Saturday, May 15, 2010

Global Wildcat Banking

5/15/10 Global Wildcat Banking

ECB Executive Board member Jose Manuel Gonzalez-Paramo: “Central Banks Can’t Work if Markets Dysfunctional.”

The $21.536 billion combined weekly drop in foreign central bank holdings of treasuries plus agencies is the largest one in the decade-long dataset. This is not business as usual!

Regulators on Friday shut down the Midwest Bank and Trust Company in Elmwood Park, Ill., as well as three smaller banks in Georgia, Michigan and Missouri to bring the number of bank failures this year to 72.

Credit-default swaps on the Markit CDX North America Investment Grade Index rose 6.88 basis points to a mid-price of 107.96 basis points as of 4:51 p.m. in New York, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates. Anadarko Petroleum Corp. swaps jumped to the highest in more than a year after ING Bank NV estimated costs of the Gulf of Mexico oil spill may reach $7.8 billion.

The dollar index jumped 2.1% this week to 86.249 (up 10.8% y-t-d).

Doug Noland: "There’s way too much Credit backed by little more than government assurances or perceptions of government insurance. And never before has an enormous global “leveraged speculating community” so dominated the markets for debt instruments and, in the process, so relied on faith in the efficacy of government market interventions. It’s global wildcat banking in its purest ever form....Global policymakers and Credit markets have been fueling Bubbles and accommodating profligacy for years now. It would have taken a concerted effort by global central bankers to rein things in. The Greenspan/Bernanke Federal Reserve would have had no part of it. Quite the contrary. It was fundamental to Greenspan/Bernanke doctrine to deal with market and economic fragility through the aggressive reflation of system Credit. This doctrine of inflationism was instrumental in nurturing Credit and speculation excesses that worked over time to increasingly distort the pricing of finance, the quantity of Credit created, and the allocation of real and financial resources. The ECB’s big mistake was not to have forcefully fought the Fed.....My bearish thesis on our markets and economy is based upon the view that the financial fuel for our recovery has been unsound, unstable and unsustainable. This “Monetary Process” is now in jeopardy. The Global Government Finance Bubble, which lunged into its terminal phase of excess with the collapse of the Wall Street/mortgage finance Bubble, has been pierced. Greece’s debt crisis marks a momentous inflection point. And, yes, some government markets – certainly including Treasuries – are benefiting from Greek and periphery European debt woes. Yet key Bubble dynamics percolate under the surface.
I have argued that the Global Government Finance Bubble has been the biggest and most precarious Bubble yet. The incredible scope of global sovereign debt expansion over the past couple years has been rather obvious. Less apparent are related distortions - to the pricing and allocation of finance throughout international markets - based specifically upon the market's perception that politicians and central bankers would act aggressively and successfully to forestall future crises. This policy-induced market distortion fostered an incredible bout of risk-taking – especially considering the fundamental backdrop – and a resulting massive flood of finance out to the risk markets. This perception has been blown to smithereens in Europe and has quickly become vulnerable everywhere.....The dollar and Treasuries have benefited. This has supported the bullish view that the unfolding crisis is largely a European issue. It has also helped dampen the impact to our markets from changing global perceptions with respect to the capacity of policymakers to stem crises. Here in the U.S., Credit spreads and risk premiums (corporates, MBS, municipals, etc.) have widened some. Yet faith still runs deep that Washington won’t allow a crisis. This confidence must hold for sufficiently loose U.S. finance to continue to support our fragile recovery.
The confluence of global financial crisis and intense financial sector scrutiny here at home will at some point prove confidence in Washington overly optimistic. For now, when it comes to pricing risk and disciplining profligate borrowers, our debt markets remain dysfunctional."

J.D.Rosendahl: "If we take a look at the broader market (NYSE) we see a market that has lagged a lot, in relation to its 50 day "MA. That creates a divergence worth watching, it's not exactly bullish."

The world’s rich economies are continuing to pile up public debt in spite of a recovery in the global economy, according to the International Monetary Fund.

In a regular report on public finances released on Friday, the fund suggested increases in value added taxes and excise duties as a way to plug the deficits. How about cutting spending?


Undersea robots worked to insert a small tube into a leaking pipe on the sea floor to stem the flow of oil into the Gulf of Mexico. BP hopes to know by tonight if the tube succeeded in siphoning the oil to a tanker at the surface. The Oil Drum: "The intent in trying this route first is that it captures the fluids before they mix with seawater, and thus will prevent the formation of the methane hydrates that were a problem with the first containment box. Should the pipe insertion not work, the “top hat” is sitting on the ocean bed near the site, ready to be deployed."


Seeking Alpha: "The Dow's chart isn't looking as spectacular when adjusted for inflation: After quite a rally, it's still 30% off its 1999 peak, and only just over double its 1929 peak."


The capacity utilization rate for total industry advanced 0.6 percentage point to 73.7 percent, a rate 6.9 percentage points below its average from 1972 to 2009, but 4.5 percentage points above the rate from a year earlier.


Tim W. Wood: "I’ve identified very specific DNA Markers that have occurred at every major market top since 1896 and it is the setup surrounding these markers that is key along with the cyclical structure of the market, all of which is covered in detail in Cycles News & Views.

I have included the current Dow theory chart below. The latest development here is the formation of a minor non-confirmation in conjunction with the most recent high. My research shows me that since 1896 a large percentage of the annual cycle tops have occurred in conjunction with a Dow theory non-confirmation. However, non-confirmations do not mean that a market top is inevitable. This merely serves as a warning. In the meantime, according to Dow theory, we must consider the primary trend to be in force until it is properly reversed, and that requires a movement below a previous secondary low point....We are still operating within a much longer-term secular bear market and the Phase II decline is still ahead of us. According to history, the Phase II decline is the most devastating. Those that understand market history, the Dow theory and cycles can use that knowledge to guide them. The bottom line is that the evidence suggests that the 2008/2009 lows were not the bear market bottom."


Joe Weisenthal: "It didn't get much attention, but this week The White House announced its support for a bailout of one of the President's most important constituent groups: public school teachers (teachers unions, basically).

A post on The White House blog (via ABC News) late Wednesday evening announced that it was time for "bold action" to save teachers' jobs.

Specifically, Arne Duncan, Obama's education secretary wrote the following to Nancy Pelosi and Harry Reid:

We applaud Chairmen Harkin, Miller and Obey for crafting legislation in direct response to these challenges. S. 3206, the Keep Our Educators Working Act, H.R. 2847, the Jobs for Main Street Act, and H.R. 4812, the Local Jobs for America Act, each call for $23 billion in emergency support to preserve education jobs modeled after the State Fiscal Stabilization Fund (SFSF) established in the American Recovery and Reinvestment Act (ARRA). This funding would keep teachers in the classroom while helping to sustain meaningful and necessary reforms in public education across the country."


In the past week, rail Freight Carloads 208,809 -1.97% and oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 52.50 -8.7%.


Bank of England Governor Mervyn King says: "We are still halfway through the world's worst financial crisis ever."


Barron's: "The euro, already at a four-year low against the dollar, is likely to go lower. The bold, €750 billion rescue package and broad international collaboration should stabilize European markets and hush the talk of a breakup. Yet that won't stop the currency from careening this year toward the $1.18 level, where it made its 1999 debut."


AccuWeather.com's Senior Meteorologist Alex Sosnowski points out today that hurricanes may spread the Gulf oil inland.


Economic Disconnect: "Gold only hit a nominal record of $1219 on Tuesday. If you adjust for inflation, which you must, it’s still a whopping 47 percent below the real record, which was hit more than three decades ago at an inflation-adjusted $2309."


Obama: "Put simply, Wall Street reform will bring greater security to folks on Main Street." Meanwhile, the national debt is about $42,000 per citizen. This number does not account for illegal immigrants.

Mike Burk: "NYSE volume hit a 7 year low in mid April. Volume has increased since then, unfortunately, mostly to the down side...Average returns have been weak during the coming week and weakest during the 2nd year of the Presidential Cycle....
So far the recent decline appears to be no more than a pull back in a bull market so a return to the mid April highs appears likely.
I expect the major averages to be higher on Friday May 21 than they were on Friday May 14."

Friday, May 14, 2010

Currencies

5/14/10 Currencies

In the early going, the euro and the pound are weak while the dollar continues to gain ground.

U.S. retail sales rose a seasonally adjusted 0.4% to $366.4 billion in April, the seventh straight increase and the 12th gain in the past 13 months, led by strong sales at hardware stores and garden centers, the Commerce Department estimated Friday. Excluding the 0.5% increase in auto sales, sales rose 0.4% to $303.5 billion. The figures were stronger than the expected 0.2% decline in overall sales and the expected 0.2% gain excluding autos. Adding to the upside surprise, sales in February and March were each revised higher by two-tenths of a percentage point. Compared with April 2009, sales were up 8.8%.

Shares of credit-card networks MasterCard Inc. and Visa Inc. were both down 7% in premarket trading Friday following a U.S. Senate vote in favor of a measure that would allow the Federal Reserve to regulate fees on credit and debit cards. The amendment was offered by Sen. Richard Durbin, D-Ill., and is seen as a threat to profits at credit-card firms.

Gold for June delivery rose $17.30 to $1,246.50 an ounce in electronic trading on Globex. It earlier hit an intraday high of $1,249.70 an ounce. On Wednesday, June gold futures surged to end at a record high of $1,243.10 an ounce.

Deutsche Bank Chief Executive Josef Ackermann cast doubt on Greece's ability to repay its debt in a TV interview and said a $1 trillion euro zone rescue package will help stabilize Italy and Spain, while the situation in Portugal is more difficult.

With sales rising 2.3% and inventories up 0.4%, the inventory-to-sales ratio dropped from 1.27 to 1.24, matching the record low set in January 2006.

Gov. Arnold Schwarzenegger will release Friday his revised budget plan for the coming fiscal year, one that is expected to propose deep cuts across most state agencies and call for eliminating many health and social programs for the poor.

With unemployment remaining high and tax revenue low, California will face a deficit of more than $20 billion—a quarter of all general fund spending—in the fiscal year that begins July 1.

"We're not going to get through the deficit we have without some really tough decisions and some really terrible cuts," Mr. Schwarzenegger's spokesman, Aaron McLear, said earlier this week.


U.S. consumer sentiment rose in early May, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index rose to 73.3 in May from 72.2 in April.

The cost to insure debt to peripheral European countries and U.S. companies rose on Friday as reports about political discord in Europe reignited worries about the region's stability and drove the euro to a 17-month low. The Greek 5-year credit default swap spread widened to 587.5 basis points, up from 528.7 basis points on Thursday, according to CMA Data Vision.

"The key determinant of consumer spending growth going forward will be the pace of the recovery in the labor market and hence the path of wage and salary income," said Joshua Shapiro, chief U.S. economist at MFR in New York.

The Senate voted for a provision that would thrust the government into the process of determining who rates complex bond deals, in a move to end alleged conflicts of interest blamed by some for worsening the financial crisis.

Sony Corp. fell the most in a year in Tokyo trading after the maker of Bravia televisions and Cyber- shot cameras forecast earnings that missed analyst estimates. Sony dropped 6.5 percent to 2,958 yen at the 11 a.m. break on the Tokyo Stock Exchange, its biggest decline since May 2009.

Video Game Sales Make Surprise Plunge in April.

China's tax bureau may announce by May 20 the expansion of its property tax on commercial-use properties to residences.

The Oil Drum: "Refiners must be ready for oil prices to rebound to more than $100 a barrel on growing consumption in Asia, said Mukesh Ambani, Asia’s richest man.

“We have to again be actively prepared to see a three-digit oil price” amid sluggish refining growth and higher marginal cost of production at new fields, Ambani, chairman of Reliance Industries Ltd., said in a speech at a conference in Mumbai today."


The federal Minerals Management Service gave permission to dozens of oil companies to drill in the Gulf of Mexico without first getting required permits from another agency.


N.Y. attorney general subpoenas eight banks and three ratings firms on their actions involving mortgage-backed securities.

The Polish Zloty and Hungarian Forint are tumbling.

Oil prices fall to $71.55 amid expectations a slower economic recovery in Europe.

Bank failures in Georgia and Michigan brought the year's tally to 70, according to the Federal Deposit Insurance Corp. Friday. Bank of Ann Arbor in Ann Arbor, Mich., will take over the $109.1 million in assets and $101.8 million in deposits of New Liberty Bank of Plymouth, Mich. In Georgia, Ameris Bank of Moultrie, Ga., will take over the $135.7 million in assets and $134 million in deposits of Satilla Community Bank of St. Marys, Ga.

On Friday, the Dow Jones Industrial Average fell 162.79 points, or 1.5%, to finish at 10,620.16. The S&P 500 index dropped 21.76 points, or 1.9%, to 1,135.68, while the Nasdaq Composite fell 47.51 points, or 2%, to 2,346.85.

Thursday, May 13, 2010

Second Posting

5/13/10 Second Posting

ZeroHedge: "Yesterday Nassim Taleb said that his primary concern about an upcoming "Black Swan" is a failed Treasury Auction. This is precisely what Zero Hedge has been concerned about for the past year, although we feel that this event will likely be at least marginally telegraphed, either in the form of Direct Bidders taking down close to 50% of each auction (with the Primary Dealers monetizing the balance), and an accelerated flattening of the yield curve. Last night, Roubini, who has apparently thrown away the mantle of moderation and is back to his gloomier ways, said that he worries "that with a trillion deficit this year and next year, 2012, and for as far as the eye can see, eventually, not this year, but the next year, the markets are going to wake up and say, this is unsustainable." In other words whether via the Treasury market, or some other way, at some point the balance will shift from one where the market still believes that reserve currency is enough of a backstop to prevent the collapse of the US, to a regime where incremental bailouts will be seen as negative. That moment will be true black swan, and the beginning of the end of the great US experiment."

The UK trade deficit widened in the first quarter of the year, underlining worries that the weakness in sterling does not seem to be passing through to stronger exports as much as had been expected.

The deficit in goods and services reached £9.7bn, more than £1bn higher than in the final quarter of last year and its highest since the third quarter of 2008, when Lehman Brothers collapsed.


The Dow Jones Industrial Average fell 113.96 points, or 1%, to 10,782.95. The S&P 500 index dropped 14 points, or 1.2%, to 1,157.44, and the Nasdaq Composite dropped 30.66 points, or 1.3%, to 2,394.36.

Crude oil for June delivery fell $1.25 to $74.40 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 12. Prices are down 6.3 percent this year and are 28 percent higher than a year earlier.

The greenback advanced to $1.2549 per euro, up 0.5 percent from $1.2614 yesterday. It touched $1.2529 on May 6, the highest level since March 2009.
Europe’s common currency has dropped 1.6 percent against the dollar this week, following the EU’s plan to shore up the region’s finances.

BP Plc will in the next few days try to redirect the flow of oil from its leaking Gulf of Mexico well with a pipe to the surface, a spokesman said.

“BP is not doing this on a fixed deadline,” David Nicholas, a spokesman in Houston, said today. “It will depend on engineering developments, operational developments and the weather. Right now, the weather is within operational limits.”

The company hasn’t yet decided whether to deploy a 5-foot- tall (1.5 meter) containment dome or insert a line directly into the leaking pipe. The timeline for installing the dome is a delay from the schedule announced by Chief Executive Officer Tony Hayward, who said in Houston on May 10 it would be in place by today.


In the past week the New York Fed executed an FX swap with the ECB for $9.2 billion notional of FX swaps.


The British pound has declined below $1.45.


Spanish trade unions on Thursday called for a public sector workers’ strike and demonstrations against an emergency austerity plan, even as the government admitted that the measures would reduce already sluggish economic growth.


The companies behind denim brands such as Levi Strauss and Wrangler are witnessing volatility in the cost of the heavy cloth, threatening price rises for jeans, jackets and other garments. Denim mills, which have traditionally fixed fabric prices for manufacturers between annual cotton harvests, have begun raising prices, sometimes on a week-to-week or even a day-to-day basis, according to industry executives.
Jack Matthews, vice-president of fabric sales at PCCA, whose Texas denim mill exports fabric to factories in Latin America, described levels of volatility as “about as crazy as I’ve seen in my career”.
“A number of mills around the world seem to have taken business without having covered their cotton supply,” hoping the price would drop, he said.

11 AM Posting

5/13/10 11AM Posting

The number of people applying for unemployment benefits essentially held steady at 444,000 in the latest week, the Labor Department reported Thursday. Claims actually fell by 4,000 for the week ended May 8, but the data was revised up by 4,000 for the prior week. The net effect: no change from last week's headline number. The four-week average of initial claims - a better gauge of employment trends than the volatile weekly number - dropped by 9,000 to 450,500. Economists surveyed by MarketWatch predicted initial claims would dip to a seasonally adjusted 440,000.

The euro slid to $1.2580 as of 6:41 a.m. in New York, from $1.2614 yesterday. It traded at 116.80 yen, from 117.62. The yen was at 92.84 per dollar, from 93.24 yesterday.

The franc was at 1.4017 per euro, after strengthening earlier to 1.4006, matching the record low it reached on May 6.

The U.S. dollar index climbed above the 85 level.


Pacific Investment Management Co. said the debt crisis in Europe shows its outlook for an extended period of below-average economic growth remains valid, even after global markets rebounded from the financial crisis.

“What is happening in Europe is a vivid illustration of an underlying theme of the new normal,” Mohamed El-Erian, the chief executive officer of Pimco, said in an interview. There are “structural forces overwhelming traditional cyclical ones.”


U.S. prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter.


The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation.


U.S. home repossessions rose to a record level in April while foreclosure filings dropped in a sign mortgage lenders are working off a backlog of seized properties, according to RealtyTrac Inc. data.

“Right now it appears that the banks are focusing on processing the loans already in foreclosure, and slowing down the initiation of new foreclosure proceedings as a way of managing inventory levels,” Rick Sharga, RealtyTrac’s executive vice president, said in an e-mail. “We’ll probably see this trend continue for a while.”

A record 92,432 bank repossessions were reported in April, up 45 percent from a year earlier and 1 percent from March, Irvine, California-based RealtyTrac said today in a statement. Foreclosure filings, including default and auction notices, were 333,837. One out of every 387 U.S. households got a filing.


You can’t recapitalize a sovereign nation by issuing more debt. In the same way that more lending couldn’t enhance U.S. banks’ capital adequacy, “extending more credit to (European) nations that can’t service their accumulated debt won’t make them more creditworthy,” says Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York. The flaw in the approach adopted by European governments, as Weinberg sees it, is that lending money to countries like Greece will increase public sector debt, which last year amounted to 78.7 percent of the euro zone’s gross domestic product. The first rule of holes -- when you find yourself in a hole, stop digging -- must not translate well into euro-tongue (or English, for that matter.)


Per the credit default swap market, California cracked the top ten for highest default risks yesterday -- overtaking Iceland and Iraq.


Thirty percent (30%) of U.S. Voters now say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey. That's the lowest level of confidence measured in nearly two months.


China's central government may receive about 400 billion yuan or 29% less revenue in 2010 than a year earlier because of the decline in property prices and land sales, citing Huatai Securities analyst Chen Yong.


The Space and Science Research Center (SSRC), the leading independent research organization in the United States on the subject of the next climate change, issues today the following warning of imminent crop damage expected to produce food and ethanol shortages for the US and Canada:

Over the next 30 months, global temperatures are expected to make another dramatic drop even greater than that seen during the 2007-2008 period. As the Earth’s current El Nino dissipates, the planet will return to the long term temperature decline brought on by the Sun’s historic reduction in output, the on-going “solar hibernation.” In follow-up to the specific global temperature forecast posted in SSRC Press Release 4-2009, the SSRC advises that in order to return to the long term decline slope from the current El Nino induced high temperatures, a significant global cold weather re-direction must occur. According to SSRC Director John Casey, “The Earth typically makes adjustments in major temperature spikes within two to three years. In this case as we cool down from El Nino, we are dealing with the combined effects of this planetary thermodynamic normalization and the influence of the more powerful underlying global temperature downturn brought on by the solar hibernation. Both forces will present the first opportunity since the period of Sun-caused global warming period ended to witness obvious harmful agricultural impacts of the new cold climate. Analysis shows that food and crop derived fuel will for the first time, become threatened in the next two and a half years. Though the SSRC does not get involved with short term weather prediction, it would not be unusual to see these ill-effects this year much less within the next 30 months.”

The SSRC further adds that the severity of this projected near term decline may be on the order of 0.9 C to 1.1 C from present levels. Surprising cold weather fronts will adversely impact all northern grain crops including of course wheat and the corn used in ethanol for automotive fuel.

In pointing out the importance and reliability of this new temperature forecast and its effects on North American crops, Director Casey adds,” The SSRC has been the only US independent research organization to correctly predict in advance three of the most important events in all of climate science history. We accurately announced beforehand, the end of global warming, a long term drop in the Earth’s temperatures and most importantly the advent of a historic drop in the Sun’s output, a solar hibernation. The US government’s leading science organizations, NASA and NOAA have completely missed all three, as of course have United Nations climate change experts. It is only because of the amount of expected criticism we received because of our strong opposition to the Obama administration’s climate change policies and our declaration of the end of global warming, that the SSRC is not more fully accepted for its leadership role in climate change forecasting. The facts and reliability surrounding our well publicized predictions however stand as testament to the SSRC’s proven ability to understand the nature of global climate change. In view of the importance of this new forecast I have notified the Secretary of Agriculture to take immediate actions to prepare the nation’s agricultural industry for the coming crop damage.”
The SSRC places only one caveat on this forecast. Casey elaborates, “Only a stronger solar cycle with a period longer than the 206 year cycle can cause us to alter our projections. Although more research is needed in this area, none have yet shown themselves. The present hibernation is proceeding in almost lock step as the last one which occurred from 1793 to 1830. If it continues on present course, while the cold weather impacts on food and fuel announced today are certainly important, they do not compare with what is to follow later. At the bottom of the cold cycle of this hibernation in the late 2020’s and 2030’s there will likely be years with devastating to total crop losses in the Canadian and northern US grain regions.”

Earthfiles: "The Israeli Marine Mammal Research and Assistance Center (IMMRAC)
has reported a grey whale off the coast of Israel, the first time the huge marine
mammal has been seen outside the Pacific Ocean in
several centuries.


Crude oil approaching $74 a barrel on the downside.


EIA natural gas storage change for the latest week is forecast at a build of 102. Working gas in storage was 2,089 Bcf as of Friday, May 7, 2010, according to EIA estimates. This represents a net increase of 94 Bcf from the previous week. Stocks were 97 Bcf higher than last year at this time and 325 Bcf above the 5-year average of 1,764 Bcf. In the East Region, stocks were 145 Bcf above the 5-year average following net injections of 53 Bcf. Stocks in the Producing Region were 102 Bcf above the 5-year average of 685 Bcf after a net injection of 27 Bcf. Stocks in the West Region were 79 Bcf above the 5-year average after a net addition of 14 Bcf. At 2,089 Bcf, total working gas is above the 5-year historical range.

Wednesday, May 12, 2010

Record Gold Price

5/12/10 Record Gold Price

"Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday." Obama promised change. He succeeded by lowering the standard of living for Americans while Goldman and Morgan and Citi made money 63 days out of 63 days in the first quarter. Thank goodness they received TARP money. Otherwise we might have had 40 million on food stamps.

Global trade rebounded further in March, driving U.S. exports and imports to their highest levels since October 2008, the Commerce Department estimated Wednesday. The U.S. trade deficit -- the difference between exports and imports of goods and services -- increased by $1 billion to a seasonally adjusted $40.4 billion, the highest since December 2008 when global trade contracted violently after the September 2008 financial crisis. In March, imports increased 3.1% to $188.3 billion, while exports climbed 3.2% to $147.9 billion. Imports of petroleum increased sharply in March to $22.3 billion, the most since October 2008.

The U.S. government ran a $83 billion budget deficit in April, the Treasury Department reported Wednesday. Income was $245.3 billion, the Treasury said, 8% below the total recorded last April. Spending was $328.0 billion, up 14% year-over-year. The deficit in line with a Congressional Budget Office estimate and marked the 19th consecutive monthly budget shortfall. A year ago in April the deficit was $20.9 billion. For the first seven months of the fiscal year, the government incurred a budget deficit of about $800 billion, roughly the same as last year.

WSJ: U.S. prosecutors are investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against, in a step that intensifies Washington's scrutiny of Wall Street.

Gold futures surged above $1,240 an ounce on Wednesday, extending their sharp gains after ending at a record high in the previous session, as the safe-haven appeal of the precious metal continued to draw investors.

Jim Rogers: " We still would recommend staying away from the Chinese imminently popping bubble, which will likely reprice industrial commodities by 30-50%."

IBM said it expects its profit to roughly double to more than $20 a share by 2015, helped by growth in emerging markets as well as the company's push into high-margin technology services and software businesses.

House Energy and Commerce Committee Chairman Henry Waxman said that BP officials told House investigators that the Deepwater Horizon well didn't pass a key pressure test the morning of the April 20 explosion.

George Ure: " we note the Exxon Valdez spill involved 10.8 million US gallons.

With this data in hand, we can estimate that on (or about) June 10, this will pass the Exxon Valdez in size. And, it will be double the Exxon Valdez by about August 1st. September 22 it will be three times the Exxon Valdez and - if they haven't got it shut down, November 12 or so it will be four times the size of Exxon Valdez.


China's economy is teetering on the edge of a major slowdown, though it's not a shakeout in the property market that's about to spark the distress, according to a noted China strategist. David Roche, an economic and political analyst who manages the Hong Kong-based hedge fund Independent Strategy, says the world's third-largest economy is now on the brink, faced with the inevitable reckoning that follows an extended bank-lending binge. "We've got the beginnings of a credit-bubble collapse in China," said Roche.


The Gini coefficient - a commonly used measure of inequality of wealth - has reached 0.47 in China, overtaking the recognized warning level of 0.4, government-affiliated experts have said. "The Gini coefficient in China has been continuously rising after it reached the alarming 0.4-level 10 years ago," Chang Xiuze, a researcher with the academy of microeconomic research under the National Development and Reform Commission, was quoted as saying in the Economic Information Daily on Monday. Li Shi, a professor on income distribution and poverty studies with the Beijing Normal University, said the income of the top 10 percent of the richest Chinese was 23 times that of the bottom 10 percent in the country in 2007, as compared with 1998, when the gap was only 7.3 times. Some economists believe the widening wealth gap is partly the result of large amounts of "illegal income" resulting from corruption. "The income of senior executives in some State-owned enterprises is about 128 times of the average social income," Su Nanhai, director of the labor and wage institute under the Ministry of Human Resources and Social Security, was quoted as saying. "It is sad that smart and hardworking people cannot have high incomes if they work in non-monopolized trades," he said.


Kevin Depew: "It's not important, nor is it even possible, to understand what specifically occurred that day to cause the market's drop. Better to understand the conditions that caused it to happen. If you peel back the layers of market activity from March 2009, you'll find that the majority of the market's surge occurred in overnight trading on virtually no volume. Similarly, away from the market, in the economy, virtually all real economic activity was replaced by government programs with incomes replaced by transfer payments. This had the effect of supplanting economic activity that had been sharply dampened by the deflationary force of too much debt.
The lesson from last Thursday is that there's no real market based on anything remotely resembling real value anymore. CNBC commentator Jim Cramer on Thursday afternoon looked at the stock of Procter & Gamble (PG), down more than 20%, and observed "that's not a real price." Well, neither was the price 24% higher any more real, it was just higher. Is Procter & Gamble at $65 truly reflective of investor expectations of future production? I don't think so. Today, almost all asset prices are functions of government intervention in markets and the consequences of currency debasement."


Though the Real Misery Index has increased 16% from March 2009 to April 2010, the stock market has increased 56% during that period, reflecting an alarming discrepancy between the two metrics.

Lynn Reaser, the incoming president of the National Association of Business Economists, calls it a two-tier economy, with those who are employed doing better amid rising consumer confidence while the unemployed suffer.

Stock prices, meanwhile, are driven by the behavior of investors, who make up a small portion of the population -- not those who are underemployed, says Karen Dynan, the vice president of economic studies at the Brookings Institution.


Jim Rogers said Europe's bailout of indebted nations to overcome the sovereign-debt crisis is just "another nail in the coffin" for the euro as higher spending increases the region's debt.

The 16-nation currency weakened for a second day against the dollar after rallying as much as 2.7 percent on May 10, when the governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators and the European Central Bank pledged to intervene in government securities markets.


Spain will cut wages of state employees and slash investment spending, sparking union anger at the government's toughest moves yet to rein in a budget deficit some feared could ignite a bigger version of the Greek crisis.


Results of several studies suggest that the new compound NT 201 improves treatment of blepharospasm and cervical dystonia by at least 25 percent, according to news source Docguide.com.

According to a presentation by researchers at the annual meeting of the American Academy of Neurology (AAN), held here recently, the efficacy of NT 201 (botulinum neurotoxin free from complexing proteins) has been demonstrated in several controlled clinical studies of patients with focal dystonia.

Lead researcher Michael Marx, M.D., of Merz Pharmaceuticals, Germany, gave several poster presentations during which he reported that in a pooled analysis of four studies — two on blepharospasm and two on cervical dystonia — patients injected with NT 201 achieved a mean symptomatic improvement of approximately 25 percent over placebo, and more than half reported at least moderate symptomatic improvement.

NT 201 differs from other botulinum products in that the new compound is free from complexing proteins that could cause the creation of neutralizing antibodies. It is already available in Argentina, Canada, Mexico and 13 European nations.

Merz funded the study.


Beijing private equity firm Hopu Investments and Singapore sovereign investor Temasek Holdings are to take a stake of up to $1.1bn in Oklahoma natural gas company Chesapeake Energy.
The firms have collectively agreed to buy $600m of Chesapeake non-voting convertible preferred stock, and have a 30-day option to take an additional $500m in preferred stock. The cash will be used by the company to pay down debt.

EIA: Gasoline inventories show surprise decrease.

The U.S. Energy Information Administration projected that U.S. natural gas consumption would climb by 3% in 2010, propelled by higher usage among utilities and industrial consumers.

Gas consumption is expected to reach 64.4 billion cubic feet a day in 2010, slightly higher than the previous month's forecast of 63.8 billion cubic feet a day, the EIA said in its monthly Short-Term Energy Outlook.

Natural gas prices at the benchmark Henry Hub should average $4.48 a million British thermal units in 2010, up 4 cents from the previous month.

U.S. gas production is expected to increase by 1.3% in 2010, slightly lower than the agency's previous forecast, to reflect recent changes in how the EIA calculates production data. The EIA expects a contraction in drilling activity to contribute to a slight production decline in 2011.

The EIA expects natural gas in U.S. storage to climb to 3.8 trillion cubic feet by the end of the injection season, when natural gas stockpiles are replenished to meet winter heating demand. Inventories are not expected to reach last year's record of 3.837 trillion cubic feet, according to the report.


Gold futures settled at a record high Wednesday as concerns about Europe's nearly $1 trillion rescue plan and its potential for inflation showed no signs of letting up. Gold for June delivery added $22.80, or 1.9%, to $1,243.10 an ounce on Comex. Silver also rallied, with silver for July delivery rising 37 cents, or nearly 2%, to $19.66 an ounce, its highest since March 2008 as investors jumped into silver on concerns that gold had gotten too rich for them.


Cisco shares fell by 2% in after-hours trading. One analyst speculated that it was likely due to investor disappointment that the company did not post blow-out results. Cisco also issued a revenue forecast for the current period that was largely in line with previous estimates.


The Dow Jones Industrial Average gained 148.65 points, or 1.4%, to 10,896.91. Shares of IBM (IBM) gained 4.6%, leading the advance on the blue-chip average, which saw 27 of its component stocks rising. The S&P 500 index rose 15.88 points, or 1.3%, to 1,171.67, while the Nasdaq Composite gained 49.71 points, or 2%, to 2,425.02.


SAP AG, the world’s biggest maker of business-management software, agreed to acquire Sybase Inc. in a transaction valued at $5.8 billion to help it fend off competition from Oracle Corp.

Sybase shareholders will receive $65 a share, Walldorf, Germany-based SAP said in a statement today. That is 56 percent higher than the closing price of $41.57 yesterday, before the deal discussions became public.

In a lopsided 90-9 vote on Wednesday, senators approved an amendment to a regulatory reform bill that would preserve the Fed's power over small state-chartered banks instead of moving them to another banking regulator.

Tuesday, May 11, 2010

China's Bear Market

5/11/10 China's Bear Market

“If inflation isn’t contained, the central bank will have to raise interest rates,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “We’ll still need to gauge housing prices in the coming months as the previous crackdown measures were put in place not long ago. More tightening policies could follow.”

The Shanghai index has dropped more than 20 percent from a November peak, the definition of a so-called bear market, on speculation efforts to rein in the housing market will hurt earnings. Investor Marc Faber said on May 3 that China’s economy may “crash” within a year as stock and commodity price declines signal the property bubble is set to burst.

Bank of China Ltd. and China Merchants Bank Co. dropped at least 1.7 percent, while Poly Real Estate Group Co., the nation’s second-largest developer by value, plunged 2.7 percent.

At least five people were reported dead Monday night in Oklahoma after severe weather caused tornadoes to form across parts of the southern Plains, with some touching down with deadly force in the Oklahoma City area.

Members of the governing Christian Democrats reacted Sunday in Berlin to exit polls in North Rhine-Westphalia. By NICHOLAS KULISH BERLIN - Chancellor Angela Merkel's conservative bloc lost its grip on the upper house of Germany's Parliament on Sunday.

MBIA Inc. shares were down more than 10% in premarket trading Tuesday after the bond insurer said it swung to a first-quarter loss of $1.5 billion as it was hit by losses on insured credit derivatives. Another bond insurer, Assured Guaranty Ltd, saw its shares weaken before the bell Tuesday following its quarterly earnings report.

Chain-store sales for the week ended May 8 rose 4.3% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales inched up 0.1%. "Sales edged up during the first week of the May fiscal month as warm weather in the South and East helped to drive seasonal demands, as well as Mother's Day acting as a catalyst for traffic," said Michael Niemira, ICSC's chief economist. He said the underlying pace of consumer demand continues to be healthy as an ICSC-Goldman Sachs customer tracking survey found strong year-over-year traffic at apparel-specialty stores, discounters and department stores with the pace a little softer for department stores than in previous weeks. He sees May sales to rise by about 3.5%.

OPEC now expects global oil demand to grow by 950,000 barrels a day to 85.38 million barrels a day. It previously expected growth of 900,000 barrels a day.

Urban property prices in China continued to rise in April in spite of several policy tightening measures from Beijing, according to government figures reported Tuesday. Property prices in 70 cities increased 12.8% in April from the year-earlier month, accelerating from the 11.7% rise registered in the previous month, figures released by the National Bureau of Statistics showed, according to reports. Prices rose 1.4% during the month, even from prices recorded in March, when they gained 1.1%, reports added.

BP, Transocean and Halliburton pointed fingers over who bears responsibility for the oil-rig explosion. At hearings Tuesday, Halliburton is expected to describe a failure to place a cement plug within the well before withdrawal of drilling "mud" that kept gas from escaping. Two rig workers corroborated.

Money markets and the cost of protecting bank bonds from losses show investors are concerned the almost $1 trillion rescue plan announced by European leaders may not be enough to contain the region’s sovereign debt crisis.

The Markit iTraxx Financial Index of credit-default swaps on European banks and insurers was last at 145 basis points, compared with 108.5 basis points for the Markit iTraxx Europe Index of 125 investment-grade companies, a benchmark it traded an average 10 basis points below for three years, according to CMA DataVision. The three-month Libor-OIS spread, which widens as banks’ willingness to lend decreases, advanced to 19.09 basis points from 18.92 yesterday and 6 basis points on March 15.


The euro lost all of yesterday’s gains on concern the $1 trillion bailout will hurt European economic growth. Stocks fell, paring the MSCI World Index’s biggest advance in a year. Chinese shares entered a bear market.

The euro weakened 0.7 percent against the dollar at 8:44 a.m. in New York, trading below the level it was before the European Union-led aid package was announced early yesterday. The Stoxx Europe 600 Index fell 1.8 percent, after rising 7.2 percent yesterday. Futures on the Standard & Poor’s 500 Index dropped 1 percent. Copper traded below $7,000 a metric ton.

The European Union’s unprecedented bailout package is unlikely to be a “long-term solution” for the region, Marek Belka, the director of the International Monetary Fund’s European department, said in Brussels yesterday. Inflation in China accelerated to an 18-month high, the nation’s statistics bureau said today, increasing pressure on the government to raise interest rates in an economy that has been an engine of growth through the global financial crisis.

“The euphoria of 24 hours ago has passed,” Derek Halpenny, European head of global currency research at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a report today. “We are in little doubt that steps taken will offer the euro little support and the aid package does not change the fact that Spain and Portugal in particular will still have to undergo further painful austerity measures.”


Rob Hanna: "Striking about Monday’s rally was the very low volume in the Nasdaq. It not only fell below the high levels achieved during Thursday and Friday’s wild trading, but it actually posted the lowest volume in over a week. This brought about a compelling study from the May 19,2009 blog post. I’ve updated that study below:"


The Daily Capitalist: "The EU is effectively proclaiming; “if you pour our brew down the drain we are just going to make more of it.” To defend the Euro, something has to be sold against it. The Fed (the tallest midget) has re-opened the USD swap line to the EU so that newly-digitized dollars can be sold for Euros in the market. Clearly, the bailout is USD bearish – not Euro bullish. If the EU was serious about saving the Euro, then the ECB would have to dump its gold and hike funding rates. They are going “all in” with a six of clubs. In the current backdrop it seems preferable for the Fed to inflate immediately, rather than the ECB, given the relative strength/weakness of the USD/EUR. This is the same playbook global central banks have been following for a while. The mere fact that all major currencies today need to be defended wreaks of fraud. If something is as it seems there is no need to defend it."

ZeroHedge: "Fed Pretends It Is Preparing to Soak Up Excess Reserves, Even As Currency Swaps Are Sure to Add About $500 Billion to Fed's Assets."
Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge. In other words, the very banks that Europe is bailing out are betting more and more aggressively with each passing day against Europe's own survival! Even George Soros has shed a tear of pride in how beautifully his initial plan to take on the BOE has mutated for the Bailout Generation.

Beijing property prices fell 31.4% for the week ending May 9 from the week ending April 11, to a average price of 16,898 yuan per square meter, citing statistics from consulting firm Comprehensive Real Estate Services Corp.

While the Sanders Amendment no longer contains a full audit, Senator David Vitter has introduced an amendment which contains the Audit the Fed language that passed the House last fall. The Senate must pass the Vitter amendment for full disclosure and full accountability going forward." Ron Paul

Ministry of Commerce spokesman Yao Jian has said China plans to reduce its 2009 trade surplus by 100 billion US dollars.

Job openings at U.S. businesses and government agencies increased 1.8% in March to 2.69 million, while the number of people hired rose 5.8% to 4.24 million, the highest level in 14 months, the Labor Department estimated Tuesday. With 2.69 million job openings and 15 million people officially classified as unemployed, there were 5.6 potential applicants for each opening, about the same as in February. In March, the number of people leaving their job for any reason rose 1.2% to 4.02 milion. Layoffs were essentially unchanged at 1.83 million, while the number of people who quit their job rose 0.9% to 1.87 million, the most in a year.

FMX Natural Gas Daily – May 11, 2010
"Natural gas prices were up 15.5 cents yesterday as traders bought gas in appreciation for its ability to hold up through last week’s asset meltdown. With oil prices and equities back up yesterday, gas traders saw natural gas as suddenly worth buying. The thinking ran something like this: If natural gas prices were able to hold up while the entire asset world was collapsing, then surely they deserve a shot at the long side once everything starts to rally."

Reggie Middleton
Post date: 05/11/2010 - 02:01
I told you it probably wouldn't work. Now, you really have speculators lining up to put on the short trade of the a lifetime. Methinks those lines may start to get pretty long as well as I spy the Asian markets as well as the US and European futures drop like rocks in desalinated pond water. Asking 2 trillion euro, can I get a bid for 2 trillion euro, going... going... gone!

The government reported U.S. wholesale sales rose 2.4% in March, while inventories climbed 0.4%.

Pfizer, the world’s largest pharmaceutical company, plans to lay off or relocate up to 1,400 New York City employees, seven years after receiving millions of dollars in tax breaks to create jobs in the city. On Monday the company, which has already scrapped about 2,000 positions, also put its office tower at 685 Third Avenue up for sale.

Peter Morici: "In 2010, the trade deficit with China is reducing U.S. GDP by more than $400 billion or nearly three percent. Unemployment would be falling rapidly and the U.S. economy recovering more rapidly but for the trade deficit with China and Beijing's currency policies."

Dean Foods shares slid further Tuesday, slumping to 11-year lows, after equity analysts slashed their stock-price targets on the No. 1 U.S. milk producer. Dean shares dropped 7% to $9.73. The current average price target of analysts is now $11.50, down from $18.50, according to FactSet. The stock plunged 28% Monday when Dean suspended its 2010 outlook and said it faces a price squeeze from private-label milks at grocery stores. "As long as retailers continue to use the milk category as a loss leader, Dean and other dairy processors have minimal control," Deutsche Bank analyst Eric Katzman wrote. Dean sells regional milk brands such as Berkeley Farms and Meadow Gold as well as Horizon Organic and Silk soy milks.
Dean Foods to cut 350 to 400 jobs.

Gold for June was popping $22.30 to $1,223.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Tuesday has traded as high as $1,223.80 and as low as $1,201.50. The U.S. dollar index was also rising 0.48% to $84.56 while the euro resumed its down trend falling 0.47% to $1.27 against the dollar. The spot gold price today was up over $19, according to Kitco's gold index.

Foreign central banks have agreed to pay an interest-rate premium of 100 basis points to the Federal Reserve for dollar swaps, the New York Fed announced Tuesday. The Fed re-established the currency swaps with five central banks on Sunday and Monday to provide extra dollar liquidity in conjunction with the plan to guarantee European debt. The swaps contracts were posted Tuesday on the New York Fed's website. The central banks can borrow dollars against their own currencies for up to 88 days, and will pay interest of 100 basis points over the overnight U.S. dollar-indexed swap rate (OIS) to the Fed. The swaps arrangements were finalized with the European Central Bank, the Bank of England and the Swiss National Bank. The contracts with the Bank of Japan and the Bank of Canada are still being negotiated.

The Dow Jones Industrial Average fell 36 points, or 0.3%, to 10,748.26, after gaining nearly 90 points during the session. The S&P 500 index fell 3.9 points, or 0.3%, to 1,155.79, weighed down by a 0.8% drop in the energy sector. The Nasdaq Composite rose 0.6 points to 2,375.31.

The Senate unanimously approved one amendment that would expose the details of the Fed's emergency lending during the crisis, when it pumped hundreds of billions of dollars into financial markets to stabilize the banking sector and economies worldwide. The proposal would mark a first in putting the U.S. central bank under Congressional scrutiny, but is a much softer measure than had first been proposed.

Conservative leader David Cameron struck a deal with Britain’s No. 3 party to form the first coalition government since World War II, ending 13 years of Labour control.

“We have deep and pressing problems,” Cameron said following his arrival at the prime minister’s Downing Street residence 90 minutes after Gordon Brown’s departure tonight. “For those reasons, I aim to lead a proper and full coalition. That’s the right way to provide this country with the strong and stable, good and decent government this country needs.”

Cameron, 43, replaced Brown after five days of unprecedented talks following elections May 6 that failed to produce a majority for the first time since 1974. His coalition partner, Nick Clegg, head of the Liberal Democrats, became deputy premier.


The Latin America Economic Surprise Index is falling to -15.50 today, which is the lowest since Dec . 23, 2009.


Microsoft Corp. is rolling out a new edition of its Office programs to businesses Wednesday. And for the first time it's offering versions of Word and other programs that work in a Web browser, for free.

Office 2010 marks a milestone in Microsoft's efforts to keep up with an industry shift from programs that run on PCs to free, Web-based ones that can be accessed from any computer. And yet Microsoft must be careful not to undermine its lucrative desktop software business, which accounted for 29 percent of Microsoft's revenue and 51 percent of its operating income in the most recent quarter.
Consumers can start buying Office 2010 or using the free applications on the Web in June.

Monday, May 10, 2010

Trillion Dollar Bailout

5/10/10 Trillion Dollar Bailout

European finance ministers agreed late Sunday on a package of loan guarantees worth as much as 500 billion euros ($670 billion) designed to keep the Greek debt crisis from spreading to other vulnerable countries, Spanish Finance Minister Elena Salgado announced. The agreement came after a full day of closed-door meetings in Brussels. The finance ministers held a joint press conference shortly after the opening of Asian markets to discuss the program. The package was designed to ease market fears that Greece, Portugal or Spain will have to restructure their debt, a move that would have hit European banks particularly hard. The International Monetary Fund will also contribute to the plan.

EU's Rehn: 'We will defend euro whatever it takes'

Futures for the S&P 500 were up 52 points at 1,159 and were 50.7 points above fair value. Futures for the Nasdaq were rising by 83.3 points and were 84 points above fair value. Dow futures hovered up close to 400 points.

ZeroHedge: "Update: Germany now officially joins the fray: Euro zone central banks have started buying government bonds, Germany's Bundesbank said on Monday. "We confirm this," a Bundesbank spokesman said. From Reuters.
From Market News: "The Bank of France has begun buying eurozone government bonds, a spokeswoman confirmed Monday, without giving further details." Can't have those French banks face reality now can we. 65 years after France was saved from fascist rule, America has saved its financial system again from insolvency, and instituted something else. What that "something else" is, we are not quite sure yet, but gradually we are getting a sense. "

John Hussman: "The bottom line is that 1) aid from other European nations is the only thing that may prevent the markets from provoking an immediate default through an unwillingness to roll-over existing debt; 2) the aid to Greece is likely to turn out to be a non-recourse subsidy, throwing good money after bad and inducing higher inflationary pressures several years out than are already likely; 3) Greece appears unlikely to remain among euro-zone countries over the long-term; and 4) the backward induction of investors about these concerns may provoke weakened confidence about sovereign debt in the euro-area more generally....Looking at the current state of the world economy, the underlying reality remains little changed: there is more debt outstanding than is capable of being properly serviced. It's certainly possible to issue government debt in order to bail out one borrower or another (and prevent their bondholders from taking a loss). However, this means that for every dollar of bad debt that should have been wiped off the books, the world economy is left with two - the initial dollar of debt that has been bailed out and must continue to be serviced, and an additional dollar of government debt that was issued to execute the bailout. Notice also that the capital that is used to provide the bailout goes from the hands of savers into the hands of bondholders who made bad investments. We are not only allocating global savings to governments. We are further allocating global savings precisely to those who were the worst stewards of the world's capital."

"Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair Floor-wide operations at the Exchange by impeding the fair and orderly opening of securities."

China posted a $1.68B trade surplus in April, Xinhua News Agency reports.

The Oil Drum: "Crude oil demand will rise this year, unimpeded by a debt crisis in Greece that may spread to other European nations and slow growth, oil ministers from Saudi Arabia and Algeria said.

Organization of Petroleum Exporting Countries members should abide by oil-production levels approved in 2008 even as demand increases, Abdalla Salem El-Badri, the group’s secretary general, said yesterday.

“Oil demand is very good, it is going to increase this year,” Saudi Arabia’s Ali al-Naimi said to Bloomberg in Doha yesterday. Use of crude will rise in China, India and the Middle East, as those countries “are not affected by what’s happening in Greece,” Algeria’s Chakib Khelil said in an interview."


Goldman, in a quarterly regulatory filing, said it faces a number of probes and reviews, which could be damaging to Wall Street's most influential firm.

It said it anticipates additional shareholder actions and other investigations related to its offerings of collateralized debt obligations, which are at the heart of charges against the firm filed by the Securities and Exchange Commission.

Goldman shares have tumbled more than 20 percent since the SEC accused the bank on April 16.


Fannie Mae said it expects default rates and credit-related costs to remain heightened this year with housing still weak, saying there is "significant uncertainty as to our long-term financial sustainability."


A growing percentage of U.S. homeowners were saddled with "underwater mortgages" in the first quarter, accounting for almost one in four homes in a trend that poses a serious threat to the housing market's recovery, real estate website Zillow.com said on Monday.

U.S. home values also declined again in the first quarter, Zillow reported.

Homeowners with "underwater" mortgages -- where the amount owed on the mortgage exceeds the value of the home -- are more prone to defaults and foreclosures.

The percentage of American single-family homes with mortgages in negative equity rose to 23.3 percent in the first quarter from 21.4 percent in the fourth quarter, according to the Zillow Real Estate Market Reports.

U.S. home values in the first quarter were down 3.8 percent year-over-year and down 1 percent quarter-over-quarter, to $183,700, according to the Zillow Home Value Index. It was the 13th consecutive quarter of year-over-year declines.


Google's Android-based smartphones accounted for 28% of smartphone sales, while the iPhone accounted for 21%, according to market research firm NPD. Research In Motion outsold both of them, and had 36% of the sales.


Stephen Roach: "The crises are coming with greater frequency. Over the last 25 years we have had an average of one crisis every 3 years. The gap this time is 18 months. The scale is bigger. This is a much more serious problem in the eurozone than the Asian financial crisis."


McDonald's Corp. said Monday that its April same-store sales, or those from restaurants in operation at least 13 months, rose 4.9%. They rose 3.8% in the U.S., 5.3% in Europe and up 3.9% in Asia, Middle East and Africa. Shares of McDonald's, a member of the Dow Jones Industrial Average, rose 2.6% to $69.80 in pre-market trading.

Moody's: "We expect to conclude our review in the coming four weeks. The migration will most likely be substantial, probably within the Baa range; but an adjustment to below investment grade is also possible. This will depend on developments in the Greek economy once the fog of financial panic, support-mobilisation and street demonstrations dissipates. The country’s debt is large but not unbearable; however, the required adjustment is obviously very painful, and short-term economic prospects are clearly dismal – though not out of proportion with developments already seen in several European economies last year. Once we have concluded our review, we will publish a detailed explanation of our rationale for re-positioning the rating."

The Dow Jones Industrial Average rallied 404.71 points, or 3.9%, to end at 10,785.14, its biggest gain since March of 2009. The S&P 500 ROSE by 48.85 points, or 4.4%, to 1,159.73, also the biggest gain since March 2009. The tech-heavy Nasdaq Composite gained 109.03 points, or 4.8%, to 2,374.67, its first triple-digit gain since Oct. 2008.

The euro came further off session highs Monday after Moody's Investors Service said it will finish its review of Greece's sovereign debt in the next four weeks and that a downgrade to Baa is likely. It also held out the possiblity that a downgrade to junk may occur. The euro bought $1.2794, still up about 0.6% for the day but off earlier highs of $1.3094. "Investors seem to feel the optimistic feelings may be a bit premature," said Dan Cook, senior market analyst at IG Markets. The U.S. dollar index traded at 84.14, down 0.5%.

Sunday, May 09, 2010

Cardinal Climax

5/9/10 Cardinal Climax

Mike Burk: "The market is over sold so there is likely to be, at least, a short term bounce. However, there has been no sign of a bottom which would be indicated by a reduction of downside volume and new lows.

I expect the major averages to be higher on Friday May 14 than they were on Friday May 7."


Francis Bussiere: "The 30 month cycle is the 1/4 Harmonic of the well known Decennial cycle and has marked many important double tops and bottoms in the last decade as was discussed back in my letters of December 09 seen here, This cycle was suggesting a January and April 2010 double top like we saw 4 x 30 month cycles ago in 2000, but also 30 months ago in July and October 07, which was a mirror image of the July and October lows of 2002 exactly 2 x 30 months before. Since we saw both tops come on schedule with this cycle, it is best to assume the drop on May 6th was significant and probably marks the high of the year as it also fits in with the Price and Time Geometry of the April 2000 top, the 9/11 Panic Low, the August 2004 low and the March 2009 low forming a neat Butterfly pattern and the indicators are in a position for a decline to occur."


Arch Crawford: "In April 1986 we had a Lunar Eclipse conjunct Pluto. The close proximity with Pluto is rare. So we told subscribers, "If you don't feel this one, you're not alive!" We were prophetic, as the April 26th Chernobyl accident raised radiation levels worldwide.
By the way, we have another Lunar Eclipse conjunct with Plato on June 26. Pluto “rules” nuclear power, debt, interest rates, and the use of force, say the astrologers. Maybe June 26 is the de facto start of the Cardinal Climax... In November 1989, we observed a Saturn conjunct with Neptune, both opposite Jupiter to the day. This alignment happens every hundreds of years; i.e., it is extremely rare. Several days later the Berlin Wall fell....On August 1, give or take a week, we’ll have the most five-planet alignments in perhaps thousands of years. Known as the “Cardinal Climax,” this is the meanest, nastiest, most challenging and most transformational of any planetary phenomena in all of written history!...The United States will come apart in this Depression!"

May 27, 2010 – Uranus enters Aries for the first time since 1935; Uranus was last in Aries from 1927 to 1935.

June 5, 2010 – Jupiter enters Aries for the first time since 2000; Jupiter was last in Aries from early 1999 to early 2000.

Meanwhile, the U.S. Dollar Index has rallied over 14% since its short-term lows in November, and it is up 3.5% this week alone. "As a result of this recent spike, the Dollar index is not just trading at overbought levels, it's at extremely overbought levels," said Bespoke.

From Michael Gray of the NY Post. Hat trick to ZeroHedge.
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.