Saturday, May 29, 2010


5/29/10 Fragility

Bloomberg: Some 17% of junk bonds yield at least 10 percentage points more than Treasuries, up from 9.2% last month…The jump is the biggest since the distress ratio rose 11 percentage points in November 2008.

Doug Noland: "Fundamentally, this Bubble’s main price distortions emanate from the market perception that synchronized global fiscal and monetary policies will sustain global financial and economic recoveries. This creates a dynamic where massive issuance of sovereign debt is generally priced in the marketplace with meager little risk premiums. Similarly, the perception that markets and economies are underpinned by government policies ensures that debt instruments throughout – certainly including U.S. corporates, municipal debt, agencies, and mortgages – trade at narrow risk spreads to sovereigns. It’s the ultimate “too big to fail.”....This dramatic loosening of financial conditions inflated global securities prices. Huge rallies in the risk markets played a significant role in bolstering confidence. This combination of loose finance and improved confidence was instrumental in fostering economic recovery. The bounce back in economic activity then supported the bubbling markets and emboldened the speculators. That’s where we’ve been.
Over the past month, markets have gone from close to euphoria to near panic. The global financial Bubble ran smack up against an expanding Greek debt crisis, a tightening of Chinese mortgage Credit, and a tightening regulatory noose around the U.S. financial sector and speculative finance more generally. Complacent, highly speculative and over-liquefied securities markets were bludgeoned by losses, contagion effects, de-leveraging, and general mayhem.....Well, I believe finance has tightened and this tightening will not prove fleeting. The global Bubble has been pierced, a result of Greece – although the catalyst could have as easily been developments in the U.S. or China. But since crisis erupted initially in the Eurozone, the dollar/Treasuries have benefited thus far from de-leveraging and some safehaven perceptions. Many are programmed to interpret this as good news for U.S. recovery, although the important news is that market perceptions have changed; markets have become hyper-volatile; and the backdrop is so uncertain that speculators and investors will choose - or be forced to - rein in risk-taking.
The waves of liquidity unleashed through speculator leveraging and the flight out of safehaven assets has run its course. As we’ve seen over the past few weeks, markets can go from seemingly over-liquefied to illiquid the moment speculators reverse course and head for the exits. The markets have been reminded of this harsh reality and behavior will change. Others would argue that there is no crisis in the U.S. Credit system and, with Treasury yields so low, financial conditions have actually loosened. I would counter that it’s a global financial Bubble and destabilizing contagion effects were unleashed with the big rally in Treasuries....And it’s rising risk aversion that will pressure financial conditions and fuel liquidity concerns. The markets have passed an important inflection point, and faltering markets are certainly not good for fragile confidence."

Life is good. Coney Island's new amusement park is open. On June 11 the movie of Atlas Shrugged goes into production.

WSJ: "Six banks in Washington have failed this year, while about one-fourth of the banks and savings institutions based in the state are operating under toughened regulatory scrutiny."

Seeking Alpha: "insiders' share sales of QQQQ components have outpaced share purchases 3,933 to 1."

Mike Santoli: "BP TAKES THE CONCEPT OF A "DEEP VALUE" investment into a new dimension, as the energy company's shares continue to get pounded to valuation depths rarely seen. The selling comes amid the catastrophic oil-well spill a mile under the Gulf of Mexico.

With BP shares (ticker: BP) at 42.95, down another 5% Friday and off from 60 before the well exploded, the market has relieved the stock of nearly $60 billion in market value.

David Steinberg of DLS Capital, an Illinois-based deep-value manager, says this has generated good value in the stock, even under conservative assumptions of future costs and penalties. Analysts have been cutting BP cash-flow estimates for 2011. The lowest forecast is now $40 billion. This places the company's ratio of enterprise value (market value plus net debt) to cash flow around 4. Its 10-year average multiple is above 6.5.

Viewed another way, BP's enterprise value Friday equaled $8.77 per barrel of oil-equivalent reserves, versus a five-year average of $12.25. Trading back up to that average over the next couple of years would mean a $13 rise in the share price, he notes, atop a dividend yield that now stands above 7% and appears secure."

There’s nothing wrong with throwing a little money at a problem to make it go away. There’s equally nothing wrong with throwing a little borrowed money at a problem to make it disappear, as long as you have the means to pay that borrowed money back. But what happens if you throw a lot of borrowed money at a problem, and the problem doesn’t go away? If you’ve ever experienced a situation like that you can probably understand how Europe feels right now. It just unleashed a magnificent $1 trillion euro bailout and the market responded with a selloff by the end of the week! So what happened? That money was supposed to make the problem go away, after all. And it was a lot of money. Why did the market respond to it with such disdain? We believe the market’s reaction is confirming what we have long suspected: that these bailouts provide next to no long-term value. They don’t produce real jobs. They don’t improve productivity. They just prolong the precarious leverage game played by the financial sector, and do so at tremendous cost to taxpayers. "Bailout and Stimulate" has been the rallying call for governments and central banks since the beginning of this financial crisis – and it has certainly had its impact over the last two years, but not the type of impact we need to propel real, sustainable growth. - Eric Sprott

Wal-Mart is counting on $1 ketchup bottles and sub-$4 cases of Coke to get its low-price mojo back.

The sharp cuts came ahead of Memorial Day weekend. They have already pushed rivals such as Target into price wars. And the markdowns are expected to keep coming throughout the summer.

They're one of the boldest moves the world's largest retailer is making to turn around sluggish business and win back shoppers from rivals. The cuts target 22 foods and other essentials at an average savings of 30 percent -- splashy enough to get attention and perhaps change perceptions.

The world's largest retailer is also restoring items like certain soups and laundry detergent it stopped carrying when it tried to declutter its stores.

Tim W. Wood: "Yes, I think that the advance out of the March 2009 low has been crippled and obviously the events seen in May were not good. Nonetheless, I do not see any evidence in accordance with Dow theory that the bullish primary trend change, associated with the counter-trend bear market advance, has been reversed at this time.

In accordance with Dow theory it is the close that counts, not the intraday high or low. Also in accordance with Dow theory, the primary trend is considered to be in force until it is reversed by a joint move of the averages with a move above or below the previous secondary high or low point. In the case of an advance, a move below the previous secondary low point is required. I have received numerous e-mails asking me if the recent violation of the May 7th closing low constituted a bearish primary trend change. In my eyes, the answer is no. I believe that the move down into the May 7th closing low was part of the same move that carried the market to the most recent lows. In other words, I do not believe that the May 7th closing lows were of the proper degree to have marked a secondary low point....The Phase II decline is out there and it will be global in nature."

ZeroHedge: "BP Suspends "Top Kill" For Second Time After Trying Two Junk Shots. Less Than 10% of Injection Fluids are Staying Inside the Leaking Pipes."

Friday, May 28, 2010

The Consumer

5/28/10 The Consumer

Consumer spending in the U.S. unexpectedly stalled in April as Americans used growing wages to rebuild savings.

The pause in purchases compared with a 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News and followed a 0.6 percent gain in March, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent for a second month, and the savings rate rose for the first time in four months.
With incomes running faster than spending, the personal savings rate rose to 3.6% of disposable income from 3.1% in March. It was the highest savings rate since January. Inflation was tame. Core inflation rose 1.2% in the past year, the slowest rate since last September. The US personal savings rate increased from a revised 2.8% to 3.2% in April.

The euro is falling in May for the sixth straight month versus the dollar, its longest string of monthly losses since spring 2000. The shared currency was first introduced in 1999.

ZeroHedge: "The power games among the ranks of Europe's puppet elite continue (the real elite as is well known consists of a few CEOs of insolvent banks). Earlier today, Pierre Lellouche, France's Europe minister, came out with another statement our of left field, that could set off the next round of European destabilization. In an interview with the FT, Lellouche said that the €440 billion European bailout "is an enormous change. It explains some of the reticence. It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty.” As the bailout is already being pursued by various German scholars on grounds it is forbidden by the EU constitution, this statement will not be taken lightly by Germany which has had to lose major internal political credibility to enforce a bail out that it itself is not enamored with. Sure enough, the FT notes: "Mr Lellouche’s comments are likely to go down badly in Germany, where the government has insisted the debt guarantee scheme to help beleaguered eurozone members is a temporary mechanism, set up on an intergovernmental basis where Berlin retains a veto, and in no way implies a breach of the EU’s treaties."Furthermore , as was noted previously, a finding that the bailout is not constitutional would render the entire support mechanism moot, resulting in the imminent bankruptcy of Greece. Is this yet another concerted subversive effort on behalf of the European labor interests to expel the underperforming PIIGS and sink the euro? "

Royal Dutch Shell said it would pay $4.7 billion cash to buy privately held East Resources Inc, giving it substantially more exposure to crucial shale gas plays in North America.

But analysts cautioned the deal would put pressure on Shell's balance sheet at a time the company is already planning substantial spending.

The deal will increase Shell's daily gas production in North America by about 7.5 percent and give it access to a swathe of the Marcellus Shale, the northeastern U.S. rock formation that is one of the crucial sources of future U.S. gas production.

Companies sold the least amount of bonds in a decade this month as concern Europe’s sovereign debt crisis will slow the global economy drove up relative borrowing costs by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse.

Borrowers issued $66.1 billion of debt in currencies from dollars to yen, a third of April’s tally and the least since December 2000, according to data compiled by Bloomberg. At least 14 companies withdrew offerings, including New York-based retailer Jones Apparel Group Inc. and theater chain operator Regal Entertainment Group.

BP said Friday its price tag for the worst oil spill in U.S. history climbed close to $1 billion as the firm continues its effort to plug the blown out well that's been gushing at least 12,000 barrels a day for five weeks.

BP said it has spent $930 million on the project since the well blew out in late April.

George Ure: "Several years back, a cycle watcher named Steve Puetz attempted to see if eclipses and market crashes were somehow related. He studied eight of the greatest crashes in financial history, from the Holland Tulip Mania of 1637 to the Nikkei of 1990. He found that market crashes tend to occur near full moons, and that the greatest number of crashes start after the first full moon after a solar eclipse, when that full moon is also a lunar eclipse. Puetz found that all eight crashes occurred six days before to three days after a full moon that occurred within six weeks of a solar eclipse. The odds of that being a coincidence, Puetz calculated, are less than 1 in 127,000." The NASA Eclipse web site says we have a total solar eclipse coming up on July 11th. And that means the next full moon after July 11th will come July 26th.

Arch Crawford: "Well, when something is worse than the Revolutionary War, World War I, the Great Depression, and World War II, that's bad - it's the worst I've seen the charts in over 200-years. "

As he explains it, says George Ure, there's Mars conjunction Saturn which will be in opposition to Jupiter conjucting Uranus all squaring Pluto.

Lipper FMI reports that investors pulled $5.3 billion from equity mutual fund during the past week, the largest outflow since March 2009. Including ETFs, the outflow was a massive $16.7 billion, the largest since 2002.

The Chicago purchasing managers index fell to 59.7% from 63.8% in April.

The UMich index rose to 73.6 in late May from 72.2 in April. An earlier estimate for May was 73.3. Economists surveyed by MarketWatch had expected a final May reading of 73.4. The long-term average is about 87.

Mexico to ban junk foods from schools.

Paulson & Co., Centerbridge Partners LP and Blackstone Group LP won a bankruptcy auction for hotel chain Extended Stay Inc. with a $3.9 billion bid, a person familiar with the matter said.

Fitch Ratings on Friday downgraded Spain's debt to AA+ from AAA, citing concerns about the country's level of debt relative to its gross domestic product.

The Treasury Department and the Federal Reserve are willing to let bailed-out insurer American International Group Inc. reduce the price it would accept in the sale of its Asian insurance unit, AIA Group Ltd., Bloomberg reported Friday. U.K. life insurer Prudential said Friday it is renegotiating its $35.5 billion deal with AIG to acquire the business.

"North Korean Major General Pak Rim Su refuted the results of the international investigation into the sinking of a South Korean warship and said "any accidental clash that may break out in the waters of the West Sea of Korea or in areas along the Demilitarized Zone will lead to all out war," at a press conference today, according a KCNA statement."

Sun West Bank in Las Vegas, Nev. was shut down late Friday, according to the Federal Deposit Insurance Corp., pushing up the total of U.S. bank closures in 2010 to 78. City National Bank, a subsidiary of City National Corp., will assume all of Sun West's deposits. Granite Community Bank N.A. in Granite Bay, Calif., was closed on Friday, according to the Federal Deposit Insurance Corp., bringing the number of U.S. bank closures in 2010 to 77. Three affiliated banks in Florida were closed Friday, according to the Federal Deposit Insurance Corp., raising the tally of bank failures in 2010 to 76. The Bank of Florida - Southeast in Fort Lauderdale; the Bank of Florida - Southwest in Naples; and the Bank of Florida - Tampa Bay in Tampa were shut down.

On Friday, the Dow Jones Industrial Average fell 122.36 points, or 1.2%, to 10,136.63. The broad S&P 500 index fell 13.65, or 1.2%, to 1,089.41, while the Nasdaq Composite fell 20.64 points, or 0.9%, to 2,257.04. For the week, the Dow fell 0.6% but the broad market index rose 0.2% and the Nasdaq gained 1.3%. For the month of May, however, the Dow fell 7.9% and the S&P fell 8.2%, both having their worst monthly performance in 15 months. The Nasdaq fell 8.3% in May, its worst month since Nov. 2008.

Thursday, May 27, 2010


5/27/10 China

China is reviewing its eurozone debt holdings in the wake of Europe's financial problems, the Financial Times reported in its online edition Wednesday. China's State Administration of Foreign Exchange, which manages the reserves, has expressed concern about its exposure to the five eurozone markets of Greece, Ireland, Italy, Portugal and Spain, the newspaper said. State Administration of Foreign Exchange holds an estimated $630 billion of eurozone bonds in its reserves, according to the FT.

Daniel Gross: "About 23 percent of U.S. exports go to Europe (see Page 19) and about 19 percent go to members of the European Union. The crisis in Europe is bad for American companies that ship their output across the Atlantic and whose goods have to compete with suddenly cheaper European goods."

In its first forecast for the storm season that begins next Tuesday, the National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with 8 to 14 developing into hurricanes, nearly matching 2005's record of 15.

The Dow yesterday was at the lowest close of the year, with the only times the Dow has closed under 10k being in a three day brief period between February 5 and 7th.

BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.

A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.

Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.

Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.

Costco Wholesale Corp.,reported that fiscal third-quarter net income rose 46% on 12% higher net sales and 10% higher same-store sales. For the quarter ended May 9, net income reached $306 million, or 68 cents a share, from $210 million, or 48 cents, in the year-earlier quarter. Net sales rose to $17.39 billion from $15.48 billion. Total revenue, which includes membership fees, rose 12% to $17.78 billion from $15.81 billion. The earnings reflect a gain in the latest quarter of $14 million before taxes from a partial reversal of the Canadian tax liability; and a year-ago pretax charge of $34 million from a litigation settlement. A survey of analysts by FactSet Research produced consensus estimates of 66 cents of profit on $17.54 billion of sales. Same-store sales for the latest quarter reflected rises of 6% in the U.S. and 26% internationally. Excluding higher gasoline prices and stronger currencies in Canada, the U.K. and South Korea, same-store sales rose 4%, reflecting increases of 3% in the U.S. and 8% overseas.

The U.S. economy grew at a 3.0% pace in the first quarter - lower than the 3.2% previously reported - owing mainly to smaller increases in consumer spending and investment in business software, the government said Thursday. Economists surveyed by MarketWatch expected first-quarter growth to be revised up to 3.5%.

Dan Fuss, whose Loomis Sayles Bond Fund beat 95 percent of competitors the past year, said he sold all of his Treasury holdings because of prospects interest rates will rise as the U.S. borrows unprecedented amounts.

“The fundamentals are awful,” Fuss said in a telephone interview yesterday from Boston. “The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury. Do you really want to buy the debt of the biggest issuer?”

The number of people applying for unemployment benefits fell 14,000 to a seasonally adjusted 460,000 in the week ended May 22, the Labor Department reported Thursday. Economists surveyed by MarketWatch had expected a result of 458,000. The four-week average of initial claims -- a better gauge of employment trends than the volatile week-to-week number -- rose 2,250 to stand at 456,500. For the week ended May 15, continuing claims fell 49,000 to 4.61 million. The four-week average of these ongoing claims also declined, off 11,500 to 4.64 million, the lowest level since January 2009. In the week ended May 8, about 5.34 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, down about 2,700 from the prior week. Altogether, 9.87 million people were collecting some type of unemployment benefits in the week ended May 8, down about 78,000 from the prior week.

The percentage of corporate bonds considered in distress surged this week to the highest since 2009 as investors dumped debt of the neediest borrowers on concern Europe’s fiscal crisis will make it harder for them to refinance.

More than 17 percent of junk bonds yield at least 10 percentage points over Treasuries, up from 9.2 percent last month, Bank of America Merrill Lynch’s Global High-Yield Index shows. The jump is the biggest since the distress ratio rose 11 percentage points in November 2008, two months after Lehman Brothers Holdings Inc. collapsed. Bonds of MGM Mirage and Freescale Semiconductor Inc. joined the list this month.

U.S. distressed bonds have lost 10 percent in May, according to the indexes, as credit markets seize up amid speculation Greece and other nations in Europe with rising budget deficits won’t be able to meet their debt payments. Junk bond sales plunged this month to the lowest level since March 2009, data compiled by Bloomberg show.

May 27 (Bloomberg) -- Greece’s struggle to fix its budget crisis may signal to other governments that it’s easier to default than cut spending, creating “massive” risk for bondholders, said Citigroup Inc. credit strategist Matt King.

“You can’t put Greece in a vacuum,” King said at a high- yield financing conference in Paris organized by IIR Ltd. Other governments may “decide the pain in reducing fiscal spending is just not worth it, especially when a lot of these bonds are held by foreigners,” he said.

Barry Ritholtz: "The WSJ notes that several of the biggest banks (Bank of America, Deutsche Bank and Citigroup) are lowering their net borrowings in the “repo” market by 41% at the ends of each quarter tomake their balance sheet look better for Q reports."

BP began a top kill procedure Wednesday afternoon, pumping 50000 pounds of thick, viscous fluid twice the density of water into the pipe that is leaking in its latest attempt to stop the flow of oil.

A statement on the website for China State Administration of Foreign Exchange Thursday said reports that may sell some of its holdings in eurobonds were "groundless." Those reports triggered late selling for U.S. stocks Wednesday as the euro dipped below a key threshold. The denial helped pushed Europe stocks and the euro higher.
SAFE also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties. It also said it views the euro zone as "one of the most important investment markets" and a key component in its strategy to hold diversified investments for the long term. The statement appears to counter a Financial Times report Wednesday that said the agency was discussing plans to diversify some of its estimated $630 billion in euro-bonds that it holds as part of $2.4 trillion forex stockpile.

Transocean supervisors that were aboard the Deepwater Horizion rig told government officials Wednesday about a disagreement with BP officials hours before the blast on Aprl 20 that killed 11 and resulted in the current oil leak in the Gulf of Mexico. In a joint hearing held by the U.S. Coast Guard and the Minerals Management Service in Louisiana, Douglas Brown, Transocean's chief mechanic on the rig, said that key representatives from both companies had a heated argument in an 11 a.m. meeting on that day, according to a report by The Wall Street Journal. Brown said Transocean's crew leaders objected to a decision by BP on how to start removing heavy drilling fluid and replace it with lighter sea water from a riser pipe connected to the well head. BP declined to comment on the testimony.

Wal-Mart's Asda Group has agreed to acquire the U.K. stores of discount-supermarket group Netto FoodStores for $1.12 billion.

George Ure: "

I just love John Crudele's ongoing exposure in the NY Post ("Two more Census workers blow the whistle") on how Census workers got fires and rehired to make it look like more hiring has been going on that is really the case."

By Jason Simpkins, Managing Editor, Money Morning
The euro's recent struggles have done more than bring the currency's viability into question. They've put the European Central Bank (ECB) on a collision course with a liquidity crisis.
The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.

Monsanto Co., the world’s largest seed company, cut its profit forecast after deciding to reduce the price of its Roundup herbicide because of an oversupplied market.

Profit in the fiscal year through August will be $2.40 to $2.60 a share, excluding some items, from $3.10 to $3.30 previously, St. Louis-based Monsanto said today in a statement.

The Oil Drum: "I am putting up these two pictures to show why I believe that the injection pressure of mud into the well has dropped, indicating that BP have filled the well, and are now holding pressure to see if there are any problems. I would assume, if none develop, that they will inject cement to seal the top of the well, sometime today."

Gary Dorsch: "Thus, the focus of the second phase of the European debt crisis has shifted from the specter of a sovereign bond default to a frightful situation where European banks may become unwilling to lend money to the private sector, or could demand higher interest rates or impose tougher collateral rules. In other words, the markets fear a “double-dip” liquidity crunch, which could deprive European companies with junk bond ratings of badly needed funds as banks become more risk averse.

Since May 10th credit default swaps for the Euro-zone’s top 50 junk rated bonds has surged to as high as €625,000 to insure €10 million of debt. That’s up sharply from €460,000 since the $1 trillion bank rescue plan was announced. In fact, the European corporate bond market has been effectively shut down for banks with bond issuance slumping to $2.6 billion in May, down from $82 billion in January....

The European Central Bank (ECB) has crossed the Rubicon agreeing to monetize hundreds of billions of Euros held in Greek, Portuguese, and Spanish bonds. In the process the supply of Euros in world money markets is likely to increase. The ECB’s efforts at sterilizing the bond purchases are voluntary and have been feeble at best. Furthermore, at the end of the day, there is little chance that Greece’s 2.5 million working citizens can repay 300 billion Euros of debt, while at the same time absorbing 25% wage cuts in the public sector and paying 23% VAT taxes.

At some point Greece’s government would seek to untangle the noose strangling its economy and demand a restructuring the country’s debts, and in a polite way tell its lenders to take a big haircut. Argentina is holding a $20 billion debt swap this month at 45 cents on the dollar, nine years after defaulting on $95 billion of loans. The Euro would remain a very unstable and weak currency. Reports that Beijing is becoming increasingly nervous about its Euro zone bond holdings drove the Euro to as low as $1.2180 and fueled a flight for safety into gold."

Barron's: latest weekly M2 money supply is registering at $8,529 billion, whereas last week it was $8,504 billion, and $8,315 billion at this time last year.

The Senate passed the Restoring American Financial Stability Act last week, approving a new program that would reduce mortgage payments for the unemployed.
The program would provide $3bn from the Troubled Asset Relief Program (TARP) to lend up to $50,000 to unemployed homeowners, who could reasonably resume making payments again within two years. The program was modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.

Kuwait's sovereign wealth fund, the Kuwait Investment Authority, on Thursday denied a report in a Kuwait newspaper that it planned to reduce its exposure to investments in the euro zone, Reuters reported. "KIA denies local newspaper reports that there is a consideration by (KIA) to reduce its investments and presence in European countries ... as a reaction to crises that some European countries are facing," KIA said in a statement. The Al-Anba newspaper earlier Thursday said the fund planned to reduce euro-zone investments due to worries about Portugal and Spain.

Coast Guard Admiral Thad Allen said Thursday that BP's effort to plug its leaking oil well through its "top kill" procedure appears to be working, according to a report by The Los Angeles Times. The oil continues to flow, but at lower pressure. BP Plc spokesman Mark Salt declined to confirm the report, but said the operations continue. Allen also said the government is preparing to release an esimate of the amount of oil that has been leaking from the well. Official estimates have been at 5,000 barrels a day, but others have said the leak is worse.

Dubai International Capital and a committee of banks asked lenders on Thursday for a three-month extension to Sept. 30 of certain maturities, though the size of the debt in question was not specified.

In trading on Globex this morning, July crude oil prices were up 1.76 to $73.27.

" Post date: 05/27/2010 - 07:00
There is a massive structural imbalance in residential real estate that will take at least a decade or more to unwind. 26 million homes for sale and 70 million missing buyers do not add up to a bull market. 80 million retiring baby boomers are putting huge generational pressure on the market. Losing a city the size of San Francisco in demand every year. A replay of 1929 to 1955 when prices remained flat?"

ZeroHedge: "The WSJ reports that, as broadly expected, Lehman is not alone in its illegal Repo 105 window-dressing scam: it turns out that Citigroup and Bank Of America also routinely used such shady practices for years. As Michael Rapoport reports, "Citigroup said the misclassified transactions-of $5.7 billion as of the end of 2009, and as much as $9.2 billion over the past three years-involved "a very limited number of our business units" that "used this type of transaction in very small amounts." So its all good - fraud may have been performed but it was just nickel and diming: after all it's not like Citigroup was robbing cemeteries or anything (and since guilt was neither admitted nor denied in that specific case, one can say Citi was never sleeping because it was robbing graveyards but only due to honest mistake). Sure enough, this disclosure come only after the SEC demanded clarification on Repo-105 comparable transactions at all major firms. And with such daily distractions as ten trillions point swings in the market, and crude oil filling up the world ocean, who really cares anymore that all US banks commit fraud on a daily basis. The punchline: "Bank of America and Citigroup say their misclassifications were due to errors--not an attempt to make themselves look less risky." Well, that surely justifies everything."

China to have surplus diesel and gasoline next year, according to PetroChina.

EIA Natural Gas Storage Change Forecast

For Week Ending 5/21/2010

Surveys and Analysts Forecasts

Stor. Change






BNP Paribas




Dow Jones Average












EIA: storage + 104. Working gas in storage was 2,269 Bcf as of Friday, May 21, 2010, according to EIA estimates. This represents a net increase of 104 Bcf from the previous week. Stocks were 71 Bcf higher than last year at this time and 318 Bcf above the 5-year average of 1,951 Bcf. In the East Region, stocks were 117 Bcf above the 5-year average following net injections of 55 Bcf. Stocks in the Producing Region were 115 Bcf above the 5-year average of 730 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 86 Bcf above the 5-year average after a net addition of 18 Bcf. At 2,269 Bcf, total working gas is above the 5-year historical range.

Property developers are estimated to owe the Spanish banking industry 300 billion euros ($369 billion) following a decade-long, debt-fuelled property boom. Many banks now have huge property portfolios and analysts have been looking at what would happen if things got worse.

Simon Goodfellow, the head of European equity strategy research at ING Wholesale Banking, has been drawing comparisons with the Japanese housing bubble between 1981 and 1991.

“The boom in Japanese house prices from 1981 to 1991 saw prices rise by 225 percent," Goodfellow said. "In Spain between 1998 and 2008 Spanish house prices rose by 178 percent.”

So far, Spanish house prices have only fallen by 10 percent, according to Goodfellow.

The Dow Jones industrials surged 285 points, or 2.9%, to 10,259. It was the blue chips' second-best one-day gain of the year. The Standard & Poor's 500 Index was up 35 points, or 3.3%, to 1,103. And the Nasdaq Composite Index soared 82 points, or 3.7%, to 2,278 -- and ended the day back in the black for the year.

A 7.2-magnitude earthquake struck Vanuatu in the South Pacific on Friday at 4:14 a.m. local time, the U.S. Geological Survey said. The epicenter was about 300 miles from Port Vila, Vanuatu's capital, and 1,290 miles from Brisbane, Australia. So far, NOAA's West Coast and Alaska Tsunami Warning Center does not expect a tsunami along the West Coast of the United States.

Wednesday, May 26, 2010


5/26/10 BP

"It's almost worth the Great Depression to learn how little our big men know."
Will Rogers

Orders for U.S.-made durable goods rose 2.9% in April on stronger demand for airplanes and communications equipment, the Commerce Department reported Wednesday. Excluding the 16.1% increase in transportation goods, orders fell 1.0%. The increase exceeded the expected 2.5% rise forecast by economists surveyed by MarketWatch. Total orders have risen in four of the past five months. March orders were revised to show almost no change from the prior estimate of a 0.6% decline. Shipments rose 1.4% in April, and were up 1.8% excluding transportation goods. Inventories rose 0.7%. Nondefense capital goods, excluding aircraft, often called core durable-goods orders, fell 2.4% in April after a 6.5% gain in March. On an ex-Defense basis, Durables rose by +3.4%; and on an ex-Transportation basis Durable Goods FELL by 1.0%.

BP said Wednesday that it has begun a series of diagnostic tests to determine whether the "top kill" procedure to plug the oil leak in the Gulf of Mexico can be successfully executed. The company said the top kill procedure could take two days and it cannot be predicted how long it will take to know if the operation has been a success. The company said it will continue to provide a live video feed from the seabed throughout the process.

BP Plc told congressional investigators on Tuesday that pressure tests on a drill pipe showed a fundamental mistake hours before the deadly explosion that caused the Gulf of Mexico oil leak, a memo released by two congressmen showed.

McDonald’s Corp. is raising 250 million Swiss francs ($217 million) from its first sale in the currency in almost three years as investors seek so-called safe- haven alternatives to weakened euro-denominated assets.

The world’s largest restaurant company is offering a yield of about 50 basis points more than the benchmark swap rate on the six-year notes, according to a banker with knowledge of the sale. The sale lifts this week’s corporate issuance in the Swiss currency to 450 million francs, the most since August 2009, according to data compiled by Bloomberg.

Randall Forsyth: "So far, the problems of illiquidity in the money markets are "contained," to borrow a phrase that described the status of subprime mortgages in 2007 and 2008. If so, Libor ought to come back down closer to the Fed funds range. Conversely, a continued upward creep in Libor would indicate the fundamental problems remain."

Spanish top bank BBVA is said to have be unable to renew a $1 billion commercial paper line, according to the WSJ.

ZeroHedge: "Yesterday we reported a rumor that the Fed and the ECB were set to announce "new liquidity measures." Today, the WSJ's Jon Hilsenrath reports that this development would likely materialize in the form of a lowering of the rate at which the Fed offers Euro-Dollar swaps, currently priced at 100 bps over OIS. This has not gone unnoticed by the market: even with 3M Libor flat from yesterday, the front month Eurodollar has surged from yesterday, on this most recent confirmation that the central banks will drown the world in free liquidity before another session of liquidations has to take place."

U.S. new-home sales rose 14.8% in April to their highest level since May 2008, the Commerce Department estimated Wednesday. The increase in new-home sales to a seasonally adjusted annual rate of 504,000 was well above the 425,000 pace expected by economists surveyed by MarketWatch. New-home sales in March were revised to a 439,000 level compared with the previous estimate of 411,000. New-home sales are up 47.8% compared with a year ago. The months' supply of homes on the market fell to 5.0 months in April from 6.2 months in March. Median sales prices have fallen 9.5% in the past year to $198,400.

Tillerson reiterated Exxon's view that oil will continue to provide the majority of the world's energy needs by 2030. Natural gas will outstrip the use of coal by that time, he said.

Anadarko Petroleum Corp. says insurance will cover more than $160 million of costs related to the Gulf of Mexico rig disaster.

The company owns a 25 percent non-operating interest in the field where a rig leased by a unit of BP PLC exploded and sank two weeks ago. Oil continues leaking from the well and the resulting spill is threading wildlife and businesses along the Gulf coastline.

In an SEC filing Anadarko says net insurance coverage will likely total about $177.5 million, less deductibles of $15 million.

"This insurance is designed to cover costs associated with stopping the hydrocarbon release, drilling relief wells and other associated costs," Chairman and CEO Jim Hackett told analysts.

Paul Farrell: "Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls. Dow sinking below 6,470...The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ... This is no buying opportunity, this game's in the refrigerator, call it."

The United States and China have very unique cultures and histories. "But we know," said Secretary Clinton, "that our future, both our challenges and our opportunities, will be shared. We have traveled different paths, but that shared future is our common destination and responsibility."

The Oil Drum: "This is the day when the top kill of the leaking BP well in the Gulf of Mexico will likely be attempted. Kent Wells, Senior Executive VP for Exploration and Production, has given a technical brief on what is likely to happen. Having tried a number of other ways of describing the underlying idea, a more mundane example came to mind. If you have roots growing into the drain that runs out of your house, and you turn the tap on in a bathroom, the water will still be able to get down past the roots, and there is no problem. However if you flush a toilet or equivalent higher flow, this can’t easily get past the roots, and thus the water backs up and flows back out into your basement.

Essentially that is what is being tried. The well has a certain ability to get oil through the Blowout Preventer (BOP) at a given (though debated) flow rate. If the volume is increased, by pumping mud into the well below the BOP, then the well will “back up” and the oil will flow back down the well. As it does more mud enters the well. This is dense enough that, as the column grows longer it pushes down on the oil, and applies enough pressure, due to this weight, to overcome the pressure in the rock. Without that positive difference, there is nothing to drive the oil out, and thus the well is “killed.”

U.S. banks are sitting on $185 Billion in loans that are either 90+ Days Past Due or on Nonaccrual.

The three-month U.S. dollar London interbank offered rate, or Libor, extended its climb to another 10-month high on Wednesday, but the pace of its rise slowed as market tensions surrounding North Korea and South Korea and euro-zone debt woes appeared to ease. Libor was fixed at 0.5378%, the British Bankers' Association said, up from 0.5363% on Tuesday.

ZeroHedge: "The EURJPY is preparing to take out 110 support."

The Dow finished down 69 points to 9,974. The Nasdaq Composite Index was down 15 points to 2,196, and the Standard & Poor's 500 was off 6 points to 1,071.

Tuesday, May 25, 2010

$13 Trillion in Debt

5/25/10 $13 Trillion in Debt

“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.
“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites
improved, the most recent monthly data are not as encouraging. It is especially disappointing that the
improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax
incentive ended on April 30th, we don’t expect to see a boost in relative demand.”

There are signs of “renewed weakness” in U.S. housing markets, accordig to Standard & Poor’s, which just released the March data for home prices, showing that 13 of the 20 main metro areas showed a decline in home prices from February.

The one-year rise in prices in the 20-city composite of 2.35% was below economists’ projections for a 2.9% rise, according to Thomson Reuters.

The national index’s decline accelerated from Q4 to Q1, with a drop of 3.2%, bigger than Q4’s 1% decline, though the national index still rose 2% compared to last year’s Q1.

All this has widened the drop in Dow Industrials futures, currently down 217 points at 9,826.

ZeroHedge: "Total US debt per today's Daily Treasury Statement was $12,989,095 million. Also today, the US Treasury auctioned off $42 billion in coupon debt. This means that as of this moment, assuming the new debt were to settle today, the US has $13,031,095 billion in debt: congratulation America - you have now passed lucky $13 trillion in total debt. But don't worry, we won't stay here for long. At the current rate of issuance, $14 trillion will be passed in 8 months, and $15 trillion in another 7. By the end of 2011, we estimate total US sovereign debt to be about $15.5 trillion. For some recent vivid examples of prosperity courtesy of runaway debt issuance, please see Argentina, Japan and Greece."

Japan's Nikkei average fell 2 percent to its lowest in more than five months on Tuesday, as the euro fell further on worries that Europe's woes now included the health of some banks in addition to sovereign debt problems. The Nikkei finished down 3%.

The spread between Libor and overnight index swaps have also widened, a move that's viewed as a sign of banks growing more reluctant to lend to each other. European banks are being forced to pay more for short-term dollar borrowings than banks in the U.S. and Asia—suggesting that lenders world-wide are increasingly nervous about the risks ahead for European banks.

For 2011, Medtronic expects earnings of $3.45 a share to $3.55 a share, which includes approximately 5 cents a share of dilution from the acquisition of Invatec and the pending ATS Medical acquisition. Analysts expected 2011 earnings of $3.52 a share.

- North Korean leader Kim Jong Il told the military to be combat-ready in a message that coincided with South Korea’s announcement that it blamed his regime for the sinking of a warship, a dissident group said.

Kim’s order was broadcast on May 20 by O Kuk Ryol, vice chairman of the National Defense Commission, according to the website of North Korea Intellectuals Solidarity, a Seoul- based group run by defectors from the communist country.

Wal-Mart says that starting Tuesday the iPhone 3GS with 16 gigabytes of storage space will cost $97 with a two-year contract with AT&T. It currently costs $197.

Minerals Management Service employees accepted lunches and other gifts from oil- and natural-gas companies and used government computers to view porn, an Interior Department report said.

Rigzone: "OGX has identified gas and condensate in well 1-OGX-11D-SPS on the Natal prospect in the shallow waters of the Santos Basin. Thus far, an oil column of about 138 feet (42 meters) with net pay of roughly 112 feet (34 meters) was encountered in sandstone reservoirs in the Santonian section, with high porosity and consistent hydrocarbon shows. Drilling is still in progress by the Ocean Quest semisub, and the well will be drilled to a final depth of up to 20,013 feet (6,100 meters) aiming at additional objectives. The well, the OGX-11D, is situated about 65 miles (104 kilometers) off the coast in the BM-S-59 block in waters measuring 558 feet (170 meters). OGX wholly owns and operates the block."

ZeroHedge: "Libor is now at 0.53%, eurodollars are plunging, new Fed-ECB rescue facilities are rumored to be imminent, Germany is set to introduce a ban on naked shorting of all stocks, and sovereign risk is exploding: it will be a fun day. Spain, Italy and Korea are all more than 20% wider on the day, as the contagion virus is spreading faster and faster toward the heart of Europe."

U.S. consumers are regaining confidence about the economy and their chances for finding a job, the Conference Board said Tuesday, as it reported that its consumer confidence index rose to 63.3 in May from 57.7 in April. It was the third consecutive increase and the highest level since March 2008. The separate expectations index rose to its highest level since August 2007, before the recession began. Although still weak by historical standards, consumer confidence "appears to be gaining some traction," said Lynn Franco, head of consumer research at the private research organization. "The improvement has been fueled by growing optimism about business and labor market conditions."

Canada's main stock market index declined 1.7% on Tuesday as the price of crude oil futures fell below $68 a barrel.

South Korea's central bank intervened in the market Tuesday to defend the Korean won as the currency fell steeply against the U.S. dollar on the back of escalating tensions on the Korean peninsula, according to media reports. The dollar had surged to 1,270 won but eased to close at 1,250 after the Bank of Korea stepped in to sell dollars, according to Yonhap News. Inter-Korea relations have deteriorated in recent days after the South Korean government accused North Korea of sinking a South Korean navy warship and demanded an official apology.

Dell is developing a tablet computer called Streak that will run Google's open-source Android operating system.

Money market rates climbed Tuesday, pushing one metric of banks' willingness to lend to one another to the highest since last April, on growing worries about debt-related problems in Europe. The 3-month London interbank offered rate for dollars rose to the highest since July. The TED spread jumped to 36.9 basis points, or 0.369 percentage points, also the highest since July. The TED spread -- the gap between the three-month T-bill interest rate and three-month Libor -- spiked in October 2008 to more than 460 basis points, according to FactSet Research. In another sign of rising costs for companies to borrow funds, two-year swap spreads rose to 58 basis points, the highest since May 2009. A swap spread is the gap between the rates to exchange floating- for fixed-interest payments and comparable-maturity Treasury yields. Wider spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders. "The bottom line is that equity investors will continue to remain tentative until some level of stability emerges among these spreads," Mike O'Rouke, chief market strategist at BTIG.

Oil settles 2.1% lower at $68.75 a barrel.

Three regional Federal Reserve banks last month wanted to raise the discount rate the central bank charges banks for emergency loans, according to minutes from Fed meetings released on Tuesday.

The regional banks of Richmond, St. Louis and Dallas wanted to boost the primary credit rate to 1 percent from the current 0.75 percent in an effort to normalize the differential between it and the benchmark federal funds rate.

The American Petroleum Institute reported Tuesday an increase of 616,000 barrels in oil stockpiles in the week ended May 21. The API also reported a decrease of 3.19 million barrels of gasoline in stock and an increase of 1.5 million barrels in the stocks of distillates, which include diesel and heating oil.

ZeroHedge: "Curve Flattening Continues: 2s10s Now Under 240 bps.....Should the CP rates continue rising without moderation, look for European credit markets to break soon enough."

The Dow Jones industrial average dropped 22.82 points, or 0.23 percent, to 10,043.75. But the Standard & Poor's 500 Index gained just 0.38 point, or 0.04 percent, to end at 1,074.03. The Nasdaq Composite Index shed 2.60 points, or 0.12 percent, to 2,210.95.

Monday, May 24, 2010

Richard Russell

5/24/10 Richard Russell

Richard Russell: "In 50 years, this is the most decisive top I can ever remember... the damage and cost of this reversal will run into the trillions."

Japanese shares fell Monday morning in Tokyo, with a drop Friday in oil and gold prices in New York putting pressure on trading firms and helping to send the benchmark index to its lowest intraday level since early December. The Nikkei Stock Average shed 0.2% to 9,768.37 after trading as low as 9,730.91, and the broader Topix fell 0.1% to 878.72.

The euro fell against the dollar, ending a three-day gain, on concern Greece’s fiscal crisis will spread to other nations and hamper the region’s economic growth.

The Dollar Index rose for the first time in four days before U.S. reports that economists said will show the housing market is improving and consumers turned the most optimistic in 20 months. The single currency weakened versus 12 of its 16 major counterparts after the Bank of Spain said on May 22 it appointed a provisional administrator to run CajaSur, a savings bank crippled by property loan defaults.

“Weekend revelations that the Bank of Spain has acted to support a regional lender is likely to weigh on the euro,” Gareth Berry, a currency strategist at UBS AG in Singapore, wrote in a note to clients. “This will probably revive concerns about the broader stability of the euro-zone banking system.”

The euro fell to $1.2518 as of 9:30 a.m. in Tokyo from $1.2570 in New York last week. The currency dropped to 112.65 yen from 113.13 yen. The dollar was at 89.93 yen from 90 yen. of Irish Debt Could Yet Eclipse That of Greece. What will sink us, unfortunately but inevitably, are the huge costs of the September 2008 bank bailout, writes MORGAN KELLY. IT IS no longer a question of whether Ireland will go bust, but when.

ZeroHedge: "It is no secret that the last few weeks saw massive liquidations along all asset classes. The result was a huge outflow across almost all products: Loans, HY Bonds, Municipals, Commodities... all a typical reaction to broad based liquidations. However, note we said "almost" - one class that actually posted a $6.2 billion inflow was equities. Yet not is all as it seems: peeking underneath the hood indicates that the bulk of this inflow, or $10.3 billion, had to do with inflow into ETFs... or rather, just one ETF - the SPY, accounting for $10.1 billion. Did someone prop up the entire equity market last week by massively pushing capital into the most liquid equity proxy available?"

Asian broker CLSA Securities : "The negative price action since late last summer in Chinese A-shares and Hong Kong-listed Chinese property stocks looks more and more like the key lead indicator for the global markets."

The Bank of Spain took over a struggling regional lender, underlining worries about the banking sector in Europe. The leader of Spain's largest union, Comisiones Obreras (CCOO) reportedly said on Monday that the country is moving closer to a general strike over government cutbacks. Speaking to Spanish television, Ignacio Fernandez Toxo, said the strike would be a disaster for Spain, though. A one-day strike by unions is already planned for June 8 and over the weekend, Prime Minister Jose Luis Rodriguez Zapatero said he would not give in to union demands that he rescind on measures in his €15 billion austerity plan, which includes a 5% cut in pay for civil servants.

IBM plans to acquire AT&T's Sterling Commerce unit, which makes business software, for $1.4 billion in cash.

John Hussman: "Of the 3257 issues traded on the NYSE last week, 2955 declined and just 275 advanced. The S&P 500 has now abruptly erased nearly 8 months of progress. Moreover, we observed a "leadership reversal" with new 52-week lows flipping above the number of new 52-week highs. Our broader measures of market action deteriorated to a negative position as well. Historically, we can identify 19 instances in the past 50 years where the weekly data featured broadly negative internals, coupled with at least 3-to-1 negative breadth, and a leadership reversal. On average, the S&P 500 lost another 7% within the next 12 weeks (based on weekly closing data), widening to an average loss of nearly 20% within the next 12 months - often substantially more when the Aunt Minnie occurred with rich valuations and elevated bullish sentiment.

The most recent instance was November 9, 2007, which was followed by a market loss of more than 50%, but the instances also include September 22, 2000, prior to a nearly two-year bear market decline; July 14, 1998 prior to the "Asian-crisis" mini-crash; July 27, 1990, at the beginning of the pre-Gulf War plunge; October 9, 1987, just prior to that market crash; July 2, 1981 at the beginning of the 1981-82 bear market and again in May 21, 1982, following a strong rally during that bear market, leading into a steep decline to the final lows; November 9, 1973 (just after a swift rally during the 1973-74 bear market, and leading into the main portion of that loss); and November 21, 1969, at the beginning of the 1969-70 bear market."

Seeking to evade new UN sanctions, Iran on Monday formally submitted its plan to swap some of its enriched uranium for reactor fuel and said the onus was on world powers to defuse tensions by accepting the deal.

Gentiva Health Services Inc. agreed to acquire Odyssey HealthCare Inc. for nearly $1 billion, a combination that will create the largest US home health and hospice provider.

Europe's debt crisis will affect demand for Chinese goods, the state planning commission said on Monday, as the United States and China held talks in Beijing. The United States suggested Europe's debt crisis would have minimal impact on global growth, but China took a more pessimistic view, warning it would impact demand for its exports and other regions would suffer too.

The rate banks say they pay for three-month loans in dollars rose above 0.5 percent for the first time in 10 months amid concern that the creditworthiness of financial institutions is deteriorating.

The London interbank offered rate, or Libor, for such loans advanced today to 0.51 percent, the highest level since July 16, from 0.497 percent at the end of last week, according to data from the British Bankers’ Association. The dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to the most since July 30.

Resales of homes in the United States rose 7.6% in April to a seasonally adjusted annual rate of 5.77 million as buyers rushed to complete sales before a tax credit expires, according to data released Monday by the National Association of Realtors. Sales were stronger than the 5.63 million pace expected by economists. Inventories surged 11.5% to 4.04 million in April, an "unwelcome" development, said Lawrence Yun, chief economist for the NAR. The inventory level represented an 8.4-month supply at the April sales pace. Yun said the elevated inventories suggest that prices won't rise much over the next year or two. The median price is up 4% in the past year at $173,100.

"Probably the safest place for most people's money is in Treasury bills or a fund that specializes only in Treasury bills," says Prechter, citing American Century's Capital Preservation Fund as an example. "That's as close to cash as you can get. Actual cash is not a bad idea either," he says.

Robert McHugh: "Big picture: We believe stocks have entered catastrophic wave (C) down, which should be the third and most devastating phase of the Grand Supercycle degree wave {IV} Bear Market. This decline has the potential to be a nation changing economic meltdown."

A 6.5-magnitude earthquake struck the Acre region in Brazil at 11:18 a.m. local time, the U.S. Geological Survey said Monday. The epicenter was about 79 miles from Cruzeiro do Sul, Brazil and 465 miles from Lima, Peru.

About 1.2 million jobless workers could be "cut off" from federal unemployment benefits next month if Congress does not pass an extension soon, according to a statement released Monday by the National Employment Law Project. The House could vote as early as Tuesday on extending the benefits, and the Senate could consider the bill later this week, congressional aides said. "Unemployed Americans are pulling their hair out -- and they are looking to Congress for help," said Christine Owens, NELP's executive director. "Even if it means staying in Washington as the congressional recess approaches, the unemployment bill must move forward." Extending the benefits is part of a larger jobs and tax bill pending in Congress.

Texas Rangers will file for Chapter 11 bankruptcy as part of a deal to sell the company to Nolan Ryan and Chuck Greenberg, according to a letter from Ryan posted on Major League Baseball's Web site Monday. "With the support of Major League Baseball, we've chosen to implement the sale through a voluntary, 'pre-packaged,' court-supervised process under Chapter 11 of the U.S. Bankruptcy Code. This is the best way to complete the sale and smoothly transition to new ownership, which we expect will occur by mid-summer," said Ryan. The process is not expected to affect the day-to-day management of the team.

The Dow Jones Industrial Average fell 126.82 points, or 1.2%, to 10,066.57. The S&P 500 index dropped 14.04 points, or 1.3%, to 1,073.65, while the Nasdaq Composite fell 15.49 points, or 0.7%, to 2,213.55.

Gold for June delivery rose $17.90 to settle at $1,194 an ounce as other metals also posted gains, bouncing back from last week's thumping. Palladium for June delivery added $14.10, or 3.2%, to $453.55 an ounce.

Sunday, May 23, 2010


5/23/10 UK

Britain was at risk of falling victim to the European financial crisis amid signs that investors view British banks as increasingly risky, an Australian analyst said on Sunday.
University of New South Wales Professor of Business Law Michael Peters said rising lending rates between British banks were a sign the fallout from the European debt crisis has already spread to England.

"The United Kingdom is the basket case no one wants to talk about," Peters told Australian Associated Press.

"The problem is Britain is worse than Greece. The Greek's borrowed money for infrastructure ... whereas England borrowed all its money to underwrite the banks during the global financial crisis."

Mr Clegg warned that the “age of plenty” was over and a period of painful retrenchment was beginning. He said the coalition partners would need to hold their nerve as they took the unpopular decisions necessary to deal with the “great black hole” in the public finances left by Labour.

The UK government could fire 300,000 people and the number may rise to 700,000 according to the Times of London. The nation has an estimated £156 billion budget deficit. Governments in Greece, Spain, and Portugal are taking similar measures by lowering government worker salaries and starting lay-offs.

Although the exact cause of the Deepwater Horizon explosion isn't certain, at least a dozen offshore drilling experts agree that cement, or pipes encased by cement, had to have failed first. Several have specifically fingered BP's design for that cement job, which used relatively little cement and relied on an unusual configuration that made it harder to test for imperfections, they said. The Mississippi Canyon Block 252 project had encountered problems, including two reported gas kicks, where drillers failed to keep gas from surging up, according to the hearings and company sources. Government and company documents suggest the project was over budget. But the Deepwater Horizon had struck oil, something that happens in only about a quarter of exploration wells.
All that was left to do was to seal the well so another vessel could produce from it later. Cementing involves standard techniques. But "there is an art to it, and every well is a little different," said Gene Beck, an associate professor of petroleum engineering at Texas A&M who testified at the congressional hearings.
Halliburton, the cementing contractor, worked according to BP's design. The crew of the Deepwater Horizon conducted pressure tests that assess seals, but not the cement.