Saturday, November 06, 2010

Cash For Clunkers

11/6/10 Cash For Clunkers

Dr. Lacy Hunt, Hoisington Investment Mgt. Co.: "The October employment situation was dramatically weaker than the headline 159k increase in the payroll employment measure. The broader household employment fell 330k. The only reason that the unemployment rate held steady is that 254k dropped out of the labor force. The civilian labor force participation rate fell to a new low of 64.5%, indicating that people do not believe that jobs are available, but this serves to hold the unemployment rate down. In addition, the employment-to-population ratio fell to 58.3%, the lowest level in nearly 30 years."

Regulators shut down four more banks Friday, bringing the 2010 total to 143, topping the 140 shuttered last year and the most in a year since the savings-and-loan crisis two decades ago.
The Federal Deposit Insurance Corp. took over K Bank, based in Randallstown, Maryland, with $538.3 million in assets, and Pierce Commercial Bank, based in Tacoma, Washington, with $221.1 million in assets. The FDIC also seized two California banks: Western Commercial Bank in Woodland Hills, with $98.6 million in assets, and First Vietnamese American Bank in Westminster, with assets of $48 million.

Ballmer selling 75 million shares of Microsoft stock
Microsoft CEO Steve Ballmer has sold $1.3 billion in Microsoft stock over the past three days, and says he could sell $700 million more.

From August lows, the S&P500 has gained almost 18%, the S&P400 Mid-Caps 21%, and the small cap Russell 2000 25% and silver is up 50%.

Doug Noland: "The greatest risk is a destabilizing crisis of confidence in our nation's debt obligations. Our system doubled total mortgage debt in just over six years during the mortgage/Wall Street finance Bubble. Washington is now on track to double the federal debt load in just over 4 years. Federal Reserve policy remains instrumental in accommodating a precarious Credit Bubble at the heart of our monetary system....QE2 will only exacerbate increasingly unwieldy financial flows and unstable global markets....the Fed's move will further stimulate unfolding global booms....There may be some gain from inflating U.S. stock prices. Yet the struggling consumer sector is going to get smacked with higher food and energy prices....QE2 will only worsen already unprecedented global imbalances. Global policymakers must be at their wits' end."

A two-day strike by BBC reporters over pension changes has caused widespread disruption to the BBC's programs.

The Automatic Earth: "If that is really so, then QE2 works exactly the way it was meant to work. They're not all that dumb, and they're not making the grand mistakes some folks claim they do. They're robbing you blind in plain daylight, and, as they go along, make you believe that's in your best interest. It’s all nothing but a high-stakes game of pick-pocketing.
Just never even try to tell me again that it's not successful. And i don’t mean delivering economic growth; the US economy won’t see real growth for more years than you care to know. No, QE2 is very simply successful in fooling you. "

Leslie P. Norton: "As the dollar wobbles, China is pulling back from U.S. Treasury securities and buying up hard assets around the world."

The ECRI Weekly Leading Economic Index rose to 123.90 this week from 123.20 the prior week and is now at the best level since the week of May 21.

A Saudi tip about a possible al-Qaida effort to bring down airplanes was relayed to U.S. authorities in early October, nearly three weeks before the group's Yemen affiliate tried to ship mail bombs to the U.S. in cargo planes, U.S. intelligence officials said Friday.

A member of the Troubled Asset Relief Program's oversight panel, AFL-CIO attorney Damon Silvers, openly worried at a hearing last week about the risk that Bank of America might need another bailout.

Jessie Livermore:“It never was my thinking that made the big money for me. It was always my sitting, got that? My sitting tight!”

Cash for Clunkers= QE2 purchase of U.S. Treasuries. It would be cheaper to hand them out for wallpaper or if truly desperate toilet

“There's nothing wrong with cash. It gives you time to think.”
Robert Prechter Jr.

Friday, November 05, 2010


11/5/10 Jobs/Jobless

The Labor Participation Rate dropped to 64.5% of the labor force from 64.7
percent the previous month. The number of people actually employed dropped by
330,000. The CES birth-death model which estimates jobs into existence: that
added 61,000 jobs to the economy for October although 45,000 jobs were in
professional services (which tend to be short term) and in Eduction which is a
seasonal as colleges start for the year. The employment-population ratio, at
58.3 percent, edged down over the month.
The labor market showed signed of improvement in October, data from the Labor
Department showed Friday. Total non-farm payrolls rose by 151,000 in October,
higher than the 70,000 gain expected by Wall Street economists. The
unemployment rate held steady at 9.6% for the third straight month. Economists
forecast the unemployment rate to rise to 9.7%. The payrolls count in August
and September was revised higher by a cumulative 110,000. Payrolls fell a
revised 1,000 in August and by 41,000 in September. There were strong upward
revisions to job creation in the past two months. Average hourly earnings
increased 5 cents, or 0.2% to $22.73. Economists had been expecting a 0.2%
gain. Earnings are up 1.7% in the past year. The average workweek rose 6
minutes to 34.3 hours. Private hiring, which excludes government agencies, rose
159,000 in October, the biggest gain since April. Economists projected an 80,000
gain, the survey showed.
Manufacturing payrolls unexpectedly decreased by 7,000 last month. Economists
had projected a gain of 5,000.
Employment at service-providers increased 146,000, the first gain since May.
(How many were seasonal workers for the holidays?) Retail trade employment rose
by 28,000 in October, including increases in automobile dealers (+6,000) and
in electronics and appliance stores (+5,000). Construction companies added
5,000 workers and retailers took on 27,900 workers. Government payrolls
decreased by 8,000. State and local governments reduced employment by 7,000,
while the federal government trimmed 1,000 jobs.
The so-called underemployment rate -- which includes part- time workers who’d
prefer a full-time position and people who want work but have given up looking
-- was little changed at 17 percent after 17.1 percent in the prior month.
The report also showed an increase in long-term unemployed Americans. The number
of people unemployed for 27 weeks or more increased as a percentage of all
jobless, to 41.8 percent.
The number of temporary workers increased 34,900. Payrolls at temporary-help
agencies often slows as companies seeing a steady increase in demand take on
permanent staff.
The diffusion index for private payrolls dipped in October, to 55.0 from 55.6,
which is a four-month low, and for manufacturing, the diffusion index fell to
42.1 from 54.3, which is the lowest since December 2009.

ZeroHedge: "The inverse silver lining to today's jobs report that will be lost
in the shuffle of what is perceived as a good NFP (despite consistent initial
jobless claims of around 450K, which means that either there is a massive data
error, or the rate of job creation has somehow surged) is that labor force
participation has now dropped to the lowest rate it has been since 1984, at
64.5%. Assuming a reversion to the long-term average participation rate of 66%,
means that the civilian labor force is in reality 157.4 million as opposed to
the disclosed 153.9 million, a delta of 3.5 million currently unaccounted for.
Maybe someone can ask the president during his imminent press conference what
happened to the unemployed population, which would have been 18.3 if this labor
force delta was incorporated, resulting in an unemployment rate of 11.6%."

Shares of Starbucks Corp. were up about 4% in premarket action Friday, the
morning after the coffee shop chain reported that its fiscal fourth quarter
profit doubled - and also raised its outlook. On Thursday, Starbucks said that
it earned $399.3 million, or 37 cents a share, on the period - up from $199.4
million or 20 cents a share, in the same quarter a year ago. Sales rose 17% to
$2.8 billion while same-store sales - those at outlets open at least a year -
were up 8%. Looking ahead, Starbucks said that it now expects 2011 earnings to
be in a range of $1.41 to $1.47 a share, up from a previous view of $1.36 to
$1.41 a share.

Germany's industrial orders dropped 4% in September compared to the previous
month, according to seasonally adjusted data released on Friday. The decline
was much steeper than what economists had expected. The figure for August was
revised higher to 3.5% increase in orders.

Strategists and politicians say BHP Billiton's bid for Potash is all but dead
in the face of stiff political opposition. "This government does not change its
mind," Carleton professor Jonathan Malloy says. Saskatchewan's Premier agrees:
"We have to say no to takeovers that have very strategic implications - and
that point is insurmountable."

(Bloomberg) -- Brazil’s Finance Minister Guido Mantega said he’s not considering
additional currency measures even as the U.S. throws “money from a helicopter”
in a bid to boost economic growth.
Mantega said the Federal Reserve’s decision yesterday to inject $600 billion
into the economy through debt purchases won’t work and increases the risk of
asset bubbles forming around the globe. He said President Luiz Inacio Lula da
Silva will urge the U.S. to change its policy next week when he attends the
Group of 20 nations summit in Seoul, South Korea.
“It doesn’t work to throw money from a helicopter because this won’t make growth ,” Mantega told reporters in Brasilia. “In Brazil, there is no risk of
bubbles because we took measures that block exaggerated inflows.”
While the U.S. debt-buying will weaken the dollar, Brazil isn’t considering any
new measures to control currency gains.

U.S. crude supplies are 14 percent above the five-year average, Energy
Department figures show. $3 gas realistic?

More than 75% of groundwater in the North China Plain is not safe to drink
because of heavy metal, chemical fertilizer and surface water pollution, citing
a study by the China Geological Survey. The poor quality of the water is
affecting people's health and causing conflicts over supply, the report cited
Zhang Zhaoji, an expert at the Chinese Academy of Geological Sciences, as
saying at a conference.

Some 42,389,619 Americans received food stamps in August, a 17% rise from the
same time a year ago, according to the U.S. Department of Agriculture, which
tracks the data. That number is up 58.5% from August 2007, before the recession
By population, Washington, D.C. had the largest share of residents receiving
food stamps: More than a fifth, 21.1%, of its residents collected assistance in
August. Washington was followed by Mississippi, where 20.1% of residents
received food stamps, and Tennessee, where 20% tapped into the government
nutrition program.
Idaho posted the largest jump in recipients in the past year. The number of
people receiving food stamps climbed 38.8% but their rolls are still fairly
low. Just 211,883 Idaho residents collected food stamps in August.The average
benefit size per person nationwide in August was $133.90. Per household it was

Just 7 percent of people said they had more confidence in the Fed in 2010,
below the 12 percent in 2009 but the same percentage as in 2008, the Thomson
Reuters/University of Michigan survey showed.
"The loss (of confidence) will affect perception of the Fed's ability to keep
prices stable," said Richard Curtin, the survey's director.
People in the middle-third income group reported the least positive views of
the Fed, with 58 percent saying they were less confident.
Overall, 49 percent said they were less confident in the Fed now compared with
five years ago, the same as in 2009.

David Rosenberg: "There may be inflation in commodities but it is the deflation
in wages that will end up being the most troublesome development moving
forward across many levels."

A gauge of pending sales of homes fell 1.8% in September, "signaling an uneven
recovery entering 2011," the National Association of Realtors reported Friday.
The association's pending-home-sales index fell to 80.9 from a slightly
upwardly revised 82.4 in August. Pending sales reflect contracts signed between
home buyers and sellers, and closing a sale usually takes a few months.
Lawrence Yun, chief economist of NAR, said in a statement that a foreclosure
moratorium is likely to cause some disruption in the housing market, and that
tight credit and low appraisals "continue to constrain the market." In
September pending home sales fell in three of four regions: down 5.7% in the
Midwest, 3.5% in the South, and 1.7% in the Northeast. The index rose 3.5% in
the West. Nationally, the index is down almost 25% compared with the prior

For the first time, federal scientists have found damage to deep sea coral and other marine life on the ocean floor several miles from the blown-out BP well — a strong indication that damage from the spill could be significantly greater than officials had previously acknowledged.
Tests are needed to verify that the coral died from oil that spewed into the Gulf of Mexico after the Deepwater Horizon rig explosion, but the chief scientist who led the government-funded expedition said Friday he was convinced it was related.

U.S. stocks finished the week sharply higher, after midterm elections that split Congress and as the Federal Reserve said it would deliver another $600 billion in easing measures. On Friday, stocks rose only slightly after a larger-than-expected gain in nonfarm payrolls was offset by an unemployment rate that remains at 9.6%. The Dow Jones Industrial Average rose 9.24 points, or 0.1%, to 11,444.08. The S&P 500 index gained 0.4% to end at 1,225.85 The Nasdaq Composite added 0.1% to 2,578.98. For the week, however, the Dow rose 2.9%, the S&P 500 gained 3.6%, and the Nasdaq was up 2.9%.

-U.S. consumers increased their debt for the first time in eight months, the Federal Reserve reported Friday. Total seasonally adjusted consumer debt increased $2.1 billion, or a 1.1% annualized rate, in September to $2.41 trillion. Economists expected a decrease. August consumer credit was revised to a 2.5% decline compared with the initial estimate of a 1.7% drop. The increase in September was led by non-revolving credit, such as auto loans, personal loans and student loans, which increased $10.4 billion or 7.9%. Revolving debt decreased $8.3 billion or 12.1%. This is the 25th straight monthly drop in credit card debt.

Thursday, November 04, 2010

Tipping Point

11/4/10 Tipping Point

Natural-gas futures turned lower Thursday after a government inventories
report showed a rise in stockpiles above expectations. Natural gas for December
delivery fell 5 cents, or 1.3%, to $3.787 per million British thermal units.
Ahead of the midmorning release, it had risen to $3.872 per million BTUs. The
Energy Information Administration said working gas in storage rose 67 billion
cubic feet in the week ended Oct. 29. Analysts polled by Platts expected a gain
of 61 to 65 billion cubic feet. Oil futures held to gains, with the December
contract up $1.61, or 1.9%, to $86.30 an ounce.
Working gas in storage was 3,821 Bcf as of Friday, October 29, 2010, according
to EIA estimates. This represents a net increase of 67 Bcf from the previous
week. Stocks were 37 Bcf higher than last year at this time and 353 Bcf above
the 5-year average of 3,468 Bcf. In the East Region, stocks were 95 Bcf above
the 5-year average following net injections of 39 Bcf. Stocks in the Producing
Region were 209 Bcf above the 5-year average of 1,009 Bcf after a net injection
of 26 Bcf. Stocks in the West Region were 48 Bcf above the 5-year average after
a net addition of 2 Bcf. At 3,821 Bcf, total working gas is above the 5-year
historical range.

Gold for December delivery rallied $40, or 3%, to $1,377.60 an ounce and
reached an intraday high of $1,382.10 an ounce. Silver for December delivery
vaulted $1.06, or 4.3%, to $25.50 an ounce. Less than a day after the Federal
Reserve rolled out a new $600 billion bond-buying program designed to drive
down rates and jumpstart the economy, the European Central Bank and Bank of
England both kept policy unchanged and refrained from taking any additional
monetary easing measures. The euro jumped more than 1% to $1.427, and the dollar
index fell 1% to 75.68.

The productivity of American businesses rose by 1.9% in the third quarter,
marking the sixth increase in the last seven periods. Real output grew at an
annualized rate of 3.0%, while hours worked rose 1.1%, the U.S. Labor
Department reported Thursday. The unit cost of labor, meanwhile, fell 0.1%.
Unit labor costs are 1.9% lower compared to one year ago. Compensation per hour
rose 1.8%, but real compensation per hour, which adjusts for inflation,
increased by a much smaller 0.4%.

The number of workers who filed new applications for unemployment benefits
jumped 20,000 to 457,000, reversing a sharp decline from the week before.
Economists polled by MarketWatch had expected initial claims to climb to a
seasonally adjusted 445,000 in the week ended Oct. 30. Claims for last week
were revised up by 3,000 to 437,000, according to U.S. Labor Department data.
The latest increase put weekly claims back to the same level as the end of
2009, meaning there's been no change this year. Continuing claims, which
reflect workers who've already been receiving benefits, dropped 42,000 to 4.34

Mining giant BHP Billiton's $39 billion offer for Canadian fertilizer maker
Potash Corp. of Saskatchewan (POT)(CA:POT) was rejected by the Canadian
government late Wednesday, according to reports. The government said that it
wasn't satisfied the bid would be of net benefit to Canada, according to an
Associated Press report. BHP Billiton has 30 days to convince the government to
change its mind, Dow Jones newswires reported, citing industry minister Tony

U.S. stocks on Thursday embraced the Federal Reserve's latest monetary move, bringing the Dow Jones Industrial Average to its first finish above where it stood before Lehman Brothers collapsed in September 2008. "The reflation trade boosting asset prices remains the story," said Peter Boockvar, equity strategist at Miller Tabak. The Dow Jones Industrial Average rose 219.71 points, or 2%, to 11,434.84. The S&P 500 added 23.09 points, or 1.9%, to 1,221.05. The Nasdaq Composite climbed 37.07 points to 2,577.34.

Gold futures rallied to a record over $1,380 an ounce Thursday, and silver futures rocketed more than 6%, after investors piled into precious metals as a hedge against the sinking U.S. dollar after the Federal Reserve rolled out a new, $600 billion of extraordinary stimulus measures to prevent deflation. Gold for December delivery closed up $45.50, or 3.4%, to $1,383.10 an ounce. Silver for December delivery surged $1.61, or 6.6%, to $26.04 an ounce. December copper rose 13 cents, or 3.4%, to $3.91 a pound. Palladium rallied $32.05, or 5%, to $674.75 an ounce. And January platinum advanced $58.70 an ounce, or 3.5%, to $1,755.90 an ounce.

Brazil's Finance Minister Guido Mantega on Thursday reportedly criticized the U.S. Federal Reserve's decision to launch another round of quantitative easing. Mantega told reporters that the plan by the Fed to purchase $600 billion in bonds will create more imbalances globally, and that it won't produce what the U.S. needs, which are jobs, he said. Brazil will log its disapproval of the plan with the Group of 20 when it meets in Seoul, Korea this month, he said. Brazil has recently been fighting appreciation of its currency (USDBRL) against the U.S. dollar.

George Ure: "Starting tomorrow, Nov. 5, we will enter into a plateau in the building tensions language. While we might have one "pop" in the data/tensions next week, things should be normal (there's that damn word again...) until late the 13th to early the 14th when the tip begins.

Now, about that "pop": The kind of thing that would cause a 6-8 hour pop in the data would be something like a morning scare headline like "More terrorist mail bombs discovered!" toward the middle of next week, but then it would be discovered by mid-afternoon, for example, that "Ooops! Mistake, sorry about that..." and that's how we get a pop and then fade back to plateau.

Once we get to the actual TIP, what's changed is that instead of the charts going down at about a 45 -degree angle through January 23 of 2011, the release date starts a little later (the 14th, yeh?) and ends a little earlier (January 16-18, 2011). Which means (of necessity) the average slope of the release will be steeper (approaching 50-degrees on a chart."


11/3/10 BHP

Saskatchewan is poised to sue the federal government if Canada approves BHP
Billiton Ltd.’s $40 billion hostile takeover offer for Potash Corp. of
Saskatchewan Inc., Premier Brad Wall said.
“We’ve made a well-rounded, compelling case that the answer in this takeover bid

from Investment Canada should be “no,” and that the wishes of the province
should be respected,” Wall told reporters yesterday in Regina, the provincial
capital. “If we are going to make a legal challenge, it will have to happen
quickly, and it will.” Industry Minister Tony Clement is due to announce by
midnight whether Canada
will allow the deal to proceed. Saskatchewan has argued the takeover of Potash
Corp. by Melbourne-based BHP would cut provincial tax revenue by C$3 billion
($2.97 billion) over 10 years, lead to fewer jobs and forfeit Canadian control
of a “strategic” resource.
Wall said the Canadian government should reimburse the province for revenue lost

if it approves BHP’s bid.
“If they want to make this deal, then they can indemnify the province of
Saskatchewan against the costs,” Wall said. “It will be Ottawa’s deal, not
Saskatchewan’s deal, and the people of Saskatchewan will not be on the hook for

Russian fertilizer company Phosagro plans to bid for Potash Corp, according to
a media report, rivaling BHP Billiton's $39 billion offer awaiting a crucial
ruling from the Canadian government.
Phosagro Chairman Vladimir Litvinenko has asked Russian Prime Minister

Putin to approve a potential deal and request financing from Russian banks,
Russian business daily Vedomosti reported on Wednesday.

Pride International shares rose nearly 10% to $34 a share in premarket trades
on Wednesday, after a report in The Wall Street Journal said the $5.5 billion
market cap oil-service firm is considering a possible sale of the company.
Pride International has spoken about a buyout deal to Seadrill Ltd. and Ensco
PLC, said the report, which cited unnamed people familiar with the matter. Noble

Corp considered buying the company, but walked away, the report said. No deal
is imminent since Pride has a reputation for moving slowly on deals.

After racking up billions in debt, getting a gov't bailout and filing for
bankruptcy, GM may now be eligible for tax breaks worth up to $45.4B, thanks to
a little-noticed federal ruling last year allowing recipients of TARP bailout
money to use tax-loss carry-forwards.

Private-sector employment rose 43,000 in October, according to the ADP
employment report released Wednesday. Employment in the service-producing
sector rose 77,000, while the goods-producing sector fell 34,000. On Friday the

government will report nonfarm payrolls for October, and economists polled by
MarketWatch are looking for a gain of 70,000, compared with a decline of 95,000

in the prior month. Also, economists expect the unemployment rate to rise to
9.7% from 9.6%. "Since employment began rising in February, the monthly gain has

averaged 34,000 with a range of -2,000 to +65,000 during the period.

figure is within this recent range and is consistent with the deceleration

economic growth that occurred in the spring. Employment gains of this
magnitude are not sufficient to lower the unemployment rate. Given modest

growth in the second and thirds quarters, and the usual lag of employment
behind GDP, it would not be surprising to see several more months of

employment gains, even if the economic recovery gathers momentum."

"Downsizing activity remained flat in October, as employers announced job

totaling 37,986 during the month. That was 2.2 percent more than the 37,151

planned layoffs in September, according to the latest job-cuts report
released Wednesday by global outplacement firm Challenger, Gray &


Thirty-Year Treasury Bond Yields rose the most in two months after the Federal
Reserve said it will buy $600 billion in U.S. securities through June in an
unprecedented second round of purchases to boost the economy. “The yield curve
should start to steepen because the Fed will focus on 5- to 6- years,” said
William Larkin, a fixed income portfolio manager in Salem, Massachusetts at
Cabot Money Management, which manages $500 million. “The risk once they finish
is that inflation will be elevated. There’s a good chance we’ll be rip-roaring
in terms of growth and inflation.”
Thirty-year bond yields rose 10 basis points to yield 4.03 percent at 2:45 p.m.
in New York, the biggest drop since Sept. 9. The yield on the 10-year note rose
2 basis point to 2.6 percent. To implement the Federal Reserve's new policy of
quantitative easing, the New York Fed plans to buy $850 billion to $900 billion
in Treasury notes over the next eight months, including $600 billion in new
purchases and about $250 billion to $300 billion to reinvest the proceeds of
maturing mortgage-backed securities, the New York Fed announced Wednesday. The
average duration of Treasurys purchased by the Fed will be five to six years.
Around the eight day of each month, the Fed will announce the details of that
month's planned purchases.

December gold was off $19.30, or 1.4%, to settle at $1,337.60 an ounce on the
Comex division of the New York Mercantile Exchange. Ahead of its settlement,
silver came off the previous day's 30-year high, declining 47 cents, or 1.9%,
to $24.38 an ounce.

Casey's General Stores Inc. shares dropped 4% Wednesday after the retailer said
it halted merger talks with convenience-store operator 7-Eleven. The board of
directors "unanimously determined that the revised proposal does not reflect
the value of Casey's and its significant growth opportunities, and is not in
the best interests of Casey's, its shareholders, and other constituencies."
7-Eleven confirmed the termination of the proposal, a negotiated offer of $43
per common share, in a morning press release.

Tuesday, November 02, 2010

W2 Filings

11/2/10 W2 Filings

ZeroHedge: "In what can easily be characterized as the most blatant error in its
history (and soon, potentially, fraud), the Social Security Administration
announced that as a result of several erroneous W2 filings, amounting to a
$32.3 billion "mistake" the entire statistical wage table released previously
has been scrapped and a new one has been released, indicating that wages in the
US, and especially for the top earners, dropped, instead of declining modestly,
and in some cases increasing. Of course, the timing for the revelation on the
day of the elections is a total coincidence. As per the revised tables, average
incomes of top earners did not quintuple as had been released on October 15 to
$519 million, but instead declined by 7.7% to $84 million. Additionally, as
Bloomberg which caught the error initially and demanded a correction, notes, a
comparison of the Oct. 15 data and the corrected figures show the change
affected wage statistics more broadly. The Oct. 15 index indicated that the
average wage nationwide fell $384 to $39,269 in 2009. The corrected index shows
averages wages fell $598 to $39,055. And here is the original mea culpa from the
SSA: "Yesterday, the Social Security office announced it found “invalid” wages
from two of the 74 top wage earners detailed in its data." Had it not been for
Bloomberg who noticed the ridiculous surge in the top earners, this would have
remained unchallenged, and the administration would have certainly used it as
bragging rights on how it makes the uberwealth even uberwealthier. Hilariously,
spokesman Mark Lassiter provided the best summary to this mega screw up: "We
call it erroneous, you call it fictitious. It’s the same thing.” So... to the
government fraud and error are the same? And apparently both pass thorough
"quality control".... Uh, what's that GDP number again."

Clorox shares dropped 5% to $63.19 early Tuesday after the household products
maker warned of slowing shipments. It also missed the consensus analyst targets

for its fiscal first quarter. For the quarter ended Sept. 30, Clorox said
volumes fell 2% due to lower shipments of Glad food-storage products, Scoop
Away Cat Litter and Kingsford charcoal. Sales dropped 3%. "Late first-quarter
shipments were particularly soft and that trend has continued into the first
weeks of our second quarter," Chief Executive Don Knauss said in a statement.
In addition, Clorox cut its fiscal 2011 sales-growth target.

Oracle shares rose 31 cents to $29.44 after the company said it would acquire
on-demand software company Art Technology Group Inc. for $1 billion, or $6 a

Marathon Oil said Tuesday its third-quarter earnings rose to $696 million, or
98 cents a share, from $413 million, or 58 cents a share, in the year-ago
period. Adjusted earnings rose to $1 a share, from 61 cents a share. Wall
Street analysts expected the Houston oil firm to earn 94 cents a share,
according to a survey by FactSet Research. Marathon now expects production
growth of 5% in 2011 and 2012, up from 4% in the current year. "The majority of

our expected 2011 and 2012 growth is driven by the advancement of existing oil
projects, including the Bakken Shale play in North Dakota, Canadian oil sands
mining and our first deepwater Angola development," the company said. Looking
ahead, it sees opportunities in Iraq, Wyoming, Colorado and Poland.

Chain-store sales for the week ended Oct. 30 rose 2% from the year-earlier
period, according to a survey released Tuesday by the International Council of

Shopping Centers and Goldman Sachs. On a week-over-week basis, sales inched up
0.1%. "Overall customer traffic improved relative to a year-ago as Halloween
shopping for candy and costumes was a sales driver at drug stores, discounters,

dollar stores, wholesale clubs and even traditional grocery stores business,"
said Michael Niemira, ICSC's chief economist. "But warm seasonal weather,
across a large portion of the nation, continued to pare down sales at apparel
and department stores overall." He forecast October same-store sales to rise 2%

to 2.5%. Retailers report their October results on Thursday.

(Bloomberg) -- India’s central bank raised interest rates for a sixth time this
year in Asia’s fastest round of increases and said the chance of further policy
tightening in the “immediate future is relatively low.”

The Reserve Bank of India boosted the repurchase rate by a quarter-point to 6.25

percent and the reverse repurchase rate by a similar margin to 5.25 percent with

immediate effect, according to a statement in Mumbai. Fifteen of 23 economists
had predicted the decision in a Bloomberg News survey.

Governor Duvvuri Subbarao’s move comes as counterparts in nations from Japan to
the U.S. are considering additional monetary stimulus, increasing the risk of an

influx of capital into India that might exacerbate inflation. The yield
advantage of Indian 10-year government bonds over similar maturities of U.S.
Treasuries is hovering near a decade high.

“Today’s rate increase is aimed at making sure that inflation doesn’t get out of

hand,” said Jay Shankar, chief economist at Religare Capital Markets Ltd. in
Mumbai. At the same time, “it’ll further add to higher inflows” of capital from
overseas, he said.

The rupee gained 0.2 percent to 44.41 per dollar as of 4:16 p.m. in Mumbai,
while the Bombay Stock Exchange’s Sensitive Index was little changed at 20,345.

Irish Finance Minister Brian Lenihan may have just one month to stave off an
international bailout. The extra yield that investors demand to hold Irish
10-year bonds over German bunds surged to a record yesterday as Lenihan tries
to put together a 2011 budget by Dec. 7 that convinces investors he can get the

country’s finances in order. “The behavior of international bond markets
suggests the government’s various announcements haven’t convinced markets that

we are on a credible, stable path,” said Karl Whelan, an economics professor at

University College Dublin and a former economist at the Federal Reserve.

Australia Unexpectedly Raises Rates; Currency Jumps. The Reserve Bank of
Australia unexpectedly increased its benchmark interest rate on concern
stronger growth will cause inflation to accelerate, driving the nation’s
currency toward parity with the U.S. dollar.

The homeowner vacancy rate was 2.5 percent in the July-September period, the
same as in the April-June period. the Commerce Department said. In the third
quarter of 2009, the homeowner vacancy rate was 2.6 percent. The residential
rental vacancy rate was 10.3 percent in the third quarter, compared to 10.6
percent in both the second and first quarters of 2010, the Commerce Department

Charles Hugh Smith: "Given that the economy faces $15 trillion in writedowns in
collateral and credit, the Fed's $2 trillion dollars in new credit/liquidity is
insufficient to trigger either inflation or another speculative bubble...Size of

U.S. economy: $14 trillion. Probable size of QE2: $1 trillion. That means QE2 is

perhaps 7% of GDP. Even a whopping $2 trillion QE would equal about 14% of GDP."

ZeroHedge: "As I peer through the fog and attempt to see visions of things to
be, I see nothing but pain ahead. Anyone who can look at the following chart
and not conclude that there is much pain ahead for this country is either a
Goldman Sachs banker, a Federal Reserve Governor, or a bought off politician in

Washington DC. It is no coincidence that after Richard Nixon closed the gold
window in 1971 and allowed the Federal Reserve to “manage” our economy that
total debt outstanding in the US surged from $2 trillion to over $50 trillion.
GDP has risen by 1,300% since 1971, while total US debt has risen by 2,600%.
Now for the kicker. Real GDP has only gone up by 292% since 1971. This means
that 1,000% of the increase in GDP was from Federal Reserve created inflation.
Over this same time frame, real wages have declined by 6%, from $318 per week
in 1971 to $299 per week today. Inflation has been the American drug of choice

to commit suicide over the last 40 years. It is stealthy, seemingly painless,
and deadly. Inflation is the “painless” method through which the Federal Reserve

has decided this country will commit suicide."

Rackspace Hosting Inc. shares rose $1.69, or more than 6%, to $27 on speculation
that the cloud-and-managed hosting technology company could be acquired by Dell
Inc. Speaking at a conference in Hong Kong, Dell CEO Michael Dell said the
company would make a cloud-computing acquisition on Tuesday, but gave no
further details. Dell shares were off by 15 cents at $14.26.
Acme Packet is also seeing heavy trading. The Bedford, Mass.-based company is
another cloud computing play.

Dell is buying Boomi, an SaaS provider that provides services for moving
applications to the cloud. Ray Wang, an analyst with the Altimeter Group, said
the acquisition signals the Boomi acquisition may be the first of many to come:
"Integration vendors who can connect cloud to on-premises are a key component
in any vendor's strategy to master the cloud. Dell's move shows it has an
intention to move towards the cloud and will continue to acquire key pieces
such as CEP engines, big data solutions, and semantic web players. Other
area that will be important will come from medium as well as large scale
analytics, and storage. Let's see what they do next."

IDC estimates that companies store 500 billion gigabytes of data today and that
will double every 18 months.

BP increased its estimate of the likely cost of its Gulf of Mexico oil spill to
$40 billion.

More than 4.3M home loans are 90 days-plus delinquent or in foreclosure, LPS
Applied Analytics says, with 9.27% of mortgages in delinquency.

The Dow Jones industrial average was up 64.10 points, or 0.58 percent, at 11,188.72. The Standard & Poor's 500 Index was up 9.19 points, or 0.78 percent, at 1,193.57. The Nasdaq Composite Index was up 28.68 points, or 1.14 percent, at 2,533.52.

The American Petroleum Institute reported late Tuesday a decline of 4.1 million barrels on the nation's crude-oil inventories on the week ended Oct. 29. That was larger than the 2-million-barrel decline seen by analysts polled by Platts. Gasoline stocks declined 3.2 million, the API said. The trade group also reported a decline of 4.7 million for distillates stocks. Analysts surveyed by Platts had expected gasoline stocks to increase 1.1 million and supplies of distillates down 900,000 barrels.

Ireland's sovereign bonds plunged Tuesday, and the costs of buying protection against a default surged, after the reported resignation of a Irish parliament member fostered simmering worries that political factions in peripheral European countries could stymie budget reforms. Irish credit default swaps spreads jumped 22 basis points to 5.20 percentage points, leading an increase in the cost of default protection on debt of the so-called "PIIGS" countries, according to Markit. Greek CDS widened 15 basis points to 8.45 percentage points, while Portuguese CDS gained 8 basis points to 4.02 percentage points. Ireland's 10-year bonds tumbled, sending yields up 19 basis points to 7.16% and further blowing out the gap versus benchmark German yields.

Gold for December delivery rose $6.30 to $1,356.90 an ounce on the Comex division of the New York Mercantile Exchange. Silver returned to a 30-year high, with the December contract advancing 28 cents, or 1.2%, to $24.84 an ounce.

Monday, November 01, 2010

Savings Rate and Income

11/1/10 Savings Rate and Income

The savings rate for U.S. households fell to its lowest level in more than a
year in September as incomes fell and spending increased, the Commerce
Department said Monday. Personal income fell 0.1% in September. This is the
largest decline since July 2009. Consumer spending rose 0.2%.The savings rate
has now declined in a straight line since peaking at 6% (2010 high), to the
current low. Wall Street economists had expected a 0.2% increase in income and
a 0.3% gain in spending. Real disposable incomes fell 0.3% in September.
Inflation moderated further in September. The personal consumption expenditure price rose 0.1% in September after a 0.2% gain in August. Inflation is up 1.4% in the past year. The core PCE was flat in September after rising 0.1% in
August. Economists expected a 0.1% gain.

China's factories ramped up their production last month and were buoyed by an
influx of new business, highlighting the strength of the world's second-largest
economy but also pointing to price pressures.
Two surveys of the manufacturing sector, which are designed to provide an
early indication of conditions in a broad range of industries, both jumped to
six-month highs in October.
The official purchasing managers' index (PMI) rose to 54.7 in the month from
53.8 in September, blowing past expectations. The HSBC PMI, a private
companion, climbed to 54.8 from 52.9.
The increase was all the more impressive since the official survey has
traditionally sagged in October, weighed down by the week-long National Day
holiday, when factory production slows.

John Hussman: "If the past decade has been a lesson for investors, that lesson
should have two components. The first is that valuations matter. The second
lesson is that the effects of wasteful misallocation of capital cannot be fixed
by policies that encourage the wasteful misallocation of capital....If the past
decade has been a lesson for investors, that lesson should have two components.
The first is that valuations matter. The second lesson is that the effects of
wasteful misallocation of capital cannot be fixed by policies that encourage
the wasteful misallocation of capital."

Fiserv, a market analytics company, has scaled back its home price projections
considerably. In February, it forecast national price gains of about 4% through
the end of 2011. The company's latest prediction is for a 7.1% drop in prices
between June 30, 2010 and June 30, 2011.

Natural gas futures rose to a six- week high, capping a second straight monthly
gain, on forecasts of cooler-than-normal weather in early November that may
spark demand for the heating fuel.
Below-average temperatures are expected along the U.S. East Coast and parts of
the Gulf of Mexico coast from Nov. 3 through Nov. 7, according to Commodity
Weather Group in Bethesda, Maryland. The high temperature in New York on Nov. 5
may be 51 degrees Fahrenheit (11 Celsius), 6 degrees below normal, according to
AccuWeather Inc. in State College, Pennsylvania.
“The six-to-10-day forecast is a little colder, so you’ll start to see more
heating demand,” said Phil Flynn, an analyst with PFGBest in Chicago. “The
seasonality of the market is starting to kick in a little bit.”

Iran has changed some 15 percent of its foreign exchange reserves into gold and
will not need to import the metal for the next ten years, Mehr reported, citing
Central Bank Governor Mahmoud Bahmani.
Iran’s gold reserves have “multiplied several times” in the past two years,
Bahmani said in a report published late yesterday by the state-run news agency.

The results are from Gallup's Oct. 28-31 survey of 1,539 likely voters. It
finds 52% to 55% of likely voters preferring the Republican candidate and 40%
to 42% for the Democratic candidate on the national generic ballot -- depending

on turnout assumptions. Gallup's analysis of several indicators of voter
turnout from the weekend poll suggests turnout will be slightly higher than in
recent years, at 45%. This would give the Republicans a 55% to 40% lead on the
generic ballot, with 5% undecided.

Beijing has taken a fresh step to discourage property buying by ordering banks
to charge higher mortgage interest rates for first home buyers, local media
reported over the weekend. Lenders were told by China's banking regulator that
they can offer at most 15 percent, versus the previous 30 percent, discount to
the benchmark interest rates to new mortgage loan applicants, the Beijing
News reported.

BHP Billiton may increase its $39 billion bid for Potash Corp. by 10%. The
revised offer won't be made until after a Nov. 8 court case about Potash
Corp.'s use of a so-called poison-pill defense against the attempted takeover.

The Top 5 percent in income earners — those households earning $210,000 or more
account for about one-third of consumer outlays, including spending on goods
and services, interest payments on consumer debt and cash gifts, according to
an analysis of Federal Reserve data by Moody’s Analytics.

The Institute for Supply Management said its index of factory activity rose to
56.9% in October from 54.4% in September, a report likely to give a boost to
U.S. markets. ISM had been expected to decline to 54.0%, according to
economists surveyed by MarketWatch. Readings over 50% indicate more firms are
growing than contracting.

Republicans are likely to win some 231 seats in the House and take control of
the chamber, the poll projected. Ipsos pollster Cliff Young predicted Democrats
would hang on to control of the Senate with either a margin of 52 seats to 48
for Republicans or 53-47.

Treasury expects to borrow $431 bln Jan.-March '11.

The Federal Reserve will probably begin a new round of unconventional monetary
easing this week by announcing a plan to buy at least $500 billion of long-term
securities, according to economists surveyed by Bloomberg News.

The Schork Report has switched our daily bias in natural gas to bullish. In the
60 sessions (since August 06th) we held our bias, the spot contract for
December delivery closed lower in 36 of them, i.e., 3 in 5 sessions. However,
all goods things must come to end and for gas bears we believe it has. As we
noted throughout October, the historical tendency is for gas to rally (and
peak) in the fourth quarter.
We think the time for the pre-winter rally might have arrived. We are now of
the mindset that the trend has turned, but of course we will maintain our
vigilance. We expect the market to be trading above 4.131 by week’s end, at a

ZeroHedge: "Bloomberg reports that the week ending October 29 saw the largest
amount of insider selling (by notional) in S&P500 stocks in months, possibly in
all of 2010 (unfortunately our records don't go back all the way to the
beginning of the year). Altogether, $662 million in stock was sold in the past
week, compared to purchases of just $1.6 million. The result: an insider
selling to buying ratio of 423x. This is nearly double the prior week's 229x.
Yet the ratio was rescued by three brave buyers who bought up $787k and $407k
worth of American Express and Procter and Gamble. Absent these two purchases
the ratio would have been a disaster. What is more important is the
denominator side of the fraction, as the total selling over the week hit what
appears to have been a near-term record, at a total of $662 million. Biggest
selling continues to take place at the (no surprise here) tech names which
continue to be bid up by investors hoping a return of the dot com bubble. If
there is a clearer indication that no bubble is imminent than relentless
insider selling, someone please tell us. And this week the insider certainly
are telegraphing just that when it comes to Oracle, Apple, McDonalds, Precision
Castparts, EMC and Coca Cola."

The Dow Jones industrials finished up 6 points to 11,125. The blue chips had been up as many as 125 points and down as many as 56 points. The Standard & Poor's 500 Index added 1 points to 1,180 after coming within four points of 1,200. The Nasdaq Composite Index closed down 3 points to 2,498.

Dec natural gas shed 4.9% today to settle at $3.84 per MMBtu. It was quite an interesting session for natural gas futures, which traded to its best levels, at $4.187, before falling over 9% throughout the day to its lowest levels.

Sunday, October 31, 2010


10/31/10 Wary

If Medicare premiums increase in 2011, will my Social Security benefit be
reduced? The law contains a "hold harmless" provision that protects more than
70 percent of Social Security beneficiaries from paying a higher Part B
premium, in order to avoid reducing their net Social Security benefit. (In
other words, because there will not be a cost-of-living increase, Part B
premiums stay the same for most people.)
Those not protected include higher-income beneficiaries subject to an
income-adjusted Part B premium and beneficiaries newly entitled to Part B in
In addition, almost 20 percent of beneficiaries have their Medicare Part B
premiums paid by state medical assistance programs and thus will see no change
in their Social Security benefit. The state will be required to pay any
Medicare Part B premium increase.

According to housing-market consultancy Zelman & Associates, banks listed 15% more repossessed home in October than in September.
As of September, banks owned nearly 994,000 foreclosed homes, up 21% from a year earlier. The shadow inventory stood at 5.2 million homes, down 7% from a year earlier. Grand total: 107 months of inventory.

Some independent forecasters are projecting GOP gains of 50 seats or more, which would offset all of the GOP's losses in the past two elections and rank in size with the party's historic 1994 landslide.

Mike Burk: "My analysis of the market is heavily influenced by breadth and seasonality. For the last several years the record of seasonality has been spotty. Seasonality suggests the market should be very strong next week while my read of the breadth indicators suggest it is about to fall off a cliff.
I expect the major averages to be lower on Friday November 5 than they were on Friday October 29."

38% of middle income families plan to spend less than $500 on holiday gifts, double the number last year. No wonder. No jobs. Unemployment benefits
running out for millions of Americans.

Explosive devices in cargo packages addressed to Chicago, Illinois, destinations appear to have been designed to detonate on their own, without someone having to set them off, the top White House counterterrorism official told CNN on Sunday.
John Brennan, President Barack Obama's assistant for homeland security and counterterrorism, said on CNN's "State of the Union" program that the sophisticated explosives could have been intended to blow up the air cargo planes carrying them, as suspected by British authorities.
"It is my understanding that these devices did not need somebody to detonate them," Brennan said, adding that U.S. authorities continued to investigate.

Dean Baker: "Come on folks, we had the second largest inventory build-up in history. Pull that out and final demand grew at just a 0.6 percent annual rate.
Does anyone thing that inventories will continue to grow at this rate? This means that instead of adding to growth inventories will subtract from an economy that has no almost no forward momentum. This is all GDP accounting 101. This should be the headline on the 3rd quarter numbers."

Mark Thoma: " White House considering 'decoupling' top-tier tax cut, by By Lori Montgomery, Washington Post: With Republicans poised to gain ground in Tuesday's elections, the White House is losing hope that Congress will approve its plan to raise taxes on the nation's wealthiest families and is increasingly focusing on a new strategy that would preserve tax breaks for both the wealthy and the middle class. According to people familiar with talks at the White House and among senior Democrats on Capitol Hill, breaking apart the Bush administration tax cuts is now being discussed as a more realistic goal. That strategy calls for permanent extension of cuts that benefit families earning less than $250,000 a year, and temporary extension of cuts on income above that amount.The move would "decouple" the two sets of provisions, Democrats said, and focus the debate when tax cuts for the rich expired next year or the year after. Republicans would be forced to defend carve-outs for a tiny minority populated by millionaires, an unpopular position that would be difficult to advance without the cover of a broad-based tax cut for everyone, aides in both parties said."

Sprott Inc, the Canadian fund manager specializing in resource investments, said on Friday that it planned to raise $500 million in the initial public offering of the Sprott Physical Silver Trust.
The offering will consist of 50 million units priced at $10 each.
The trust, which will be managed by Sprott Asset Management, will invest and hold nearly all its assets in silver bullion.
It will be listed on the NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U," respectively.

As noted several times over the years, I have a significant position in physical silver at a cost below $6. Increased speculation has entered into the silver
market at $24.That makes me wary. (During the same holding period physical gold has risen from $400 to $1357.)

Charles Hugh Smith: "The U.S. stock market is looking vulnerable to buyer's remorse.
Even those of you who don't enjoy charts will see the signs of an exhausted market just waiting for the sell signal from the Powers That Be to roll over. Standard-issue financial pundits forget that "surprising" declines benefit those same select hands which kept the market lofting higher the past few months as volume (i.e. broad-based appetite for equities) declined.
The easiest way to make large profits is to go short when everyone else has been lulled into complacency/mild bullishness, then engineer a sharp downturn that triggers stops all the way down. Once the complacency has been replaced by fear and angst, then scoop up shares which have been discounted.
Rinse and repeat."

A suspected suicide bomber wounded 32 people in an attack targeting Turkish police in Istanbul's main square on Sunday.

Vacation home rental matchmaker HomeAway just received a reported $25 million investment from Google Ventures, as corporate venture arms increasingly look for ways to invest in high-revenue, pre-IPO companies.
The New York Times first broke the story. Neither Google Ventures nor HomeAway could be reached for confirmation of the monetary amount of the deal.

ZeroHedge: "A Fed paper released in September, which we luckily missed as otherwise it would have led to the collective death through uncontrollable foaming in the mouth of the entire Zero Hedge staff, was "Oil Shocks and the Zero Bound on Nominal Interest Rates", in which author Martin Bodenstein (an econ Ph.D.) argues that oil price shocks (i.e., surges in the price of oil such as the one we are about to experience courtesy of a fresh trillion in liquidity about to be unleashed by the Fed) are... wait for it... beneficial to GDP and stimulative to the interest-rate sensitive parts of the economy. To wit: "In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion.". Yes you read that right. The Fed is stealthily floating the idea that a surge in oil prices will be for the greater good. In essence, the Fed is telegraphing that while it acknowledges that oil is about to jump to over $100, it won't be as bad as those with a functioning brain dare to claim. And, as we show below, it will actually be a very good thing! While we would probably get a massive lethal subdural hemorrhage if told to argue a view so blatantly and stupefyingly demented, insane and, simply said, wrong, as that espoused by Bodenstein, we are glad that Sean Corrigan of Diapason has gone the extra mile to not only expose the Fed charlatans for their voodoo gimmickry in this narrow topic, and brings up an even more critical idea, which is that the Fed "actually welcomes the current surge in the prices of many of the staples of everyday life; that it actually exults in the drain being exerted on family budgets; that it revels in the squeeze on profit margins being suffered by already-struggling small businesses, because it imagines this will serve to lower the reckoning of the ethereal construct of a generalized, future real interest rate and that this alone will serve to shower riches upon all who are presently suffering, in comparison for the present woes." That nobody has reached this conclusion before is explainable - it is something only the brain of an illogical, demented, perverted genocidal madman's brain can come up with. Which is why we are now convinced the Fed is hoping for not only mild inflation, but an outright surge in prices."