Saturday, December 04, 2010


12/4/10 Risk/Reward

Doug Noland: "Considering the unmatched degree of fiscal and monetary stimulus, U.S. economic performance remains ominously dismal. Rising mortgage yields and a rising tide of austerity throughout municipal finance portend challenges for an economy already at 9.8% unemployed....The gamey U.S. stock market has placed a big wager on the “risk on” trade. With QE2 in the early phase, greed has thus far held fear at bay. It surely won’t take months of disappointing data to spark QE3 banter. And there’s nothing like a world of synchronized speculative asset markets to embolden those banking on global policymaker liquidity backstops – the Fed, the ECB, BOJ, PBOC… Perhaps U.S. equities will begin to decouple from global asset inflation when the fragile U.S. economy and Credit system come to be viewed as relatively more vulnerable to surging commodities prices and rising global yields....It took months for mortgage Credit contagion to spread from subprime to attack the heart of the U.S. Credit system. Perhaps it’s a stretch to analyze in terms of an unfolding bursting of a global government finance Bubble - as opposed to a European peripheral debt crisis. I just don’t think so. And I fully expect that after market ebbs and flows – and near panics that incite more speculator-emboldening central bank market interventions/liquidity injections – the markets will inevitably discipline Washington."

China may order higher reserve requirements for banks to counter capital inflows and a possible jump in lending at the start of 2011, said Li Daokui, an adviser to the central bank.
Li was commenting on the Communist Party Politburo announcement that the nation will move next year to a “prudent” monetary policy from the current “moderately loose” stance. The statement, which endorsed a continued “proactive” fiscal policy, was reported by the state-run Xinhua News Agency.
Boosting reserve requirements would counter inflows of money and “China’s own economic cycle, such as the fact that banks tend to lend more at the beginning of a year,” Li said in a phone interview in Beijing yesterday.

Bank of America, Citigroup, Morgan Stanley, Barclays, Goldman Sachs, and JPMorgan—received at total of about $8.78 trillion through the PDFC program.
That $8.78 trillion figure represents over 98 percent of the funds lent by the PDFC program. PDFC lending totals represent the aggregate amount of overnight borrowing by the banks —not the amounts outstanding at any one time.

The Automatic Earth: "As uncertainty has increased, there has been more and more emphasis on gaming the system in order to wring a quick profit out of it and less and less emphasis on productive investment, as productive investments have too long a time horizon to deliver gains in a world proceeding at a frenetic pace. This has been going on for years, and has led to our current milieu of casino capitalism, or ponzi finance.
This system of money chasing its own tail in ever tighter circles is clearly unstable, and I would argue is about to self-destruct under the increasing pressure of its own internal contradictions and the catabolic (self-consuming) process taken past real limits. As it does so, the pace of change will becomes even more rapid for a period of time, and coupled to that will be increasing hardship for a critical mass of people."

It was early Spring 2009 and the earth was falling. I mentioned it was finally cherry picking time. The risk/reward was. in my view, greatly in one's favor. It was the best buying opportunity since 1982. Now we have reached the red zone-- not the NFL red zone. It's the 90% risk/ 10% reward zone. We reached that in the Treasury market over one month ago. Now just remember when they raid the whorehouse they take all the girls. Stocks are next. Then come the commodities. It is unavoidable. It won't be pretty. Play the risk game and you risk your economic solvency. You are not too small nor too big to fail.

Ron Paul's Twitter page:"Re: Wikileaks- In a free society, we are supposed to know the truth. In a society where truth becomes treason, we are in big trouble. "

42.9 million Americans on food stamps. Real unemployment at least 17%. About 51 million Americans have no health insurance. Home prices continue to fall. Foreclosures are expected to rise again in 2011. What recovery? Are we in the throes of a depression?

Friday, December 03, 2010


12/3/10 Discouraged

Total nonfarm payrolls increased a slim 39,000 in November, much lower than
the 155,000 gain expected by Wall Street economists. The unemployment rate
moved up to higher to 9.8% in November from 9.6% in the previous month.
Economists forecast the unemployment rate to hold steady at 9.6%. This is the
highest unemployment rate since April. Average hourly earnings were
essentially unchanged at $22.75. Economists had been expecting a 0.2% gain.
Earnings are up 1.6% in the past year. The average workweek was steady at 34.3 hours.
Private payrolls that exclude government agencies also gained less than
forecast, rising by 50,000 in November.
Manufacturers cut jobs for a fourth straight month, payrolls dropped at
construction companies and government employment declined.
Employment at service-providers increased 54,000. The number of temporary
workers rose 39,500. Construction companies subtracted 5,000 workers and
retailers let go 28,100 workers. Government payrolls decreased by 11,000. State
and local governments reduced employment by 13,000, while the federal government
added 2,000 jobs. "Discouraged workers" rose to a recession high of 10.6% (from
10.4% last month).
Private companies, which have been hiring since the beginning of the year,
added 50,000 jobs in November. Most of those increases came from the
temporary help, where 40,000 jobs were added, and health care sectors, with an
additional 19,000 jobs.
6.3 million unemployed for 6 months or longer, the highest since July. The
"underemployment" level remains at 17%.
The jobless rate has now topped 9 percent for 19 straight months, the longest
stretch on record. The number of unemployed persons was 15.1 million in
November. The labor force participation rate was unchanged at 64.5%.

(WSB Radio) -- Despite the freezing temperatures, hundreds fought for a place
in line in Marietta, Georgia to apply for federal aid to help pay their heat
and power bills this winter. Only 30 people were being let in at a time at the
assistance center in Marietta.
"It was freezing," applicant Linda Benefield told WSB-TV. "I was in line for
three hours and 15 minutes, but I needed the help."

With what a deep devotedness of woe
I wept thy absence - o'er and o'er again
Thinking of thee, still thee, till thought grew pain,
And memory, like a drop that, night and day,
Falls cold and ceaseless, wore my heart away!
~Thomas Moore

(Bloomberg) -- Cotton jumped the most allowed by ICE Futures U.S. for a second
day as growers struggled to meet soaring demand in China, the world’s biggest

Orders for U.S. exports in the year that ends July 31 have more than doubled
from a year earlier, Department of Agriculture data show. For the week ended
Nov. 25, shipments were up 21 percent from a week earlier, the USDA said. Cotton
prices have surged 67 percent in 2010 as U.S. inventories tumbled and demand
rose at Chinese textile mills.
“We’re exporting so much cotton we can’t get it out of the country fast enough,”
said Louis Barbera, a broker at VIP Commodities in New York. “The physicals are
almost all the way committed.”

Sprint Nextel Corp. supports a network accord between partner Clearwire Corp.
and Deutsche Telekom AG’s T-Mobile USA, said Goldman, Sachs & Co. analyst Jason
Armstrong, who met with Sprint management yesterday.

Banks flooded the Federal Reserve with billions of dollars in “junk bonds” and
other low-grade collateral in exchange for much-needed liquidity during the
crisis, as the financial sector struggled under a crippling credit crunch, new
data show.More than 36 per cent of the cumulative collateral pledged to the US
central bank in return for overnight funding under the Primary Dealer Credit
Facility was equities or bonds ranked below investment grade. A further 17 per
cent was unrated credit or loans, according to a Financial Times analysis of
Fed data released this week. A large chunk of itsemergency lending went to
foreign banks.

ZeroHedge: "As John Lohman, and David Rosenberg subsequently, remind us, the
spread between the inventory and the new orders components of the manufacturing
ISM came at a spread unseen in over 30 years, and a phenomenon which without
fail leads to at least a sub 50 print in the ISM, if not outright

The Reserve Bank of Australia borrowed $53 billion from the Federal Reserve in
10 transactions during the financial crisis, citing the U.S. central bank. The
RBA drew on a currency-swap facility to assist its domestic banks.

The Oil Drum: "The early arrival of unseasonal cold weather in the U.K. has
increased demand for natural gas for heating which has called for heavy
withdrawals of natural gas from storage and resulted in headlines like Could
Britain’s gas stocks run out this winter?."

Economic Disconnect: "Take out your graphical tools and punch up all the "hard
data" you want. Match it up with the stock market. The markets have bet on
improvement with not much to back it up until very recently. Either markets are
priced right now to perfection, a monster explosion of mythic proportions is at
hand for the economy, or wishful thinking and dependence on liquidity without
end is priced in. Corporate profits are wonderful but most of that is based on:
-employment cuts
-low input costs (until recently)
-ultra cheapo money rates (thanks FED for some disclosure!)"

Jesse's Cafe Americain: "There can be no sustained economic recovery until the
median wage and employment improves and this require specific reforms and
programs to repair the damage caused by twenty years of irresponsible
monetary, regulatory, and fiscal policy.

The Fed's approach to quantitative easing is nothing more than an adjunct to
the trickle down, supply-side approach. Provide money to the banks and the
people will borrow; provide subsidies and tax cuts to those who have the most
already and the condition of the many will improve. Trickle down, supply side,

and efficient markets hypothesis are proven to be at best mistaken economic
theories, and possibly coldly calculated propaganda by the same people who
co-opted the political process and brought forward the many control frauds that
led to the financial crisis."

"Distrust and caution are the parents of security." Benjamin Franklin

U.S. and foreign businesses lowered their demand for capital equipment in
November after three straight monthly gains, the Commerce Department reported
Friday. Factory orders decreased 0.9% in November, a bit weaker than the 0.7%
decline expected by economists. Orders rose a revised 3.0% in September, up
from the prior estimate of a 2.1% gain. Orders for durable goods fell 3.4% in
October, revised down slightly from 3.3% estimated a week ago. Orders for
nondurable goods rose 1.5% in October.

Millions more Americans were on food stamps this Thanksgiving. A staggering 42.4
million Americans – 13.7% of the population.

The U.S. deficit commission received the backing of a majority of its 18-strong
panel, but fell short of the 14 votes needed to possibly trigger congressional

The eternal optimists in the crowd might suggest that retailers were merely
waiting for Black Friday returns to determine hiring needs for the holiday
season, but we reject that argument. Firms are trying to sell more with less
resource utilization, and that’s coming through in the payrolls numbers. –Guy
LeBas, Janney Montgomery Scott

Only 39,000 jobs created in November is awful. After we back out health care
and social services, which are largely gov’t funded, the private sector is not
creating permanent jobs–none, zero, nada. After health care, social services
and temp services are backed out, the private sector lost 24,000 jobs. Ugh! So
much for the gradual recovery. –Peter Morici, University of Maryland

"Caution is the eldest child of wisdom” Victor Hugo

Crude-oil futures on Friday rallied to a fresh 2-year high, overcoming early
weakness triggered by a disappointing U.S. jobs report, and getting a boost
from a tumble in the U.S. dollar. Oil for January delivery ended up $1.19, or
1.4%, to $89.19 a barrel on the New York Mercantile Exchange, the highest close
since early October 2008. For the week, it's gained 6.5%. January gasoline
ended less than a penny lower at $2.35 a gallon but surged 8.8% for the week.
Heating oil futures rallied more than 6% during the week.

Gold futures rallied more than 1% Friday but stopped short of a fresh record
high as disappointing jobs data and a weaker dollar pushed investors towards
the perceived safety of the metal. Gold for February delivery rose $16.90 to
$1,406.20 an ounce on the Comex division of the New York Mercantile Exchange.
Silver settled at $29.27 an ounce, a fresh 30-year high, and palladium rallied
to a 9-year high for the second session in a row. Palladium settled at $770.10
an ounce.

Federal Reserve Board Chairman Ben Bernanke will tell "60 Minutes" that he won't rule out expanding the Fed's $600 billion bond-purchase plan, CBS News said Friday. In a preview of the interview sent in a press release, CBS said Bernanke "explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more." U.S. financial markets rallied in closing minutes of the trading day after the release was sent out shortly after 3:30 p.m.

The Dow Jones Industrial Average rose 19.68 points, or 0.2%, to 11,382.09, leaving the blue chips up 2.6% on the week. The S&P 500 climbed 3.18 points, or 0.3%, to 1,224.71, giving it a 3% jump from the week-ago close. The Nasdaq Composite gained 12.11 points, or 0.5%, to 2,591.46, a weekly gain of 2.2%.

Thursday, December 02, 2010

Unadjusted Unemployment Benefits

12/2/10 Unadjusted Unemployment Benefits

The number of workers who filed new claims for unemployment benefits rose
26,000 last week to 436,000, the U.S. Labor Department reported Thursday.
Economists polled by MarketWatch had expected claims to rise to a seasonally
adjusted 429,000 in the holiday-shortened week of Nov. 27. Last's week's
upwardly revised reading of 410,000 was still the lowest in more than two
years. The four-week average of initial claims, meanwhile, fell 5,750 to
431,000, the lowest level since August 2008. The moving average smoothes out
quirks in the weekly data and is considered a more accurate gauge of employment.
Continuing claims, which reflect workers already receiving benefits,
climbed 53,000 to 4.27 million in the week ended Nov. 20. Altogether, 8.91
million people received some kind of state or federal benefit in the week of
Nov. 13, up 377,000, on an unadjusted basis.

PepsiCo Inc. said Thursday it has agreed to acquire 66% of Wimm-Bill-Dann Foods
OJSC, a Russian food-and-beverage company, for $3.8 billion, pending the
required government approvals. In connection with this acquisition, PepsiCo
said it will offer to acquire the remaining shares of Wimm-Bill-Dann through an
offer following completion of that acquisition "at such time and on terms as
are mandated by Russian law," and PepsiCo may acquire additional shares in
other transactions. The transaction will raise PepsiCo's annual global revenues
from nutritious and functional foods from approximately $10 billion today to
nearly $13 billion, the company said.

Lou Crandall: “The recovery is going to continue to be painfully slow, but there
is not much that the government can do about that,” Crandall says. “Some
progress is being made, but it is from such dismal levels that we have not yet
re-established a sense that things are moving in the right direction.”

(Bloomberg) -- Federal Reserve data showing UBS AG and Barclays Plc ranked
among the top users of $3.3 trillion from emergency programs is stoking debate
on whether U.S. regulators bear responsibility for aiding other nations’ banks.
UBS was the biggest borrower under the Commercial Paper Funding Facility, with
$74.5 billion overall, more than twice as much as Citigroup Inc., the top U.S.
bank recipient, according to the data released yesterday. London-based Barclays
Plc took the biggest single amount under another program that made overnight
loans, when it got $47.9 billion on Sept. 18, 2008.
“We’re talking about huge sums of money going to bail out large foreign banks,”
said Senator Bernard Sanders, the Vermont independent who wrote the provision
in the Dodd-Frank Act that required the Fed disclosures. “Has the Federal
Reserve become the central bank of the world? I think that is a question that
needs to be examined.”

New Delhi: The government has approved a 10% hike in price of natural gas that
state – owned firms like Oil and Natural Gas Corp (ONGC) sell to consumers in
non-priority sectors such as steel and petrochemicals.
“Effective 1 December, ONGC and OIL have been allowed to charge up to $5.25 per
million British thermal unit for 7-8 million standard cubic meters per day of
gas that is sold to non-power and non-fertilizer sector,” a senior government
official said.
The rates set would be excluding cess, transportation charge, marketing
margin/service charge and taxes.
Natural gas produced by ONGC and Oil India Ltd (OIL) from fields given to them
on nomination basis is sold at government controlled price, called APM
(Administered Pricing Mechanism) rate.

The Energy Department is expected to report Thursday a drop of 26 billion cubic
feet to 30 billion cubic feet in natural gas storage inventories for the week
ended Nov. 26, according to a survey of analysts by Platts, the energy
information arm of McGraw-Hill Cos.
The Energy Information Administration reported a drop of 23 billion cubic feet
in the nation's reserves of natural gas for the week ended Nov. 26.

ZeroHedge: "RealtyTrac has just reported that even though the volume of
foreclosed homes plunged by 25% from Q2 to Q3 and 31% from Q2 of 2009, the
discount on foreclosed homes has hit a five year high, as interest in even
ultra bargain properties has collapsed following the expiration of the
homebuyer tax credit, and confirming yesterday's bad Case Shiller (remember
that one?) number. Per RealtyTrac: "foreclosure homes accounted for 25 percent
of all U.S. residential sales in the third quarter of 2010 and that the average
sales price of properties that sold while in some stage of foreclosure was more
than 32 percent below the average sales price of properties not in the
foreclosure process — up from a 26 percent discount in the previous quarter and
a 29 percent discount in the third quarter of 2009." Yet despite the major
price drop, buying interest has evaporated as nobody there is no longer any
purchasing power left in the lower and middle sections of the housing market:
"a total of 188,748 U.S. properties in some stage of foreclosure — default,
scheduled for auction or bank-owned (REO) — sold to third parties in the third
quarter, a decrease of 25 percent from the previous quarter and a decrease of
nearly 31 percent from the third quarter of 2009. The average sales price of
properties in some stage of foreclosure was $169,523, down 2.46 percent from
the previous quarter and down 0.44 percent from the third quarter of 2009." And
while the average price of non-foreclosed homes posted a slight uptick in Q3,
the volume drop was even worse: "The average sales price of properties not in
foreclosure was $249,721, up 6.42 percent from the previous quarter and up
4.36 percent from the third quarter of 2009. Sales volume of non-foreclosure
properties decreased 29 percent from the previous quarter and nearly 31 percent
from the third quarter of 2009."

Pending-home sales rose 10.4% in October after falling 1.8% in September. The
National Association of Realtors also said sales are down 20.5% since October
2009. Economists had expected pending-home sales to remain flat, according to
“The fundamentals that are driving home sales are low mortgage rates combined
with job and income growth and that’s why housing should be expected to grow in
coming months,” said Dean Maki, chief economist at Barclays Capital Inc. in New
York. “Housing activity will still look low relative to the boom years, but we
expect a solid growth rate to occur.”

China gold imports jumped by 500% in the first 10 months compared to all of

The Dow Jones Industrial Average gained 106.63 points, or 1%, to end at 11,362.41. The S&P 500 index rose 15.46 points, or 1.3%, to 1,221.53, lifted by a 2.6% gain in its financial sector. The Nasdaq Composite jumped 29.92 points, or 1.2%, to 2,579.35.

Crude-oil futures overcame a weak start to rally 1.4% on Thursday, boosted by a weaker dollar, higher equities, and momentum buying as traders see the market headed for $90 a barrel soon. Crude for January delivery added $1.25 to $88 a barrel. Gasoline also extended its rally, settling 2.4% higher at $2.36 a gallon, its best since early May.

Policy makers in China, which holds $883.5 billion in U.S. Treasuries, are concerned the nation with the world’s biggest economy is debasing its currency, according to Kenneth S. Rogoff and James Rickards.

Barry Ritholtz: "Pro Publica has been maintaining a list of bailout recipients, updating the amount lent versus what was repaid.
So far, 938 Recipients have had $607,822,512,238 dollars committed to them, with $553,918,968,267 disbursed. Of that $554b disbursed, less than half — $220,782,546,084 — has been returned.
Whenever you hear pronunciations of how much money the TARP is making, check back and look at this list. It shows the TARP is deeply underwater."

Naked Capitalism: "The Fed has withheld information that was of the collateral posted by borrowers to secure $885 billion of loans. Without this information, it is impossible to ascertain the risks undertaken in various emergency facilities. Dodd Frank specifically requires this detail be released."

Kroger Chief Executive Officer David Dillon told analysts on a conference call the recovery is slower and weaker than Kroger had expected and competition remains “intense,” he said.

LivingSocial, an online coupon website, said late Thursday it receieved a $175 million investment from Inc. The company also said it received an $8 million investment from Lightspeed Venture Partners. LivingSocial said it will use the funds to continue to grow its business and maintain a series of worldwide launches.

Wednesday, December 01, 2010

Seasonal Hiring

12/1/10 Seasonal Hiring

Extended unemployment benefits for nearly 2 million Americans begin to run out
Wednesday, cutting off a steady stream of income and guaranteeing a dismal
holiday season for people already struggling with bills they cannot pay. Unless
Congress changes its mind, benefits that had been extended up to 99 weeks will
end this month.

Planned job cuts for November were 28 percent higher than those reported for
October, bringing the pace of downsizing to its highest level in eight months,
a report by global outplacement consultancy Challenger, Gray & Christmas showed
Wednesday. Employers announced plans to reduce payrolls by 48,711 jobs in
November, compared with 37,986 planned layoffs reported in October, according
to the report.The non-profit sector led the surge, with 10,761 layoffs during
November."Government and non-profit job cuts are down 16 percent from a year
ago, but that is probably little consolation to employees in the sector, which
is still struggling despite signs of recovery in other areas of the economy,"
John A. Challenger, chief executive officer of Challenger, Gray & Christmas,
said in a statement."The November increase in job cuts is not indicative of a
broader trend," he added. "Historically, job cuts tend to increase in the final
months of the year. This is the period when many companies make budget and
payroll decisions for the coming year." Hiring announcements totaled 26,012 in
November, led by retailers, who planned to add 15,900 seasonal
workers. Challenger, Gray & Christmas,estimates retailers will hire 600,000
temporary workers this holiday seasons, up 20 percent from 501,400 in 2009. A
survey by indicates merchants will bring in 26 percent more
seasonal workers.
Private-sector employment rose 93,000 in November, the largest gain in three
years, according to Automatic Data Processing Inc.'s employment report released
Wednesday. Employment in the service-producing sector gained 79,000, while the
employment in the goods-producing sector rose 14,000. On Friday the government
will report on employment for November, and economists polled by MarketWatch
expect a gain of 155,000 for nonfarm payrolls, and for the unemployment rate to
remain at 9.6%. Job creation came primarily from the service sector, which rose
by 79,000, gaining for the 10th month in a row. Goods producers added 14,000,
while manufacturing lost 16,000.
Temp agency jobs are growing faster than regular jobs in the private sector. In
September, about 24,000 temp jobs were added, and in October, the total was
35,000. In both months, those jobs represented 22 percent of all private sector
job gains.
Those figures don't include temp jobs at companies that hire workers directly,
and they do not include a major source of temporary labor this time of year:
seasonal retail employees.
The official purchasing managers' index (PMI) rose to a seven-month high of
55.2 in November from 54.7 in October, the China Federation of Logistics and
Purchasing said on Wednesday.
The reading compared with the median forecast of 54.7 in a Reuters poll of 11

The UK purchasing managers' index for manufacturing reached a 16-year high in
November as exports surged and companies added jobs at a record pace.
The index, based on a survey of manufacturing companies, reached a level of
58, up from 55.4 in October, and the highest since September 1994. Any figure
above 50 means that companies are reporting a rise in new business.

” The Mortgage Bankers Association (MBA) today released its Weekly Mortgage
Applications Survey for the week ending November 26, 2010. The Market
Composite Index, a measure of mortgage loan application volume, decreased
16.5 percent on a seasonally adjusted basis from one week earlier. This week's
results include an adjustment to account for the Thanksgiving holiday. On
an unadjusted basis, the Index decreased 34.2 percent compared with the
previous week. The Refinance Index decreased 21.6 percent from the previous week.
This is the third weekly decrease for the Refinance Index which reached its
lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.1
percent from one week earlier and is at its highest level since the
beginning May 2010. The unadjusted Purchase Index decreased 22.9 percent compared
with the previous week and was 2.7 percent higher than the same week one
year ago.

Bloomberg: The failure of European leaders to contain the region’s debt crisis
with a bailout of Ireland has driven relative borrowing costs in the global
corporate bond market to a 12-week high. Investors demand an extra 1.77
percentage points in yield to own company bonds instead of government debt, the
most since Sept. 8, Bank of America Merrill Lynch index data show. The premium
European banks pay in the currency swaps market to borrow in dollars more than
doubled in the past three weeks to the highest level since May as the cost to
protect against losses on their bonds jumped to a 20-month high. Global debt
markets are showing signs of strain amid concern a sell-off in euro-region bond
markets will force leaders to bail out more nations, impose losses on creditors
and cause the global economy to slow. Company bonds lost 1.04 percent in
November, the worst performance since losing 4.44 percent in October 2008, Bank
of America Merrill Lynch’s Global Broad Market Corporate index shows. “There’s
definitely more fear in the market than we had a couple of weeks ago,” said
Eric Stein, a money manager who helps oversee $54.2 billion in fixed-income
assets at Eaton Vance Management in Boston. “We need a real sustainable
solution. These kind of ad hoc Band-Aid measures aren’t really going to do
anything to help Europe over the long term and investors are more and more
realizing that.” In London, the Markit iTraxx Europe Index of 125 companies
with investment-grade ratings rose 3.5 basis points to 117, the highest since
Sept. 23, Markit prices show. In emerging markets, relative yields rose 11
basis points to 273 basis points, the widest since Oct. 4 on a closing basis,
according to JPMorgan Chase & Co. index data. Spreads have widened 31 basis
points since the end of October. Concern that Spain will fail to close Europe’s
third- highest deficit has driven up financing costs for the nation’s lenders.
Relative yields on euro-denominated Spanish bank bonds rose 141 basis points
to 385 basis points in November -- the biggest monthly jump on record, according
to data compiled by Bank of America Corp. Swaps on Spain jumped 13 basis points
yesterday to a record 364 on a closing basis, according to CMA. Contracts on
Italy, Portugal and Ireland also jumped to records. Signs of strain are
showing up in the interest-rate swaps market. The difference between the rate to
exchange floating-for fixed-interest payments for two years and the comparable-
maturity Treasury yield, known as the swap spread, widened 3.98 basis points to
28.13 basis points, the most since July. The European crisis also is causing a
surge in the premium European banks pay to borrow in dollars in the swaps
market. The price of two-year cross-currency basis swaps between euros and
dollars reached minus 50.6 basis points yesterday, the largest effective
premium for dollar borrowing in swaps since May, according to data compiled by
Bloomberg. The gap has widened from minus 30.3 basis points on Nov. 22. “People
perceive credit risk much higher in European counterparties,” Douglas
Borthwick, head of foreign-exchange trading at Stamford, Connecticut-based
Faros Trading LLC, said in an interview. The increase in swap rates is
“extremely aggressive, and what that means is that essentially over the last
three or four days, credit departments have gone around saying we need to
adjust your credit with local names,” he said.

Google Inc. is in the final stages of launching its long-awaited e-book
retailing venture, Google Editions, a move that could shake up the way digital
books are sold. The long-delayed venture—Google executives had said they hoped
to launch this summer—recently has cleared several technical and legal
hurdles, people close to the company say. It is set to debut in the U.S. by
the end of the year and internationally in the first quarter of next year,
said Scott Dougall, a Google product management director.

API: Crude inventories down 1.14 mln barrels.

ZeroHedge: "While everyone knows that it was two and a half decades of
imbecilic monetary policy courtesy of the Monstro [sic] that caused the credit
bubble, few things were as much of a direct proximal cause of the market crash
as the August 2007 quant collapse. And few indices tracked the obliteration of
the M/N quant landscape that followed as well as the HSKAX (below). Well,
after two years of painful grinding (for the market neutrals), the HSKAX is
back to the same level to which it plunged in that week in early August 2007.
What does it mean? Who knows, suffice to say that the market not only stopped
working when the quants were all briefly destroyed back in 2007, but it
marked the all time high in the S&P. We are now back to those same levels.Only this
time instead ot the Market Neutrals providing the traditional market liquidity
it is the HFTs, the NYSE DMMs, and the New York Fed. What happens next is
anyone's guess."

The Interior Department is weighing new disclosure requirements for wells on
public lands that produce natural gas using hydraulic fracturing, amid fears
that fracking can contaminate drinking water supplies.

Toys"R"Us is picking up 45,000 seasonal workers. Macy's is hiring 65,000 across
the country.
Kohl's is adding more than 40,000 seasonal staffers, an increase of 20 percent
over 2009.
Best Buy will hire a total of 29,000 temporary workers this season, the same
amount as last year.
"Seasonal hiring apparently will not be as strong as in the past, and there is
some indication of the ongoing impact of the recession on retailing in
general," says Matthew K. Harding, CEO of the property management firm. "These
are part-time, minimum-wage jobs," he explains. "Most retailers don't invest
money or training in seasonal workers."

Even after a round of state spending cuts and tax hikes, state budget gaps are
projected to grow worse, according to a report released by the National
Governors Association and the National Association of State Budget Officers.
In order to help close state budget gaps, 39 states made $18.3 billion in mid-year
budget cuts to their fiscal 2010 budgets while 14 states have already made $4.0
billion in cuts to their fiscal 2011 enacted budget. Fiscal 2010 general
expenditures were pegged at $612.6 billion, a 7.3% drop, and fiscal 2011
budgets call for $645.1 billion in spending. Total general tax revenue in 2010
were $609.7 billion, and 2011 revenue is seen at $636.3 billion. By fiscal
2012, Recovery Act funds that provided $58.3 billion in 2010 and $43.2 billion
in 2011 will end in June 2011, the groups noted.

The Institute for Supply Management on Wednesday said its index of factory
activity edged down to 56.6% in November from 56.9% in October. ISM was
expected to decline slightly to 56.8%, according to economists surveyed by
MarketWatch. Readings over 50% indicate that more firms are growing than
contracting. The index peaked this year in April at 60.4% after companies
restocked low inventories, but momentum fizzled over the summer and is now in
a holding pattern.

Citigroup's chief economist warned this week that euro zone turmoil may be the
"opening act" of a global sovereign debt crisis that could infect the United
States and Japan.

(Bloomberg) -- Severe winter weather continued to disrupt travel across Europe
as snowfall shut down airports in Geneva, London and Edinburgh and Eurostar
trains connecting the U.K. to the continent were canceled.
Gatwick airport, the U.K.’s second-busiest, will remain closed for snow
clearance until at least tomorrow morning, according to its website. In Germany,
the use of a runway at Frankfurt airport was impeded because of strong tailwinds
and more flights were canceled, Thomas Uber, a spokesman for operator Fraport
AG, said by telephone. Geneva airport closed last night and won’t reopen until
at least 2 p.m. local time.
“We’ve had an incredible quantity of snow and it’s still falling,” said Geneva
airport spokesman Bertrand Staempfli, who asked passengers with flights before 2
p.m. not to travel to the airport.

Spending on private construction projects rose 0.8 percent to a $481.78 billion
rate, double September's 0.4 percent increase, and included a 2.5 percent
increase in spending on new-home building. Public construction spending gained
0.4 percent in October to $320.54 billion a year after a 1.2 percent rise in
September - the strongest annual rate for public construction spending since
July 2009.

The United States is prepared to support an extension of the European
Financial Stability Facility, the euro-zone rescue fund put in place by the
European Union following the Greek bailout, through an extra commitment of
funding from the International Monetary Fund, Reuters reported Wednesday,
citing an unnamed U.S. official. The report was credited with boosting the
euro and lifting U.S. stocks to new daily highs. The official said a decision is up
to the European officials, but that the United States would support using the
IMF in current circumstances, the report said.

Hanukkah marks the rededication of the Holy Temple in Jerusalem in the second
century B.C. and the miracle of a smidge of found oil lasting eight days. It
begins this year at sundown Wednesday.

The Dow Jones Industrial Average rallied 249.76 points, or 2.3%, to end at 11,255.78, marking its best day since Sept. 1. The S&P 500 index rose 25.52 points, or 2.2%, to 1,206.07, while the Nasdaq Composite advanced 51.20 points, or 2.1%, to 2,549.43. At the same time 10-year Treasury bonds
jumped 16 basis points to 2.97%, a 4 month high yield.

According to the WSJ the US is not discussing a larger IMF contribution to the European Rescue Fund.

Last year, retailers hired an additional 453,600 seasonal workers, a substantial increase from the 231,000 they hired in 2008.

Tuesday, November 30, 2010


11/30/10 Housing

The euro zone's debt crisis deepened on Tuesday as investors pushed the
spreads on Spanish, Italian and Belgian bonds to euro lifetime highs and
Portugal warned of "intolerable risks" facing its banks.

Swiss power and automation firm ABB Ltd on Tuesday announced a recommended offer
to aquire industrial motor group Baldor Electric Co.for $63.50 per share, in an
all-cash deal worth $4.2 billion, including net debt of $1.1 billion. The
transaction represents a 41% premium to Fort Smith, Arkansas-based Baldor's
Nov. 29 closing stock price of $45.11. ABB will retain the Baldor management
and brand, while Baldor headquarters will remain in Forth Smith and become
headquarters for the combined motor and generator business for the U.S.
Synergies of more than $100 million on an annual basis and global revenue
synergies of at least the same amount are expected. The transaction is expected
to be earnings accretive in one year, ABB said.

(Bloomberg) -- Corporate bond sales worldwide are tumbling on concern Ireland’s
debt crisis will spread across Europe as returns on the notes approach their
worst month since credit markets froze two years ago.
Issuance has slumped 31 percent since Nov. 15, compared with the same period a
year earlier, after surging 34 percent in the first half of the month, according
to data compiled by Bloomberg. Plunging returns on debt of borrowers from
France’s Credit Agricole SA to Bentonville, Arkansas-based Wal-Mart Stores Inc.
are dragging bonds to a 1.08 percent loss in November, Bank of America Merrill
Lynch index data show.

A research firm says major stores took in about the same amount of money Friday,
Saturday and Sunday that they did Thanksgiving weekend last year, even though
more shoppers came out. ShopperTrak, which is based in Chicago, said Monday
that customer traffic rose 2.8 percent, making up for a 1.1 percent decline in
2009, but shoppers were focused on deals.
The firm expects holiday sales overall to rise 3.2 percent.Sales for the
weekend totaled $20.48 billion, compared with $20.49 in 2009, which was 1.6
percent more than in 2008, according to ShopperTrak. Revenue edged up 0.3
percent for Friday, fell 0.9 percent for Saturday and rose 0.5 percent for
Sunday compared with 2009.

Hedge funds increased bullish bets on natural gas to the highest level in four
months on speculation that lower-than-normal temperatures will bolster heating
demand and trigger withdrawals from record stockpiles. The funds and other
large speculators increased so-called net-long positions, or wagers on rising
prices, by 50 percent in the seven days ended Nov. 23, according to the
Commodity Futures Trading Commission’s weekly Commitments of Traders report.

Chinese Selloff Intensifies As Traders Expect Imminent Rate Hike Following China
State Council Comments.

Number of credit card users drops by 8 million in past year: some by choice,
others cut off.

The Case Shiller Home Price index declined to 147.49% YoY compared to 148.59
previously. The Composite-20 Index increased 0.59% YOY on expectations of a
1.0% Increase, prices in Q3 dropped by 2.0%, with a 0.8% drop in September. In
absolute terms, the Composite-20 index is back to December 2007 levels.
"Another weak report; weaker than last month. The national index is down 1.5%
from the third quarter of last year and 15 of 20 cities are down over the last
12 months. Other than Tampa, FL, there are no new lows this month but many
analysts will argue that a double dip will be confirmed before Spring. While
some of the bad numbers may reflect the end of the government’s tax incentive
for first time homebuyers, there are other problems weighing on the housing
market.” says David M. Blitzer, Chairman of the Index Committee at Standard &
Poor's. “The national economy is certainly the number one issue for housing.
Additionally, there is a large supply of houses on the market and further,
hidden, supply due to delinquent mortgages, pending foreclosures or vacant
homes. New construction is running at less than half the pace needed to meet
normal demand, so a sustained recovery could be a ways off." Home prices
decreased in 18 of the 20 metropolitan areas tracked by Case-Shiller in
September compared with August.

The euro dipped below $1.30 for the first time since mid-September. Italy, the
euro zone's third largest economy, is now being referred to as "too big to fail"

and "too big to bail."

(Bloomberg) -- Spain’s banks may struggle to refinance about 85 billion euros
($111 billion) in debt next year as costs surge on concern continental Europe’s
fourth- biggest economy may need an Irish-style bailout.

“There’s a universal dumping of Spain going on,” said Andrea Williams, who helps

manage about 623 million pounds ($968 million), including shares in Banco
Santander SA, at Royal London Asset Management. “The fear is that Portugal,
Spain and Italy are now in line after what happened in Ireland.”

An index of U.S. consumer confidence rose to 54.1 in November, reaching the
highest level since June, with consumers more optimistic about future business
conditions and job prospects, the Conference Board reported Tuesday. Economists
polled by MarketWatch had expected a reading of 53. "Hopefully, the improvement
in consumers' mood will continue in the months ahead," said Lynn Franco,
director of Conference Board's consumer research center, in a statement.
Confidence for October was revised to 49.9 from a prior estimate of 50.2. A
barometer of consumers' expectations rose to 74.2 in November - the highest
level since May -- from 67.5 in October, while consumers' assessment of the
present situation ticked up to 24 from 23.5. The Conference Board's index helps
analysts compare fluctuations in confidence, with a reading of 100 for the base
year of 1985. Generally when the economy is growing at a good clip, confidence
readings are at 90 and above.

The Chicago purchasing managers index rose to 62.5 in November from 60.6 in
October, a stronger-than-anticipated increase. Economists polled by MarketWatch
had expected a reading of 59. It's the last of the major regional manufacturing
gauges before Wednesday's Institute for Supply Management's manufacturing

India’s economy grew 8.9% in July-Sept quarter from year ago.

Nasdaq Composite down 0.4% in November. Dow industrials down 1% for November.
S&P 500 down 0.2% for the month.

Silver for March delivery added $1.02, or 3.8%, to settle at $28.21 an ounce on the Comex division of the New York Mercantile Exchange. Gold for February delivery rose $18.60, or 1.4%, to end at $1,386.10 an ounce.

The Dow closed down 46 points, the Nasdaq 27, and the S&P 7.

Monday, November 29, 2010


11/29/10 Plutocracy

Plutocracy is rule by the wealthy, or power provided by wealth. The combination
of both plutocracy and oligarchy is called plutarchy.

Tim Lundmark: "One of Satan’s greatest deception was tricking the people he does
not exist. I wonder if the greatest deception our government has done is
tricking us into believing we are truly free."

WSJ: "492: The number of days since the average borrower in foreclosure last
made a mortgage payment.
Banks can’t foreclose fast enough to keep up with all the people defaulting on
their mortgage loans. That’s a problem, because it could make stiffing the bank
even more attractive to struggling borrowers.
In recent months, the number of borrowers entering severe delinquency — meaning
they missed their third monthly mortgage payment — has been on the decline,
falling to about 700,000 in October, according to mortgage-data provider LPS
Applied Analytics. But it’s still more than double the number of foreclosure
processes started.
As a result, banks are taking progressively longer to foreclose. The average
borrower in the foreclosure process hadn’t made a payment in 492 days as of the
end of October, according to LPS. That compares to 382 days a year ago and a
low of 244 days in August 2007.
In other words, people who default on their mortgages can reasonably expect, on
average, to stay in their homes rent-free more than 16 months. In some states
such as New York and Florida, the number is closer to 20 months."

The NRF survey, conducted by BIGresearch, showed that 52 percent of shoppers
surveyed said they planned to go to department stores, up from 49.4 percent a
year earlier. Clothing stores also gained, at 24.4 percent versus 22.9 percent
a year earlier.
But discounters fell, with 40.3 percent saying they shopped at those stores,
compared with 43.2 percent last year.

The cost of insuring Spanish and Portuguese government debt rose Monday as
spreads on peripheral euro-zone sovereign credit default swaps, or CDS, widened
to record levels in the wake of a lackluster Italian bond auction, analysts
said. The five-year Spanish CDS spread widened by 25 basis points to 350 basis
points, according to data provider Markit. That means it would now cost
$350,000 a year to insure $10 million of Spanish debt against default, up from
$325,000 on Friday. The Portuguese spread widened to 545 basis points from 502,
Markit said, while the Italian spread widened to 231 basis points from 215.
"Spain and Portugal are now at record wides, suggesting that contagion fears
haven't been assuaged by Ireland's bailout," said Gavan Nolan, vice president
for credit research at Markit.

Ireland will pay an average 5.8 percent for international bailout loans as part
of an agreement that protected the senior bondholders of Irish banks and
preserved the country’s low corporate tax policy.

John Hussman: "On the surface, the U.S. economy is gradually recovering. Based
on mean reversion to potential GDP (which generally occurs over a 4-year
horizon absent an intervening recession), we would expect GDP growth over the
coming 4-year period to average 3.8%, with average monthly employment growth of

200,000 jobs. This would be my "benchmark" expectation if the U.S. and
international banking systems were "clean." However, my concern is that the
surface U.S. recovery is built over a foundation that is vulnerable to further
strains. If our policy makers had made proper decisions over the past two years

to clean up banks, restructure debt, and allow irresponsible lenders to take
losses on bad loans, there is no doubt in my mind that we would be quickly on
the course to a sustained recovery, regardless of the extent of the downturn we

have experienced. Unfortunately, we have built our house on a ledge of ice."

A majority of Irish people favor defaulting on debts to bondholders at the
country's "stricken" banks, citing a poll commissioned by the newspaper. The
poll found 57% of respondents favor a default on bank debt, against 43% who
oppose such a move. About two-thirds of respondents also opposed austerity
measures in the government's four-year budget plan released on Nov. 24, the
poll showed.

US government starts shutting down (alleged) copyright infringement related
sites without any opportunity for government claims to be challenged.

Thailand last week joined the crush of Asian countries rushing to acquire a
stake in Canada's giant oil sands projects when its PTT Exploration &
Production Public Co. Ltd. (OTC ADR: PEXNY) agreed to buy 40% of Statoil ASA's
(NYSE ADR: STO) Canadian oil sands project for $2.3 billion.

ZeroHedge: "A growing school of thought believes that - without major debt
restructuring for Ireland - the current solution is just buying time. Many
traders also fear that the interest rate applied to the new cash of 5.83% is
unmanageable for the Irish economy." In other words start your Portugal, Spain,

Belgium, Austria bailout countdown timer.

Server problems knocked out Internet service to millions of Comcast customers
along the Eastern Seaboard late Sunday.

The glitch hit users in Massachusetts, Connecticut, Maryland, Virginia, New
York, New Hampshire, and D.C., according to media reports. Service had
apparently been restored as of early Monday.

Federal civilian employees' pay would be frozen in 2011 and 2012 under a
proposal made Monday by President Barack Obama. The pay freeze is part of a
strategy to cut the U.S. budget deficit and would save $2 billion for the rest
of fiscal year 2011, and $28 billion over the next five years, the White House
said. The freeze would apply to all civilian federal employees but not military

Wal-Mart is to pay $2.3 billion for control of Massmart , giving the world's
largest retailer a substantial presence in South Africa and paving the way for
further expansion across the continent.

Economist Nouriel Roubini says Portugal should consider asking for a bailout
before its financial plight worsens.

China repeatedly failed to act on U.S. requests for it to stop shipments of
missile components from North Korea to Iran via Beijing in 2007, according to
U.S. diplomatic cables leaked Sunday.

Simon Black: "When it appears more and more each day that those common values
diverge from your own, all that's left of a country are irrelevant, invisible
lines on a map. I don't find these worth fighting for...The government beast in
your home country feeds on debt and taxes, and the best way to win is for
bright, productive people to move away with their ideas, labor, and assets.
This effectively starves the beast and accelerates its collapse. Then, when the
smoke clears, you can move back and help rebuild a free society." (via

The Dow Jones Industrial Average closed off 39.51 points, or 0.4%, at 11,052.49, well off an earlier low of 10,929. The S&P 500 index was down 0.1% at 1,187.76. The Nasdaq Composite fell 0.4% to 2,525.22.

Sunday, November 28, 2010

Retail Sales

11/28/10 Retail Sales

Senior Chinese officials visited Seoul and discussed with South Korea's foreign
minister ways to ease tensions over North Korea's artillery shelling on its
southern neighbour's island.

Best Buy CEO Brian Dunn:"What we are really seeing with the consumer is that the
consumer is being very careful and thoughtful about their purchases."

Kevin Strawbridge, CEO of price comparison Web site, said
visitors to his company's site are up "very significantly" from last year. And
those visitors are finding seeing steep discounts in the prices of televisions,
Blu-Ray and DVD players, MP3 players, and even for some lower-quality types of
3-D television sets, he said.

The National Retail Federation has said up to 138 million people could hit
stores this weekend. The industry trade group forecast a 2.3 percent increase
in sales during November and December, up from a 0.4 percent rise in 2009.

China's Foreign Ministry suggested it wouldn't escalate its protests against
the naval exercises as long as they took place outside China's "exclusive
economic zone," a term of international maritime law for an area where
countries enjoy mineral and fishing rights, generally 200 nautical miles from a
country's coast.

Technicians have finished loading fuel into Iran's first nuclear power reactor
and aim to start up the facility by late January, the country's nuclear chief
said Saturday.
The startup of the Bushehr power plant, a project completed with Russian help
but beset by years of delays, will deliver Iran the central stated goal of its
atomic work — the generation of nuclear power.

Mike Burk: "Last week followed the average seasonal pattern pretty closely, the
indicators were mostly flat, but the secondaries were stronger than the blue
chips. Next week has a strong positive seasonal bias that lasts through the
early part of the following week.
I expect the major averages to be higher on Friday December 3 than they were
on Friday November 26.
Last week the secondaries were up while the blue chips were down so I am
calling last weeks positive forecast a tie."

Irish Communications Minister Eamon Ryan said talks between the EU and the
International Monetary Fund on an €85 billion Irish aid package will conclude
Sunday. European finance ministers gathered Sunday to complete a multibillion-euro bailout for Ireland as financial markets waited to see if a restructuring of Irish banks would mean losses for bondholders.
The €85bn loan – from the International Monetary Fund and members of the European Union – could run for as much as nine years, considerably longer than the three-year loan provided to Greece, Irish government officials told the Financial Times.
The package is expected to include around €50bn for budgetary support over the next three years before Ireland is able to return to the international debt markets. A further €35bn is earmarked as fresh capital and liquidity support for the banks, which have been ravaged by property losses and have become almost totally dependent on the European Central Bank for day to day liquidity.

Larry Fink, founder of BlackRock, the world’s largest money manager, has warned
that the euro will fall sharply as a result of the escalating eurozone crisis,
in a sobering assessment of the turmoil in financial markets.
In an interview with the Financial Times, he predicts that the single currency,
battered this week by the fear that the fall-out from Ireland’s debt problems
will spread to other countries including Portugal and Spain, will fall to $1.20
against the dollar, a slide of nearly 10 per cent.

Even as stores across the U.S. reported increased traffic on Black Friday, the busiest shopping day of the year, sales rose just 0.3 percent to $10.7 billion, ShopperTrak, the Chicago-based consulting firm, said yesterday. "The smaller than expected increase is due in part to discounts offered earlier in November as well as online-only promotions, ShopperTrak founder Bill Martin said. Traffic to stores was up over 6% for the first two weeks of November, an early boost that could affect retailers' performance in the coming weeks, he said."

One in five renters and one in seven homeowners in Washington DC area spend more than half their income on housing, according to census figures.

Pyongyang says the U.S. is using last week's shelling as a ploy to send an aircraft carrier and its 75 bomber jets into the Yellow Sea.

John Mauldin: "The difference between a technical “recession” and growth is meaningless if you can’t find a job. If sales are slower because 17% of people are underemployed and governments are cutting back, it certainly doesn’t feel like a growing economy to you. That difference is the margin between 2% average GDP growth and 3.5% average growth. That doesn’t seem like a lot, but the compounding effects are large over time.
The US economy grew at 1.9% for the last decade, the slowest since the 1930s. Given that government spending is going to go down (at least I hope so), unemployment is going to take some time to get under control; and with the whole developed world in a mess, it is hard to see an economic environment where we can average 3.5% a year for this decade. It is going to be another Muddle Through decade. Unless you are on the margin.
As businesses adjust, as entrepreneurs respond, we will slowly come out of this. But it is going to take longer than we would like."

Angry Bear: "Ireland is not only insolvent because it has no liquidity, no way of meeting its debts. The government decided to link the economic future of the country to a failed banking system and now the two are inextricably intertwined. No amount of raised taxes can bail out the banks and still pay the day-to-day running expenses of our welfare state....As a nation we're a joke, a laughing stock, and now it's time to become a colony of the IMF under the direction of the same cowboy outfit that brought peace and prosperity to Argentina and Iceland. O Joy, I just can't wait. We the Irish People have our asses greased for yet another bout of sodomy. We're used to it. It feels good. And this time we walked right into it. Heck, we can always get drunk afterwards, have a rare old session and weep and wail over our Fenian dead."