Saturday, October 09, 2010

Borrowed Time

10/9/10 Borrowed Time

Rob Hanna: "While the stock market is open on Monday, banks, schools, government offices, and the bond market are closed. In past years with the bond market closed, the stock market has done quite well on Columbus Day. Of course the most famous Columbus Day rally was in 2008 when the market gained over 11% after having crashed the week before. This year circumstances are much different and the market has put in some nice gains this week. In the Subscriber Letter last year I showed research that suggested an up week prior to Columbus Day typically made for a good Columbus Day."

The Automatic Earth: "In the end, the math is simple. If home prices keep falling, unemployment numbers keep rising. That correlation has been proven time and again. And if this happens (make that when), mortgage-backed securities will continue to fall in whatever "value" they still might have. That in turn means banks will need to be restructured, re-financed, re-Frankensteined.
It also means Fannie Mae and Freddie Mac become a multi-trillion dollar liability on the American people, many of whom will, the horror, the horror, by then just happen to have lost that $100,000 plus in equity on their American Dream property.
This will lead to an explosion in unemployment, since ever fewer people will have any discretionary income needed to keep stores and factories open, which will then hammer home prices even more. Consequently, tax revenues at all levels will scrape the gutters, forcing governments at all levels to lay off more workers, and so on: you can by now finish the story pourself and color the pictures. It's called debt deflation, people, and once you’re in debt way over your head as a society or as an individual there's nothing you can do but to lay low and let it run its course.
The Bureau of Labor Statistics September U3 unemployment just came in at 9.6%, unchanged from August. Curious, since Gallup put it at 10.1%. The BLS U6 number, the wider, more realistic gauge, jumped from 16.7% to 17.1%. John Williams' SGS alternate number is closing in at 23%. Only Spain resembles that in the western world.
If you can accept that 90-odd% of US banks are zombie banks (toxic assets!), that nothing has changed despite the money that was transferred from you to them, that their losses on toxic paper are far worse than anything you could ever afford, then you will have tp accept that you are zombies too, zombies, not investors, and that it's immaterial whether you make a nickel or two on gold purchases, that those matter only in Wile E. Coyote's suspended cartoon reality, not in yours.
One last thing to take with If time is money, we're living on borrowed time."

Japanese Finance Minister Yoshihiko Noda said on Friday that finance leaders from the Group of Seven nations agreed at a meeting that excessive and disorderly foreign exchange movements are undesirable.

The governing body of the International Monetary Fund on Saturday backed a plan for the international financial institution to "deepen its work" on exchange-rate movements and capital flows. In a statement following its annual meeting, the finance ministers and central bankers said capital flows and exchange rate movements were critically important to the operation of the global economy and the stability of the international monetary system. The ministers asked the IMF to conduct in-depth studies to strengthen the management of capital flows. The officials said economic recovery remains fragile and uneven. They said that countries should avoid protectionist measures.

Mike Burk: "Since late August the major indices have rallied 11% - 16% depending on the index, unfortunately most of the breadth indicators have not demonstrated the appropriate exuberance....
The 4th quarter during the 2nd year of the Presidential Cycle is one of the strongest, but, seasonality has bee turned upside down for the 3rd quarter so that pattern is in doubt. The breadth indicators are not great, but they are not negative.
I expect the major averages to be higher on Friday October 15 than they were on Friday October 8."

China’s central bank governor Zhou Xiaochuan said the global economic recovery is “weak and highly uneven” and warned that mounting fiscal deficits in developed countries may lead to renewed risks of sovereign default that would destabilize financial markets.
“Sovereign risks could deteriorate again at any time, producing systemic effects on the global financial stability,” he said in a statement released in Washington at the annual meeting of the International Monetary Fund. The developed countries, he said, “should formulate and implement credible fiscal consolidation plans, and prevent sovereign risks from damaging financial stability.”

Friday, October 08, 2010

What Payrolls?

10/8/10 What Payrolls?

The U.S. labor market shed more jobs than expected in September, as state and local governments shed workers during the month. The Labor Department said Friday that total nonfarm payrolls shrank by 95,000 in September, higher than the 8,000 loss expected by Wall Street economists. Private-sector nonfarm employment expanded by 65,000 in September, lower than the 85,000 gain expected. The unemployment rate remained unchanged at 9.6%. Economists forecast the unemployment rate to rise to 9.7%. Average hourly earnings were flat at $22.67, below the 0.2% rise economists anticipated. Earnings are up 1.7% in the past year. August and July payrolls were revised lower by a cumulative 15,000 jobs.
Government employment declined (-159,000), reflecting both a drop in the number of temporary jobs for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly (+64,000). In September, 41.7 percent of unemployed persons had been jobless for 27 weeks or more. Part-time workers for economic reasons increased by a whopping 612,000 workers.The CES Birth Death model contributed 115,000 "new jobs" to the economy including 12-thousand in construction, 17-thosuand in trade and transportation & utilities, 26-thousand in professional services and 23-thousand in leisure & hospitality.
The number of people 'not in the workforce' increased by 175,000.
For the period ended March 2010, the BLS has overestimated jobs by 366,000 (0.3%), or just over 30K jobs per month.

In Q3 2009, the nation's consumer debt was 2.4494 trillion and the run-rate announced on Thursday was just 2.4143 trillion.

Rising tensions amid an escalating global currency war has sparked talk of capital controls, but such a move would be dire for markets, warned Mark Mobius, executive chairman of Templeton Emerging Markets Group on CNBC Friday.
"We could really move into a depression globally," Mobius said, should currency controls, trade wars and trade restrictions be implemented.

The federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30, according to preliminary estimates released Thursday by the Congressional Budget Office.

Mike Shedlock: "To recap, the only way the economy can get better is if it gets worse first. So bad news is good news, and good news shows the bad news worked. Thus, all news is good news. Such is the magic of QE....the only thing keeping the unemployment rate "low" at 9.6% is a huge drop in the participation rate this year with people (at least according to the BLS) dropping out of the economy at a staggering rate."

The BRIC countries are united in opposing U.S. efforts to weaken or eliminate mechanisms to control currency fluctuations, Russia’s Finance Ministry saidBrazil, Russia, India and China will put up “strong resistance” to attempts to make a “harsh appraisal” of currency controls at the annual meeting of the International Monetary Fund and World Bank this week in Washington, Deputy Finance Minister Dmitry Pankin told reporters late yesterday.The BRIC countries “have agreed on a position that exchange rates aren’t themselves a problem,” Pankin said. “Rather they are a consequence of deeper processes, such as tendencies to save, to invest, of the investment climate.”
The huge quant fund DE Shaw actually laid off 25% of its employees, not 10% like we previously thought.

The FDIC may seek more than $1B from execs of failed banks and has authorized more than 50 lawsuits as it tries to recoup losses from the credit crisis.

ZeroHedge: "M2 continues its seemingly endless rise least on a seasonal adjusted basis. In the week ended September 27, M2 rose to a fresh record of $8,741.9 trillion: a$30.9 billion W/W jump which was the 4th largest weekly rise year to date. This was the 12th sequential increase in M2, which in 2010 has increased by over quarter of a trillion dollars. Not surprisingly, the biggest swing factor in the weekly change was the $20 billion rotation in Demand Deposits, which switched from an outflow of ($9.2) to $12.8 billion. Surely, this is precisely as the administration had intended: some may recall that last week we noted that the broke FDIC had decided to increase the insurance on demand deposits from $250,000 to infinity, precisely in hopes of achieving this effect."

Bank of America is halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process, the company announced Friday.

Gen. James Jones is calling it quits as President Obama's national security adviser, Fox News has confirmed. His resignation will be effective in two weeks.

Sanofi-Aventis SA plans to cut 1,700 jobs, or about 25% of its U.S. pharmaceutical positions, Bloomberg News reported Friday, citing a company spokesman. About 1,400 of the cuts will come from sales, and 300 jobs will be eliminated at the company's Bridgewater, N.J., offices.

The U.S. dollar fell to a fresh 15-year low against the Japanese yen on Friday, and headed towards setting a new all-time low, as the greenback fell broadly after a U.S. payrolls report solidified expectations that the Federal Reserve would easy policy further.

The 2-year U.S. Treasury bond at a fresh new all-time low yield of 0.34% and the 10-year at 2.34% as the curve flattens even more. The one-month bill yields 0.12%.

In Canada, employment decreased by 6,600 in September, an unexpected drop as analysts were expecting an increase of 10,000 jobs.

Corn futures shot up Friday after the U.S. Department of Agriculture cut crop estimates by 3.8% as bad weather cut yields. Corn for December delivery, the most active contract, added 30 cents, or 6%, to $5.28 a bushel on the Chicago Board of Trade. The USDA on Friday cut total production projections for the 2010/2011 year to 12.66 billion bushels, from 13.16 billion bushels in its September projection. Yields were down as hot summer weather, and warmer than usual nights, "did not allow corn to pollinate as it normally would," said Darrin Newsom, a senior analyst at DTN Telvent in Omaha. "There's a very, very small margin of error for 2010/2011," he said. Corn's run boosted other soft commodities; November soybeans rallied 6.6% to $11.35 a bushel, December wheat vaulted 9% to $7.19 a bushel.
The corn harvest will be 4 percent smaller than expected, while the soybean harvest will be 2 percent smaller.

Excessively expansionary U.S. monetary policy—essentially the “our currency, your problem” attitude—may eventually lead to foreign retaliation in currency markets. With the Chinese having close to $3 trillion worth of dollar assets and a U.S. bond market that is seriously overvalued and vulnerable, the current situation is unsettling to say the least. - Tony Boeckh (via ZeroHedge)

The yen at 81.72, a new 15-year low. The U.S. dollar index at 77.28.

Inventories at the wholesale level rose by 0.8 percent in August, following a 1.5 percent increase the month before, the Commerce Department said Friday. Sales rose by 0.5 percent, a slightly smaller gain than the 0.8 percent rise in July.

The Dow Jones industrial average climbed above 11,000 for the first time since early May. The Dow climbed 58 points to 11,006; the Nasdaq jumped 18 to 2401; and the S&P 500 climbed 7 points to 1,165.

Thursday, October 07, 2010


10/7/10 Dire

Yesterday, Federal Reserve Chairman Ben Bernanke delivered a speech before the the Annual Meeting of the Rhode Island Public Expenditure Council in Providence, Rhode Island. In the speech, he warned about the current state of the government finances. His conclusion, the situation is dire and "unsustainable".

A grim report prepared for Prime Minister Putin by Russian Ministry of Finance experts warns today that the United States is expected to be ordered by its G-20 counterparts at its October 21-23 meeting in South Korea to devalue the US Dollar by no less than 50% in order to stave off what is widely believed to be an imminent collapse of the World's economic system.

Natural gas futures rose Wednesday as traders moved to correct the market ahead of the weekly inventories report.
November natural gas futures settled 12.2 cents, or 3.3%, higher at $3.865 a million British thermal units on the New York Mercantile Exchange.
Prices have retreated over past weeks as moderate temperatures continue to hamper demand for gas heating. With no storms threatening offshore production in the Gulf of Mexico, supplies have stockpiled and left the market with a large surplus.
But after approaching lows not seen since August, the market has rebounded, gaining some momentum going into the government's release of weekly storage data.
The U.S. Energy Information Administration is expected to report that 78 billion cubic feet of gas were added to storage for the week ended Oct. 1, according to a Dow Jones Newswires survey of analysts and traders. It would be higher than last year's 68-bcf build and the 67-bcf five-year average addition for that week.
For the week ended Oct. 1 the build was 85-bcf.
Working gas in storage was 3,499 Bcf as of Friday, October 1, 2010, according to EIA estimates. This represents a net increase of 85 Bcf from the previous week. Stocks were 149 Bcf less than last year at this time and 220 Bcf above the 5-year average of 3,279 Bcf. In the East Region, stocks were 36 Bcf above the 5-year average following net injections of 53 Bcf. Stocks in the Producing Region were 131 Bcf above the 5-year average of 951 Bcf after a net injection of 32 Bcf. Stocks in the West Region were 52 Bcf above the 5-year average after no net change. At 3,499 Bcf, total working gas is within the 5-year historical range.

Security is the main barrier for cloud computing adoption. About 91 percent are concerned about security issues in the public cloud, with 50 percent indicating security as the primary barrier to implementation. 86 percent believe data is more secure in a private cloud. 76 percent of those surveyed feel outside vendors are not as diligent about data security as internal IT departments.
Difficulty maintaining regulatory policy compliance in the public cloud versus that of the private cloud was an issue for 81 percent of respondents.
The data provided by Harris Interactive displays the market need for an integrated approach towards security and workload management. It shows that the market is in demand of secure and compliant solutions that manage applications in cloud in an enhanced way, irrespective of if it is a private, public or a hybrid computation. Understanding these concerns of the organizations, cloud computing can move up scales within an enterprise.

Indian economy will grow by 9.7 percent in 2010 and 8.4 percent in the next fiscal year. The International Monetary Fund projected this growth based on India's growth in emerging Asia's economic standards.
However, neighbouring China is expected to grow at an even faster rate of 10.5 percent in 2010 and and 9.6 percent in 2011, driven by domestic demand, the IMF said in its latest World Economic Outlook report.

ZeroHedge: "In September $20 billion was pulled out from domestic stocks. This occured despite the nearly 9% surge in stocks."

Despite the fact that median annualized pension plan returns for the past 10 years have averaged 3%, most pension plan managers and consultants continue to assume 8% annualized returns in perpetuity.

Global commodity markets are headed for a "significant correction" by year-end, warns Sailesh Jha, managing director, Asia macro strategy & sales at Jefferies Singapore.
While the growth outlook for emerging markets is "looking pretty strong", Jha highlights that in the next two-three months "data will soften and the tide will turn".

Japan's foreign reserves hit a record-high $1.1 trillion as of the end of September, the country's Ministry of Finance said on Thursday. Japanese authorities interevened in curreny markets that month through Sept. 28, spending 2.125 trillion yen ($25.6 billion) to curb yen appreciation, the ministry said last week. On Wednesday, the ruling Democratic Party of Japan revealed its $57.6-billion stimulus plan that included examining the establishment of a sovereign-wealth fund using its massive foreign reserves. Japan would be the first Group of Seven country to create such a fund, which it has conisdered in the past, but such plans have never moved forward.

The Australian dollar traded at 98.34 U.S. cents.

Shares in Autonomy, a bellwether of the UK technology sector, fell sharply after the software company lowered its forecast for full-year revenue by 3 per cent as jitters about the pace of the economic recovery continue to weigh on customer spending decisions.
Cambridge-based Autonomy, which provides software that allows companies to search and organise information such as e-mails and phone calls, said it now expected full-year revenue growth of about 17 per cent. Consensus estimates had forecast full-year revenues at Autonomy would rise by about 21 per cent this year.

Samsung Electronics Co., the world’s second-largest maker of semiconductors, reported profit that missed analysts’ estimates after prices of computer-memory chips and flat-screens declined.

The number of people who filed new claims for state unemployment benefits fell 11,000 to 445,000 in the latest week, the lowest level since early July, the U.S. Labor Department reported Thursday. Economists polled by MarketWatch had expected initial claims to rise to a seasonally adjusted 455,000 in the week ended Oct. 2. The four-week average of new claims, which is less volatile than the weekly number, decreased by 3,000 to 455,750. Continuing jobless claims, which refers to workers who were already receiving regular weekly benefits, declined 48,000 to 4.46 million, Labor reported.

Retired NORAD Officer's New Book Predicts a Tentative Worldwide UFO Display on October 13, 2010 ... A newly-published book by a retired NORAD officer predicts October 13, 2010 as the tentative date for a fleet of extraterrestrial vehicles to hover for hours over the earth's principal cities. Author says the event to be the first in a series intended to avert a planetary catastrophe resulting from increasing levels of carbon-dioxide in the earth's atmosphere dangerously approaching a "critical mass." – Yahoo

UK housing prices just suffered their worst month in recorded history.
The average housing price dropped by 6,000 pounds, or $9,500, during the month of September alone.

Unemployed homeowners in Massachusetts will be able to take out interest-free loans of up to $50,000 to help them make mortgage payments, under a $1 billion federal program unveiled today in Roxbury by the US Department of Housing and Urban Development.

Jim Quinn: "
There is a Part 2 to the story of Consumer Deleveraging that will play out over the next decade. Consumers will deleverage because they must. They have no choice. Boomers have come to the shocking realization that you can’t get wealthy or retire by borrowing and spending. As consumers buy $500 billion less stuff per year, retailers across the land will suffer. To give some perspective on our consumer society, here are a few facts:
* There are 105,000 shopping centers in the U.S. In comparison, all of Europe has only 5,700 shopping centers.
* There are 1.2 million retail establishments in the U.S. per the Census Bureau.
* There is 14.2 BILLION square feet of retail space in the U.S. This is 46 square feet per person in the U.S., compared to 2 square feet per capita in India, 1.5 square feet per capita in Mexico, 23 square feet per capita in the United Kingdom, 13 square feet per capita in Canada, and 6.5 square feet per capita in Australia.
Despite the ongoing recession and the fact that consumers must reduce their spending over the next decade, irrationally exuberant retail CEOs continue their death march of store openings. Below are announced expansion plans for some major retailers:
* GameStop – 400 new stores
* Walgreens – 350 new stores
* Dollar General – 315 new stores
* Ashley Furniture – 300 new stores
* Target – 128 new stores
* Starbucks – 100 new stores
* Best Buy – 55 new stores
* Kohl’s – 50 new stores
* Lowes – 45 new stores"

Chip-maker Advanced Micro Devices is not going to be up for sale any time soon, its chief executive, Dirk Meyer, said today in response to Oracle’s recent interest in making acquisitions in the chip-manufacturing sector.
But the AMD executive said the company would listen to any potential propositions that would be good for shareholders, according to a report from Reuters. Meyer made the comments at an industry conference in Barcelona, Spain.

Spot gold passed a new record price of $1,364.

30-year fixed-rate mortgage average fell to a new record low of 4.27%.

The euro in recent action traded 0.7% higher at $1.4010 versus the dollar, topping the $1.40 level for the first time in eight months.

Time may be Genzyme Corp.’s best defense against Sanofi-Aventis SA’s $18.5 billion hostile takeover, after the U.S. company shed protections that could have helped deflect an unwanted suitor.
Sanofi made a $69-a-share tender offer Oct. 4, after Cambridge, Massachusetts-based Genzyme spurned that bid as too low and refused to negotiate. Genzyme no longer has a poison pill to dilute any stake Sanofi gains. It also changed its charter to re-elect all directors annually, making the board vulnerable to complete replacement by a majority shareholder.
Massachusetts law still provides a protection: it requires board approval even after a tender offer succeeds, said Mark Schoenebaum, an analyst with ISI Group Inc. Should Genzyme refuse to clear a deal, Sanofi couldn’t attempt to replace the directors until an annual meeting in mid-2011. That gives Genzyme time to show progress in fixing manufacturing defects that slashed drug sales, and to show the promise of up-and- coming experimental treatments, said Les Funtleyder, an analyst with Miller Tabak & Co.

The Dow Jones Industrial Average fell 19.07 points, or 0.2%, to end at 10,948.58. The S&P 500 index fell 1.91 points, or 0.2%, to 1,158.06, weighed down by telecoms and materials. The tech-heavy Nasdaq Composite, however, finished slightly higher, gaining 3.01 points, or 0.1%, to 2,383.67.

Shares of Adobe Inc. jumped more than 8% late Thursday afternoon on a report of a secret meeting the company held with executives of Microsoft Corp. Adobe shares were last up $2 at $27.73 -- coming off their lowest level in 15 months. The New York Times reported on its Bits blog that Microsoft CEO Steve Ballmer and a team met with Adobe CEO Shantanu Narayen at Adobe's offices in San Francisco. The meeting lasted an hour and covered topics ranging from Apple's control of the mobile phone market and the possibility that Microsoft and Adobe could merge, according to the report, which cited unnamed sources.

(Bloomberg) -- For $2 trillion, Federal Reserve Chairman Ben S. Bernanke may buy little improvement in growth, employment or inflation over the next two years.
Firms with large-scale models of the U.S. economy such as IHS Global Insight, Moody’s Analytics Inc. and Macroeconomic Advisers LLC project only a moderate impact from additional Fed asset purchases. The firms estimate that the unemployment rate will remain around 9 percent or higher next year whether the Fed buys $500 billion or $2 trillion of U.S. Treasuries in a second round of unconventional stimulus.

The 2-year Treasury bond yield again fell to an all-time low of 0.35%, the 10-year at 2.38%, and the 30-year at 3.71%.

Wednesday, October 06, 2010

The Put

10/6/10 The Put

Companies in the U.S. private sector shed 39,000 jobs in September, according to the ADP employment report released Wednesday. The reading was below than economist's expectations of a 20,000 gain. This is the first decline in the ADP report since January. In August, companies added a revised 10,000 jobs, up from the initial estimate of a drop of 10,000. According to ADP, the goods-producing sector lost 45,000 jobs in September, including 17,000 in manufacturing. The service sector added 6,000 jobs. On Friday, the Labor Department will release its monthly employment report. Economists expect nonfarm payroll fell 8,000 in September after falling 54,000 in August. The unemployment rate is expected to inch higher to 9.7%. The private sector is expected to add 85,000 jobs, up from 67,000 in the prior month.

Large businesses, defined as those with 500 or more workers, saw employment decline 11,000 while employment among medium-size businesses, defined as those with between 50 and 499 workers, decreased by 14,000. Employment among small-size businesses, defined as those with fewer than 50 workers, decreased by 14,000.

A lot of fellows nowadays have a B.A., M.D., or Ph.D. Unfortunately, they don't have a J.O.B. ~"Fats" Domino

Peter Morici: "Permanent increases in federal spending and regulatory burdens are further encouraging outsourcing and discouraging hiring....
the government's share and federal deficits are likely to be much greater than President Obama's economic team is projecting.
Too much spending will require too many new taxes-and not just pushing rates marginally above 50 percent on families earning $250,000. Fears about new taxes and more regulations are stifling business investment and further encouraging outsourcing."

The prospects in the global real estate sector are “dismal,” with a downturn that could last eight years, the International Monetary Fund warned Wednesday.

U.S. economic growth will be much weaker this year and in 2011 than previously thought and that dims hopes for bringing down a very high unemployment rate anytime soon, the International Monetary Fund said on Wednesday.
In a sober assessment of the U.S. outlook, the IMF pulled down its estimate for 2010 growth to 2.6 percent from the 3.3 percent it published in July and said gross domestic product or GDP will expand 2.3 percent in 2011 instead of 2.9 percent.
"The most likely prospect for the U.S. economy is for a continued but slow recovery, with growth far weaker than in previous recoveries, considering the depth of the recession," the IMF said in its World Economic Outlook published ahead of weekend semi-annual meetings of it and the World Bank.
The IMF said the main reason the U.S. recovery is so weak is that consumer spending is sluggish and suggests it is little wonder that is the case. Falling home prices have reduced household wealth, 9.6 percent of the workforce is unemployed, banks won't lend and people are scared into saving.

The Automatic Earth: "
And talking about "would you buy stocks in the face of this data", for a preview of next time: we're fast on our way back to what "we" were 60-70 years ago, when there were 90%+ less "investors" relative to the total population than there are today. Talk about a dying breed. Banks are not the only zombies in our economies. We're all zombies. All our wealth has evaporated, and we're just not clueing in. Pension fund? Gimme a break. Value of your home? Get real. Indispensable at your job? Let's not go there."

The number of Americans receiving food stamps rose to a record 41.8 million in July as the jobless rate hovered near a 27-year high, the government said. Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases jumped 18 percent from a year earlier and increased 1.4 percent from June, the U.S. Department of Agriculture said today in a statement on its website. Participation has set records for 20 straight months.

General Electric will acquire Dresser, an energy infrastructure technology and service provider, in a deal worth $3B. Privately-held Dresser posted 2009 revenues of $2B and earnings of $318M.

The yield on the 2-year Treasury declined to an all-time low of 0.38%, the 10-year to 2.37%, and the 30-year to 3.64% as the yield curve continues to flatten. As investors cheer the Fed put, interest income hampers those on fixed incomes. As the population ages, low interest rates will hurt consumer
spending and the latter is much more important than the Fed put.

Costco Wholesale Corp posted higher quarterly profit on Wednesday as consumers began spending more on discretionary items such as apparel.
Net income rose to $432 million, or 97 cents a share, in the fiscal fourth quarter ended August 29, from $374 million, or 85 cents a share, a year earlier.
Quarterly sales rose 8 percent to $23.59 billion.
Analysts had forecast a profit of 95 cents a share, on revenue of $24.23 billion, according to Thomson Reuters I/B/E/S.
The largest U.S. warehouse club operator also said same-store sales rose 4 percent in September, excluding the impact of gasoline sales.

Oct. 6 (Bloomberg) -- Goldman Sachs Group Inc. said the U.S. economy is likely to be “fairly bad” or “very bad” over the next six to nine months.
“We see two main scenarios,” analysts led by Jan Hatzius, the New York-based chief U.S. economist at the company, wrote in an e-mail to clients. “A fairly bad one in which the economy grows at a 1 1/2 percent to 2 percent rate through the middle of next year and the unemployment rate rises moderately to 10 percent, and a very bad one in which the economy returns to an outright recession.”

Nobel Prize-winning economist Joseph Stiglitz said the Federal Reserve’s policy of cutting interest rates to a record low has had repercussions worldwide, including currency misalignments and the risk of asset price bubbles.
“Fed policy was supposed to reignite the American economy, but it’s not doing that,” Stiglitz, a professor at Columbia University in New York since 2001, said in a Bloomberg Television interview today. “The flood of liquidity is going abroad and causing problems all over the world.”

The recession put a 3.1 percent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released Tuesday.

According to outplacement consulting company Challenger, Gray & Christmas, employers planned to lay off 37,151 workers in September, up 7 percent from the 34,768 planned job cuts in August, a low for 2010.

The dollar touched an eight-month low versus the euro on speculation the Federal Reserve will join the Bank of Japan in increasing purchases of government debt to sustain an economic recovery.
The Dollar Index fell to levels last seen in January before reports this week forecast to show applications for U.S. unemployment benefits rose and the jobless rate climbed. The yen strengthened past 83 per dollar for a second day, moving close to the lowest since the BOJ intervened to weaken its currency last month, while the Australian dollar rose to a two-year high. The euro dipped after Fitch Ratings downgraded Ireland’s credit, before recovering most of the drop. The dollar fell to a 15-year low versus the yen.

The White House blocked efforts by federal scientists to tell the public just how bad the Gulf oil spill could have been, according to a panel appointed by President Barack Obama to investigate the worst offshore oil spill in U.S. history.
In documents released Wednesday, the national oil spill commission's staff reveals that in late April or early May the White House budget office denied a request from the National Oceanic and Atmospheric Administration to make public the worst-case discharge from the blown-out well. The Unified Command — the government team in charge of the spill response — also was discussing the possibility of making the numbers public, the report says, citing interviews with government officials.
The White House did not immediately respond to a request for comment.

Gold soars to record, settles at $1,347.70/oz. Silver rose 23 cents to $23.05.

Working-class whites are favoring Republicans in numbers that parallel the GOP tide of 1994 when the party grabbed control of the House after four decades.
The increased GOP tilt by these voters, a major hurdle for Democrats struggling to keep control of Congress in next month's elections, reflects a mix of two factors, an Associated Press-GfK poll suggests: unhappiness with the Democrats' stewardship of an ailing economy that has hit this group particularly hard, and a persistent discomfort with President Barack Obama.
Crude-oil for November delivery rose 41 cents, or 0.5%, to $83.23 a barrel on the New York Mercantile Exchange. Natural-gas futures advanced 12 cents, or 3.3%, to $3.87 per million British thermal units.
Companies have almost exhausted the strategy of boosting earnings by cutting workers and other costs, and consumers grappling with lower home values and unemployment of 9.6 percent aren’t inclined to spend, said Walter “Bucky” Hellwig, a Birmingham, Alabama-based senior vice president at BB&T Wealth Management, which oversees $17 billion.
Verizon, which is cutting 13,000 jobs in the fixed-line phone business to cope with subscriber losses, is forecast to post 10 percent lower adjusted profit in the third quarter and little-changed earnings in the fourth quarter.
If you don't like your job you don't strike. You just go in every day and do it really half-assed. That's the American way. ~Homer Simpson, The Simpsons

The Dow Jones Industrial Average is unlikely to move much higher than its current level as a long-term "diamond" pattern is signalling weakness ahead, Chris Zwermann, global strategist at Zwermann Financial, told CNBC Wednesday.
Airport in inner Mongolia is reportedly shut down because of UFO sightings.

The Dow Jones Industrial Average closed up 22.93 points, or 0.2%, to 10,967.65. The Nasdaq Composite tumbled 19.17 points, or 0.8%, to 2,380.66, with software firms particularly hard hit after a revenue warning from data-storage services company Equinix Inc.. The S&P 500 lost 0.78 point, or 0.1%, to 1,159.97.

Tuesday, October 05, 2010


10/5/10 Guaranteed

The Bank of Japan unexpectedly slashed its key interest rate to near zero.
Japan's central bank cut its benchmark interest rate to a range of zero to 0.1% and said it may create a fund of up to $60 billion to purchase government securities and other assets.

- Activity in the nation's services sector expanded in September, according to the Institute for Supply Management's non-manufacturing index released Tuesday. The index climbed to 53.2% from 51.5% in August. Economists polled by MarketWatch expected the services index to climb to 52.3%.
Japan's central bank cut its benchmark interest rate to a range of zero to 0.1% and said it may create a fund of up to $60 billion to purchase government securities and other assets.

"The unexpected Japanese decision to expand its balance sheet speaks to the fragility of the global recovery and further aids the already consensus view that another full round of asset purchases from the Fed is forthcoming," said strategists at CRT Capital Group. Moody's Investors Service also put Ireland's rating on downgrade for review, signaling continued problems in European sovereign debt.

Gymboree Corp., the Burlingame, Calif., kid's-clothing retailer, has hired Goldman Sachs to find a buyer, the New York Post reported. Sources told the paper that a number of private-equity firms are interested in the retailer, and one source said Leon Black's Apollo Management has approached the firm and is expected to join the auction. People close to the situation said management initially demanded $55 to $60 a share for Gymboree, the Post reported. The shares closed Monday at $48.24.

Gold for December delivery rose $12.80 to $1,329.60/oz on Globex in midmorning European trade, a fresh record for a front-month contract.

California may have to issue IOUs unless lawmakers agree to delay paying some of the bills that accumulated as Governor Arnold Schwarzenegger and legislative leaders negotiated a budget compromise, a spokeswoman for the controller’s office said.
The deferrals are needed because California racked up $8.4 billion of delinquent bills as it operated without a spending plan for more than three months, said Hallye Jordan, spokeswoman for Controller John Chiang. That’s more than the $5 billion bridge loan Treasurer Bill Lockyer is lining up from a group of Wall Street banks to tide the state over.

Across the country, a growing number of towns, cities and other local governments are seeking refuge in similar havens that many states provide as alternatives to federal bankruptcy court. Pennsylvania will have 20 cities and smaller communities in its distressed-cities program if Harrisburg receives approval. Michigan has 37 in its program; New Jersey has seven; Illinois, Rhode Island and California each have at least one. This is on top of troubled housing, power and hospital authorities.
The increasingly common pleas for state assistance — after two relatively quiet decades — reflect the yawning local budget deficits that have appeared in the last two years.
As tax revenue has fallen, the cost of providing labor-intensive government services, like teaching and policing, has proved hard to reduce.

New orders for manufactured goods in August, down three of the last four months, decreased $2.2 billion or 0.5 percent to $408.9 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent July increase. Excluding transportation, new orders increased 0.9 percent. Shipments, also down three of the last four months, decreased $2.5 billion or 0.6 percent to $415.1 billion. This followed a 1.2 percent July increase. Unfilled orders, down following four consecutive monthly increases, decreased $0.1 billion to $804.0 billion. This followed a slight July increase. The unfilled orders-to-shipments ratio was 5.59, up from 5.53 in July. Inventories, up seven of the last eight months, increased $0.7 billion or 0.1 percent to $526.4 billion. This followed a 0.9 percent July increase. The inventories-to-shipments ratio was 1.27, up from 1.26 in July.

"FDIC Board Proposes Rules on Temporary Unlimited Deposit Insurance Coverage for Noninterest- Bearing Transaction Accounts"

Russia Today is reporting the "Coldest Winter in 1,000 years is on the way."

Bruce Krasting: "The US fiscal year is over. Social Security has published eleven months of data. They have provided sufficient information to come up with hard estimates for September. Some numbers:

2010 Fiscal Cash Flow = -$35b.

Payroll Tax Receipts minus Benefits Paid = -$22b.

Of interest is that $25b of the $35 cash deficit was a negative adjustment from prior years. There has been no additional information how this overstatement took place. In the scheme of Washington these days missing $25b is a not a big deal."

Silver for December delivery rallied 70 cents, or 3.2%, to $22.74 an ounce.

Saks said it will close its Saks Fifth Avenue store in Southampton, N.Y., on Saturday, and its Saks Fifth Avenue OFF 5TH stores in Reno, Nev., on Jan. 1.

The Federal Reserve Bank of New York purchased $5.19 billion in Treasury bonds on Tuesday, part of officials' pledge to reinvest cash from maturing mortgage-backed securities and housing agency debt back into the bond market to support the economic recovery. Dealers offered to sell the Fed $23.621 billion in debt maturing from 2016 to 2020.

Ultra-loose monetary policies by the U.S. Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize winning economist Joseph Stiglitz said on Tuesday.
A "flood of liquidity" from the Fed and the ECB is bringing instability to global foreign exchange markets, Stiglitz told reporters after a conference at Columbia University.
"The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy," Stiglitz said. "It's doing nothing for the American economy, but it's causing chaos over the rest of the world. It's a very strange policy that they are pursuing."

ZeroHedge: "After last week saw an insider selling to buying ratio of 1,411 to 1, this week the ratio has nearly doubled, hitting a ridiculous 2,341 to 1. And while Wall Street's liars and CNBC's clowns will have you throw all your money into "leading" techs like Oracle and Google, insiders in these names sold a combined $200 million in stock in the last week alone (following Oracle insider sales of $223 million in the prior week). Insiders can. not. wait. to. get. out. fast. enough. This Fed-induced rally is nothing short of a godsend for each and every corporate executive. But yes, there may be value: there was insider buying in 2 (two) companies last week: General Dynamics and Best Buy, for a whopping total of $177,064. At the same time sales were a total of $414 million: so is anyone wondering why JPMorgan is reopening its gold vault... Anyone left holding the bag on this market when the FRBNY props are taken away, will be left with the same return as all those investors who entrusted their money with Madoff. Guaranteed."

Antal E. Fekete: "The way to return to the gold standard is for the US government to open the US Mint to gold -- as ordained by the American Constitution that has been violated by power-hungry presidents such F. D. Roosevelt and his successors, every one of whom swore to uphold it, only to turn around and trample on it.
It would be an extraordinary act of statesmanship if a new president reinstated the monetary provisions of the American Constitution.
There is no other way to prevent the collapse of the debt tower, or to fend off the tsunami of unemployment and the global breakdown of law and order."

Retail sales in the 16 countries that use the euro unexpectedly fell during August, official figures showed Tuesday, in another sign that consumer confidence remains fragile despite a stronger than anticipated economic recovery. Eurostat, the EU's statistics office, said eurozone retail sales dropped by 0.4 percent in August from the previous month, in contrast to market expectations for a 0.2 percent increase. August's decline was the first since April, though the monthly increases since then have been small.

The U.S. budget deficit for the 2010 fiscal year ended Sept. 30 is likely to be close to 10 percent of gross domestic product, or almost as large as the previous year’s shortfall, a Treasury official said.

U.S. crude for November delivery rose $1.17 or 1.44 percent to $82.64 per barrel by 11:59 a.m. EDT, having reached a two-month high at $82.82.
ICE Brent November crude rose 85 cents or 1.02 percent to $84.13 a barrel.

Gary Shilling says the growing housing surplus may depress prices another 20%, bringing the total decline from the 2006 peak past 40%. He says this would merely return prices back to the flat trend from 1890, pointing out that prices may fall below trend on the way down, just as they overshot on the way up, as is often the case in cycles.

"The Fed has little tools in terms of giving the economy a new pulse," says van Ark of the Conference Board. "It can avoid things getting worse. In the meantime we are looking at huge issues that need to be resolved. For that we need growth."

Microsoft chief executive Steve Ballmer apparently told the London School of Economics Tuesday that the company will debut its own tablets as early as this Christmas, according to multiple news reports.

"The problem is you have consumers who are still very wary," he says. "Unless you change the mood of the consumer, spending is not going to fall of a cliff. But by the same token, it's not going to be robust anytime soon."

The Dow soared 193 points, the Nasdaq 55 points, and the S&P 23 points.

Economists expect Friday's jobs numbers to be a wash—private payrolls likely increased 75,000 but the government cut another 78,000 Census workers from its payrolls.
When factoring in the other variables, that probably means zero jobs growth and an unemployment rate inching up to 9.7 percent from 9.6 percent, mainly because more unemployed people rejoined the search for work.

ZeroHedge: Since the end of July "our biggest creditor (China) has lost over $100 billion when adjusted for the purchasing power loss in the dollar."

Monday, October 04, 2010


10/4/10 Vigilant

John Hussman: "To obtain a broad indication of economic performance, we averaged eight different measures reported by the ISM and the Federal Reserve. These included the ISM National, Chicago, Cincinnati and Milwaukee surveys, as well as the Federal Reserve's Empire Manufacturing, Philadelphia, Richmond and Dallas surveys. The average (standardized) values of the Overall, New Orders and Backlog components of these indices turned uniformly negative last month."

Sara Lee Corp. rose 17% in preopen trading on Monday after the New York Post reported that the company turned down a buyout offer from investment firm KKR & Co. that would have valued the well known company at about $12 billion. The paper cited two unnamed people familiar with the situation.

Sanofi-Aventis said Monday that it has launched a hostile $18.5 billion offer for Genzyme Corp. after the U.S. company previously rejected an approach at the same price. The offer is worth $69 a share in cash, representing a 31% premium to the average price over the month before speculation began that it had approached Genzyme. "While Sanofi-Aventis' strong preference is to engage in constructive discussions with Genzyme, Genzyme's board and management team's continued refusal to do so has led Sanofi-Aventis to commence the tender offer," the company said in a statement. Sanofi-Aventis added that it has met with shareholders holding more than 50% of Genzyme and said those shareholders were "frustrated with Genzyme's persistent refusal to have meaningful discussions regarding Sanofi-Aventis' proposal." The offer is scheduled to expire on Dec. 10.

The Pakistani Taliban has said they carried out another attack on a fuel depot supplying NATO troops in Afghanistan.
Police now say three have been killed and more than twenty-five oil tankers destroyed during the Monday morning attack near the capital Islamabad.
This is the second such incident since Friday when Pakistan closed one of the main routes used by NATO supply trucks into Afghanistan.

Isilon Systems Inc., the maker of devices used to store video, audio and digital images, is seeking bidders for a possible sale, according to two people briefed on the matter. The company hired Frank Quattrone’s Qatalyst Partners to canvas would-be acquirers, said one of the people, who declined to be identified because the plans haven’t been made public. Isilon, based in Seattle, is seeking to emulate the bidding war that surrounded rival data-storage maker 3Par Inc., both people said.

For the first time in more than a year analysts are cutting their forecasts for Standard & Poor’s 500 Index earnings.

There was a new all-time low yield for the 2-year U.S. treasury at 0.3987%.

U.S. factory orders fell by 0.5% in August, the Commerce Department reported Monday.
The 0.5 percent decrease in total bookings compared with a 0.4 percent drop projected by the median forecast of economists in a Bloomberg News survey.

Sales of homes in the U.S. rose 4.3% in August, based on the number of contracts signed. The National Association of Realtors said its pending home sales index rose to 82.3 from 78.9 in July. Pending sales reflect contracts signed between home buyers and sellers. The closing of a sale usually takes a few months. Lawrence Yun, chief economist of NAR, said ultra-low interest rates are drawing buyers back into the market, though the housing sector is still subdued. A year earlier, the pending home sales index stood at 103.0. Pending sales fell in the North but rose in all other regions.

Japan has warned its citizens to be vigilant while traveling in Europe because of the threat of an al-Qaeda commando-style attack, in a new travel advisory.

U.S. consumer bankruptcy filings rose 11% in the first nine months of this year, versus the same period in 2009, the American Bankruptcy Institute said Monday, citing data from the National Bankruptcy Research Center. Filings totaled 1,165,172 nationwide during the first nine months of 2010, compared to 1,046,449 total consumer filings during the same period a year ago. The bankruptcy filings so far in 2010 represent the highest total since 2005. "We expect that there will be nearly 1.6 million new bankruptcy filings by year end," ABI Executive Director Samuel Gerdano said in a statement. Consumer bankruptcies totalled 130,329 in September. That was 3.3% up from August 2010.

ZeroHedge: "Ever heard of the oxides of Lanthanum, Cerium, Neodymium, Praseodymium and/or Samarium? With price surges between 250% and 600% in one quarter, you may wish you have. The recent pissing contest between Japan and China, which culminated with a temporary export ban in rare earth metals such as those named above, translated in ridiculous price jumps in some compounds most have never even heard of, let alone traded, yet which would have made not only the year, but the decade for hedge funds invested in them. And with China producing more than 90% of the world's supply of rare earth minerals, coupled with increasing probability of escalating global (and regional) trade wars, it is distinctly possible that the gains recorded recently in gold will be dwarfed by the imminent Samarium Oxide bubble, which 3 months ago was trading at $4/kg and is now over $30."

The Dow Jones Industrial Average fell 78.41 points, or 0.7%, to 10,751.27. The S&P 500 index dropped 9.21 points, or 0.8%, to 1,137.03, while the Nasdaq Composite fell 26.23 points, or 1.1%, to 2,344.52.

David Rosenberg: ""I think fourth quarter [GDP] can be flat to negative, as almost all the GDP growth in Q3 was from auto-production."

Like all valuable commodities, truth is often counterfeited. ~James Cardinal Gibbons

Sunday, October 03, 2010


10/3/10 Foreclosing

- Shoreline, Wash.-based Shoreline Bank was closed by regulators late Friday, marking the 129th U.S. bank failure of the year. Shoreline Bank had about $104 million in assets and $100 million in total deposits as of June 30, the Federal Deposit Insurance Corp. said in a statement. The bank failures will cost the federal deposit insurance fund $41.4 million, the FDIC said. The Shoreline bank failure comes shortly after Crawfordville, Fla.-based Wakulla Bank was also closed by regulators earlier Friday.

A major title insurance company has stopped insuring homes foreclosed by JPMorgan Chase, another sign that the controversy over the legal practices of the big lenders is starting to influence the housing market.

The service sector accounts for less than 45% of China's GDP.

Chinese Premier Wen Jiabao offered Greece a major vote of confidence, saying China will buy Greek bonds and create a $5 billion fund to help Greek shipping companies buy Chinese ships.

Daniel Aaronson & Lee Markowitz: "September's stock market rally, the best September since 1939, was impressive not only because of its magnitude, but also because of its influence on investor sentiment. The American Association of Individual Investors (AAII) sentiment poll surged from 20.7% bulls on August 26, 2010 to 50.9% bulls as of September 16, 2010. While the three week increase may not seem significant, an increase this big has only occurred 7 other times during the 1204 weeks since AAII started accumulating this data in 1987. The change in optimism can be attributed to a newly held view, recently conveyed on CNBC by a well-known investor, that investing in stocks is a win-win proposition because either the economy will grow or the Federal Reserve will print enough money to make the stock market rise. Since investing is never risk-free, we question any thesis suggesting that one cannot lose."

Crude for November delivery was up $1.61, or 2%, to $81.58 a barrel on the New York Mercantile Exchange. That’s the highest close for crude oil since Aug. 9, and the first settlement above the $80 mark since Aug. 10.

China pledged on Sunday to support a stable euro and not reduce its holdings of European government bonds in an effort to deflect criticism of its foreign exchange policy ahead of an EU-China summit this week.

William Ernest Hocking: "We cannot swing up on a rope that is attached only to our own belt."

A Gallup survey shows mental health cases are up more than 25 percent on the Gulf Coast since the three-month disaster ruined livelihoods.

Asha Bangalore: "The third quarter average of the ISM index stands at 54.4 vs. 58.8 in the second quarter, which suggests a slowing of economic activity in the third quarter." If the GDP were to turn negative in the 4th quarter, there is a greater chance for deflation to appear-- not just in housing and unemployment and wages but in capital investment, borrowing, lending, and risk taking.
As such, one should consider taking profits in copper and gold.

Levels of some cancer-causing oil compounds rose significantly in the waters off the Louisiana coast during the BP spill in the Gulf of Mexico, according to Oregon State University researchers."It's an incredibly huge jump in concentration in a natural environment," said Kim Anderson, an OSU environmental toxicology professor, who found a 40-fold increase in polycyclic aromatic hydrocarbons, or PAHs, from May to June.

Daring is not safe against daring men.

John Browne: "the debt-to-GDP ratio of the United States is currently 65 percent, which puts the country towards the solvent end of the debt spectrum among developed Western nations. However, the real debt-to-net GDP ratio is a staggering 358 percent, making the U.S. the most insolvent nation in the group, behind even Greece!
In the interest of brevity, I will only touch on the fact that the above number is actually still an underestimate. It does not account for the portion of gross GDP claimed by state and municipal governments to service their debts. After all, all levels of government tax the same base. So, the effective portion of GDP available to the federal government is even smaller still."

ZeroHedge: "If there is another systemic risk flaring episode, and Ireland is most certainly shaping up to be the next Greece and Portugal, just how will banks proceed to raise much needed liquidity, which has dropped from nearly €400 billion in late Q2 2010 to just above zero, and the lowest since the Lehman bankruptcy."

CalculatedRisk: "Buck Wargo at the Las Vegas Sun reports that "extend and pretend" for commercial real estate (CRE) might be ending: Lenders gaining speed in going after commercial foreclosures
[The] tsunami of commercial foreclosures ... never materialized as ... lenders were working with owners to lower interest rates and extend loans ... Now that philosophy is starting to change.

"[A] number of banks have been hesitant to pull the trigger on foreclosures, but we have seen recently banks are beginning to go ahead with the foreclosure process.” [said John Delikanakis, an attorney with Snell & Wilmer]"