Saturday, November 20, 2010


11/19/10 Friday

The People's Bank of China announced late Friday it will raise banks' reserve
requirement ratio by half of a percentage point from Nov. 29, as part of
efforts to control credit, marking the third such hike since September,
according to reports. The hike will bring most big banks reserve requirements
to 18.5%. The PBOC most recently lifted banks' reserve requirements on Nov 10
in a surprise move, which fwas ollowed a combined interest rate and reserve
requirement hike in September. The move follows data showing October CPI gains
of 4.4% from a year earlier, the fast pace in 25 months.

State Farm Insurance says it is closing its 450-person regional headquarters in
Rohnert Park, and smaller Bay Area offices in San Francisco, San Ramon and
The local closures are part of a larger statewide restructuring by the
Bloomington, Ill.-based insurance giant in recent years. In 2002, it reduced its number of California satellite offices from 66 to 21.

President Obama arrived in Portugal this morning for two days of meetings with
NATO allies as they craft a new plan for the war in Afghanistan and seek a new
mission statement that will keep them relevant in the 21st century.
After a lengthy trip to expand American trade opportunities in Asia last week,
Obama turned around immediately for a trip to reassure friends in Europe that
their shared security and economic concerns are also a top priority. The focus
for the weekend is forming the NATO plan to begin turning security
responsibility for Afghanistan over to local forces this year, a long-term
process that Obama now acknowledges will probably last into 2014.
At the same time, Russian President Dmitry Medvedev will meet with the allies to
talk about cooperating on a missile defense shield for Europe. The idea was
previously too distasteful for Russia to discuss in such an international
forum, but warming relations between Obama and Medvedev helped to pave the way.

George Ure: "
Port of Long Beach last month had imports up 33.5% for the month - compared
with year ago levels - while exports were up only 26.3%. Ov er the viaduct,
the Port of Los Angeles was up only 3.2% compared with last year and exports
were up only a quarter of a percent, or so.

Up the coast a ways, Oakland had loaded inbound up 9.3% while loaded export was

up 3-10th's of a percent. Seattle showed imports up 15.7% while exports jumped

34.9% but I don't know if the grain exports are counted in that or not.
Inbound full was down 1.7% compared with last year in Tacoma while outbound
international was down a whopping 25.1%.

Once ashore, the Association of American Railroads' Railtime Indicators report
(11/18 edition) shows rail traffic is still holding well below 2006, 2007, and
2008 but showing a continued bump over 2009."

Fewer new businesses are getting off the ground in the U.S., available data
suggest, a development that could cloud the prospects for job growth and
innovation. In the early months of the economic recovery, start-ups of
job-creating companies have failed to keep pace with closings, and even those

concerns that do get launched are hiring less than in the past. The number of
companies with at least one employee fell by 100,000, or 2%, in the year that

ended March 31, the Labor Department reported Thursday. That was the second
worst performance in 18 years, the worst being the 3.4% drop in the previous
year. Newly opened companies created a seasonally adjusted total of 2.6
million jobs in the three quarters ended in March, 15% less than in the first
three quarters of the last recovery, when investors and entrepreneurs were
still digging their way out of the Internet bust.

The European Central Bank (ECB) has issued a clear warning that it will press

ahead with plans to raise interest rates and withdraw lending support for
banks despite the eurozone debt crisis, even if this risks pushing Ireland,
Portugal and Spain into deeper trouble

Thursday, we closed just below the rising 20 day moving average on the S&P.

(Bloomberg) -- Foreclosures on prime fixed-rate mortgages in the U.S. jumped to
a record in the third quarter as unemployment strained household budgets of the
most creditworthy borrowers.

The inventory of homes in foreclosure financed by prime fixed-rate loans rose to

2.45 percent from 2.36 percent in the previous three months, the Mortgage
Bankers Association said in a report today. New foreclosures rose to 0.93
percent from 0.71 percent. Both numbers were the highest in the 12 years since
the Washington-based trade group started tracking the categories.

In a speech this morning, IMF director Dominique Strauss-Kahn was highly
critical of the eurozone banking sector, and warned the crisis is far from

"The wheels of cooperation move too slowly," he said, "in part because
policymakers are not paying enough attention to the pan-European dimension."

Google agrees to delete collected personal data, Daily Mail reports.

Air China to buy $4.49B worth of aircraft from Airbus at a discount.

ZeroHedge: "Seasonally adjusted M2 has just surpassed $8.8 trillion for the
first time, hitting a record $8,802.2 billion, a jump of $16 billion on a SA
basis. This is the 17th out of 18 consecutive weeks that M2 has increased. On a

non-seasonally adjusted basis, M2 also jumped to a record high, hitting $8,765
billion, a jump of $56.9 billion W/W, and an increase if just over $100 billion

in the past two weeks alone. While the jump itself is not surprising as it
comes in anticipation, and realization, of QE2 (we would love to have the
semantic and highly theoretical debate of whether or not the Fed "prints money"

but will focus on the practical for now), the last week's components of the M2
were odd to say the least. In the past week we saw both the biggest drop
in commercial banks savings deposits in 2010 ($61.3 billion) and the biggest
jump in demand deposits ($57.6 billion)."

Del Monte Foods Co. climbed as much as 14 percent in early trading after the
Financial Times reported the maker of canned fruit and Meow Mix cat food is in
advanced discussions to be taken over by KKR & Co.

The parties are talking about a price of around $18.50 a share, the newspaper
reported, citing unidentified people familiar with the matter. That would be 18
percent higher than the San Francisco-based company’s close of $15.71 yesterday
on the New York Stock Exchange.

China Investment Corporation’s Hong Kong chairman Lawrence Lau said China
should stop purchasing US Treasuries but should continue to buy US dollar
assets and warned of the impact of a simultaneous sell-down of Treasuries by
holders such as China, Hong Kong, Japan and Korea.

Marc Faber: "I think in general that Consumer Price Indices published by China
and the US do not reflect the real cost of living that households in these
countries view is that inflation in China is running at 10% per
annum....I think that China and the US are on a collision course, both
economically and politically."

Flows into equity and bond funds "hit a wall in mid-November," said fund-tracker EPFR on Friday, weighed by investor worries about indebtedness in the euro zone and weaker demand from China amid rising inflation. EPFR said globally tracked equity funds were hit with redemptions totaling $5.6 billion just a week after collectively posting their biggest inflow in more than 22 months. Bond funds posted their worst week in almost two years because of the removal of $2.5 billion. Only three major equity fund groups - Asia ex-Japan, Global and EMEA Equity Funds - posted inflows during the week ending Nov. 17. But all emerging market equity funds combined posted inflows for the week, and extended year-to-date flows to $81.9 billion, "within a whisker of last year's $83.3 billion inflow record," wrote EPFR.

Gulf State Community Bank of Carrabelle, Fla. was closed by financial regulators on Friday, marking the 147th bank closure of this year. All deposit accounts, excluding the Cede & Co. deposits, have been transferred to Centennial Bank of Conway, Ark. The latest failure is the 27th so far in the state of Florida for 2010.

On Friday, the Dow Jones Industrial Average rose 22.32 points, or 0.2%, to end at 11,203.55. The S&P 500 index gained 3.04 points, or 0.3%, to 1,199.73. The Nasdaq Composite rose 3.72 points, or 0.2%, to 2,518.12. For the week, the Dow rose 0.1%, the S&P up 0.04%, while the Nasdaq was flat.

Thursday, November 18, 2010


11/18/10 Unemployment

The number of workers who filed new claims for unemployment benefits rose by
2,000 last week to 439,000, the U.S. Labor Department reported Thursday.
Economists polled by MarketWatch had expected claims to rise to a seasonally
adjusted 445,000 in the week ended Nov. 13. Claims in 2010 have ranged from a
high of 504,000 to a low of 427,000. The four-week average of initial claims
dropped 4,000 to 443,000, the lowest level since September 2008. The moving
average smoothes out quirks in the weekly data and is considered a more
accurate gauge of employment trends. Continuing claims, which reflect workers
already receiving benefits, declined by 48,000 to 4.3 million. Altogether, 8.85
million people were getting some kind of state or federal benefit in the week
ended Oct. 30, the latest data available. That was down almost 146,000 from the
prior week. 20% of the data was estimated due to Veteran's Day.

Irish Finance Minister Brian Lenihan on Thursday said Ireland may ask for an
aid package for its banking sector after it wraps up talks with the European
Union and International Monetary Fund, news reports said. "If these talks were
to result in a substantial contingency capital funding" pool, it would be a
"very desirable outcome," Lenihan told the Irish parliament in Dublin,
according to Bloomberg. Lenihan said no deal has yet been reached. Lenihan said
deposits in the country's banks remained safe and covered by the government's
guarantees, according to Dow Jones Newswires.

The Automatic Earth: "A large part of the blame lies within Ireland itself. It
had and has blatant corruption, and it has scores of politicians that are
either for sale or too dumb to put their socks on the right foot in the
morning, or -which seems quite likely- both. But the thing is that it’s not
the Irish people, even if they might have known better when Dublin real estate
prices increased five- or tenfold. The Irish have through their history gone
through literally hundreds of years of hardship the kind of which is presently
seen only in places like Bangla Desh or Rwanda, and it very much looks like
that's where the country is heading once again.
And before, wherever you are on the globe, you elect to count your blessings,
beware: most of you will see your politicians, too, choose to save their banks
rather than their people, and you too will follow the Irish down that same
steep slope. It’s the old "be careful what you wish for" theme.
If Ireland should mean anything to the rest of us today, and in the days going
forward, it's as a big bold read flashing warning sign: you're next in line."

Moscow approves $32B sale of state assets; disposals to help cover budget

Sears Holdings Corp. on Thursday reported a wider fiscal third-quarter loss on
5% lower revenue. For the quarter ended Oct. 30, the loss widened to $218
million, or $1.98 a share, from $127 million, or $1.09, in the year-earlier
period. Revenue declined to $9.68 billion from $10.19 billion. A survey of
analysts by FactSet Research produced a consensus estimate of a loss of $1.02 a

share on revenue of $9.95 billion. On an adjusted basis, Sears posted a loss
before interest, taxes, depreciation and amortization of $38 million, compared

with a year-earlier profit of $161 million on the same basis. The Kmart unit's
profitability improved but overall results were "disappointing," particularly
as apparel and appliances sales at Sears declined, W. Bruce Johnson, interim
president and chief executive, said in a statement. Domestic comparable-store
sales fell 4.8% in the quarter.

The rising 50 day moving average on the S&P, currently at 1167. Yesterday we had

an inside day.

Charles Hugh Smith: "The Federal Reserve is an example not just of
run-of-the-mill hubris but of the far more profound Pathology of Power.

The rule of law has been supplanted in the U.S. by self-serving propaganda
campaigns serving State and financial Elites: this is the Pathology of Power.
The Federal Reserve is an instructive example because it is so blatant."

ZeroHedge: "For a stark demonstration of market momentum euphoria look no
further than the AAII weekly bullish/neutral/bearish sentiment. After hitting
57.56% in the week ended November 11, the highest since 2007, bullish sentiment

plunged by 17.56%, to 40.00%, the biggest drop since January 2009, and the
fourth biggest shift in sentiment since 2006. Alas, this is the kind of bipolar

sentiment shift that will accompany a market in which everything continues to
correlate with near precision to the dollar, and in which no bad news matter
until they matter, and from all in buying the mood shifts to relentless

As many as 138 million U.S. shoppers could be hunting for Black Friday bargains

during the three days after Thanksgiving, according to a retail trade group
survey released on Thursday.
Nearly 60 million Americans plan to hit the stores, while an additional 78
million might join the crowds of shoppers, the National Retail Federation said.
The total number of possible shoppers is 4 million more than forecast last
year, when the NRF forecast 134 million Americans would be out shopping over
the three-day weekend.
The group does a follow-up survey to ascertain how many of those consumers
actually did shop over the weekend, but it includes shoppers on Thanksgiving

Bespoke Investment Group: "Ninety percent of stocks in the Energy sector remain
above their 50-day moving averages. The Utilities sector is a different
story. Just 24% of stocks in this sector are above their 50-days. The
Financial sector is the only other one with less than 50% of stocks trading
above their 50-days."

General Motors Co.'s initial public offering opened at $35 a share on Thursday
in its first trade on the New York Stock Exchange, as the auto maker returned
to the stock market after an 18-month absence. The IPO had priced at $33 a
share, the top of its $32-$33 range. In recent trades, GM changed hands at
$35.63, a premium of nearly 8% over its IPO price.

FMX Connect: "We have an EIA underground storage report this morning, and Dow
Jones is looking for an average of 8 bcf being added to storage figures today.

That is less than the 20-21 bcf added a year ago and the 17-18 bcf average
build over the last five years.
Working gas in storage was 3,843 Bcf as of Friday, November 12, 2010, according

to EIA estimates. This represents a net increase of 3 Bcf from the previous
week. Stocks were 13 Bcf higher than last year at this time and 327 Bcf above
the 5-year average of 3,516 Bcf. In the East Region, stocks were 70 Bcf above
the 5-year average following net withdrawals of 8 Bcf. Stocks in the Producing
Region were 215 Bcf above the 5-year average of 1,031 Bcf after a net injection

of 13 Bcf. Stocks in the West Region were 41 Bcf above the 5-year average after

a net drawdown of 2 Bcf. At 3,843 Bcf, total working gas is above the 5-year
historical range.

The index of manufacturing activity in the Philadelphia region surged in
November to its highest level in almost a year, the Federal Reserve Bank of
Philadelphia reported Thursday. The Philly Fed diffusion index rose to 22.5 in
November from 1.0 in October. The increase was must stronger than expected.
Economists polled by MarketWatch were expecting the index to rise to 5.0. The
index is the highest since December 2009. Indexes for new orders and shipments
improved markedly in the month. The index for employment increased 11 points.
Price increases were widespread again in November.

A larger share of homes entered the foreclosure process in the third quarter,
though the delinquency rate for mortgage loans dropped, the Mortgage Bankers
Association reported on Thursday in its quarterly delinquency survey. Mortgages

at least one payment past due or in foreclosure fell to 13.78% of all
mortgages outstanding in the third quarter, down from 13.97% in the second
quarter and 14.41% a year ago, on a non-seasonally adjusted basis. But
foreclosure starts hit 1.34%, up from 1.11% the previous quarter and down from
1.42% a year ago. "Mortgage delinquency rates declined over the quarter and
over the past year, due primarily to a large decline in the 90-plus day
delinquency rate," Michael Fratantoni, MBA's vice president of research and
economics, said in a news release. "The number of loans in foreclosure also
dropped, bringing the serious delinquency rate to its lowest level since the
second quarter of 2009. However, the foreclosure starts rate increased for all
loan types and the foreclosure starts rate for prime fixed loans set a new
record high in the survey, as more loans entered the foreclosure process,"
Fratantoni said.

A "mild pickup" may be in store for the U.S. economy this spring, following a
post-holiday lull, the Conference Board said Thursday as it reported that its
leading economic index rose 0.5% in October. Economists polled by MarketWatch
had expected the index -- a weighted gauge of 10 indicators that are designed
to signal business cycle peaks and troughs -- to gain 0.6%. "The economy is
slow, but latest data on the U.S. LEI suggest that change may be around the
corner," said Ken Goldstein, economist at the Conference Board, in a statement.

Six of the 10 indicators rose in October, with the largest contribution from
the interest rate spread. Among the two negative contributors, the largest
negative contribution came from the index of supplier deliveries. Two of the
indicators held steady in October. The September index was revised higher to a
gain of 0.5% from a prior estimate of 0.3%.

The global investment strategist for Knight Capital, which executes more trades

than any other U.S. firm, said that a breakdown in the equitable terms of
global trade, especially by China, will end the emerging market global growth
“The game is over,” said Knight’s Mark Lapolla in a one-page note to clients
today. “We expect a shockingly powerful rally in the dollar, broad-based
weakness across the commodity sector, a dramatic widening of emerging market
credit spreads, and what could prove to be a stampede of hot fund flows out of
the emerging markets.” “We believe the data and government actions out of China,

the back-up in U.S. interest rates, the Fed’s emphatic commitment to QE2,
intensifying pressures across the EU, broadly rising commodity prices,
government efforts to control hot money flows, have finally pushed the global
terms of trade to their tipping point,” wrote Lapolla.

The unemployed would have three more months to file for extended jobless
benefits under a bill introduced in the House Wednesday.
The legislation would extend the deadline to file for federal unemployment
benefits to Feb. 28, sparing 4 million people from falling off the rolls. The
deadline is now Nov. 30.
"Terminating this emergency unemployment assistance will not only devastate
families, but it also will hurt the entire economy by depressing consumer
confidence and demand," said Rep. Sander Levin, D-Mich., the chairman of the
House Ways and Means Committee who is introducing the bill with Rep. Jim
McDermott, D-Wash.
Federal jobless payments, which last up to 73 weeks, kick in after the
state-funded 26 weeks of coverage expire. These federal benefits are divided
into tiers, and the jobless must apply each time they move into a new tier.
Congress has extended the deadline to file those applications four times in the

past year.
A bill to extend federally-funded benefits for long-term jobless workers failed
to pass in the House of Representatives Thursday. To pass the House, the bill
needed to capture two-thirds of the votes -- 258 lawmakers voted in favor of
the extension, while 154 voting against it. The bill would have extended
special federal unemployment insurance benefits through February, calling for
$12.5 billion in emergency spending. Without an extension, long-term jobless
workers will start losing benefits in coming weeks, with about two million cut
off by the end of the year.

Gold for December delivery added $16.10 to $1,353 an ounce on the Comex
division of the New York Mercantile Exchange. Silver rallied 5.2% after a
consultancy said it expected prices past $30 an ounce in 2011. December silver
surged $1.32 to $26.83 an ounce on Comex.

Bank of America Merrill Lynch says its latest survey of big fund managers,
conducted between November 5 and 11, found "market sentiment at its most
bullish since April 2010." reported a better-than-expected growth in revenue for the third quarter, as earnings for the period rose slightly. For the quarter ended Oct. 31, Salesforce reported net income of $21.1 million, or 15 cents a share, compared to net income of $20.7 million, or 16 cents a share, for the same period last year. Earnings on a non-GAAP basis would have been 32 cents a share for the recent period. Revenue grew 30% to $429 million. Analysts were expecting earnings of 31 cents a share on revenue of $409.8 million, according to consensus estimates from FactSet Research.

The Dow Jones Industrial Average gained 173.35 points, or 1.6%, to end at 11,181.23, with all but one of its 30 components rising, led by a 3.4% gain in shares of Alcoa Inc. The S&P 500 index gained 18.10, or 1.5%, to 1,196.69, with the energy sector leading the gains. The Nasdaq Composite advanced 38.39, or 1.6%, to 2,514.40.

Benchmark crude for December delivery added $1.41, or 1.8%, to $81.85 a barrel on the New York Mercantile Exchange. Gasoline rallied 3.3% to $2.23 a gallon.

Wednesday, November 17, 2010


11/17/10 GM

Construction of new U.S. homes sank 11.7% to an annualized rate of 519,000 in
October, the lowest level in 18 months, but permits rose slightly, the Commerce
Department reported Wednesday. The last time starts were that low was in April
2009. In addition, housing starts in September were revised down to 588,000
from an original reading of 600,000. Economists surveyed by MarketWatch had
expected housing starts in October to drop to an annual rate of 600,000 on a
seasonally adjusted basis. Permits for new construction, viewed as a more
accurate gauge of home building, rose 0.5% in October to an annualized rate of
547,000. Permits were also revised slightly higher in the prior month.
U.S. consumer inflation decelerated in October, the Labor Department said

The consumer price index increased 0.2% in October, driven by a 2.6%
gain in energy prices. Other price increases were moderate, including food.
The core CPI, excluding food and energy costs, was flat for the third straight
month in October. Economists were expecting the CPI to rise 0.3% in October and
for the core rate to rise 0.1%. In the past year, the CPI has risen 1.2%. The
core rate is up 0.6%, the slowest pace on record and well below the Fed's
target of about a 2% rate.

China's State Council on Wednesday announced guidelines to control prices amid
rising inflationary pressures, according to a report. Under the guidelines,
the State Council, China's cabinet, said it would strive to improve agricultural
production and ensure market supplies, and urge local governments to offer
temporary subsidies to needy families, according to a Xinhua news service
report. Bank of America Merrill Lynch economist Lu Ting said the key point of
the guidelines was to focus on "adding supply and facilitating transportation,
while also curbing speculative demand." However, "since we believe China's
economy is not overheated, one implication from the State Council's stance is
that [the policy] will not significantly cool the economy to achieve price
stability," he added. China's Shanghai Composite ended 1.9% lower and Hong
Kong's Hang Seng Index dropped 2% on Wednesday on worries Beijing would further
tighten its policy to restrain price increases.

With Chinese official inflation accelerating, and the government rushing to
implement price controls for food, the inflation statistics themselves are now
coming under far more intense scrutiny than before. And failing.
Two weeks ago, a Chinese think tank said that official data had been
understating inflation by 7%.

China's government has said it will provide poorer households with subsidies in
response to double-digit food price inflation.
Inflation accelerated to 4.4% in October, with food prices rising 10.1%.
The government also said it had not ruled out price controls if current grain
and vegetable shortages worsen.
Meanwhile the Shanghai stock exchange has fallen nearly 10% in four days on
fears of more interest rate rises in response to the price rises.
China’s stocks fell after Premier Wen Jiabao said the cabinet is drafting
measures to curb rapid price gains, boosting speculation the government may
raise interest rates and order price controls to slow inflation.

China could raise interest rates for a second time this year as soon as Nov.
19, citing an analyst. The central bank may raise rates due to sustained
inflationary pressure, the report said. Earlier announcements also indicate
that rate decisions are often released on Fridays or around the 20th of the

China is considering raising its gold reserves, a move which would push up gold
prices in the future, a person providing consulting services to the Chinese
government said.

California Will Default On Its Debt, Says Chris Whalen.

For the period ended Oct. 30, Target reported a profit of $535 million, or
74 cents a share, up from $436 million, or 58 cents a share, a year earlier.
Total revenue, which includes the company's credit-card business, rose 2.2% to
$15.61 billion. Same-store sales rose 1.6%.
Analysts polled by Thomson Reuters had most recently forecast earnings of 68
cents a share on $15.61 billion in revenue.
Gross margin fell to 30.6% from 30.8%.
Bad-debt expenses at Target's credit-card segment slumped 64%. That let profit
more than double to $130 million even as revenue declined 22% on lower finance,
fee and other income. Accounts at least 60 days delinquent fell to 4.9% of
receivables from a year-earlier 6.5%. The 90-day delinquency rate dropped to
3.5% from 4.6%.

Charles Hugh Smith: "The BLS also reported "discouraged workers" increased by
411,000 and the labor participate rate fell again. Why does that matter? If
there are 20 workers participating in the economy, and 10 are unemployed, then
the unemployment rate is 50%. If nine of those unemployed drop out
("discouraged workers") and stop looking for work, then the unemployment rate
magically drops to 9%: there are ten employed workers and only one
unemployed.In other words, the unemployment rate can fall not because there are
actually more people getting jobs but because there are fewer people looking,
i.e. in the labor pool....Unlike in previous recessions, the number of
unemployed who have been jobless for 26 weeks or longer has skyrocketed,
suggesting there is a structural dearth of jobs being created in the economy. "

(Dow Jones)--The United Kingdom knows that it has "special neighborly links and
obligations" toward Ireland, German Finance Minister Wolfgang Schaeuble said
The U.K. in my opinion would be willing to talk" about a possible British
contribution to aid to Ireland, he said after a meeting of European Union
finance ministers.
Any U.K. aid would be bi-lateral and not part of a euro-zone aid effort,
Schaeuble said. It would therefore be on top of any possible euro-zone rescue,
and not subtracted from euro-zone aid, he said.
Schaeuble added that the problems with the Irish banking sector and possible
market risks resulting from that "are a problem of Ireland."
Any rescue package from the euro zone would be made available for the country,
and not for its banking sector, he said.
Schaeuble also said that if any country does ask for a rescue, the euro group is
able to act quickly.
He declined to say whether he thinks Ireland should ask for a rescue, but said
"the Irish government is conscious of its responsibility" and "knows the danger
of such developments in markets is always that they can spill over to other

The Fed's Eric Rosengren doesn't expect the economy to pick up any time soon
and recent data "has not been particularly encouraging." In particular, GDP
minus inventories has been anemic.

Carol Bartz said that Yahoo serves up some 18 billion ads a day now across their
network. “We’re content, that’s what we are. It went off track when people
thought it was a ‘search’ company,” Bartz said.

LCH Clearnet doubles the extra margin requirement it charges for Irish bond
trading to 30%, but says "we are not making any judgment on Irish
creditworthiness, this decision is based solely on government bond-spread

The next tranche of Greek aid has been delayed to January from December, says
Austrian finmin Josef Proell, though an EC spokesman counters the payment was
always scheduled for January. Payment will be preceded by a Dec. eurozone vote
and a review of Greece's fiscal compliance.

The Energy Department may say on Nov. 18 that natural gas supplies rose 9
billion cubic feet last week, according to the median of 16 analyst estimates
compiled by Bloomberg. The five-year average gain for the week is 18 billion.
“There’s cold temperatures on the rise, and there’s the possibility that they
may report a net storage withdrawal tomorrow,” said Teri Viswanath, director of
commodities research at Credit Suisse Securities USA in Houston, who estimated
that inventories dropped by 5 billion cubic feet.
Natural gas for December delivery rose 15 cents, or 3.9 percent, to $3.968 per
million British thermal units at 11:53 a.m. in the New York Mercantile Exchange.

General Motors Co priced its initial public offering of common stock at $33 a
share, two people familiar with the offering said late Wednesday. The auto maker
is selling 478 million shares of common stock, so the IPO will raise roughly
$15.8 billion, making it the second-largest in U.S. history. This doesn't
include underwriters' options to buy another 71.7 million shares of GM common
stock to cover over-allotments. Underwriters are likely to exercise these
options in coming days, one of the people said on condition of anonymity. That
would bring the amount raised from the IPO to about $18.2 billion. This doesn't
include a planned offering of preferred stock by GM.

The Dow Jones Industrial Average fell 15.62 points, or 0.1%, to end at
11,007.88, after earlier rising to an intraday high of 11,042.16. The S&P 500
Index rose 0.25 points to 1,178.59. The Nasdaq Composite gained 6.17 points, or
0.3%, to 2,476.01.

Tuesday, November 16, 2010


11/16/10 China

U.S. producer prices rose 0.4% in October on a seasonally adjusted basis, as
energy prices increased, the Labor Department reported Tuesday. Prices for
finished energy goods rose 3.7% -- the largest gain since January -- as
gasoline increased 9.8%. Meanwhile, food prices fell 0.1% in October as the
index for fresh and dry vegetables declined 8.1%. Core producer prices, which
exclude volatile food and energy costs, fell 0.6% on lower prices for light
motor trucks and passenger cars. The decline follows 11 consecutive months of
gains in core prices. Economists surveyed by MarketWatch had expected overall
producer prices to rise 0.7%, and for the core to gain 0.1%. In September,
overall producer prices rose 0.4%, while the core gained 0.1%. The government
also reported that prices for intermediate goods rose 1.2% in October, while
prices for crude goods gained 4.3%.

Wal-Mart Stores Inc. said Tuesday that its fiscal third-quarter
profit rose to $3.44 billion, or 95 cents a share, from $3.14 billion, or 81
cents, a year earlier. Sales in the quarter ended Oct. 31 rose 2.6% to $101.2
billion from $98.7 billion. The most recent quarter's results included a
5-cent tax benefit, Wal-Mart said. The company forecast fourth-quarter profit of $1.29
to $1.33 a share. It also raised its full-year outlook to $4.08 to $4.12 a
share from a previous guidance of $3.95 to $4.05 a share. Analysts surveyed by
FactSet estimated the Bentonville, Ark.-based retailer to earn 90 cents a share
in the third quarter, $1.28 a share in the fourth quarter and $4.02 for the
year. Sales at U.S. Wal-Mart stores open at least a year fell 1.3 percent, the
sixth consecutive quarterly decline. Chief Executive Officer Mike Duke said he
expected that U.S. performance to improve during the fiscal fourth quarter,
which includes the holiday shopping season.
"Walmart U.S. will be the price leader this holiday season, and I am confident
about improving comp trends for the fourth quarter," Duke said in a statement.
The company forecast U.S. same-store sales to range between a 1 percent drop to
a 2 percent increase in that quarter.

For all of fiscal 2011, Home Depot now expects to earn $1.94 a share from
continuing operations as sales rise 2.2%. FactSet's survey is looking for $1.90 a share.

Home prices could fall another 10% through 2011, forecasts S&P, as the housing
market contends with "an elevated, but declining level of short sales and
distressed asset sales; a large backlog of distressed properties that have yet
to be re-marketed for sale; and a high national unemployment rate."

Federal emergency unemployment benefits begin phasing out at the end of this
month, which will reduce the weeks of benefits available to
unemployment-insurance claimants in Washington.
For the past year, eligible jobless workers could receive up to 99 weeks of
unemployment benefits. This includes up to 26 weeks of regular benefits, up to
53 weeks of emergency unemployment compensation (EUC) and up to 20 weeks of
extended benefits.
With the end of EUC, people who are drawing regular benefits at the end of
November and people who file new claims after Nov. 27 will be limited to 46
weeks of benefits.
“Although Congress has stepped in at the last minute and continued the program
several times over the past two years, it doesn’t look like there will be
another save this time,” said Employment Security Commissioner Paul Trause. “As
a result, thousands of unemployed workers will find their benefits ending
sooner than they expected.”
This week, Employment Security is notifying about 238,000 claimants who maybe
affected by the expiration of the EUC benefits. After completing some final
computer programming over Thanksgiving weekend, the department will send
notices telling claimants which EUC tier they are in, if applicable, and will
be able to tell them how many weeks of emergency unemployment compensation and
extended benefits they have remaining.

The Mexican government has passed a law restricting how many greenbacks
Americans can exchange south of the border. The new magic number: $1,500 per

Chinese stocks suffered sharp declines Tuesday, with property developers
tumbling on further tightening measures that target the sector, while coal and
metal shares fell on concerns about price curbs.
China’s Shanghai Composite skidded 4% lower to end at 2,894.54, its second
severe selloff in three days, after the benchmark fell 5.2% Friday.

The Oil Drum: "the IEA forecasts that OECD demand for oil has already peaked.
Consumption of oil in the United States, Europe, Japan, Australia and other
'developed' OECD nations is set to decline permanently, starting about.. now."

The Housing Time Bomb: "We could be reaching a tipping point in a matter of days
or weeks. If you are long stocks via the "easy money Fed trade" then I think
you might want to reconsider. We will see a deflationary collapse if rates
continue to rise like this because the fraud and the losses that accompany it
will be exposed. It's too early to call this of course but the trend has
definitely been set. It remains to be seen as to whether or not it continues.
If we start getting close to 4% on the 10 year we are in DEEP trouble because
we have so much debt that we need to service.
One thing is clear trend or no trend: Since QE started, some extremely large
investors are bailing out of our credit and muni markets.Someone doesn't like
what they see which is unsettling to say the least.
Ben and the Fed now have a decision to make: Do they continue QE and get into
a potential brawl with the bond vigilantes or does he possibly end the program
in the hopes that the bond market will settle down and keep rates low.
Has judgement day arrived? I'm afraid will know soon enough."

Bloomberg: The International Monetary Fund reduced the weighting of the U.S.
dollar and the yen and increased that of the euro in its Special Drawing
Rights valuation basket after its regular five-year review.
The value of the SDR, which the IMF created in 1969 to supplement its member
countries official reserves, will continue to be based on a basket of currencies
comprised of the dollar, euro, yen and pound, the fund said in an e-mailed
statement. UBS AG, the world’s second-largest foreign-exchange trader, said in
June that the fund may include the Australian and Canadian dollars in the SDR
basket this year, boosting demand for the commodity-backed currencies.

The CME has just raised its margin requirement on silver again, bringing
maintenance margins up from $6,500 to $7,250. On gold the new maintenance margin
is up from $4,251 to $4,500,

South Korea raises interest rate by 25 bps - for second time in 2010.

The output of the nation's factories, mines and utilities was flat in October,
the Federal Reserve said Tuesday. The data was weaker than expected.
Economists surveyed by MarketWatch had expected a 0.2% increase. Production was
held down by a decline in utility output due to unseasonably warm weather.
Factory activity alone rose 0.5% in October after rising 0.1% in September.
Capacity utilization - a gauge of slack in the economy - held steady at 74.8%
in October compared with September.

Foreign investors bought a net $81 billion of long-term U.S. assets in
September down from $128.7 billion in August, the Treasury Department said
Tuesday. International demand for Treasurys decelerated to an increase of $78.3
billion in September from a gain of $117.2 billion in August. Official
purchases of Treasurys hit a record high $39.5 billion. . Foreign official
institutions sold a record amount of Fannie Mae and Freddie Mac bonds.
Including short-term securities and bank lending data, foreigners purchased a
net $81.7 billion of U.S. assets compared with net purchases of $11.2 billion a
month earlier. According to the data, China, Japan and the United Kingdom all
increased their Treasury holdings in September.

European Central Bank Executive Board member Juergen Stark said the central bank
will continue with its exit from emergency measures after the end of the year.

Copper futures retreated nearly 5% Tuesday amid a broad commodities selloff
sparked by a rising dollar and concerns that China could take steps to rein in
inflation -- and curb its growth and appetite for commodities. Copper for March
delivery retreated 19 cents, or 4.9%, to $3.73 a pound.

The National Association of Home Builders/Wells Fargo housing market index
rose to 16 from a downwardly revised 15 reading in October. Economists polled
by MarketWatch had expected a 16 reading, and the October data originally
showed a reading of 16. The seasonally-adjusted index shows a reading of over
50 when more builders view conditions as good than poor - which hasn't been the
case since April 2006.

The Dow closed down 178, the Nasdaq down 44, and the S&P down 19.

Chile's central bank late Tuesday lifted the country's key interest rate by 25 basis points to 3%, meeting widely held expectations.

The American Petroleum Institute late Tuesday reported supplies of crude oil declined 7.65 million barrels for the week ended Nov. 12. The Washington-based trade group also reported a decline of 1.5 million barrels for gasoline stocks, and a increase of 222,000 barrels of distillates supplies. The API data comes ahead of the more closely watched data from the Department of Energy. Analysts polled by Platts expect an increase of 1.2 million barrels for crude-oil stocks, a rise of 650,000 barrels for gasoline stocks, and a decline of 1.8 million barrels for distillates stocks.

Gold for December delivery lost $30.10 to settle at $1,338.40 an ounce. Silver for December delivery retreated 86 cents to $25.23 a pound.

Monday, November 15, 2010

Treasury Yields

11/15/10 Treasury Yields

Caterpillar Inc. said Monday it inked a merger agreement to buy mining
equipment maker Bucyrus International Inc. in a deal valued at $8.6 billion,
including debt. Bucyrus shareholders will receive $92 a share in cash, or $7.6
billion. The deal values Bucyrus at a premium of 32% over its closing price of
$69.62 on Friday. Caterpillar expects to close the deal in the middle of 2011.
"For several years, mining customers have been asking us to expand our range of
products and services to better serve their increasingly complex requirements,"
said Caterpillar Chairman and CEO Doug Oberhelman. "This announcement says to
those customers, we heard you loud and clear."

The euro traded near a six-week low against the dollar as Ireland denied
speculation it was seeking a rescue before tomorrow's meeting of European
finance chiefs.

Ireland said it’s in talks with European officials about “market conditions” as
Germany pushes it to accept a bailout before a meeting Nov. 16 of finance
ministers that aims to reverse a bond sell-off across the euro- region’s
“Ongoing contacts continue at official level with international colleagues in
light of current market conditions,” a Finance Ministry spokesman said in an
email tonight. “Ireland has made no application for external support” and the
government is “fully funded till well into 2011,” the spokesman said.

(Bloomberg) -- Leaders of the world’s biggest economies ended four days of
talks without taking decisive measures to address the global imbalances that
have fueled asset bubbles and risk leading to a protectionist backlash.
Asia-Pacific leaders yesterday in Japan pledged to take “concrete steps” toward
creating a regional free-trade agreement without setting a target for achieving
that goal. Their meeting followed the Nov. 11-12 Group of 20 summit in Seoul
that “opposed protectionist trade actions” while failing to agree on a remedy
for trade and investment distortions.

"BHP Billiton Ltd., the world’s largest mining company, abandoned its $40
billion cash offer for Potash Corp. of Saskatchewan Inc. after Canada rejected
the proposal. BHP reactivated its buy-back program."

Guy Lerner: "The "dumb money" and the Rydex investor are extremely bullish.
Company insiders are selling to an extreme degree. In aggregate, this is a
bear signal.
The price cycle is playing out as expected. Fear has given way to greed. Greed
will lead to fear. Lower prices finds buyers as the selling dries up. Higher
prices leads to selling as there are no more buyers. It is the price cycle -
that is dictated by fear and greed - that plays over and over and over again
in the markets."

John Hussman: "It should not be a surprise if present levels of corporate
profits are followed by negative profit growth over the coming 5 years."

Business conditions in the New York area deteriorated in November, as the New
York Fed's Empire State manufacturing survey plummeted 27 points to -11.1,
driven by a sharp drop in new orders. The release was far worse than economist
expectations for a +15 reading and marks the first negative reading since July
2009. The shipments index also fell below zero. The new orders index plummeted
37 points to -24.4, its sharpest drop since September 2001.

U.S. retail sales rose for the fourth straight month, climbing 1.2% in
October, as consumers flocked to auto showrooms and made more purchases
online. Sales for September and August were also revised higher. Excluding motor
vehicles, retail sales rose 0.4% in October, the Commerce Department reported
Monday. Economists surveyed by MarketWatch had forecast total sales to rise by
0.7%, or 0.4% excluding the volatile automotive segment. Retail sales have
risen at an annual rate of 6.3% over the past three months. Sales were revised
to a 0.7% increase in September, compared to an original reading of 0.6%.
August sales were revised up to 0.9% from 0.7%.

Isilon Systems Inc., the Seattle provider of storage systems for file-based
data like video, audio, digital images and more, agreed to be acquired by EMC
Corp. for $33.85 a share cash, the companies said on Monday. That's a deal
value of $2.25 billion net of Isilon's cash on hand. Isilon shares closed
Friday at $26.29, so EMC is paying an indicated premium of 29% for the company.
The New York Post had reported late on Sunday that the deal might be announced
today. EMC is the Hopkinton, Mass., IT-infrastructure provider. The boards of
both companies have approved the terms. And EMC affirmed its financial targets
for 2010.

China will limit investment in real estate by foreign individuals and
companies, according to new rules announced Monday. Foreigners will be limited
to a single residential property unit and companies will be permitted to
purchase only commercial properties they intend to use, according to a Dow
Jones Newswires report, which cited a joint statement between the State
Administration of Foreign Exchange and the Ministry of Housing and Urban-Rural
Development. The rules are in addition to existing curbs imposed by some
Chinese cities which restrict real estate investments by foreigners to a single
property outside their principal residence.

Loehmann’s Holdings Inc., the Bronx, New York-based seller of discounted
designer goods, filed for Chapter 11 bankruptcy after it failed to exchange $110
million of senior notes.

The Telegraph: "Unless the ECB takes fast and dramatic action, it risks
destroying the currency it is paid to manage, and allowing a political
catastrophe to unfold in Europe.
If mishandled, Ireland could all too easily become a sovereign version of
Credit Anstalt - the Austrian bank that brought down the central European
financial system in 1931, sent tremors through London and New York, and set
off the second deeper phase of the Great Depression, the phase when politics
turned ugly.
“Does the ECB understand the concept of contagion?” asked Jacques Cailloux,
chief Europe economist at RBS. Three EMU countries have already been shut out
of the capital markets, and footloose foreign creditors hold €2 trillion of
debt securities issued by Spain, Portugal, Ireland and Greece."

Business Insider: "The government changed the "seasonal adjustment" it made to
the payroll numbers--and, in so doing, boosted the number of "jobs" created in
October by 100,000. Stephanie Pomboy of MacroMavens (via John Mauldin) explains:
" 'The seasonal bar which the payroll data must jump was (inexplicably and
dramatically) lowered from prior Octobers.
" 'Thus, in October 2009, the BLS set the bar at 870,000 jobs, similar to the
840,000 it anticipated in October 2008. This year, by contrast, it lowered the
bar to 768,000. Mumbo, jumbo, payrolls presented "an upside surprise" of
Alan Abelson of Barrons (again via John Mauldin) adds the following:
"According to John Williams at Shadow Government Statistics, the BLS' fiddling
with the figures via what he calls 'seasonal-factor games' actually created
200,000 phantom jobs last month. John cites such finagling as the reason his
prediction of an October decline and a rise in the jobless rate was wrong. It
also explains why seasonally adjusted payrolls were revised upward by 110,000
in September, including 56,000 in August."

Lacker Says Fed's New Easing Push Too Risky.

Massey Energy Co. shares rose 2.9% to $48.50 in pre-market trades on Monday. The
Wall Street Journal reported that steel giant ArcelorMittal has expressed
interest in buying the coal firm if it decides to put itself on the selling
block. Meanwhile, Coal India Ltd. is also interested in Massey Energy, an
executive with the firm told the newspaper in an interview. The Richmond, Va.
company is due to discuss its options in a board of directors meeting next
week, the newspaper article said.

Williams Cos. will pay $925 million for 85,800 acres in the Bakken Shale
region of North Dakota, as the natural gas producer ramps up its crude oil
business. The area lies entirely within the Fort Berthold Indian Reservation.
Responding to depressed natural gas prices and taking aim at higher crude oil
prices, Williams said the transaction in the "core" of the Bakken Shale will
help lift oil revenue to 25% of its exploration and production business by
2013, up from 7% now. The Tulsa, Okla., company estimates that the properties
represent about 185 million barrels of oil equivalent in total net reserves.

Lowe's Cos missed quarterly sales estimates as U.S. shoppers put off expensive
home renovations in a weak economy, prompting the company to forecast a
full-year profit below Wall Street expectations.

Inventories at U.S. businesses rose 0.9% in September, as sales gained 0.5%,
the Commerce Department reported Monday. Economists polled by MarketWatch had
expected inventories to rise 0.9%. The inventory-to-sales ratio, an indication
of demand, remained at 1.27, compared with 1.3 a year ago. In August
inventories rose 0.9% as sales gained 0.3%. Retail inventories rose 0.8% in
September, compared with 1.1% in the prior month.

The percent of income garnered by the wealthiest 10% of U.S. households hit
48.2% in 2008, up from 34.6% in 1980, according to a recent report on income
equality by the Congressional Joint Economic Committee. "Much of the spike was
driven by the share of total income accrued by the richest 1% of households.
Between 1980 and 2008, their share rose from 10% to 21%, making the United
States one of the most unequal countries in the world."
And the income gap has actually widened since the financial crisis: According
to the 2010 Census, the top 20% of workers -- those making more than $100,000
each year -- received 49.4% of all income generated in the U.S., compared with
the 3.4% earned by those below the poverty line. As reported by, that
ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of
7.69 in 1968.

Posted by: madhedgefundtrader
Post date: 11/15/2010 - 11:41
Karl Denninger of Market Ticker thinks there is a secondary banking crisis next
year that will trigger a cascading collapse in the stock market, and another
government bailout. TARP 3 anyone? Going back to an S&P 500 earnings of
$105-$110 a share in the face of the soaring cost input factors is totally
laughable. “Foreclosure Gate” will be much worse than expected. The 900 pound
gorilla in the room is the second line problem, which is mostly concentrated in
the top banks. We could reach 3,000 in the Dow and 300 in the S&P 500. (via

The hedge-fund industry saw the biggest inflows of capital in almost a year
during October as investors gained confidence from signs of economic
stabilization and strong market gains, according to estimates released Monday
Investors plowed a net $18.4 billion into hedge funds last month, the largest
inflow since November 2009, said.
October’s inflows were up from $12.2 billion in September, $6.73 billion in
August, $7.72 billion in July and a net outflow of $2.54 billion in June,
according to data.

Treasurys sell off on worries of U.S. rating. "Treasurys are getting splattered
and 10-year yields are at three-month highs; if rates are going up it's not a
good thing for equities," said Peter Boockvar, equity strategist at Miller
Tabak. "This is the Fed's worst nightmare," Boockvar added.

Motorola is aiming to split the company into two separate entities as early as
January, according to Co-Chief Executive Greg Brown, who will take the top job
at its government and business unit. Motorola previously said it would split in
two in the first quarter, creating Motorola Mobility, which will sell mobile
phones and television set-top boxes and Motorola Solutions, which sells wireless
technology to governments and businesses.

The pace of recovery in output and employment in the U.S. economy looks a
little slower now than it did three months ago, according to 43 forecasters
surveyed by the Federal Reserve Bank of Philadelphia. The panel expects real
GDP to grow at an annual rate of 2.2 percent this quarter, down from the
previous estimate of 2.8 percent. On an annual-average over annual-average
basis, the forecasters predict slower real GDP growth in 2010, 2011, and 2012.
However, some of that downward revision will be compensated with a stronger
real GDP growth.

The Dow Jones Industrial Average added 9.39 points to 11,201.97. The S&P
500 fell 1.46 points to 1,197.75. The Nasdaq Composite fell 4.39 points to
2,513.82. 2-year Treasury yields 0.54%, 10-year 2.95%, and 30-year 4.40%.

SF Fed's John Williams: “The unemployment rate will probably still be around 9%
at the end of 2011 and won’t reach 8% until late in 2012,” he said."

Mitsubishi UFJ Group said Monday that it had agreed to buy a $6.1 billion
portfolio of assets from Royal Bank of Scotland, confirming a deal rumored for
some time.

ZeroHedge: "For all those wondering how to cut down on government expenditures, here's a thought: cut the skyrocketing salaries! A study by USA Today, using US Office of Personnel Management data, confirms what has been widely known: that the biggest beneficiaries of government largesse over the past 5 years as a worker cohort, are none other than Federal workers themselves. The numbers are stunning: those earning over $150,000 in the past five years have grown from 7,420 to 82,034, a 1,006% increase. More shockingly, those earning over $180,000 has surged from just 805 in 2005, to 16,912 in 2010: a 2,001% increase. And it is on the background of this that Congress is planning on giving 2.1 million federal workers another 1.4% across the board pay raise! Additionally, it appears that the bulk of the gains have taken place since Obama took office. Can someone please stop the lunacy: this country is beyond bankrupt and it turns out that in addition to Wall Street (which everyone knows does nothing but transfer wealth from the middle class to a few choice CEOs and groupthinking Bloomberg terminal operators), the biggest thief is the very government itself, which has perfected the art of giving with one hand, and taking with 10, almost as well as those enclosed in glass corner offices on Park, Lexington and Broad (and now West)."

Apple is preparing to disclose its iTunes Store will soon start carrying music by the Beatles, according to people familiar with the situation.

Sir Richard Branson’s Virgin Group has entered the race to build, design and run the first dedicated high-speed railway line in the US, a $2.6bn (£1.6bn) route between Tampa and Orlando in Florida.

Sunday, November 14, 2010


11/14/10 PCI

Facebook may be on the verge of offering e-mail to the 500 million members of its social-networking site, making it the largest e-mail service on the planet.

Mike Burk: "NASDAQ new highs fell from 356 November 4 to 54 last Friday.
NYSE new highs fell from 569 on November 4 to 49 last Friday. Last weeks sell off appears to be no more than routine consolidation following a great run up. At this point, however, there is no evidence the sell off is complete.
I expect the major averages to be lower on Friday November 19 than they were on Friday November 12."

(Bloomberg) -- China renewed an attack on quantitative easing, citing the risk of increased prices in emerging economies, a day after the Group of 20 nations said the markets can adopt regulatory steps to cope.
China “doesn’t support” the monetary easing that causes “imported” inflation in developing countries, Commerce Minister Chen Deming told a forum today in Macau, a Chinese special autonomous region. The capital inflows increase the risk of “asset bubbles,” Jin Zhongxia, deputy director general of the international department at the People’s Bank of China, said at the same forum.

The Oil Drum: "Peak oil is not just here — it’s behind us already.
That’s the conclusion of the International Energy Agency, the Paris-based organization that provides energy analysis to 28 industrialized nations. According to a projection in the agency’s latest annual report, released last week, production of conventional crude oil — the black liquid stuff that rigs pump out of the ground — probably topped out for good in 2006, at about 70 million barrels per day. Production from currently producing oil fields will drop sharply in coming decades, the report suggests."

Wal-Mart's highly awaited Black Friday ad promises hot deals on high-definition TVs, Blu-ray players, laptops and holiday gift favorites such as toys and DVDs, according to a copy of the retailer's circular obtained by on Saturday.
The world's largest retailer promised last month that it would do whatever was necessary to be the most competitive on prices during the year-end holiday shopping season.

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), a real-time measure of the flow of goods to U.S. factories, retailers, and consumers, fell 0.6 percent in October following a decline of 0.5 percent in September and a decline of 1.0 percent in August. ... “We have had a recovery ‘time out,’” summarized [Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast].

Calculated Risk: "Despite failures, the Unofficial Problem Bank List continued its rise to the 900 level. This week the list count finished at 898 after six additions and two removals. Assets total $418.5 billion, up from $416.5 billion last week."