash cloud threatens to shut down airspace over England.

Winds are blowing the ash cloud South East from its current position above Ireland and Scotland where no-fly zones have already been imposed.

The Met Office said the new ash was likely to move into England's airspace.

Credit Agricole: " $ rallies are truly toxic. Don't forget that during the last one 1995-2000 we blew up Asia in 97-00 and stocks in 2000!"

"Sales for the final week of the April fiscal month slide, but, customer traffic continued to show solid gains at discounters, department stores and apparel stores," said Michael Niemira, ICSC's chief economist. "The pace of spending was somewhat more subdued this past week then in recent weeks. Still, the month-adjusted for the Easter seasonal shift-held up well, though the reported unadjusted numbers for April will likely be flat to down slightly after the 9% percent spike in March."

Pfizer expects 2010 adjusted earnings of $2.10 a share to $2.20 a share, compared to the Wall Street target of $2.20. Pfizer said it's reducing its 2012 revenue target by $800 million to reflect higher health care costs.

Australia’s central bank increased the benchmark interest rate for the sixth time since early October after policy makers raised their outlook for inflation and judged the nation is insulated from Greece-sparked debt woes.
Governor Glenn Stevens boosted the overnight cash rate target to 4.5 percent from 4.25 percent, the Reserve Bank of Australia said in a statement in Melbourne today. The decision was predicted by 18 of 24 economists surveyed by Bloomberg News.

Tuesday the Euro traded towards 130 as it broke 131 with ease and the Dollar Index rose 1% to 83.23.

Richard Suttmeier: "My market call has been: Dow 8,500 before 11,500."

From Bloomberg:

Filings totaled almost 146,000 in April, according to data compiled by Automated Access to Court Electronic Records, a service of Oklahoma City-based Jupiter ESources LLC. March filings were about 158,000.
The April filing total represented a 15 percent increase from April 2009 total. This is the 2nd highest month since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted.

Spiegel Online International: "

European governments agree that saving Greece is imperative. They are worried about the euro, and the Germans are concerned about their banks, which, lured by the prospect of high returns, have become saturated with government bonds from Greece and other southern European countries. They are also terrified that after a Greek bankruptcy, other weak euro countries could be attacked by speculators and forced to their knees.

There are, in fact, striking similarities to the Lehman bankruptcy. This isn't exactly surprising. The financial crisis isn't over by a long shot, but has only entered a new phase. Today, the world is no longer threatened by the debts of banks but by the debts of governments, including debts which were run up rescuing banks just a year ago.

The banking crisis has turned into a crisis of entire nations, and the subprime mortgage bubble into a government debt bubble. This is why precisely the same questions are being asked today, now that entire countries are at risk of collapse, as were being asked in the fall of 2008 when the banks were on the brink: How can the calamity be prevented without laying the ground for an even bigger disaster? Can a crisis based on debt be solved with even more debt? And who will actually rescue the rescuers in the end, the ones who overreached?"

A powerful earthquake swayed buildings from Los Angeles to Tijuana, killing two people in Mexico, blacking out cities, forcing the evacuation of hospitals and nursing homes, and prompting a California border town to shut down its downtown area.

The 7.2-magnitude quake centered just south of the U.S. border near Mexicali was one of the strongest earthquakes to hit region in decades.

"It sounds like it's felt by at least 20 million people at this point," USGS seismologist Lucy Jones said. "Most of Southern California felt this earthquake."

Sunday afternoon's earthquake was felt the hardest in Mexicali, a bustling commerce center along Mexico's border with California, where authorities said the quake was followed by at least 20 smaller aftershocks, including three of magnitudes 5.1, 4.5 and 4.3. The initial quake had a shallow depth of 10 kilometers (6 miles).

"It has not stopped trembling in Mexicali," said Baja California state Civil Protection Director Alfredo Escobedo.

BP prepared Tuesday to deploy a 98-ton containment "dome" to try and stem a tide of oil gushing into the Gulf of Mexico and avert an environmental catastrophe.

The operation to place the giant structure over the largest of three oil leaks is unprecedented and, facing depths of almost a mile, remote-controlled submarines will have to guide it into place, hopefully by the weekend.

"We are aiming to put in on the ship today and start the process," BP spokesman John Curry told AFP, adding that containers for the remaining leaks were still being built.

Goldman’s CDSs now trade at the same level as those of Morgan Stanley, which emerged from the financial crisis in worse shape, and just below CDSs on Citi, which had to be bailed out by the US government.

Worries over an economic slowdown in China and nagging concerns about the eurozone sovereign debt crisis suppressed investors’ taste for risk-taking on Tuesday.

The FTSE All-World equity index fell 0.9 per cent, while the euro slumped and industrial commodities declined. Gold hit new 2010 highs, and US equity futures dropped 0.8 per cent.

The Oil Drum: "There are two possible scenarios for the Gulf Coast blowout. The drilling rig had just finished running casing in the hole and pumping down cement to fill the annulus between the casing and the surrounding rock. The blowout could have taken one of two forms:

• The density of the newly-emplaced cement was too low and natural gas bubbled up, creating an open channel through the unset cement. Making the cement denser involves adding heavy material, like the barite used in the drilling mud.

• At the bottom of the steel casing was a casing "shoe." There are several casing shoe designs, some of them with different names. All of them include a one-way valve that allows fluids, including unset cement, to flow out of the casing into the annulus, but nothing in the annulus can flow back into the casing. My initial guess as to the cause of the Gulf Coast blowout was failure of the casing shoe. On the Internet, there are previous examples of casing shoe failures."

Rigzone: "Halliburton had completed the cementation of the final production string 20 hours prior to the accident. Tests to demonstrate the integrity of the casing were completed. At the time of the accident, placement of the final cement casing plug had not occurred. "

Revenue for April, the biggest revenue month because it is when most Californians pay their taxes, lagged projections by nearly 30% — roughly $3 billion, according to state officials. The drop was steep enough to erase improvements recorded in each of the four previous months.

China now controls 97% of the rare earths market.

ZeroHedge: "The latest RealPoint monthly CMBS delinquency report update is out and it continues to get worse and worse. In March, the total amount of delinquent CMBS increased by $3.2 billion to $51.5 billion, or 6.4% of the total notional outstanding. "Overall, the delinquent unpaid balance is up almost 268% from one-year ago (when only $13.89 billion of delinquent unpaid balance was reported for March 2009), and is now over 23 times the low point of $2.21 billion in March 2007. The distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 27th straight month – up by $2.57 billion (7%) from the previous month and $30.31 billion (352%) in the past year (up from only $8.6 billion in February 2009)." And this data excludes the now defaulted Peter Cooper village which still remained current in March courtesy of its reserve. This loan will effectively go into real default in April or May at the latest, pushing the total delinquencies by at least another $3 billion. That's not the worst: RealPoint now sees the total delinquency rate surpassing 12% under a more stressed scenario, or double from here. Don't worry, the inability of the administration to delay the implosion of Commercial Real Estate is a victory of the bulls, and is just an indication of the "decoupling" of the CRE market fundamentals from the broader Alice in Lalaland parameters that set the everyday stock market."

Silver Lake and Warburg Pincus are to buy financial data provider Interactive Data (IDC) for $3.4 billion in cash, including a $2 billion payment to majority owner Pearson which it will use to expand.

Pearson -- which owns the Financial Times, Penguin Books and the world's biggest education business -- said it would use the proceeds from the sale of its most profitable unit to accelerate its expansion through bolt-on acquisitions.

China Stocks Drop to 7-Month Low as Banks Increase Reserves. China’s stocks fell, sending the benchmark index to the lowest in seven months, after the central bank ordered banks to set aside more deposits as reserves for the third time this year. The Shanghai Composite Index dropped 1.2 percent to 2,836.51 at 9:35 a.m. local time. The CSI 300 slid 1.3 percent to 3,027.77. The Shanghai Composite plunged 7.7 percent last month, the biggest decline since January, as the government unwound monetary stimulus and stepped up measures to prevent a housing bubble inflated by record lending last year. It has slumped 12 percent in 2010, the world’s second-worst performer.

Microsoft's(MSFT) Browser Share Dips Below 60%. Microsoft's browser market share continued to fall in April, with Internet Explorer now in use for fewer than three in five Web connections. IE's share of the market in April was 59.95, down from 60.65 percent in March, according to Net Applications. Google's Chrome grabbed the lion's share of that, increasing to 6.73 percent from 6.13 percent, while Firefox also gained nearly a tenth of a percentage point, to finish April with 24.59 percent.

The euro traded below $1.31 for the first time since April 2009 on concern a 110 billion-euro ($144 billion) rescue package for Greece will fail to contain the region’s debt crisis.

Supported by a tax credit, the pending home sales index rose a seasonally adjusted 5.3% in March, and was up 21.1% compared with a year earlier, the National Association of Realtors said Tuesday. In February, the index rose 8.3%, compared with an earlier estimate of an 8.2% gain. For March sales contracts rose 12.7% in the South, 1.9% in the West and 1.2% in the Midwest. Contracts declined 3.3% in the Northeast.

Earthfiles: "Oil Leak Could Reach Loop Current Soon and Threaten Florida Keys and East Coast."

Moody's liquidity-stress index, which falls as corporate liquidity improves, slid to its lowest level since 2005, Moody's Investors Service said Tuesday in its "SGL Monitor Flash" report. The index, which hit 4.8% in April, is down from an all-time high of 20.9% in March 2009, reflecting a decline in the number of companies with Moody's lowest liquidity rating to 26 at the end of April from 106 over the same period. "This suggests that firming business fundamentals, and not just access to the high-yield market, is improving liquidity for speculative-grade companies. The high-yield market is still strong, however, and we saw many companies refinance to push out debt maturities and improve covenant cushions," said John Puchalla, Moody's vice president and senior analyst.

The VIX rose 23.7% in recent activity. Also, the iPath S&P 500 VIX Short-Term Futures ETN (VXX), an exchange-traded fund tied to the VIX, saw a rise of 9% in recent activity.

Gold for June delivery retreated $10.90, or 0.9%, to $1,172.70 an ounce after hitting a five-month high earlier in the session.

Palatin Technologies, Inc. announced that the U.S. Patent and Trademark Office issued U.S. Patent No. 7,709,484, titled "Substituted Melanocortin Receptor-Specific Piperazine Compounds," today. The claims in the issued patent relate to small molecule compounds which bind to melanocortin receptors.
Palatin has received Notices of Allowance from the U.S. Patent and Trademark Office on four additional patent applications relating to small molecule compounds which bind to melanocortin receptors, U.S. Patent Application Numbers 11/036,282; 11/099,814; 11/464,051 and 11/464,069.

Palatin has also received Notices of Allowance on U.S. Patent Application Number 11/428,749, relating to melanocortin antagonist peptides with potential for treatment of cachexia and related indications; U.S. Patent Application Number 11/031,898, relating to peptides with potential utility for treatment of sexual dysfunction; and U.S. Patent Application Number 11/694,358, relating to linear compounds that bind to natriuretic peptide receptor A, with potential utility for treatment of heart failure, resistant hypertension and related indications. Palatin anticipates that all the allowed patents will issue over the next six to eight months.

"The issuance of this patent further fortifies our patent protection in the United States related to our work with small molecule compounds which bind to melanocortin receptors," said Trevor Hallam, Ph.D., Palatin's Executive Vice President - Research and Development. "Receiving allowances from the Patent Office on eight different applications covering several technology areas strengthens our intellectual property portfolio and is a testament to the depth and effectiveness of our research team."

The issued patent and allowed patents cover compounds discovered and developed by Palatin scientists, and are solely owned by Palatin.

The euro fell below $1.30 on Tuesday for the first time since April 2009 amid worries that Portugal and Spain may be heading toward funding difficulties similar to Greece's, which required a bailout from the euro zone and International Monetary Fund.

The Dow Jones industrials tumbled 225 points, or 2%, to 10,927. The Nasdaq Composite Index was down 74 points, or 3%, to 2,424, and the Standard & Poor's 500 Index had plummeted 29 points, or 2.4%, to 1,174.

Monday, May 03, 2010


5/3/10 BP

John Hussman: "Overall, it strikes me that the markets have wholeheartedly embraced the view that the recent downturn was nothing but a typical and purely transitory post-war wrinkle. Yet income continues to deteriorate once government transfer payments are backed out, in stark comparison to other post-war recoveries....As of last week, the Market Climate for stocks was characterized by strenuously unfavorable valuations, and a syndrome of overvalued, overbought, overbullish, rising-yield conditions that has historically been associated with poor outcomes."

Boosted by spending on autos and other durable goods, real U.S. consumer spending increased 0.5% to a record high in March, at last surpassing the pre-recession peak set in November 2007, the Commerce Department estimated Monday. After-tax, inflation-adjusted incomes increased 0.2% in the month, with transfer payments such as unemployment benefits accounting for much of the gain. The tepid income gains should hamper the economic recovery, economists say. With spending growing much faster than incomes in March, the personal savings rate fell to 2.7%, the lowest since September 2008.

Australian shares edged lower early Monday with most resource stocks on the decline after the government announced on Sunday that it would impose a new tax on mining profits.

Rob Hanna: "Monday is the 1st trading day of May. I’ve discussed many times before how the 1st trading day of the month tends to be seasonally bullish."

Conditions for the nation's manufacturers improved again in April to its highest level since June 2004, the Institute for Supply Management reported Monday. The ISM index jumped to 60.4% in April from 59.6% in March.

Machinists at Boeing's St. Louis defense systems plant have authorized a strike if a contract is not accepted before the current agreement expires next month.

The International Association of Machinists and Aerospace Workers District 837 said in a statement that the strike authorization vote was supported by 99 percent of the workers who attended a meeting on Sunday.

Norsk Hydro ASA, Europe’s third- largest aluminum maker, agreed to buy mine assets from Vale SA for $4.9 billion, securing a century’s worth of bauxite supplies and making the Brazilian miner its No. 2 shareholder.

Hydro, based in Oslo, will give Vale $1.1 billion in cash, a 22 percent stake and take on about $700 million of net debt in return for bauxite, alumina and aluminum assets, the company said yesterday. As part of the deal, Hydro will take control of Paragominas, the world’s third-biggest bauxite mine, and 91 percent of Alunorte, the largest alumina refinery, it said.

According to WSJ, investors bought a net $443 million of credit-default swaps to insure against a U.K. default last week, which took the total outstanding to $8.2 billion, or roughly matching that of Greece.

The Commerce Department says construction activity increased by 0.2 percent in March, the first advance since last October. The small gain took economists by surprise. They had been forecasting a 0.3 percent drop.

Chancellor Angela Merkel's Cabinet agreed Monday on a bill to give Greece euro22.4 billion ($29.6 billion) over three years as part of a wider bailout, as the German government realized that letting Greece go bankrupt could send the euro into a tailspin and hurt Germany's own economy.

Reggie Middleton: "Even as motor vehicle output continues to climb according to the BEA, Federal Reserve data shows that interest rates on auto loans have risen each quarter since the end of Cash for Clunkers, and the average amount financed has fallen each quarter as well. Such contradicting data should raise more question marks about whether or not the consumer recovery is really out of the woods (or if it will ever leave the woods)."

Rigzone: "Two platforms have stopped production and one has been evacuated as a safety measure due to the oil slick caused by the blow-out of the Macondo well. Approximately 6.2 million cubic feet of natural gas is shut-in. This is less than one-tenth of a percent of daily gas production in the Gulf of Mexico."

Barring a sudden triumph with the blowout preventer, BP plans to try to capture the oil with containment domes, also known as cofferdams. The idea is to lower the huge 74-ton steel domes over the blowout preventer and the other two leaks, then pump the captured oil to a barge capable of holding 250,000 barrels. of oil. But the domes are still being fabricated in Louisiana and will not be deployed for six to eight days, McKay said Sunday.

It's not a simple feat: A BP spokesman said this kind of emergency response has never been tried at such a depth.

Marc Faber said in a Bloomberg TV interview that "China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst. The market is telling you that something is not quite right. The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months."

Movie Gallery's Chapter 22 just turned into a 7. The WSJ reports that the firm has decided to shutter all of its 2,415 stores and liquidate completely.

"CNBC's house blowhard, Charlie Gasparino, laughed at the "securities fraud" line, saying, "Try proving that one." The Atlantic's online Randian cyber-shill, Megan McArdle, said Rolling Stone had "absurdly" accused Goldman of committing a crime, arguing that "Goldman's customers for CDOs are not little grannies who think a bond coupon is what you use to buy denture glue." Former Wall Street Journal reporter Heidi Moore hilariously pointed out that Goldman wasn't the only one betting against the housing market, citing the short-selling success of – you guessed it – John Paulson as evidence that Goldman shouldn't be singled out. The truth is that what Goldman is alleged to have done in this SEC case is even worse than what all these assholes laughed at us for talking about last year." Matt Taibbi

British Petroleum's Oil Leak Has Spread to At Least 4,000 Square Miles - Size of Puerto Rico.

Natural gas prices in the U.K. are the most expensive relative to New York in almost six months, attracting cargoes of liquefied natural gas across the Atlantic.

The difference between the December futures contracts on the New York Mercantile Exchange and the U.K. Intercontinental Exchange is near its widest since Nov. 18 as excess supplies depress U.S. prices. December gas in New York was at $5.164 per million British thermal units on April 30 compared with $7.16 for the ICE U.K. contract.

“You will see more cargoes going to Europe,” Zach Allen, president of Pan Eurasian Enterprises Inc., a Raleigh, North Carolina-based tracker of LNG shipments, said in a telephone interview. “The benefit of taking gas into Europe, especially the U.K., putting it into storage, and selling that gas forward into the winter market, is over $2 per Btu.”

Prices fell 30 percent this year, making the fuel the worst-performing commodity. Output in the lower 48 states increased 1.6 percent in February from January, amid increased production at shale wells, where rock formations are fractured and injected with water, sand and chemicals to release trapped reserves. Increased supplies in America are encouraging producers to send LNG imports to Europe.

The top executive of Avis Budget Group Inc.has proposed discussions with the board of directors of Dollar Thrifty Automotive Group Inc. regarding the latter's recent deal to be acquired by Hertz Global Holdings Inc. for $41 a share. In a letter to Dollar Thrifty's board, Chairman and CEO Ronald Nelson uses terms like "very surprised" and "astonished" to describe his reaction to the announcement of the Hertz-Dollar Thrifty deal late last month. "We would like to make a substantially higher offer to acquire Dollar Thrifty, especially in light of your recent performance and the potential synergies associated with an acquisition of Dollar Thrifty by Avis Budget," Nelson wrote, adding that Parsippany, N.J.-based Avis Budget would like access to information to begin a due-diligence review toward making such a counterbid.

Oil continues to gush from a runaway well in the Gulf of Mexico, a BP PLC official said Monday, calling "inaccurate" a report that said the flow had been reduced. A news report earlier Monday cited BP official Jeff Childs as saying BP had shut a piece of safety equipment and that that move had "significantly" cut the flow of oil. Data indicates that the so-called "rams" did close but the flow hasn't been reduced, BP's chief operating officer Doug Suttles told reporters Monday.

The Dow Jones Industrial Average rose 143.22, or 1.3%, to end at 11,151.83, marking the biggest point gain for the blue-chip average since Feb. 16. The S&P 500 index rose 15.57, or 1.3%, to 1,202.26, with the consumer discretionary sector up 2.1%, the highest of the broad index's 10 sectors. The Nasdaq Composite rose 37.55 points, or 1.5%, to 2,498.74.

The U.S. government is expected to borrow $340 billion in April-June, the Treasury Department said Monday. The borrowing estimate is $72 billion more than previous estimates.

Sunday, May 02, 2010


5/2/10 Rollover?

ZeroHedge: "Greece is just a pleasant distraction compared to what would happen if the US can't roll $700 billion in short-term debt each month."

European trader Glencore International is studying a merger with Xstrata to create a mining and trading group worth 55 billion pounds ($84.5 billion), a source close to the deal said.

"Glencore is working on a potential merger with Xstrata, and both sides have hired banks as advisers," the source told Reuters, adding that a deal was not imminent and would probably be "months away."

The Sunday Times reported that Glencore's advisers were discussing the details of a two-stage proposal to the Xstrata board that would see Glencore, which owns 34.4 percent of Xstrata.

China ordered banks to set aside more deposits as reserves for the third time this year, seeking to counter the risk of property bubbles and the threat inflation will surge after a record expansion in credit.

The reserve requirement will increase 50 basis points effective May 10, the People’s Bank of China said on its Web site today. The current level is 16.5 percent for the biggest banks and 14.5 percent for smaller ones.

Greece accepted an unprecedented bailout from the European Union and International Monetary Fund valued at more than 100 billion euros ($133 billion) to prevent default, agreeing to budget cuts that unions called “savage.”

The measures are worth 30 billion euros, or 13 percent of gross domestic product, and include wage cuts and a three-year freeze on pensions, Finance Minister George Papaconstantinou said in Athens today. Greece’s main sales tax rate will rise to 23 percent from 21 percent. The exact bailout amount will be announced later, he said. Euro-region finance ministers meet at 4 p.m. in Brussels. Germany will provide 28 percent of the euro region’s contribution.

Johnson & Johnson is recalling all lots of certain over-the-counter infant and children's products, including various formulations of Children's Tylenol, Motrin Infant Drops and Children's Zyrtec syrup.

Mike Burk: "Sell in May and go away" is a saying that has been around as long as I can remember. It appears to be based on the markets behavior during the 2nd year of the Presidential Cycle. It also has been more pronounced during recent times. The table below shows the collective average performance of several indices from May 1 through September 30 for all years and for the 2nd year of the Presidential Cycle. The average performance for the period over all years has been positive, however, the average performance during the 2nd year of the Presidential Cycle has been negative.

May 1 through September 30 average returns.

Index beginning All years 2nd year
R2K 1979 +1.5% -11.6%
OTC 1963 +1.2% -8.8%
SPX 1928 +1.5% -3.4%
DJIA 1885 +1.0% -1.2%"

Greeks are among the world’s leading spendthrifts with a net savings rate of around -7 per cent of GDP, according to Tim Lee of Pi Economics. Japan, by contrast, has been able to finance the huge expansion of its national debt over the past two decades thanks to its traditionally high savings rate. However, as its population ages, Japanese household savings are set to turn negative. Both the US and UK also have negative net savings rates.

An oil reservoir in western North Dakota holds nearly as much recoverable crude as the rich Bakken shale formation above it, a new state study shows.

The study released last week by North Dakota's Industrial Commission said current technology could lead to the recovery of about 1.9 billion barrels in the Three Forks-Sanish formation.

“This is good news for North Dakota and our country,” said Gov. John Hoeven. “This indicates more sustainability in this oil play.”

The Three Forks is made up of sand and porous rock directly below North Dakota's portion of the Bakken formation, where oil-producing rock is sandwiched between layers of shale about 2 miles underground.

Ron Ness, president of the North Dakota Petroleum Council, cautioned against overreacting to the state's findings. He said oilmen have known for years the Three Forks holds a vast cache of crude but technology and oil prices haven't made it economical until now.

“Oil just doesn't come when it's in a study,” he said. “For the guy out there drilling, this helps show investors this thing is for real.”

Newspaper publishers Brown Media Holdings Co. and Brown Publishing Co. have filed for Chapter 11 bankruptcy relief and plan to sell their assets in 10 states to a bidder the companies have chosen.
The Cincinnati-based, family-owned businesses filed Friday in U.S. Bankruptcy Court for the Eastern District of New York, asking for approval of $2.5 million in financing to help the companies through bankruptcy.
The companies said in a news release that the unnamed bidder will assume a substantial portion of their liabilities. They said they have strong cash balances, positive operating cash flows and financing in place to finance the bankruptcy process.