Saturday, October 30, 2010

What Treats?

10/30/10 What Treats?

John Mauldin: "The looming expiry of the emergency unemployment benefits in the U.S. poses a very large risk to aggregate personal income over the next few quarters. Currently, combined with state programs, someone who loses their job is entitled to 99 weeks of unemployment benefits (a "99er"). However, the extended benefits are set to expire on November 30th, and our back-of-the-envelope calculations shows nearly a million 99ers will be cut off in December alone, with the remainder (about 3 to 4 million) falling off the rolls by April.
"Given that the average weekly unemployment cheque is about $300/week, this amounts to nearly $80 billion (annualized) loss of aggregate income over the next few quarters. This means that personal income could fall by 1.0% QoQ annualized for each of the next three quarters, starting in Q4. The 2% QoQ real GDP estimates pencilled in for Q4 2010 to Q2 2011, will look far too optimistic if such a loss of income does occur. Given that material downside risk to growth going forward, we intend to do more detective work on this file."Government checks of one form or another are about 20% of total personal income in the US. Will the lame-duck Congress extend those benefits? Will they extend the Bush tax cuts? I just (literally) got off the phone with Suze Orman. She said she thinks they should raise the limit to $500,000 or $1 million. That higher number would be a reasonable compromise, in my humble opinion. Will the Republican Congress and Senate agree when they come back?"

Treasury 30-year bond yields climbed the most in 10 months in October as U.S. securities fell amid speculation that asset purchases by the Federal Reserve will reignite inflation.

Bloomberg (Simone Meier): "Swiss central bank President Philipp Hildebrand said there are signs the bank's record-low interest rates could fuel a property bubble, suggesting he's growing uncomfortable with the current policy. 'The longer monetary policy remains expansive, the greater the risk that it will have undesirable consequences,' Hildebrand said..."

Tim W. Wood: "History shows us that bear markets run about a third the duration of the preceding bull market. With the preceding bull market having run 33 years from the 1974 low, the 17 month decline into the March 2009 low was not THE bottom. As price moved down into the March 2009 low I began telling my subscribers that the rally out of that low would be a rally of a higher degree and that the longer the rally lasted the more dangerous it would become. What I meant by that was that the longer the rally lasted, the more convinced people would become that the THE bottom had been seen. At this point, there seems to be very few who even have a return trip back to the March 2009 levels on their radar screens, much less a continuation of the longer-term bear market. So, in that regard the bear has done a pretty good job of convincing the public that the bottom is place."

Macro Man: "You know QE expectations are getting a bit out of hand when...

Goldman calls for $2trn.
Rumours fly around that the Fed may eventually do $4trn.
China starts complaining that the Fed is about to purchase $1trn of USTs despite buying a similar amount themselves.
Xerox is up 36% since Jackson Hole.
Your Mom calls you asking what QE is.
The BoJ buys a promissory note from TMM for $1bn whose principal is equal to their combined yearend bonuses price in Gold today.
IBM issues a super long bond.
Mexico issues a really super duper long bond.
You find out that both of these organisations have a guy who had Bernanke as a thesis advisor in their Economics PhD program before joining their respective Treasury departments.
Greek tourist-tat shops sell QE wallets three times the size of normal ones.
The guy that trades European Telecoms on the Equity floor explains to you how QE works.
The TDI (Taxi Driver Index) flashes Red when your taxi driver starts using QE to justify the Gold he bought in May.
A word score of 36 in Scrabble is nicknamed "scoring a QE" in old folks homes.
Your FX sales shag starts giving you minute by minute updates about 10s30s, but doesn't know what "10s30s" is.
Handing out an extra 200,000 quid to all players when any one goes bankrupt is now mandatory and in the official rules of Monopoly.
The DPI (Dinner Party Index) flashes Red when you are in Islington and the Guardianistas around the table start debating just how much more QE is needed.
Your Mom calls you back and asks if she should put her 401k in Gold to hedge against inflation.
Bill Gross, an otherwise nice guy, goes on a rampage, and while not naming names is clearly not happy with the FOMC right now.
The UK decides to privatise the Royal Mint.
Your Mom calls you again and explains to you how QE works."
Comedy Central funnymen Jon Stewart and Stephen Colbert will hold a rally on the National Mall Saturday, putting a satirical spin on partisan politics three days before midterm elections.
Stewart and Colbert's "Rally to Restore Sanity and/or Fear" is scheduled to start at noon.

Paul McDougall, Information Week: "Microsoft's Windows Phone 7 will hit stores in November, but most analysts believe the offering, though slick in many respects, is too little, too late to meaningful bolster the company's meager 5% share of the mobile OS market.
Where does all this leave Microsoft? Out in the cold within just the next few years unless big changes are made—and those changes need to start at the top. The best thing Ballmer can do to preserve his legacy and ensure he's not Microsoft's last CEO is to start assembling a new management team that can build a foundation for real change--and rid the company of its PC-centric focus.
Ballmer has said he wants to stick around until about 2018. But realistically he's only got a couple of years to make Microsoft a leader in the categories that matter going forward—cloud, social media, mobile, and tablets. If he fails, he'll be out the door, possibly within months if Windows Phone 7 turns out to be as big a bomb as the KIN phone. If that happens, Microsoft's status as a tech industry leader won't be too far behind him."

John Taylor: "As the US authorities turn to a tighter monetary and fiscal policy, driving the country into a recession, causing the US and its banking system to withdraw liquidity forcing the dollar higher, the ECB will be forced to be more accommodative. Our analysis argues that the month of November will see the flash point that begins to reverse the markets’ optimistic course."

A Russian weapons company is marketing a new missile system that is hidden inside an ordinary shipping container. It can turn a ship, train or truck into a long range missile launcher. Channel Two Action News anchor Justin Farmer investigated the threat and found officials at the Port of Savannah had never heard of the Club K Missile system.

Teddy Roosevelt: "The nation behaves well if it treats the natural resources as assets which it must turn over to the next generation increased, and not impaired, in value."

Jeff Madrick: "In contrast, after years of denigration by some politicians and economists, Social Security benefits have become a comparatively easy target.
Tied up in this is the inexplicable notion that current Social Security benefits—which for the second year in a row are not being adjusted for inflation—are adequate. The average monthly benefit is now $1400. And Social Security accounts for 90 percent of income for one third of retired Americans. Women receive less on average because they have fewer working years. And now most American workers have seen their 401(k) savings fall sharply as a result of the financial crisis. More important, the value of homes, which are many Americans’ main asset, has collapsed."

The parcel bombs sent from Yemen destined for the United States have hallmarks of the militant group al Qaeda or its affiliate al Qaeda in the Arabian Peninsula, U.S. Homeland Security Secretary Janet Napolitano said on Saturday.

ZeroHedge: "One company which has somehow managed to slip through the cracks is the infamous General Electric: the company, that in addition to the banks, has been the biggest beneficiary of Obama's taxpayer largesse. Here are the numbers: in the period between 1991 and 2009 GE's pretax income is cumulatively $293 billion on which however the firm has paid only $25.2 billion in current domestic taxes, or a 8.58% cumulative tax rate. Yet where it gets wild is the narrower period between 2002 and 2009, during which timeframe the firm made a generous $164.4 billion in pretax net income (not to mention $639 billion in domestic revenue, just over half of total revenues of $1.2 trillion) it paid only $5 billion in domestic current taxes, or a 3.17% tax rate! So our question to the administration is how does $639 billion in domestic revenue, and $164 billion in total net income, result in $5 billion in taxes?"
Now that's a treat!!!!

The human mind treats a new idea the same way the body treats a strange protein; it rejects it.
P. B. Medawar
British (Brazilian-born) anatomist

Friday, October 29, 2010


10/29/10 Terrorism

The employment cost index for civilian workers increased 0.4% on a
seasonally-adjusted basis between June and September, the Bureau of Labor
Statistics said. For the year ended Sept. 2010, compensation costs rose 1.9%,
wages and salaries rose 1.5% and benefit costs rose 2.7%.

The U.S. economy had a small acceleration in the third quarter as consumer
spending picked up, the Commerce Department reported Friday. Real gross
domestic product rose at a 2.0% annualized rate in the third quarter, up from a
1.7% increase in the second quarter. The big story for the third quarter was in
the consumer sector, where spending rose to a 2.6% rate, the fastest pace
since the fourth quarter of 2006. Business spending slowed in the third quarter
and housing was a drag. Inventories added to GDP growth while trade subtracted
from growth.
A pick-up in consumer spending gave the economy a lift in the last quarter.
Third-quarter growth in consumer spending, which accounts for 70 percent of
U.S. economic activity, increased at a 2.6 percent rate after rising 2.2
percent in the prior period.
The third-quarter increase was the largest since the fourth quarter of 2006 and
added 1.79 percentage points to GDP growth.
But the surge in consumption was largely satisfied by imports, rather than
domestic production.
Output was also supported by a $115.5 billion increase in business inventories
after a $68.8 billion rise in the second quarter. Business inventories added
1.44 percentage points to growth, but this could be at the expense of
fourth-quarter growth.
Excluding inventories, the economy expanded at a 0.6 percent pace, slowing from
0.9 percent in the second quarter.

The U.S. economy is a "fiscal train wreck" waiting to happen that risks
ushering in a period of stagnation featuring by minimal growth, high
unemployment and deflationary pressure, U.S. economist Nouriel Roubini wrote on
In a commentary for the Financial Times, Roubini -- one of the first economists
to predict the housing crash in the United States and known as 'Dr Doom' for
his pessimistic forecasts -- said fiscal and monetary stimulus had prevented
another depression.
But he said that further quantitative easing likely to be announced by the
Federal Reserve next Wednesday will have little effect on U.S. growth in 2011,
"so fiscal policy should be doing some of the lifting to prevent a double dip
recession," he said.
He said the U.S. remains on an "unsustainable fiscal course" and the likely
make-up of Congress after elections next Tuesday, in which the Republicans look
set for strong gains, virtually takes fiscal reform off the agenda.

The Automatic Earth: "Q3 GDP according to the CMI 365-day index comes at around
+1.25%. And if I can be bold for a moment, I would say chances are that no
matter what number is published tomorrow, the BEA Q3 GDP will be very close to
that after all revisions have been done. Sadly, we won't know until say,
Christmas. If we look at what the 365-day would appear to say about Q4, I would
say we come to about -0.5% (average the graph over the 3-month window)....we
have a "second opinion" available in U6 vs U3 data, which indicate a US
unemployment rate of 17.1% instead of 9.6%. What we try to do with the CMI
data is seeking to find a similar "second opinion", this time for GDP and
consumer spending."

The National Retail Federation has forecast November- December sales will rise
2.3 percent from a year ago, making it the best holiday season in four years.

Gordon Long: "We are now debasing the US dollar with reckless spending and
money printing with the policies of Quantitative Easing (QE) and the
expectations of QE II. Both are nothing more than effectively defaulting on
our obligations to sound money policy and a "strong US$". Meanwhile with a
straight face we deny that this is our intention. It's called debase, default
and deny....
The fork in the road which we chose has resulted in:
1) massive public debt levels that can never realistically be expected to be
paid back,
2) Financial markets that are disconnected from fundamental historical values,
3) A global banking industry that can best be described as fragile and is
realistically insolvent if the accounting games were to be removed."

Senate Minority Leader Mitch McConnell, rapped by the White House for pledging
to make Barack Obama a one-term president, seems to have the support of a
majority of Americans. A new poll provided to Whispers says that 56 percent of
likely voters want the president fired.

The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that
25% of the nation's voters Strongly Approve of the way that Barack Obama is
performing his role as president. Forty-five percent (45%) Strongly
Disapprove, giving Obama a Presidential Approval Index rating of -20

Barry Ritholtz: "Roughly 30% of all July home sales in California, Arizona and
Nevada were short sales according to Inside Mortgage Finance. It also
reported that nationwide, closed short sales have climbed from roughly 45,000
in January 2010 to nearly 100,000 in June."

Tensions escalated along the North Korea-South Korea border on Friday after the
North fired two rounds at its southern neighbour.

South Korean troops immediately fired back, an official told The Associated

The shots from North Korea were fired towards a South Korean guard post in the
Demilitarized Zone between the two countries, an official at the Joint Chiefs
of Staff in Seoul told AP.

No one was injured and it wasn't clear whether the shots represented a military
action or were an accident.

However the shots came just hours after the North vowed to retaliate after the
South rejected a Pyongyang proposal for military talks.

Several shots have been fired at the National Museum of the Marine Corps
building in Virginia, the FBI said Friday.No injuries were reported.

U.S. consumer sentiment fell to 67.7 in October from 68.2 in September,
according to a survey released Friday by Reuters and the University of
Michigan. A prior estimate for sentiment in October was 67.9. Economists polled
by MarketWatch had expected a final October reading of 68.5. Worry over jobs
has weighed down consumers. The average level of the index was around 88 prior
to the most recent recession.

The Chicago PMI in October rose to 60.6 from 60.4, a stronger reading than
expected. Expectations were for a reading of 58 but the Prices Paid
index surged from 55 to 68.9.

US officials say that al Qaeda in the Arabian Peninsula, a fairly new arm of the umbrella terrorist organization, is behind an apparent plot to send explosive devices to US destinations via cargo planes,

On Friday, the Dow Jones Industrial Average rose a meager 4.54 points to 11,118.49. It fell 0.1% over the past week but still gained 3.1% for the month, its best October since 2006. The S&P 500 index fell 0.52 point to 1,183.26 on Friday. For the week, it rose 0.02% and it gained 3.7% for the month, marking its best October since 2003. The Nasdaq Composite rose 0.04 point to 2,507.41 on Friday. For the week, the Nasdaq gained 1.1% and it jumped 5.9% for the month, also its best October since 2003.

Gold for December delivery added $15.10, or 1.1%, to $1.357.60 an ounce. On the week gold has gained 2.5%.

Thursday, October 28, 2010


10/28/10 Unemployment

The number of people who filed new claims for state unemployment benefits fell
21,000 to 434,000 in the latest week, marking the third straight decline and
the lowest level since early July, the U.S. Labor Department reported
Economists polled by MarketWatch had expected initial claims to rise to a
seasonally adjusted 450,000 in the week ended Oct. 23. Claims for last week
were revised up by 10,000 to 455,000. A more accurate gauge of employment
trends is the four-week average of initial claims, which is less volatile than
the weekly number. The four-week average decreased by 5,500 to 453,350.
Continuing claims, which track jobless workers already receiving benefits, fell
122,000 to 4.36 million in the week ended Oct. 16, the latest data available.
One should remember the seasonal part-time workers hired at this time. They work
about 24 hours a week and fall off the unemployment rolls. Then in mid-January
or sooner they will be released from employment.

Potash Corp. of Saskatchewan on Thursday reported net income for the
third-quarter of $402.7 million, or $1.32 a share, versus $247.9 million, or
$0.82 in the year-ago period. The company said rapidly rising prices for key
crops lifted demand for its products. Sales rose to $1.58 billion against $1.1
billion in the year-ago period. A survey of analysts at FactSet Research was
forecasting $1.17 per share on sales of $1.38 billion. The company said it
estimates 2010 potash segment gross margin will be between $1.65 billion and
$1.75 billion on total shipments in the range of 8.3 million to 8.5 million
tons. It expects 2010 net income in the range of $5.75 to $6 per share, and
2010 phosphate and nitrogen gross margin between $750 million and $850 million.
For 2011, it expects EPS of $8 to $8.75.

Exxon Mobil Corp said Thursday its third-quarter net income rose 55% to $7.35
billion, or $1.44 a share, from $4.73 billion, or 98 cents a share, in the
year-ago period. Revenue rose to $95.3 billion, from $82.3 billion. Oil
equivalent production rose 20%. Exxon Mobil bought back $3 billion in stock
during the quarter. Capital and exploration spending rose 35% to $8.8 billion.
Wall Street analysts expected Exxon to earn $1.38 a share, according to a
survey by FactSet Research.

Karl Rove: Adding to Democratic problems, the record GOP turnout in this year's
primaries points to higher turnout next week. Four years ago, 82 million people
voted in the midterms. This year I estimate 89 million to 91 million Americans
may cast a ballot, based on voting-eligible population statistics calculated by
George Mason University's Michael McDonald. Could there be a late surge in
Democratic enthusiasm? The latest Pew poll, from Oct. 21, reports that 64% of
Republicans say they have given a lot of thought to the election, while only 49%
of Democrats have. This intensity edge is staggering, larger even than the GOP's
12-point lead in 1994.
In recent days, Mr. Obama screamed defiantly to Democratic rallies that
Republicans have to "sit in the back," and he told a Latino radio audience that
it's time to "punish our enemies and . . . reward our friends." That may be the
president's idea of how to appeal to Americans' better instincts. Next Tuesday
night we'll see how badly wrong he is. "

The Federal Reserve asked bond dealers and investors for projections of central
bank asset purchases over the next six months, along with the likely effect on
yields, as it seeks to gauge the possible impact of new efforts to spur growth.
The New York Fed survey, obtained by Bloomberg News, asks about expectations for
the initial size of any new program of debt purchases and the time over which it
would be completed. It also asks firms how often they anticipate the Fed will
re- evaluate the program, and to estimate its ultimate size.

George Ure: "With the U.S. elections coming next Tuesday, I find it kind of
interesting that secretary of state Hillary Clinton is heading out of the
country for a two-week Asia swing. Also out of the country around /just after
election time is president Obama who will be in India and elsewhere. That the
president is staying at the same hotel which was attacked by terrorists in 2008
hasn't escaped the notice of the Washington Post which had a piece on it
Now, toss into your brain-blender the recent comments of Boston University
economist Laurence Kotlikoff that the U.S. government debt is not the purported
$13.5 trillion which is publicly bandied about but 14-times higher at
$200-trillion. Canada's The Globe and Mail offers a dandy quote from
Kotlikoff: “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

The overwhelming volume of sell transactions relative to buy transactions by
company insiders over the last six months in key leading sectors of the market
is the worst Alan Newman, editor of the Crosscurrents newsletter, has ever seen
since he began tracking the data.

Jeff Clark: "China is the world's third largest producer of silver (after Peru
and Mexico), so the amount of silver coming to the global marketplace this
year will drop by more than 74 million ounces. This represents roughly 8.3%
of total annual global supply from 2009. If worldwide demand continues at its
current pace, where is the extra metal going to come from? This alone tells
us the price of silver will move higher."

Yves Smith: "I’m so offended by the latest Obama canard, that the financial
crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to
begin. Not only does this Administration lie on a routine basis, it doesn’t
even bother to tell credible lies. .And this one came directly from the top,
not via minions. It’s not that this misrepresentation is earth-shaking, but
that it epitomizes why the Obama Administration is well on its way to being an
abject failure.
On the Jon Stewart Show (starting roughly at the 1:10 mark on this segment)
Obama claims the cost of this crisis will be less than 1% of GDP, versus 2.5%
for the savings and loan crisis."

More Independent Scientists Report “Vast Volumes of Oil Present on
Seafloor”; Independent Research AGAIN Directly Contradicts NOAA/Coast Guard

Town Hall Research says Google's mobile-related revenue should reach $5B or more
by 2012, a number that far exceeds current Street view. Expecting mobile
revenue to eventually overtake traditional search, Town Hall says it is
"confident in Google’s ability to command pricing power in mobile and expect
significant improvements over time.”

Natural-gas futures turned higher Thursday after a government report showed a
supply increase within expectations. The Energy Information Administration
said natural gas in storage rose 71 billion cubic feet on the week ended Oct.
22; analysts polled by Platts expected an increase of 70 to 74 billion cubic
feet. Natural gas for December delivery gained less than a penny to $3.77 per
million British thermal units; it had traded around $3.70 before the EIA data.

The broad S&P 500 index rose 1.29 points, or 0.1%, to 1,183.74. The Dow Jones Industrial Average ended down 12.33 points, or 0.1%, at 11,113.95. The Nasdaq Composite fell 4.11 points, or 0.2%, to 2,507.37.

Microsoft Corp. said Thursday its fiscal first-quarter net income rose to $5.4 billion, or 62 cents a share, from $3.6 billion, or 40 cents a share in the same period last year. The Redmond, Wash.-based software giant said revenue for the period ended in September rose 25% to $16.2 billion. Analysts polled by FactSet Research had expected Microsoft to report first-quarter earnings of 55 cents a share, and $15.8 billion in revenue.

Halliburton Co. knew that cement used for the blown undersea BP PLC well in the Gulf of Mexico was unstable, according to a report from the National Commission on the BP Deepwater Horizon Oil Spill. Shares of Halliburton plunged 14% to $29.58 in recent activity. Halliburton documents showed that tests of the cement mixture used in the Macondo well in April showed the mixture was unstable and that there is no evidence Halliburton that highlighted the issue, according to media reports. The accident led to the worst oil spill ever in U.S. waters.

Gold for December delivery added $19.90 to $1,342.50 an ounce on the Comex division of the New York Mercantile Exchange. Silver tracked gold higher, with the December contract rallying 2% to $23.88 an ounce.

Wednesday, October 27, 2010

Consumer Demand

10/27/10 Consumer Demand

Rick Davis: "On October 20, 2010 the aggregate severity of the 2010 contraction
in consumer demand surpassed the similar measure of economic pain experienced
during the “Great Recession.” And a glance at our “Contraction Watch” tells us
that the pain is not about to end anytime soon....the “Great Recession of 2008″
had a total of 793 percentage-days of contraction over the course of 221 days,
whereas the current 2010 contraction has reached 820 percentage-days over the
course of 282 days ― without yet clearly forming a bottom. The damage to the
economy is already 3% worse than in 2008, and the 2010 contraction has lasted
28% longer than the entire 2008 event without yet starting to recover." (via
Naked Capitalism)
No jobs=no consumer!

Saskatchewan's securities regulator will hear BHP Billiton's challenge to Potash

Corp's shareholder rights plan on Nov. 8-9, assuming the federal government
allows BHP's $39 billion bid to proceed.

Orders for U.S.-made durable-goods rose 3.3% in September, the Commerce
Department reported Wednesday. This is the largest increase since January. The
increase in durable-goods orders exceeded the expected 2.5% rise forecast by
economists surveyed by MarketWatch. Orders in August were revised higher to a
drop of 1% compared with the prior estimate of a 1.5% decline. Excluding
transportation, orders fell 0.8% in September, the second decline in the last
three months. Core durable-goods orders, which are orders for capital goods
excluding defense and aircraft, fell 0.6% in September after a 4.8% rise in
August. Shipments fell 0.4% in September, and were down 0.4% excluding
transportation goods. Inventories rose 0.5%. Transportation equipment, also
up two of the last three months, had the largest increase, $7.4 billion or
15.7 percent to $54.8 billion. This was due to nondefense aircraft and parts,
which increased $6.6 billion.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage
applications, which includes purchase and refinance loans, increased 3.2
percent for the week ended Oct. 22. The four-week moving average, which smooths
the volatile weekly figures, was up 1.4 percent.

It was only the second time in eight weeks activity rose.
Michelle Meyer, senior U.S. economist at BofA Merrill Lynch in New York, said
demand remains sluggish despite the rise.

"This implies that the soft trend in home sales should persist amid high
unemployment, tight credit and depressed consumer confidence," she said.

Meyer said "underwater" mortgages ― where the amount owed on the mortgage
exceeds the value of the home ― are one of the biggest banes of the homeowners.

This negative equity makes many of them unqualified for home loan refinancing
and prevents some from selling.

"The refinancing index has increased notably, but still less than to be
expected given incredibly low mortgage rates," she said.

Greek 10-year bonds tumbled for a third consecutive day; yield jumped 58 bips
10.34% according to Bloomberg.

After a strong start to the year, the world's biggest steelmakers lost ground
in the third quarter and raised caution flags for the rest of the year,
expecting to be hit by uneven demand, falling prices and high raw-material

Communications with some 50 nuclear missiles were disrupted for 45 minutes on
Saturday, making it more difficult to launch them and sending the military
scrambling to determine the cause of the incident, according to defense
officials. The incident was significant enough that President Barack Obama was
briefed on it this week.

The latest Rasmussen Reports national telephone survey finds that 60% of
Likely Voters have an unfavorable impression of Pelosi, including 52% who hold
a Very Unfavorable opinion of her. That’s her highest Very Unfavorable rating
since regular tracking began in early February 2009. Only 33% share a
favorable impression of the California Democrat, including 16% who view her
Very Favorably. Fifty-four percent (54%) view Reid unfavorably, including 41%
with a Very Unfavorable opinion, also the highest finding since February of
last year. Twenty-nine percent (29%) hold a favorable view of Reid, who is
struggling for reelection in Nevada. That includes just seven percent (7%) with
a Very Favorable regard for him.

NEW YORK (October 27, 2010) : US cotton futures surged on Tuesday, hitting a
record high and ending nearly 4 percent higher on frenetic buying by mills,
speculators and funds, analysts said. After a fifth straight session of gains,
Lou Barbera, cotton analyst at brokerage VIP Commodities, said cotton was
"over-inflated." He predicted prices would drop in the days ahead as investment
funds started rolling positions out of the December contract.

-- Strong Chinese prices bolster cotton futures

"We're up here in la-la land, in the stratosphere," said Mike Stevens, an
independent cotton analyst in Louisiana. "You've still got the same
fundamentals going." Cotton prices have soared nearly 80 percent in value since
late July, rocketing up due to strong demand and higher fibre prices in China,
the No 1 producer which has been squeezed by tight stocks and shrinking

US mortgage lending to drop below $1 trillion, lowest since 1996, bankers say.

(Reuters) - The Federal Reserve looks set to embark on a hotly debated second
round of monetary easing next week, but much uncertainty surrounds the scope
and pace of bond purchases by the U.S. central bank.

Mike Shedlock: "In a credit-based system, where credit dwarfs money supply, it
is foolish to look at inflation through the myopic eyes of either prices or
monetary inflation alone. Sure, the Fed can print, but if there is no demand
for credit, what does $1T or even $10T of excess reserves do? The answer is
nothing other than to make the Fed's exit problem down the road a nightmare.

The combination of a rising dollar and foiled expectations of heftier quantitative easing proved poisonous for gold on Wednesday, with the metal for December delivery retreating $16, or 1.2%, to $1,322.60 an ounce. That's gold's lowest settlement since Oct 4. Most metals tracked gold, with December silver off 43 cents, or 1.8%, to $23.40 an ounce.

Crude-oil futures retreated further Wednesday after a government report showed an inventory increase of 5 million barrels for the week ended Oct. 22. Gasoline inventories decreased 4.4 million barrels, the Energy Information Administration said. That didn't blunt the negative impact of a rising dollar and weaker stocks over energy products. Crude for December delivery retreated $1.30, or 1.6%, to $81.23 a barrel. Gasoline futures remained lower, with the December contract off 2 cents, or 1.1%, to $2.05 a gallon.

Whirlpool, whose brands include Maytag and KitchenAid, said North America shipment growth will now be 3%, down from its previous target of 5% growth. North America is Whirlpool's largest sales region.

Dow industrials down 44 points at 11,125 at close. S&P 500 index down 0.3% at 1,182. Nasdaq rose 6 at 2503.

Tuesday, October 26, 2010

Single Family Homes

10/26/10 Single Family Homes

Vestas, the world’s largest wind power company, is to cut up to 3,000 jobs –
some 14 per cent of its global workforce – because of excess capacity and a cut
in order expectations in Europe.
The closures of four production facilities in Denmark and one in Sweden were
announced on Tuesday with the Denmark-based group’s third-quarter results. Net
profits fell to €126m ($176m) from €165m a year earlier and sales declined 5.1
per cent to €1.72bn.

Google’s proposed $700 million acquisition of the airline ticketing software
company ITA Software faces opposition from several online travel companies,
which say the deal would have too much influence over the travel sector, The
Wall Street Journal reports.

HSBC may be considering a bid for Northern Trust, a California-based financial
services group, The Daily Mail said.

Northern Trust has more than $643 billion of assets under management and
counts more than 20% of the wealthiest families in the U.S. among its clients.
"Rumors persist that [HSBC] is lining up a $65 a share cash offer," the Daily
Mail said, without naming its sources. HSBC, Europe's biggest bank, recently
pulled out of a bid to acquire a majority stake in South Africa's Nedbank.

The President's rating on the economy is now 73% negative, compared to 71% in
September, 68% in August and 64% in May. Only 30% of the public expects that
the economy will improve in the next year, and only 22% believe that their own
household's finances will be better in six months time.
These are some of the results of The Harris Poll of 3,084 adults surveyed
online between October 11 and 18, 2010 by Harris Interactive.

The prices of single-family homes in 20 major cities fell a non-seasonally
adjusted 0.2% in August, according to the Case-Shiller home price index
released Tuesday by Standard & Poor's. Prices have moved up 1.7% in the past
year, down from 3.2% in July. Home prices decreased in 15 of the 20
metropolitan areas tracked by Case-Shiller in August compared with July. "A
disappointing report. Home prices broadly declined in August. Seventeen of the
20 cities and both composites saw a weakening in year-over-year figures, as
compared to July, indicating that the housing market continues to bounce along
the recent lows," David M. Blitzer, chairman of the index committee at Standard
& Poor's, said in a statement.

Copper advanced to the highest level in more than 27 months, gaining for a
third day, as investors sought alternatives to a weakening dollar. Zinc rose to
the highest price in nine months.

Sweden’s Riksbank hikes key interest rate for a third time since July on
stronger economy.

Wal-Mart is increasing direct purchases from Indian farmers to 35,000 by the end
of 2015 from over 600 currently.

U.S. consumer confidence rose in October, though it is "hovering" at
historically low levels, with a monthly gauge increasing to 50.2, the
Conference Board reported Tuesday. Economists polled by MarketWatch had
expected a reading of 50. "Consumers' assessment of the current state of the
economy is relatively unchanged, primarily because labor market conditions have
yet to significantly improve," said Lynn Franco, director of Conference Board's
consumer research center, in a statement. Confidence for September was revised
to 48.6, from a prior estimate of 48.5. A barometer on consumers' expectations
rose to 67.8 in October from 65.5 in September, while consumers' assessment of
current conditions rose to 23.9 from 23.3.

The Federal Reserve will not join an appeal filed by a banking group seeking to
allow the government to withhold details of emergency loans made to financial
firms in 2008, Bloomberg News reported on its website Tuesday. The Clearing
House Association LLC, a group of large commercial banks, filed the appeal with
the Supreme Court Tuesday, the news agency said. A federal judge had ruled in
August 2009 that the central bank had to disclose the names of banks that
borrowed funds under its emergency lending programs, Bloomberg said.

International Business Machines Corp. said its board today authorized $10
billion for the company’s stock repurchase program.

China's rapid economic growth and refusal to let its currency appreciate
sharply could mix with high unemployment in the U.S. to spark a trade war
between the countries, economist Nouriel Roubini said Monday.

"Having 10% unemployment in U.S. and 10% growth in China is a recipe for trade
wars in a situation in which China doesn't allow its currency to appreciate,"
Roubini said.

Boeing Co on Tuesday said it would tell suppliers to halt deliveries of
sections for its 787 Dreamliner for two weeks because of delays at the company
that makes a key part for the tail of the plane.
Boeing, the world's second-largest commercial plane maker after Airbus , said
the halt in shipments would not affect its first Dreamliner delivery date. The
plane is nearly three years behind its original schedule.

Rob Hanna: "Volatility Contraction & A Study In Memory of Bruce Hanna
Notable about current action is that the 3/10 Offset HV Indicator has fallen
into “extremely low” territory. I first introduced this indicator in the July
13, 2009 blog. It looks at the historical volatility over the last 3 days
versus the historical volatility over the previous 10. Low readings in this
indicator occur when there has been a sharp contraction in volatility. In that
blog post I showed that these sharp contractions are typically followed by
volatility. About a year ago I wrote a detailed study that examined using the
3/10 Offset HV Indicator as a filter for daytrading Opening Range Breakouts.
The study is 5 and a half pages in length. I’ve never offered it through the
blog before. It is only available in the members section of the Quantifiable
Edges site.
I took the last week off from blogging after my father passed away. He got
dementia at a young age and it took him away from us much too soon. In his
memory a fund has been set up with the Alzheimer’s Association.
If you use the link below to make a donation to the Alzheimer’s Association I
will happily forward you a copy of the Quantifiable Edges Opening Range
Breakout (ORB) Study. The donation may be in any amount. I would ask that if
you have found the blog helpful in your trading over the years that you
consider a generous (tax-deductable) donation. "

"The supply-chain vendors and the hardware side are seeing continued weakness
in the PC business," said Sid Parakh, an analyst at brokerage firm McAdams
Wright Ragen. "What everyone is still not clear about is how much of it is
driven by real consumer softness and how much of it is driven by the iPad."
PC shipments -- which generally dictate sales of Windows and the health of the
overall tech sector -- rose only 11 percent to 89.7 million units in the
July-September period, according to industry tracker IDC, below its forecast of
13.5 percent. For the current quarter, IDC expects only 7.4 percent growth.

The Dow Jones Industrial Average gained 5.41 points to 11,169.46. The S&P 500 index rose 0.02 point to 1,185.64, while the Nasdaq Composite advanced 6.44 points, or 0.3%, to 2,497.29.

More older people are filing for bankruptcy protection, and the top reason is credit card debt. But these older people aren't piling up credit card debt because they're eating out every night and taking fancy vacations, studies show. Instead, they are going into debt because they can't make ends meet and are hesitant to ask friends or family for help. In fact, some are suffering financially because they are helping friends and family.


Monday, October 25, 2010


10/25/10 Housing

John Hussman: "The hallmark of a liquidity trap is that holdings of money
become "infinitely elastic." As the monetary base is increased, banks,
corporations and individuals simply choose to hold onto those additional money
balances,with no effect on the real economy. The typical Econ 101 chart of this is drawn
in terms of "liquidity preference," that is, desired cash holdings, plotted
against interest rates. When interest rates are high, people choose to hold
less cash because cash doesn't earn interest. As interest rates decline toward
zero (and especially if the Fed chooses to pay banks interest on cash
reserves, which is presently the case), there is no effective difference
between holding riskless debt securities (say, Treasury bills) and riskless
cash balances, so additional cash balances are simply kept idle....You can see
why monetary base manipulations have so little effect on GDP by examining U.S.
data since 1947. Expand the quantity of base money, and it turns out that
velocity falls in nearly direct proportion....Simply put, monetary policy is far
less effective in affecting real (or even nominal) economic activity than
investors seem to believe. The main effect of a change in the monetary base is
to change monetary velocity and short term interest rates. Once short term
interest rates drop to zero, further expansions in base money simply induce a
proportional collapse in velocity....Quantitative easing promises to have
little effect except to provoke commodity hoarding, a decline in bond yields to
levels that reflect nothing but risk premiums for maturity risk, and an
expansion in stock valuations to levels that have rarely been sustained for
long (the current Shiller P/E of 22 for the S&P 500 has typically been
followed by 5-10 year total returns below 5% annually). The Fed is not helping
the economy - it is encouraging a bubble in risky assets, and an increasingly
unstable one at that. The Fed has now placed itself in the position where small
changes in its announced policy could have disastrous effects on a whole range
of financial markets. This is not sound economic thinking but misguided
tinkering with the stability of the economy."

WSJ: "Sacrosanct tax breaks, including deductions on mortgage interest, remain
on the table just weeks before the deficit commission issues recommendations
on policies to pare back with the aim of balancing the budget by 2015.
The tax benefits are hugely popular with the public but they have drawn the
panel's focus, in part because the White House has said these and other breaks
cost the government about $1 trillion a year.
At stake, in addition to the mortgage-interest deductions, are child tax
credits and the ability of employees to pay their portion of their
health-insurance tab with pretax dollars. Commission officials are expected to
look at preserving these breaks but at a lower level, according to people
familiar with the matter.
The officials are also looking at potential cuts to defense spending and a
freeze on domestic discretionary spending. It is unclear if the 18-member panel
will be able to reach an agreement on any of the items by a Dec. 1 deadline.
Even if they do reach an agreement, any curbs on current tax breaks would
likely face tough sledding in Congress. The banking and real-estate lobbies
have fiercely rebuffed efforts to rescind the mortgage-interest deduction in
the past."

Bloomberg: "In the week ended October 22, S&P 500 insiders sold 229 times more
stock than they bought."

China will lift fuel prices by nearly 3% from Tuesday, the first such increase
in 7 months, according to a report by Reuters. Gasoline prices will rise by
230 yuan per tonne ($34.54) and diesel by 220 yuan per ton, the report said,
citing a marketing executive with a state oil firm who received a government
notice of the price adjustment. The cut unwinds a 3% price cut in June, the
report said.

CommScope Inc., the Hickory, N.C., maker of telecom infrastructure, confirmed
that it was in talks that could lead the Washington private-equity firm
Carlyle Group to buy it for $31.50 a share. The New York Times on Monday had
reported that people briefed on the matter said the two sides were near a deal. In a Monday statement, CommScope said that Allen & Co. was its adviser but that no
deal had yet been reached.

Washington Post: "The nonpartisan Cook Political Report now estimates that more
than 90 Democratic House seats are potentially in play; on the Republican side
of the aisle, it estimates that only nine appear in jeopardy. As a result, most
leading forecasters say it is more likely that Republicans will win the 39
House seats they need to take control.
On the Senate side, however, the battle has narrowed to a handful of true
nail-biters in Nevada, Pennsylvania, Illinois and Colorado - all of which are
likely to stay close to the end.
It would take a sweep of nearly all of them, improbable but not impossible, for
the Republicans to pick up the 10 seats they need to gain control of the
chamber. At this point, it's possible that Democrats will end up losing only
three or four seats, and they will count that as a good night."

The Obama administration is preparing to propose fuel efficiency standards that
for the first time will apply to medium- and heavy-duty trucks, including
tractor-trailers, school buses, delivery vans, garbage trucks and heavy pickup

LA Times: "Weighed down by a struggling economy, government agencies in
California shed 37,300 workers last month -- more jobs than were lost in the
private sector -- as cities and counties made their biggest payroll cutbacks
since at least 1990."

CNOOC, China's largest offshore oil producer by capacity, and Ghana National
Petroleum made a $5 billion bid to buy closely held Kosmos' assets in Ghana,
including its stake in the Jubilee oil field, Bloomberg reported Friday, citing
three unnamed people with knowledge of the matter.
The all-cash bid was received about two weeks ago, Bloomberg cited the people as
There has been little progress in the talks, the reported cited one of the
people as saying, as Kosmos and its advisers are also studying an initial
public offering as an alternative to an outright sale.

U.S. median household income fell 3 percent in 2009 to $50,221, the second
straight annual drop, the Census Bureau said.

(FT): "Freddie Mac, one of the two government-owned entities that finance
about half all US mortgages, says that homes are taking as long as eight months
to work their way through its foreclosure pipeline, two months longer than was
typical before the housing crisis began."

Sales of existing homes climbed 10% in September, with a drop in prices helping
transactions increase for a second straight month, according to a report
released Monday.

The National Association of Realtors said sales rose 10% to a seasonally
adjusted annual rate of 4.53 million, from a downwardly revised 4.12 million in
August. Nonetheless, sales are 19% below the 5.6 million unit pace in September
2009, when first-time buyers were ramping up in advance of the initial deadline
for the tax credit last November.
And prices of existing homes slipped 2.4% to a median price of $171,700.
Distressed sales accounted for 35% of all sales, compared to 34% in August and
29% in Sept. 2009.
August sales were downwardly revised to 4.12 million from 4.13 million.
“A housing recovery is taking place but will be choppy at times depending on
the duration and impact of a foreclosure moratorium. But the overall direction
should be a gradual rising trend in home sales with buyers responding to
historically low mortgage interest rates and very favorable affordability
conditions,” said Lawrence Yun, chief economist at NAR.

Calculated Risk: “Although inventory decreased slightly from August 2010 to
September 2010, inventory increased 8.9% YoY in September. This is the largest
YoY increase in inventory since early 2008....and the 10.7 months of supply in
September is far above normal.
And double digit months-of-supply suggests house prices will continue to fall.”

Chairman Ben Bernanke said the Fed would look intensively to see if policies,
procedures or internal controls led lenders to improperly foreclosure on
homeowners. Preliminary results of an in-depth report are expected to be
released next month."We take violation of proper procedures very seriously,"
Bernanke said. In a survey taken by the Realtors group this month, about 23
percent of the 2,000 agents surveyed said they have a client who is no longer
interested in purchasing a foreclosed property due to the foreclosure-document
mess."You're going to see uncertainty on the part of homebuyers," said Quinn
Eddins, director of research at Radar Logic Inc., which tracks the housing
market.Food inflation will "accelerate" during the final months of 2010 and
into the first six months of 2011, the U.S. Agriculture Department said Monday.
"Although inflation has been relatively weak for most of 2009 and 2010, higher
food commodity and energy prices are now exerting pressure on wholesale and
retail food prices," USDA food economist Ephraim Leibtag said. In its monthly
update, the USDA left its 2010 forecast unchanged for food prices to increase
0.5% to 1.5% -- the lowest rate of annual inflation in 18 years. The USDA
further kept its 2011 forecast for food prices to rise 2% to 3% over 2010.

(Bloomberg) -- Supertanker owners are facing the longest stretch of rates in 17
years as the supply of new vessels increases nine times faster than
demand for Shipping companies are making $3,155 a day for a single voyage, 90
percent the $30,900Frontline Ltd., the biggest operator, says it needs to break
Morgan Stanley estimates the tanker fleet will expand almost 13 percent year and
the International Energy Agency says oil use will grow 1.4 percent.

(Bloomberg) -- The Treasury sold $10 billion of five-year Treasury Inflation
Protected Securities at a negative yield for the first time at a U.S. debt
auction as investors bet the Federal Reserve will be successful in halting

The Dow Jones Industrial Average gained 31.49 points, or 0.3%, to 11,164.05. The S&P 500 advanced 2.54 points, or 0.2%, to 1,185.62, led by gains in chemical-company stocks. The Nasdaq Composite rose 11.46 points, or 0.5%, to 2,490.85.

This year, fewer than three in 10 voters under age 30 say they will definitely cast ballots in the Nov. 2 congressional elections, down from 36 percent 11 months ago, according t

Sunday, October 24, 2010


10/24/10 Fraud

The U.S. Federal Reserve’s push toward easier monetary policy is the “wrong way”
to stimulate growth and may amount to a manipulation of the dollar, German
Economy Minister Rainer Bruederle said.

Mike Burk: "There was some degradation in the breadth indicators last week which
is not surprising considering we have just seen a spectacular 2 month rally.
I expect the major averages to be lower on Friday October 29 than they were on
Friday October 22."

"President Obama has been running around the country trying to re-elect Democrat
members of Congress," Sen. John Thune said in the weekly Republican address
Saturday. "But if the conversations I've had with voters are any indication,
the president should spend less time campaigning to save the jobs of Democrats
in Congress, and more time trying to create jobs for the American people."

Michael Pento: "The US dollar accounts for 62% of global central bank reserves,
even though it represents less than 25% of global GDP."

Puru Saxena: "The truth is that the US is insolvent and its policymakers will stop at nothing in order to avoid sovereign default. So, it should come as no surprise that at its latest meeting, the Federal Reserve downplayed the risk of inflation, thereby setting the stage for another round of money creation."

Charles Hugh Smith: "The markets, systemically riddled with collusion, cronyism, fraud, embezzlement, misrepresentation and outright lies, have no participants except Central State proxies and "marks" who sadly still believe the ceaseless propaganda about "rising corporate profits," "recovery" and "a free-market economy." Hahahahaha--free market! Please don't make me laugh that hard, I might hurt myself."

Things gained through unjust fraud are never secure.

I want to be clear. No company is too big to be prosecuted. We have zero tolerance for corporate fraud, but we also recognize the importance of avoiding collateral consequences whenever possible.
Alberto Gonzales