Saturday, September 25, 2010

Ponzi Dynamics

9/25/10 Ponzi Dynamics

Americans have discovered the fragility of life, that ominous fragility that the rest of the world either already experienced or is experiencing now with terrible intensity.
Jose Saramago

Twenty-one banks agreed in Shanghai today to sell loans on China’s interbank market as the government allowed the transactions for the first time.
The banks include Industrial & Commercial Bank of China Ltd., HSBC Holdings Plc and China Construction Bank Corp.
The global financial crisis showed the inefficiency of risk management, People’s Bank of China Governor Zhou Xiaochuan said at a ceremony in Shanghai. The “loan transfer” plan is a new product in the nation’s interbank market and will improve banks’ risk-management ability and will help with the central bank’s macro control, he said.
“Inter-bank loan tranfers will allow banks to complement each others’ businesses because some lenders have ample liquidity but are short of clients,” said Zhao Qingming, a senior analyst in Beijing at China Construction Bank, the country’s second-largest lender. “The tranfer also enables banks to better manage liquidity, especially under the government’s loan target control this year.”

Bloomberg (Joshua Zumbrun and Matthias Wabl): “Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank might be pressured into policies that spur inflation unless a limit is placed on the size of its balance sheet. ‘Without explicit constraints on the size of the balance sheet, the Fed runs the risk of being pressured to use its balance sheet to engage in policies whose goals have nothing to do with monetary policy,’ Plosser said… Plosser’s warning comes as U.S. central bankers consider further expanding the Fed’s $2.31 trillion balance sheet to boost growth… Without constraints on the Fed, ‘the temptation may be too great to renege on the pre-announced policy and pursue policies that deliver temporary economic benefits that may be inconsistent with longer-run goals,’ Plosser said… ‘In the context of monetary policy, this time inconsistency typically results in higher than desired inflation.’”

“Former Federal Reserve Chairman Paul Volcker… said he doesn’t expect a broad-based decline in prices. ‘I’m not worried about deflation,’ Volcker said… ‘I think we’re on a path to price stability.’ ‘I do not think we should be worried about and consumed by the problem of a potential deflation that doesn’t exist,’ he said.”

Doug Noland: "Today’s government finance Bubble also feeds enormous amounts of income and “cash flow” throughout the household, corporate and financial sectors. This would tend to support so-called “de-leveraging” (debt repayment) for households and corporations, in the process reducing the need for financial sector risk intermediation. This helps to explain the stagnation in “money” supply and Bank Credit – and why these traditional indicators of system “liquidity” have lost much of their relevance....On a year-over-year basis, Federal government expenditures were up 5.0% to $3.704 TN (expenditures up 30% from three years ago). Over the past nine quarters, federal expenditures have jumped from about 21% to 25% of GDP. Federal receipts were up 8.5% y-o-y during Q2 to $2.378 TN, or 16.3% of GDP. During the past nine quarters, receipts have fallen from about 19% of GDP. State & Local receipts grew 6.4% y-o-y to $2.113 TN, while State & Local expenditures were up 3.5% y-o-y to $2.092 TN. Total government expenditures during the quarter jumped to 40% of GDP....In just eight quarters, federal government debt expanded $3.610 TN, or 54%, to $10.308 TN. In a short 24 months, federal debt has jumped from 46% to 71% of GDP. And as long as the markets allow such unprecedented issuance of non-productive Credit at historically low yields, it’s quite possible that household incomes, corporate earnings, the general economy, and the securities markets might appear ok. Heck, Washington seems awfully determined to resuscitate asset prices. But we don’t have to look back too many quarters for a stark reminder of the nature of Ponzi Dynamics and Fragilities."

John Ing: "The world is afraid of a repeat of the deflation of the Great Depression. Deflation is a negative drop in prices caused by the contraction of money supply, the opposite of inflation. In 1932, US consumer prices fell 10 percent and between 1929 and 1933 fell 27 percent in total. Today despite inflation at 40 year lows, prices are still going up, not down. In the 12 months ended in August, prices rose 1.1 percent.
Amid this fear of deflation, economists forget that deflation does not happen when there is an abundance of money. In fact the economy is not even suffering from a shortage of liquidity, but a shortage of confidence. Part of the reason is that the looming red ink and liquidity is unlike anything seen in US peacetime history. Banks today have plenty of reserves, but they are hoarding rather than lending. US corporations have repaired their balance sheets but are sitting with trillions of cash. Consumers are paying down their debts and savings are increasing. And nobody wants to borrow or use money despite zero interest rates....At the end of the day, it is not even important whether we opt for austerity, tax cuts or throw more stimulus money at the problem. The reality is that we are mired in a debt based monetary system. Money today is created by the Federal Reserve as debt. In other words, debt has become money. In inflating our way out of this debt, Washington just issues more debt since the global appetite for its debt seems undiminished. However, the monetization of this debt only postpones the day of reckoning and as other deficit economies discovered, paves the way for hyperinflation. And that money must go somewhere...It is our view that inflation has worked itself into the commodity markets raising the price of food which will reduce spending power and savings. Inflation is a dynamic animal, and this time bomb is ready to explode. Gold will be a good thing to have."

Whidbey Island Bank, Coupeville, Washington, Assumes All of the Deposits of North County Bank, Arlington, Washington. As of June 30, 2010, North County Bank had approximately $288.8 million in total assets and $276.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $72.8 million. ... North County Bank is the 127th FDIC-insured institution to fail in the nation this year, and the ninth in Washington.

Excluding transportation, new orders for durable goods increased 2.0 percent. Excluding defense, new orders decreased 1.2 percent.

We don't know where our first impressions come from or precisely what they mean, so we don't always appreciate their fragility.
Malcolm Gladwell

Comstock Partners: "The results are very clear that the current recovery is far weaker than the prior two expansionary periods, which themselves were below the average for post-war recoveries. The results are outlined as follows. Remember, for each indicator we are showing the change over 31-to-33 months after the cyclical peak for the economy.
1) GDP was up 5.3% and 5.7% at this point in the last two cycles, and is now down 1.3%
2) New home sales were down 8% and up 31%; now down 42%.
3) Industrial production was up 3% and 1%; now down 7%.
4) Retail sales were up 9% and 12%; now down 4%.
5) Payroll employment was flat and down 2%; now down 5%.
6) Personal income was up 11% and 7%; now up 2%.
7) New orders for durable goods were up 5% and 6%; now down 22%.
8) Initial weekly unemployment claims were down 5% and 9%; now up 34%.
The facts speak for themselves. The current recovery is far weaker than the prior two, which themselves were weaker than the average for post-war expansions. Moreover, as we discussed in previous comments, even this sub-par recovery has been losing steam in recent months."

Charles Blitzer: “The likely consequence could be very messy elections at a time when the country is most fragile. The instincts to print money and spend in order to get the voters' favor will be infinitely increased, and the chances of hyperinflation would go up that much faster."

Friday, September 24, 2010

The New Normal

9/24/10 The New Normal

Advanced Micro Devices on Thursday cut its third-quarter sales outlook, saying it expects revenue for the quarter ending Sept. 25. to be in the range of down 1% to 4% compared to revenue of $1.65 billion for the quarter ended June. 26. Previously, the company had said it expected revenue to be "up seasonally" from the second quarter. The chip company said the decrease was "due to weaker than expected demand, particularly in the consumer notebook market in Western Europe and North America."

BHP Billiton said on Thursday it has received antitrust clearance from U.S. regulators to proceed with its $39 billion bid for Canada's Potash Corp , clearing its first regulatory hurdle in the process.
Last month, the Anglo-Australian miner launched its hostile offer to take over the world's largest fertilizer company. Potash Corp has flatly rejected the bid as "grossly inadequate" and filed a lawsuit against BHP in an attempt to stymie it.
BHP's bid is still contingent on other regulatory approvals. It is likely to face much tougher scrutiny in Canada, where Canada's competition watchdog has already requested for additional information.
The request prompted BHP to extend the deadline on the tender offer by a month to November 18.

The U.S. Senate won’t pass an extension of the Bush-era tax cuts before the Nov. 2 elections, second-ranking Democrat Dick Durbin said.
“The reality is we’re not going to pass” the tax cuts before the election, Durbin of Illinois said today. He blamed politics, saying, “We are so tightly wound up in this campaign” that Democrats and Republicans won’t be able to reach an agreement.
Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said, “It’s clear there aren’t 60 votes for any proposal, so no proposal is going to pass at this point.”

Spotify is at risk of postponing its launch in the United States again.
CEO Daniel Ek has promised that the launch will be done by the end of 2010 but the European music service has not signed any licensing agreement with the top four record companies with only 12 weeks to go, according to multiple music industry sources.
After more than a year of negotiation with the top labels, it is expected by the sources that the chances that Spotify can make a deal with all four major record companies remain low.

The cost to hedge against losses on U.S. government debt rose to the most in six weeks as investors bet the Federal Reserve will put more cash into the economy and a report showed home prices continued to drop. Credit-default swaps on U.S. Treasuries climbed 1.7 basis points, the biggest increase in more than three weeks, to 49.4, according to data provider CMA. The Fed said yesterday that slowing inflation and sluggish growth may require further action.

The new normal: the dollar index breaks 80 to 79.30 on the downside, gold breaks $1300 on the upside, and Apple approaches $300.

The government reported orders for U.S. durable goods fell 1.3% in August. Excluding transportation, orders rose 2%.
Orders for nondefense capital goods excluding aircraft rose 4.1% in August, compared with a decline of 5.3% in the prior month. Analysts consider these core capital goods orders to be the best gauge of capital spending by businesses. Shipments in August fell 1.5%, compared with a gain of 2.5% in the prior month. Durable-goods orders in July rose 0.7%, compared with an earlier estimate of 0.4%.
The decline last month reflected a 40.2 percent plunge in non-defense aircraft orders after a 69.1 percent surge in July.
Boeing Co received only 10 orders for civilian aircraft in August, a sharp slowdown from 130 bookings in July, according to information posted on the plane maker's website.

"I personally believe that the trade of the decade will be to short bonds," said Kass, general partner in Seabreeze Partners in Palm Beach, Fla. "I know it's a variant (position)."

Silver reached its strongest price in 30 years at $21.41 an ounce, tracking gains in gold.

Ken Goldstein, economist at The Conference Board: “While the recession officially ended in June 2009, the recent pace of growth has been disappointingly slow, fueling concern that the economic recovery could fade and the U.S. could slide back into recession. However, latest data from the U.S. LEI suggest little change in economic conditions over the next few months. Expect more of the same – a weak economy with little forward momentum through 2010 and early 2011.”

U.S. house prices fell 0.5% in July to the lowest level in nearly six years, according to data released Wednesday by the Federal Housing Finance Agency.
The 0.5% seasonally adjusted drop in monthly prices came after a 1.2% drop in June; the FHFA initially reported that June prices slipped 0.3%.
Over 12 months, prices are down 3.3%. The FHFA said that the July index is roughly the same value as was seen in September 2004.

U.S. new home sales were flat in August, matching the second lowest level on record, the Commerce Department estimated Friday. Sales were steady at a seasonally adjusted annual rate of 288,000 units, below the 300,000 pace expected by economists surveyed by MarketWatch. Sales plunged in May to a record low after tax breaks for homebuyers expired and have bounced around at low levels over the past three months. New-home sales in July fell a revised 7.7% to a 288,000 level compared with the previous estimate of a 12.4% fall to 276,000. New-home sales are down 28.9% compared with a year ago. The supply of new homes fell 1.4% to 206,000. Supply in relation to sales fell slightly to 8.6 months in August from 8.7 months in July. Median sales prices have fallen 1.2% in the past year to $204,700. The number of new homes available for sale fell 1.4 percent to 206,000 units, the lowest since August 1968---just the new normal. The median home price of $204,700 is now the lowest since December 2003---just the new normal.

Target cautious on the holiday retail season.

U.S. railroads originated 304,679 carloads for the week, up 8.1 percent compared with the same week in 2009, but down 2.4 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008.
So better than last year but not better than 2008.

Petrobras late Thursday finalized the terms for the world's largest share offer, setting its sights on turning the Latin American country into one of the world's top oil producers.
Petrobras said in a regulatory filing that it priced the issue of about 4.08 billion voting and preferred shares, raising approximately
$67 billion. That tops the previous record share offer set in 1987, when Japanese telecommunications company Nippon Telegraph & Telephone Corp. raised $36.8 billion.

FT: "Deals and capital raisings in China’s booming financial services sector have outpaced those in the US for the first time since records began in 1995, fuelled by a wave of refinancings by Chinese banks needing to repair their balance sheets."

Nike shares rise 4% to a new all-time high. The dollar hit a new all-time low versus the Swiss franc---just the new normal. The CBOE Market Volatility or VIX, dropped more than 8% early Friday, on track for the biggest one-day drop in three weeks, as U.S. stock benchmark indexes jumped about 1.7%.

For Americans saving for retirement, Wyoming's loose tax code has helped propel it to the front of the pack.
Notably, residents don't pay state taxes on wages or capital gains. Both of these exemptions allow workers to save noticeably more of their earnings. What's more, even before the tax breaks, Wyoming residents have well-above-average incomes. For 2010, the state's average per capita income is estimated at $45,584. Only five states and the District of Columbia have higher incomes.
Wyoming's 6.8% unemployment rate is also well below the national average. Meanwhile, home prices there are expected to grow by 4.5% annually, on average, from 2010 to 2013, according to Moody's Analytics. Because many Americans sell their homes to downsize for retirement, price appreciation helps them grow their next eggs.

ZeroHedge: "A few months ago we penned an article titled: "Bond Yields Imply The Fair Value Of The S&P Is 750" and this was when the 10 Year was still above 3.00%. It is now around 40 bps tighter, meaning the fair value of stocks is even lower based on the historical 75% regression pattern we indicated back in June. Today, David Rosenberg also chimes in on this ridiculous divergence between the S&P and bonds, and in graphic form shows that should the gap ever close, it would lead the stock market to its fair value, which ironically, is just around the March 2009 lows of 666."

Lori Ann LaRocco: "Pete Sepp, Executive Vice President of the National Taxpayers Union (NTU) tells me while the focus is on the 2001 and 2003 tax cuts, there are new tax problems looming for the middle class.
"Thanks to the new health care law, you already have middle class tax increases on the way," Sepp says. "I'm not sure if many people don't realize but in addition to the 1099 reporting, medical expense deductions will be sharply curtailed when the health care law is up and running.
There will be limits on flexible spending accounts that will come into effect next year. Not only will you be limited to how much tax free contributions you can make for medical expenses but you'll also have to get prescriptions for over the counter medicines. That's not only time lost on the consumers part but also the doctors part as well which could mean rate increases."

David Tepper's earlier remarks that Fed intervention is sure to boost most investments may have helped goose the market, but he's wrong, Prag Cap says. "We must see an increase in aggregate demand that leads to higher corporate revenues that leads to hiring that leads to real economic recovery. If you’re banking on QE to generate real end demand, you're mistaken."

Haven Trust Bank of Ponte Vedra Beach, Fla., became the 126th bank failure of the year, according to the Federal Deposit Insurance Corp. Friday. First Southern Bank of Boca Raton, Fla., will purchase Haven's $148.6 million in assets and assume $133.6 million in deposits. FDIC said the cost to the deposit-insurance fund will be $31.9 million. Haven is Florida's 24th bank failure of the year.

The federal government on Friday seized three undercapitalized wholesale credit unions -- Members United Corporate Federal Credit Union of Warrenville, Ill.; Southwest Corporate Federal Credit Union of Plano, Tex.; and Constitution Corporate Federal Credit Union of Wallingford, Conn.-- and unveiled a package of regulations affecting the industry. The new rules include a program to have the institutions pay annual fees to cover the losses on a $50 billion portfolio of toxic mortgage securities losses on the group of undercapitalized corporate credit unions. Last year, in March 2009, the National Credit Union Administration, the regulator for federal credit unions, took control of two credit unions.

The S&P 500 halted a three-day losing stretch to notch a fourth weekly gain, its longest steak since April. Up 2.4% for the week, the Dow industrials added 197.84 points, or 1.9%, to end at 10,860.26, its best performance since Sept. 1. The S&P added 23.84 points, or 2.1%, to end at 1,148.67, up 2.1% for the week. The Nasdaq Composite climbed 54.14 points, or 2.3%, to 2,381.2, up 2.8% from the week-ago close.

Thursday, September 23, 2010


9/23/10 Casinoism

WSJ: Big U.S. banks are facing legal pressure to make up for losses tied to pools of soured low-end mortgage loans.
In the latest effort, a group of investors in 2,300 mortgage securities worth roughly $500 billion is seeking to force several banks that originated or are now servicing faulty subprime-mortgage loans to repurchase or modify them.

A new oil pipeline through three western North Dakota counties will help deliver crude to at least three regional markets and will reduce truck traffic on the region's roads, state regulators said Wednesday.
North Dakota's Public Service Commission endorsed a route for the 12-inch pipeline, which will stretch for 77 miles through Billings, Dunn and McKenzie counties. Bridger Pipeline LLC hopes to begin construction soon and finish by next summer on the $29 million project.

House Republicans are offering a collection of conservative ideas, including freezing government spending and replacing the president's sweeping health-care legislation with a scaled-back version allowing for the purchase of health plans across state lines.

The coincidence of a rising harvest moon at about 6:28 p.m. Wednesday with the last sunset of summer comes only once every 20 years.

The Automatic Earth: "When 77% of your population lives paycheck to paycheck, as David DeGraw writes, up from 43% when the recession started in 2007 and 61% when it supposedly ended, it's high time to consider dignity and respect when publishing cold statistics. How good of a thing is it for a president to tout his achievements in front of TV cameras while fast increasing numbers of those who voted him into office see no way out of their misery anymore, when for many the recession's just started instead of ended? Who does a president represent, exactly?...And a 9.6% unemployment rate, or 16.7% in more realistic terms, does not spell an end to a recession. If anything, it spells an end to an experiment started in 1776, of a new world built on freedom, truth, dignity and respect. There's not much left, other than a lot of decent people too busy and too blinded to notice they're being robbed blind as they watch 57 channels with nothing on. Cynicism rules all over the place. And you can't build anything that way."

(Bloomberg) -- Seagate Technology Plc, the world’s largest maker of hard-disk drives, held talks with previous owners TPG Capital and Silver Lake about going private again, according to people with knowledge of the discussions.
Talks ended in recent weeks, and a deal, which would have been valued at about $7 billion, is unlikely to happen, said the people, who declined to be identified because the discussions were private. Representatives of TPG, Silver Lake and Dublin- based Seagate declined to comment.
Negotiations collapsed as Seagate wasn’t meeting some of the financial projections the two private-equity firms had based the deal on, said one of the people familiar with the situation.

An appreciation of 20 percent in China's currency would cause widespread bankruptcies in China's export sector, where firms operate on thin margins, Chinese Premier Wen Jiabao said on Wednesday. "The conditions for a major appreciation of the renminbi do not exist," Wen said in a speech to U.S. businessmen in New York.

Gross domestic product increased 0.2 percent in the second quarter from the previous three months, less than the 0.7 percent median estimate in a Bloomberg News survey of 12 economists and the 0.9 percent forecast by the central bank, Statistics New Zealand figures showed in Wellington today.

George Ure: "The reality is that the crowd which preaches "free market" really only means free for those on top. This is why the PTB will go to the very ends of the earth to find someone in a TWSH (third world shit hole) who will underbid you. The lower the bid for the work and the higher the retail price in America the more wealth, power, and future for themselves and their evil spawn they ensure. (Or so they'd like to think...)"

ZeroHedge: "Since the beginning of the greatest depression, US household net worth has plunged nearly 11 trillion dollars. All the while we continue to experience price inflation and expanded government spending. In a normal economy that isn’t run by a bunch of criminals, we should expect to see price deflation as malinvestment is wiped out. Since our money is based on debt, as debt is reduced though defaults and write-downs, the monetary base should contract, thereby leading to price deflation. Of course, this is not what we are actually experiencing at the present moment since the criminal central bankers and politicians have decided to prevent the liquidation of malinvestment through a nearly endless series of bailouts, guarantees, and deficit spending."

"In the week ending Sept. 18, the advance figure for seasonally adjusted initial claims was 465,000, an increase of 12,000 from the previous week's revised figure of 453,000. The 4-week moving average was 463,250, a decrease of 3,250 from the previous week's revised average of 466,500.
The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Sept. 11, a decrease of 0.1 percentage point from the prior week's revised rate of 3.6 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Sept. 11 was 4,489,000, a decrease of 48,000 from the preceding week's revised level of 4,537,000. The 4-week moving average was 4,519,500, an increase of 2,500 from the preceding week's revised average of 4,517,000.

Macy's plans to hire approximately 65,000 seasonal associates in its stores, call centers, distribution centers and online fulfillment facilities for the holiday season. The workers will add to the retailer's contingent of 161,000 associates on a year-round basis.

The number of existing homes on the market is climbing from the current 4 million units to 5 million, versus a ten year annual trailing average sales of 2.5 million units. One month after suffering the largest percentage decline on record, sales of existing single-family homes and condos rebounded 7.6% in August to a seasonally adjusted annual rate of 4.13 million, the National Association of Realtors reported Thursday. Resales plunged a revised 27% in July to a record low 3.84 million unit pace, compared with the initial estimate of a 27.2% plunge to 3.83 million units. Economists surveyed by MarketWatch expected sales to rebound to a 4.10 million unit pace in August. Resales have sunk 19.0% in the past year. The inventory of unsold homes on the market fell 0.6% to 3.98 million, an 11.6 month supply at the current sales pace. The median sales prices fell 0.8% in the past year to $178,600.

Blockbuster Inc. said Thursday that it has filed voluntary Chapter 11 petitions after agreeing a deal with bondholders to recapitalize the company.

Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.
Henry Ford

The Energy Department on Thursday is expected to report an increase of 77 billion cubic feet to 81 billion cubic feet of natural gas in storage for the week ended Sept. 17, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
Working gas in storage was 3,340 Bcf as of Friday, September 17, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 175 Bcf less than last year at this time and 195 Bcf above the 5-year average of 3,145 Bcf. In the East Region, stocks were 16 Bcf above the 5-year average following net injections of 53 Bcf. Stocks in the Producing Region were 114 Bcf above the 5-year average of 915 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 65 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,340 Bcf, total working gas is within the 5-year historical range.

"The whole premise of the site is that everything is more valuable when you have context about what your friends are doing," says Facebook co-founder and Chief Executive Officer Mark Zuckerberg, who started accepting ads on Facebook as a Harvard sophomore in 2004 in an attempt to cover server costs. "That's true for ads as well. An advertiser can produce the best creative ad in the world, but knowing your friends really love drinking Coke is the best endorsement for Coke you can possibly get."

Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.

The Conference Board said on Thursday that its leading economic index -- a composite gauge of ten indicators including weekly jobless claims, stock prices and the money supply -- rose 0.3% in August, after a 0.1% increase in July. The rise was stronger than the 0.2% pick-up that economists polled by MarketWatch expected; nonetheless, the index has slowed to 2% in the six months to August, down from 4.8% in the preceding six months. The biggest positive contribution in August came from the interest rate spread between 10-year Treasury bonds and the federal funds rate, while the biggest drag came from the average weekly rise in initial jobless claims.

Buffett says we're still in recession and will not be out of it for a while.

A speculator is a man who observes the future, and acts before it occurs.
Bernard M. Baruch

30-year U.S. treasury bonds yield 3.72% and Freddie Mac said Thursday the 30-year fixed-rate mortgage average was unchanged at 4.37% with an average 0.7 point for the week ending Sept. 23.

Jack Bogle: "The only way I can define capitalism right now is casinoism!
The rampant trading that goes on is just foolish and creates no value for both the buyer and seller combined. We have this casino mentality. Its a rapid turn over....Under normal circumstances, I think the concerned investors should be aware of that these are no normal circumstances.
We're in an economic crisis. We remain in a global economic crisis. Corporations are having good earnings, but there is a lot of instability in the global financial system. We have seen a lot in the price of gold."

The eurozone manufacturing PMI declined to 53.6 from 55.1 in the previous month. Equally, the services PMI dropped to 53.6 from 55.9, much lower than our forecast and median of 55.4.
The German September manufacturing PMI dropped to 55.3 from 58.2 in August, while the services reading slumped to 54.6 from 57.2.

There are two times in a man's life when he should not speculate: when he can't afford it and when he can.
- Following the Equator, Pudd'nhead Wilson's New Calendar

Oil for November delivery added 47 cents, or 0.6%, to $75.18 a barrel. Natural gas held on to gains, settling 5 cents higher at $4.02 per million British thermal units, its highest price in nearly a week. Natural gas prices benefited from an Energy Information Administration report showing an increase of 73 billion cubic feet for the week ended Sept. 17.

About 45% of investors surveyed were bullish, while 29.6% were neutral and 25.4% were bearish. Last week, 50.9% of investors were bullish while 24.3% were bearish. Over the long term, 39% are bullish, 31% are neutral and 30% are bearish.

Insider selling in Salesforce and Netflix by their respective founders and ceos.

The Obama administration needs to permit corporations, private businesses and individuals the right to bring back from foreign soils at least $5 billion tax free. A similar situation was allowed one-time under Bush Jr.

ZeroHedge: "using foreign cash to pay dividends or share repurchases is considered repatriation from the perspective of US tax regulations."

Social media is expected to grow to 18 percent of companies' budgets within the next five years — that's three times as much as it is right now — according to a recent survey by Duke University and the American Marketing Association.

Dow industrials down 76 points at 10,662 at close. S&P 500 index down 0.8% at 1,124.85. Nasdaq Composite down 0.3% at 2,327.08.

Wednesday, September 22, 2010

The Voters

9/22/10 The Voters

More than half of U.S. states saw their unemployment rates rise in August, the largest number in six months, as hiring weakened across the country. The jobless rate increased in 27 states last month, the Labor Department said Tuesday. It fell in 13 and was unchanged in 10 states and Washington, D.C. That's worse than the previous month, when the rate increased in only 14 states and fell in 18. It's also the most states to see an increase since February.

While the stock market continues its recovery, suggesting that investors have become more optimistic, the voting public remains in the firm grip of pessimism and their negative outlook shows no signs of receding as we head into the midterms. In the latest POLITICO poll, 54 percent of the voters believe we are headed for a second recession, believing this by a two to one margin with only 25 percent who believe we will avoid a double dip.

China's Sinochem Corp has hired banks to advise it how to foil BHP Billiton's $39 billion bid for Potash Corp , two sources with direct knowledge of the matter told Reuters.
The state-owned chemicals group had hired Deutsche Bank and Citigroup for the purpose, the sources said after BHP extended its offer for Potash, the world's largest fertilizer group, by a month to November 18 to provide Canada's competition regulator with more information.
"Sinochem has been given an extra window of a month within which to decide whether and how they are going to bid," said London-based analyst Dominic O'Kane at Liberum Capital.

Oil services company Wellstream is being circled by four potential bidders as industry rivals look to get a slice of Brazil's potentially huge market for oil exploration.
The suitors who have approached the British company, which makes about half its revenues in Brazil, are understood to be Italy's Saipem, General Electric and US operators National Oilwell Vargo and Cameron International.

A Dutch-German medical research team led by Harald Schmidt from Maastricht University, Netherlands, and Christoph Kleinschnitz, University of Wurzburg, Germany, has discovered that an enzyme is responsible for the death of nerve cells after a stroke. The enzyme NOX4 produces hydrogen peroxide, a caustic molecule also used in bleaching agents. Inhibition of NOX4 by an experimental new drug in mice with stroke dramatically reduces brain damage and preserves brain functions, even when given hours after the stroke.
The identification of NOX4 as an enzyme with a key role in killing nerve cells after a stroke in mice makes NOX4 inhibition currently the most promising new therapeutic approach in this often deadly or disabling disease in humans. Pharmacologist, Prof. Schmidt suspects that the findings "May have implications for other disease states in which hydrogen peroxide or related oxygen radicals are suspected to play a major role but where antioxidant or vitamin therapies have failed. Inhibiting now the source of hydrogen peroxide or oxygen radicals may represent the long-sought solution to treating also heart attacks, heart failure, cancer, and other forms of nerve cell degeneration such as in Parkinson's or Alzheimer's disease."

The Dollar Index, a gauge of the currency versus six major trading partners, slid to the lowest level since March 17.

Las Vegas home sales fall as area unemployment lingers near 15%.

The dollar fell about 1% against the euro for a second day, pushing the shared currency to the highest since April, as investors around the globe interpreted Tuesday's statement from the U.S. Federal Reserve as increasing the likelihood that it will soon embark on some kind of asset-buying program, which would weaken the greenback. The euro rose to $1.3415 recently, from $1.3242 in late North American trading on Tuesday. It hasn't topped $1.34 intraday since April.

Are you sane to lend the U.S. Treasury 10-year money at an interest rate of 2.55%?

More than three-quarters of U.S. investors view Obama as anti-business and are pessimistic about his policies, while a majority outside the U.S. holds a more favorable view, a Bloomberg survey shows.

John Fund: "Comparisons between the Obama White House and the failed presidency of Jimmy Carter are increasingly being made—and by Democrats.
Walter Mondale, Mr. Carter's vice president, told The New Yorker this week that anxious and angry voters in the late 1970s "just turned against us—same as with Obama." As the polls turned against his administration, Mr. Mondale recalled that Mr. Carter "began to lose confidence in his ability to move the public." Democrats on Capitol Hill are now saying this is happening to Mr. Obama.
Mr. Mondale says it's time for the president "to get rid of those teleprompters and connect" with voters. Another of Mr. Obama's clear errors has been to turn over the drafting of key legislation to the Democratic Congress: "That doesn't work even when you own Congress," he said.

Jul. FHFA Housing Price Index: -0.5% month-on-month, vs. -1.2% (revised from -0.3%) in June. Year-on-year, prices are -3.3%.
The FHFA purchase-only home-price index is down 13.8% from the peak in 2007. The biggest losses in July came in the South Atlantic states with a 1.6% drop. Economists at Majestic Research said that home prices are weakening because existing inventory is growing at the fastest rate since 2007.

Payrolls dropped in 36 U.S. states in August, led by Michigan.

Meanwhile, yields on 2-year notes fell to a new all-time low of 0.39% in early trading.

U.S. home loan demand fell for a third straight week though fixed mortgage rates slid near all-time lows, with potential buyers still unnerved by the jobs market, Mortgage Bankers Association data showed on Wednesday.

The Energy Information Administration said oil inventories for the week ended Sept. 17 rose 1 million barrels. Oil traded around $75.30 a barrel before the report, which gave prices an initial boost as it showed an increase below what a trade group had reported earlier in the week. The increase, however, ran contrary to analysts expectations. Analysts polled by Platts expected a decline of 1.5 million barrels for the week. Gasoline stocks rose 1.6 million barrels, whereas analysts had seen it unchanged. Reserves of distillates, which include diesel and heating oil, rose 300,000 barrels, the EIA said. They were forecast to increase 100,000 barrels, according to Platts.

"Double Dip or Global Deflation?," is going to represent the worst economic contraction since WWI. Forget WWII. Think "shrinkage" to use the Gilded Age description for economic deflation. - Chris Whalen

Gold for December delivery on the Comex in New York gained as much as 1.7 percent to an all-time high of $1,295.80 an ounce before trading at $1,290.70.
The U.S. currency extended a decline against a basket of six major counterparts, dropping to the lowest level in six weeks. The dollar last traded at $1.3315 per euro.
Australia & New Zealand Banking Group raised its 2011 gold forecast by 6 percent to $1,347 an ounce, and silver target by 8 percent to $21.50 an ounce. The World Gold Council forecast in March that gold consumption in China may double within 10 years.
Why would there be a demand for a 2-year Treasury bond with a falling dollar and rising gold and silver prices?

Gold for December delivery added $17.80, or 1.4%, to $1,292.10 an ounce on the Comex division of the New York Mercantile Exchange. Silver for December delivery advanced 42 cents, or 2%, to $21.06 an ounce.

Potash Corp filed a lawsuit against BHP Billiton on Wednesday that seeks to block the mining giant's $39 billion hostile bid and intensifies the month-long takeover battle for the Canadian fertilizer company.
The lawsuit, filed in a U.S. District Court in Chicago, alleges that BHP misrepresented and failed to inform investors about material facts. It also accuses BHP of engaging in fraudulent, deceptive and manipulative behavior related to its offer.
BHP said the lawsuit is entirely without merit and that it intends to contest the matter vigorously.

With expectations for millions of foreclosures on the horizon, lenders in an Obama administration mortgage-modification program have approved in August modified permanent loans for 33,000 homeowners, bringing the total number of adjusted home-loans under the plan to over 468,000, the Treasury Department said Wednesday in its September report. Homeowners with permanent modifications have had their median monthly payments cut by 36% or more than $500 a month.

The Dow Jones Industrial Average ended down 21.72 points, or 0.2%, at 10,739.31, with 18 of its 30 components declining. The S&P 500 index slid 5.51 points, or 0.5%, to 1,134.27, held down by the financials sector, dropping 1.6%. The Nasdaq Composite Index fell 14.80 points, or 0.6%, to 2,334.55.

Blockbuster Inc is preparing to file for Chapter 11 bankruptcy within the next few days, a source familiar with the video rental chain's plans said on Wednesday.

Microsoft Corp., the world’s biggest software maker, sold $4.75 billion of bonds in four parts, including a portion of 0.875 percent 3-year debt, the lowest coupon on record, according to a person familiar with the transaction.

Tuesday, September 21, 2010

Sucker Punch

9/21/10 Sucker Punch

John Crudele: "If you invested on the first two days of each month from January through September, you would have had a 10.40 percent return on your investment in Standard & Poor's 500 stocks. If you invested on just the first day of each month, your return wouldn't have been too shabby either: 7.78 percent.
To put it into perspective, if you had placed money in the S&P at the beginning of the year and held firm, you would be up only about 2.48 percent at this point. And you are only doing that well because stocks rallied nicely over the past two weeks. Without the September rally, you would be down 2.5 percent.
A gain of 10.40 percent versus 1 percent. For doing less work!"

The number of Americans receiving long-term unemployment benefits has risen over 60 percent in just the past year.

New construction of U.S. houses surged in August, the Commerce Department estimated Tuesday. Starts rose 10.5% in August to a seasonally adjusted 598,000 annualized units, much stronger than the 535,000 pace expected by economists surveyed by MarketWatch, but still down 6.9% from August 2009.This is the highest level since April. Starts in July were revised down slightly to a 541,000 rate compared with prior estimate of 546,000. Starts of new single-family homes rose 4.3% to a 438,000 rate in August, while starts of large apartment units rose 32.2% to 160,000. Building permits, a leading indicator of housing construction, rose 1.8% to a seasonally adjusted annual rate of 569,000.
Who will buy these house? Certainly not in Nevada with 200,000 citizens out of work. Not in Southern California. Meanwhile the level of optimism for homebuilders is at an 18-month low level.
July's residential construction was revised down to show a 0.4 percent gain, which was previously reported as a 1.7 percent increase. There was a 9.8 percent rise in permits for multi-family units. Residential construction in August was lifted by a 32.2 percent jump in groundbreaking activity in the volatile multi-family segment to an annual rate of 160,000 units.
As we can see, it is all in the reporting. Same-housing numbers down 6.9% August 2009 to August 2010 or up from the month of July 2010. In the retail business it's all about same-store sales. Comparisons on a 12-month basis for housing are highly relevant. For examples, housing completions are 23.7% below August 2009.

The Standard & Poor’s 500 Index has risen on 75 percent of the days since March 2009 when the Federal Reserve announced its interest-rate decisions, according to Rob Leiphart of Birinyi Associates Inc.

Nine NATO soldiers were killed in a helicopter crash Tuesday in Afghanistan. Nearly 2100 NATO troops have died in the nine-year Afghanistan war, with 529 alone this year.
2010 Is Deadliest Year for NATO in Afghanistan.

More than 50 million Americans are now on Medicaid.

Salary and benefits [edit] Salaries As of January 2010, the annual salary of each Representative is $174,000.[. The Speaker of the House and the Majority and Minority Leaders earn more: $223,500 for the Speaker and $193,400 for their party leaders (the same as Senate leaders). A cost-of-living-adjustment (COLA) increase takes effect annually unless Congress votes to not accept it. Congress sets members' salaries; however, the Twenty-seventh Amendment to the United States Constitution prohibits a change in salary (but not COLA[14]) from taking effect until after the next general election. Representatives are eligible for lifetime benefits after serving for five years, including a pension, health benefits, and social security benefits.

Charles Hugh Smith: "Corporate America is not even halfway through downsizing. Anyone who thinks hiring is about to explode higher is not just in an ivory tower, they are wearing blinders and earphones in the dark cellar of the ivory tower. This is the story in much of corporate America: divisions are being consolidated, closed or sold, support staff are being laid off and replaced by temps, travel budgets are being trimmed further, etc. etc. etc.
Small business is hanging on by a thread. OK, so Twitter went from 200 employees to 250--whoopie. As I have often noted here, you have to be insane to add employees in this environment. Remaining employees are working longer and harder.
The solution? Require all unemployed drawing benefits to sign up for unpaid work at a non-profit, church, temple, city agencies desperate for volunteers, etc. The fiction is that the unemployed are devoting 40 hours a week to looking for work. Since there are so few job openings out there, it doesn't take more than a few minutes a day to look for what doesn't exist (paying work)."

Stocks jumped Monday with the Dow rising 1.4% to 10,753 and the S&P gaining 1.5% to 1143, its highest close in four months.
The S&P eclipsing 1130 for the first time since late June would seem to confirm the long-awaited technical breakout for the index, and could pull many reluctant investors off the sidelines. "Many automatic buy and sell orders are set around market milestones such as these, and investors watch those levels closely for clues about which way the market may go next," the AP reports.
But the wise move now is to sell this recent rally, says Robert Prechter, president of Elliott Wave International.

Fifty-seven percent of Americans say the government should cut the $1.47 trillion deficit when the economy is in trouble and 60 percent say reducing the fiscal gap would create jobs.

With the sharp rally in equities in September, investor sentiment has shifted from bearish to bullish. Volume remains weak and there is enormous short covering and, the pundits say, risk investing has evaporated. I firmly disagree. There is an underlying race to de-risk and that is reflected in 2-year U.S. treasury bonds yielding 0.42%, an all-time record low yield! Combine that with massive insider selling and you have set the equity market up for a huge sucker punch, and a very costly one at that.

(Bloomberg) -- Former Richmond Fed President J. Alfred Broaddus and former Fed economist Dean Croushore said the Fed’s statement today saying inflation remains below levels consist with price stability suggests the central bank will act to keep prices from falling.
They spoke after the Fed said today that it is willing to ease monetary policy further to boost the economy and support prices. Villanova University professor Victor Li, OppenheimerFunds Inc. economist Brian Levitt, former Fed economist Paul Ballew and Wells Fargo Securities LLC Chief Economist John Silvia also spoke today.
“If there are clear signs, perhaps in inflation expectations, that the deflation risk is rising, then at that point the Fed will need to act decisively.”

The director of the National Economic Council, Lawrence Summers, will leave the White House at the end of the year and return to Harvard University as a professor. Summers joins Peter Orszag and Christina Romer as high-profile departures from the Obama economics team. The statement confirms a report from Bloomberg News earlier.

Crude-oil inventories rose 2.2 million barrels for the week ended Sept. 17, the American Petroleum Institute said late Tuesday. Gasoline reserves rose 2.4 million barrels, while stocks of distillates rose 2.5 million barrels. Analysts polled by Platts expected a decline of 1.5 million barrels for crude oil stocks, and flat gasoline stocks.

The Dow finished up 7.41 points, or 0.1%, at 10,761.03. But the S&P 500 index, the gauge of the broad market used by market profesionals, ended down 2.93 points, or 0.3%, at 1,137.77, weighed down a 1% drop in its financials sector. The Nasdaq Composite fell 6.48 points, or 0.3%, to end at 2,349.35.

ABC Poll: "This week 89 percent of Americans rate the economy negatively, 75 percent say it’s a bad time to spend money and 55 percent rate their own finances negatively."

Monday, September 20, 2010

Jaws of Death

9/20/10 Jaws of Death

Gordon Long: "The reality is we are on the cusp of an imminent and significant collapse in the standard of living for most Americans....My point is that there is a strong possibility that the 'Jaws of Death' is an orchestrated plan to reposition America's standard of living. A plan not for the good of Americans but for the good of the banks and those that control the $630 Trillion unregulated, off shore, off balance sheet, OTC derivative market. It is no secret that America's standard of living is no longer viable, as evidenced by a continuous and chronic deterioration in the US Balance of Payments, Trade Deficit and Current Account funding. It must be addressed and this may already be happening in a stealth fashion."

Robert McHugh: "My point is that there is a strong possibility that the 'Jaws of Death' is an orchestrated plan to reposition America's standard of living. A plan not for the good of Americans but for the good of the banks and those that control the $630 Trillion unregulated, off shore, off balance sheet, OTC derivative market. It is no secret that America's standard of living is no longer viable, as evidenced by a continuous and chronic deterioration in the US Balance of Payments, Trade Deficit and Current Account funding. It must be addressed and this may already be happening in a stealth fashion."

IBM agreed to purchase Netezza Corp. for about $1.7 billion to expand its business analytics products for sales, marketing and product development. The deal values the Marlborough, Mass., company at $27 a share, a near 85% premium to its 3-month trading average of $14.54. Netezza has 500 employees and develops products that reduce the time it takes to load and extract massive amounts of historical data so it can run analytic queries more efficiently, according to IBM. The deal is expected to close in the fourth quarter. Financial advisors for the transaction were not listed. IBM said that in the last four years it has invested more than $12 billion in 23 analytics-related acquisitions. Shares of Netezza rose 13% premarket to $27.65.

John Hussman: "Though the lags are sometimes variable, as we saw in 1974 and 2008, normal lags would suggest an abrupt softening in the September ISM report (due in the beginning of October), with new claims for unemployment softening beginning somewhere around mid-October. It's possible that the historically tight relationships that we've reviewed iin recent weeks will not hold in this particular instance, but we have no reasonable basis to expect that. Indeed, if we look at the drivers of economic growth outside of the now fading impact of government stimulus spending, we continue to observe little intrinsic activity."

Treasury two-year yields were within 2 basis points of a record low on speculation the Federal Reserve will scale back its outlook for economic growth at a policy meeting tomorrow.
Officials will take additional steps to keep borrowing costs low at a subsequent meeting, according to Mohamed A. El- Erian, chief executive officer at Pacific Investment Management Co., which runs the world’s biggest bond fund. The Fed is scheduled to buy notes maturing from September 2016 to August 2020 today as part of its effort to sustain the expansion.

The rising cost of paying interest on its debt is one reason why the Irish government may not be able to cut its budget deficit to 3% of gross domestic product in 2014, the head of Ireland's central bank said Monday.
Central Bank of Ireland Governor Patrick Honohan said in a speech that further cuts in spending or tax changes may be needed to ensure the government meets that target. Mr. Honohan is also a member of the European Central Bank's governing council.

Rob Hanna: "There was some unusual action in the VIX on Friday. As many traders are aware, it typically trades counter to the S&P 500. So on days the SPX finishes up the VIX will normally close down. I have shown several times in the past that there are often bearish implications when both the SPX and VIX rise on the same day. One quirk of the VIX is that it has a natural tendency to fall on Friday afternoons and then rise on Monday mornings. So while it is unusual to see both the SPX and VIX rise on the same day, it is especially unusual to see it happen on a Friday."

Naked Capitalism: "Everywhere we look, across occupations and sectors, people with the skills to work their jobs are more likely to be working part-time for economic reasons in 2010 than they were before the recession. This is a story of aggregate demand, not a story of skills mismatch.
In light of the political climate and the impending elections, government officials may be loath to address this problem frontally. Such an approach, while politically expedient may be disastrous for the economy and for social welfare.
If the issues of long term unemployment and the large number of people dropping out of the labor force are not addressed soon then what is an aggregate demand problem can become a structural problem through hysteresis effects. Officials need to act in a bold and imaginative manner to repair the labor markets dysfunctions-much as Roosevelt did-or risk entrenching the social misery that engulfs many Americans today."

Charles Hugh Smith: "We have become a nation of complicit takers, with roughly half the populace receiving Central State-distributed cash or benefits."

A U.S. recovery is under way but at such a moderate pace that painfully high unemployment rates will persist for some time, the Organization for Economic Cooperation and Development said on Monday.

Reggie Middleton: "A cursory review of RIM's blowout earnings actually confirm my suspicions that the company is looking at material margin compression and significantly slower revenue growth as competition continues to eat Blackberries. Yes, the company looks fundamentally strong on the surface, but a broader perspective shows that it is weakening at a an ever quicker pace."

Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.

Investors in exchange-traded funds exited U.S. stocks in droves last month, pulling out $10.7 billion in assets. Their preferred alternative: emerging markets.

The National Association of Home Builders/Wells Fargo housing market index remained at 13 in September, tying the August reading for the worst showing since March 2009 and coming in below MarketWatch-compiled economist estimates for a reading of 14. At 13, the index remains far below the 50 line that indicates that more builders view conditions as good than poor. There hasn't been a reading above 50 since April 2006. “In general, builders haven’t seen any reason for improved optimism in market conditions over the past month,” said National Association of Home Builders Chairman Bob Jones in a statement. “If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy.”
Part of the reason for the low sentiment is the hesitancy builders see among potential home buyers, said National Association of Home Builder’s Chief Economist David Crowe in a statement.
“It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87 percent of respondents reporting that their market has been negatively impacted by foreclosures,” Crowe said.

NYTmes: "Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.
After other recent downturns, older people who lost jobs fretted about how long it would take to return to the work force and worried that they might never recover their former incomes. But today, because it will take years to absorb the giant pool of unemployed at the economy’s recent pace, many of these older people may simply age out of the labor force before their luck changes."

ZeroHedge: "Malaysia which, courtesy of the FT, we learn has "bought renminbi-denominated bonds for its reserves, marking a significant advance for Beijing’s attempts to internationalise the use of its currency, pitched by Chinese policymakers as a long-term rival to the US dollar."

The Dow Jones Industrial Average gained 145.77, or 1.4%, to 10,753.62. The S&P 500 index rose 17.12 points, or 1.5%, to 1,142.71. The Nasdaq Composite gained 40.22 points, or 1.7%, to 2,355.83.

Crude oil for October delivery, the front-month contract expiring Tuesday, added $1.20, or 1.6%, to $74.86 a barrel on the New York Mercantile Exchange. The most-active November contract settled at $76.19 a barrel. Natural gas for October delivery retreated 20 cents, or 5%, to $3.82 per million British thermal units. That was the biggest one-day drop for natural gas since April 29, when it fell 8.5%.

Arnaud Mares: "The sovereign debt crisis is not European: it is global. And it is not over."

The Fed meets Tuesday to discuss interest rates, and investors are hoping for a sign that the central bank might make more moves to keep rates low. There is a growing expectation that the Fed's rate-setting committee could relaunch programs to buy Treasurys and mortgage bonds in an effort to stimulate the economy. At the very least, it might hint at future plans.
"The Fed will hint at it, put it on the table, but not do anything," predicted Brian Gendreau, a market strategist at Financial Network Investment Corp.

An ominous pattern forming in the stock market may be telling us the DOW is about to plummet to 2000-3000, says Robert R Prechter, Jr. One cause of Prechter's concern is a technical pattern called a "head and shoulders top." Historically, Prechter says, this pattern has often preceded extended bear moves. Prechter thinks the left-hand "shoulder" of this pattern was the market peak in early 2000, the "head" the higher market peak in 2007, and the "right shoulder" the recovery we're enjoying now.
If the pattern is followed by the same pullback Prechter has seen in other eras, Prechter says, the DOW could fall to 2000-3000.

Sunday, September 19, 2010


9/19/10 0.08%

WSJ: "0.08% — The annual rate at which U.S. consumers have pared down their debts since mid-2008, not counting defaults....Over the two years ending June 2010, banks and other lenders charged off a total of about $588 billion in mortgage and consumer loans, according to data from the Fed and the Federal Deposit Insurance Corp.
That means consumers managed to shave off only $22 billion in debt through the kind of belt-tightening we typically envision. In other words, in the absence of defaults, they would have achieved an annualized decline of only 0.08%...That said, the way U.S. consumers are shedding their debts isn’t encouraging. Aside from defaults, many are finding relief by refinancing mortgages at extremely low interest rates — the same low interest rates that are making it difficult for an increasing number of older folks to generate enough fixed income for a comfortable retirement. The relief might help debt-ridden consumers get into a position to start spending again sooner than they otherwise would, but the borrower’s gain is the saver’s loss."

Mike Burk: "The market is overbought going into a week that seasonally has been very weak.
I expect the major averages to be lower on Friday September 24 than they were on Friday September 17."

Indiana Rep. Mike Pence was the top choice for president among conservative activists who attended this weekend's Values Voter Summit in Washington, edging out a field of more well-known Republican figures in an early test of grass-roots support.
Pence, chair of the House Republican conference, received 24% of the vote, edging the winner of the 2009 straw poll, former Arkansas Gov. Mike Huckabee, who received 22%. Each addressed the gathering on Friday, as did third-place finisher Mitt Romney, who won 13% of the vote.
Former House Speaker Newt Gingrich, who spoke Saturday, received 10%. Former Alaska Gov. Sarah Palin, who did not attend, finished a distant fifth with 7%.

24/7WallSt: "The latest Gallup employment poll shows that “Unemployment increased to 9.4% in mid-September from 9.3% in August and 8.9% at the end of July. This finding makes it far more unlikely that there will be a significant decline in the U.S. unemployment rate prior to the midterm elections.” Total underemployment, which includes those out of work and those who work part-time by seen full-time jobs, is now 18.9%
Over 9% of Americans with part-time jobs still seek full-time jobs. This number has lingered above 9% almost all year and was 9.2% in mid-September according to Gallup.
Government employment numbers for September which will come out early next month could actually show that unemployment is worsening and that an economic recovery becomes less likely by the day."

Chinese chemical conglomerate Sinochem Group has formally asked the government to back a bid for Canada's Potash Corp , a local newspaper reported on Sunday.
The Economic Observer cited sources close to the deal as saying that, according to a preliminary assessment, Sinochem would need $40 billion to $60 billion to trump a $39 billion hostile offer by BHP Billiton for Potash Corp.
The amount would be too much for Sinochem, which reported $25 billion in total assets at the end of 2009, the Beijing-based weekly newspaper cited analysts as saying.
In its application to the government, Sinochem argued that Beijing should back a bid for the Canadian firm because potash is key to China's national food security, the paper said.

Indian conglomerate Sahara India Pariwar is in discussions about buying the debt of struggling film studio Metro-Goldwyn-Mayer for $1.5 billion to $2 billion, according to two people familiar with the matter.
The sources did not elaborate on Sahara India Pariwar's plans for MGM, which has about $4 billion in debt, and stressed that the talks were still at a preliminary stage.
"On mutual interest discussions are on but it's too early to comment on the issue," said Abhijit Sarkar, corporate communications chief of Sahara India Pariwar, which owns businesses in media, entertainment, real estate and insurance.