Melduke's Blog Page

Hiring

2011-02-08T14:54:00.001-08:00

2/8/2011 Hiring

David Rosenberg: "The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.
These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support."

Richard Fisher, the president of the Dallas Federal Reserve Bank vowed on Tuesday to vote against any additional bond-buying program once the current $600 billion purchase plan expires in June. "It is hard for me to envision a scenario where I would not use my voting position this year to formally dissent should the FOMC recommend another tranche of monetary accommodation," Fisher said in a speech in Dallas. Fisher said he also expects to be at the forefront of the effort to push the Fed to trim back its Treasury holdings and tighten policy at the "earliest sign" that inflation pressures are moving out of the commodity markets and into the general price stream.

China has announced it is raising their interest rates for a second time in a bit more than a month and that has taken the wind out of the global market's sails.

Charles Hugh Smith: "What pundits and politicos don't get is small business knows the "recovery" is totally bogus. Why hire somebody who you'll have to lay off a few months from now? Laying people off is emotionally painful--you dread it, tire of it, are wearied by it. This is a real human being who is losing their job, not some ginned-up statistic hyped by some think-tank-pundit pulling down $15K a month for dishing whatever flavor of propaganda he/she is paid to churn out.
The Washington establishment--the Fed, the Treasury, Congress, the Obama Administration-- seem to believe they've successfully pulled the propaganda wool over Americans' eyes, and that the yokels actually believe "things are getting better and better every day and in every way."
Only the yokels without clients, customers and payrolls can believe the propaganda.
Meanwhile, back in the real world, small business income is down 5%. Small Business: Still Waiting for Recovery."

The American Petroleum Institute late Tuesday said crude-oil supplies declined 558,000 barrels in the week ended Feb. 5. That contrasts with analyst expectations of an increase of 2.4 million barrels, according to a poll by Platts. Gasoline stocks rose 3.2 million barrels, the Washington-based API said. Analysts polled by Platts had expected an increase of 3.1 million barrels. Distillate inventories declined 538,000, the API said. Analysts had expected a decline of 1.4 million barrels. The Department of Energy is scheduled to report its data Wednesday at 10:30 a.m. Eastern.

ZeroHedge: ""Soaring gasoline prices slammed consumer sentiment into reverse this week, threatening the slow recovery in economic views that’s been under way. With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100. It’s dropped that far only 36 times in more than 1,300 weeks of ongoing polling since late 1985; this shift erases an equally unusual 5-point gain in early January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those compare with a lifetime average of -14 and a best-year +29 in 2000. Its single best week was +38 in January 2000; its worst, -54 in December 2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda."

Alpha Natural Resources Inc., the third-biggest U.S. coal producer, agreed to buy Massey Energy Co. for about $7.1 billion in cash and stock, gaining the largest coal company in the U.S. Central Appalachian region.
Massey shareholders will receive 1.025 Alpha Natural shares plus $10 cash for each share held, the companies said in a statement yesterday. The bid values Massey at $69.33 a share, 21 percent more than Massey’s price at the close of trading Jan. 28. Massey has $1.63 billion in debt, according to Bloomberg data.

Payrolls in January probably grew at a pace that underscores the Federal Reserve’s concern it will take years for the job market to recover from the recession, economists said before a report this week.
Employment increased by 140,000 workers this month after a 103,000 gain in December, according to the median forecast of 59 economists surveyed by Bloomberg News ahead of Labor Department data on Feb. 4. The report may also show the jobless rate increased to 9.5 percent from 9.4 percent.

The Institute for Supply Management-Chicago said Monday its gauge of business activity rose to 68.8 in January from 66.8 in December, indicating another month of expansion, though at a faster pace. Economists polled by MarketWatch had expected a reading of 65 in January.

Consumer spending increased a seasonally adjusted 0.7% in December, above expectation and a sign the economy entered the first quarter with momentum, the Commerce Department estimated Monday. Income rose 0.4% in December for the second straight month. Consumer spending has risen in six straight months. Wall Street economists had expected a 0.4% increase in income and a 0.6% gain in spending. With spending outpacing income, the savings rate fell to 5.3% in December from 5.5% in November. This is the lowest level since last March.

Conditions for the nation's manufacturers improved for the 18th straight month, the Institute for Supply Management reported Tuesday. The ISM index rose to 60.8% in January from 58.5% in December. This is the highest level of the factory index since May 2004. The report was much stronger than expected. The consensus forecast of estimates collected by MarketWatch was for the index to remain steady at 58.5%. Readings above 50 indicate expansion. Below the headline, the report was also strong. The key employment index improved to 61.7% in January from 58.9% in December. New orders jumped to 67.8% in January from 62% in the prior month. Input prices soared in January. The price index jumped to 81.5 from 72.5 in the prior month.

John Hussman: "
On Monday, Wall Street let out a collective squeal of excitement as Thomas Hoenig, the president of the Kansas City Federal Reserve said that QE3 "may get discussed" if economic progress turns out to be disappointing as the year progresses. Part of the subtext that was lost in this enthusiasm is that Hoenig has consistently dissented on the policy of quantitative easing, and has called for the Fed to immediately raise interest rates to 1% and possibly higher. In saying that QE3 may get discussed, he wasn't offering hope to Wall Street, but was instead criticizing the existing policy of the Fed. The way to understand the comment is to put it in the context of Hoenig's long-standing dissent and open criticism of quantitative easing. My guess is that his complete remark was something like "The current trajectory of Fed policy is dangerous. When will it stop? Who knows? Aside from fueling speculation and inflation risk, QE2 won't help the real economy, but if the numbers are disappointing, even more reckless policies like QE3 may get discussed." Last week, Hoenig warned of another boom-and-bust cycle, and repeated his call for the Fed to reverse course, saying "I hope I'm wrong. I hope they're right. But I don't think so."
Near the end of the old TV series Happy Days, as the writers became desperate for material, there was an episode where Fonzie jumped his waterskis over a shark. That episode was widely viewed as the point where the show had simply gone on too long. My impression is that the sudden hope for QE3 is Wall Street's version of jumping the shark."

Ensco PLC (ESV) said Monday it would buy Pride International (PDE) in a cash and stock deal worth $41.60 a share. The deal values Pride International at a premium of 21% over its closing price of $34.39 on Friday. Shares of Pride International jumped 16% to $40 in pre-market trades. Ensco said the deal will make it the second-largest offshore driller in the world. The deal will immediately add to Ensco's earnings and cash flow. Pride International shareholders will receive 0.4778 newly issued shares of Ensco plus $15.60 in cash for each share of Pride. Ensco's cash portion of the deal is valued at $2.8 billion.

Danaher Corp. (DHR) said Monday it would purchase biomedical-equipment maker Beckman Coulter (BEC) for $83.50 a share, $6.8 billion in cash, including debt. The buying price represents a 45% premium to Beckman Coulter's Dec. 9 closing price, before rumors of the acquisition entered the marketplace. The Orange County, Calif., company's board of directors has already approved the deal, which is subject to customary conditions, including a shareholder vote. The transaction is expected to be completed by July and will become a part of Danaher's life sciences and diagnostics segment. Beckman Coulter has annual revenues of about $3.7 billion. Goldman Sachs & Co. (GS) acted as financial advisor to Beckman Coulter. Latham & Watkins, LLP served as legal counsel. Shares of Beckman Coulter jumped 10% premarket to $82.70. Shares of Washington, D.C.-based Danaher slipped a fraction to $47.88.

Robert McHugh: " We are inside one of these overbought extended rally periods, which will reach the 2.5 month age over the next week. So, based upon this time analysis, we could be about to see markets drop sharply, perhaps violently. Now do not go short the farm based upon this study, however be alert for the possibility, based upon the past four years of data, that danger could be imminent.
We would not be convinced that a multi-week decline has started until our three short-to-intermediate term momentum indicators, which are rarely fooled, generate new sell signals across the board. These important momentum indicators are our Secondary Trend Indicator, our key trend-finder indicators (which are a composite of three indicators, our Purchasing Power Indicator, and our 30 and 14 Day Stochastics), and our Demand Power / Supply Pressure indicators. We present the daily levels and signals from these indicators each night in our market newsletters to subscribers. These indicators have an excellent track record at finding both rising and falling trends, and have caught almost all the S&P 500 points up and down for years, including the rally from March 2009."

ZeroHedge: "A modest pick up in insider buying this week as 16 insider purchases for $1.7 million worth of stock put recent non-existence insider purchasing to shame. The biggest buying was seen in GE and Caterpillar, which two cumulative purchases for $800k accounted for nearly half of the buying in the week ended February 4. On the other side, it is relentless selling as usual: 126 insider sales amounted to $749 million worth of holding dispositions, with the core of the selling as usual focused on the usual suspects: MSFT ($154 million), QCOM ($73 million), Google ($69 million), GameStop ($60 million) and FCX ($30 million). This is a major pick up in the rate of selling compared to January, and represents a double from the last tracked number of $373 million for the week of January 22."

Monetary Disorder

2011-01-29T12:53:00.001-08:00

1/29/2011 Monetary Disorder

The U.S. economy accelerated in the fourth quarter, the Commerce Department reported Friday. Real gross domestic product rose at a 3.2% annualized rate in the fourth quarter, up from a 2.6% rate in the third quarter. The gain was slightly below expectations. Economists polled by MarketWatch expected Q4 GDP to rise at a 3.5% rate. The big story for the fourth quarter was the pickup in consumer spending. Spending rose at a 4.4% annual rate in the final three months of the year, the fastest pace since the first quarter of 2006. Inventories were a big drag on growth in the fourth quarter but this was largely offset by a positive contribution from net exports. For the year, GDP advanced 2.9%, compared with a 2.6% drop in 2009. This is the strongest growth rate in five years.

Moody’s Investors Service said it may need to place a “negative” outlook on the Aaa rating of U.S. debt sooner than anticipated as the country’s budget deficit widens.

ZeroHedge: Jim Grant: "I think what would be very good for the Fed if there would be a confession, the Fed should confess that it has sinned grievously, and is in violation of every single precept of its founders and every single convention of classical central banking. Quantitative Easing is a symptom of the difficulties that the Fed has created for itself. The Fed is running a balance sheet which if it were the balance sheet attached to a bank in the private sector would probably move the FDIC to shut it down. The New York Branch of the Fed is leveraged more than 80 to 1. Meaning, that a loss of asset value of less than 1.5% would send it into receivership if it were a different kind of institution...The Fed is now in the business of manipulating the stock market." Jim also has some very critical discussions on how the Fed never settles up on the $3.4 trillion in custodial debt on its books. As always, we can't get enough as more and more mainstream figures turn to bashing that biggest abortion of modern capital markets.

U.S. Bancorp, the fifth-biggest U.S. commercial bank by deposits, acquired a failed lender in New Mexico as regulators seized four U.S. banks with combined assets of $3.38 billion.
The collapse of First Community Bank in Taos, New Mexico, gives U.S. Bancorp 38 more branches, as it picks up $1.8 billion in deposits and about $2.1 billion in assets. Based in Minneapolis, U.S. Bancorp has more than 3,000 branches in its retail network operating as U.S. Bank.
“This acquisition is an extension of U.S. Bank’s banking franchise into its 25th contiguous state, and it immediately establishes us as one of the top three banks in terms of market share in the attractive New Mexico market,” John Elmore, executive vice president of community banking, said in a statement.
Banks in Colorado, Oklahoma and Wisconsin were also seized today, according to statements by the Federal Deposit Insurance Corp., which was named receiver in each of the transactions. The closures cost the FDIC’s deposit-insurance fund a total of $545.5 million.

Bloomberg (Pat Wechsler and Christopher Palmeri): “President Barack Obama faces a new challenge from deficit-plagued states over Medicaid costs just as he squares off with Republicans trying to repeal his 2010 health-care law, which extends coverage to 32 million Americans. Arizona Governor Jan Brewer asked for U.S. permission on Jan. 25 to reduce Medicaid eligibility and drop coverage for 280,000 people. That would save $541.5 million for the state, which projects a $1.2 billion budget deficit for the coming fiscal year. U.S. states must confront potential budget gaps of more than $140 billion for fiscal 2012 because tax collections declined by the most on record during the recession… That may prompt more to seek release from some Medicaid obligations, their biggest expense, as federal aid that has helped them cover the costs for the last three years ends. ‘There are other states contemplating” requests for waivers, said Dan Mendelson… former associate director for health in the Office of Management and Budget under President Bill Clinton. ‘Letters are coming from some big states reaching the point of no return.’ Mendelson declined to name them, saying ‘border states’ such as Texas were in ‘fiscally impossible situations.’”

Bloomberg (Carol Wolf): “The federal Highway Trust Fund, which pays for U.S. road and mass transit construction, faces insolvency sometime next year as revenue from fuel taxes declines for the sixth year… The Highway Trust Fund will run a deficit of $7 billion this year, compared with a surplus of $11 billion in 2010… The highway and mass transit portions of the fund will probably be unable to meet their obligations in 2012 and 2013…”

Doug Noland: "In reality, the world is an extraordinarily unstable place: unwieldy finance, extreme economic imbalances and related wealth disparities – along with acute inflation - have created a geopolitical tinderbox.

The unprecedented – and ongoing - global expansion of debt has created myriad risks and vulnerabilities. The ballooning of central bank balance sheets has over-liquefied markets and distorted risk perceptions worldwide. This liquidity backstop has also rejuvenated and emboldened the leveraged speculating community. Ignoring risk has been a fruitful tactic throughout the global market landscape.

The combination of massive debt growth and central bank monetization has nurtured an enormous pool of speculative finance that fuels boom and bust dynamics across virtually all risk markets and economies. This backdrop has created what I have often referred to as “Monetary Disorder.” One current facet of this monetary phenomenon is acute price pressures globally for food and energy. This inflation exacerbates unrest and social instability. Today’s developments in Egypt demonstrate how social instability has engendered political instability in a most volatile region of the world.....Associated fragilities are an inescapable downside to Monetary Disorder and attendant speculative excess. "

h Unemployment

2011-01-27T16:55:00.000-08:00

1/27/2011 Unemployment

- New applications for unemployment benefits jumped last week by 51,000 to 454,000, partly because poor weather caused administrative backlogs in four Southern states, the Labor Department reported Thursday. A labor spokesman said snowstorms earlier in the month forced unemployment offices in Alabama, Georgia, North Carolina and South Carolina to open fewer hours and process fewer claims. A reduction in the backlog contributed to the sharp increase in new claims, the spokesman said. Economists polled by MarketWatch had expected initial claims in the week ended Jan. 22 to rise to a seasonally adjusted 408,000 from a revised 403,000 the week before. Continuing claims, which reflect the number of people already receiving unemployment compensation, rose 94,000 to a seasonally adjusted 3.99 million in the week ended Jan. 15. About 9.41 million Americans were getting some kind of state or federal benefit in the week ended Jan. 8, down 223,826 from the prior week.

Moody's Investors Service said late Thursday that it continues to rate the U.S. government's bonds at Aaa with a stable outlook. However, it added that recent trends and the outlook for government financial metrics "indicate that the level of risk, while still small, is rising and likely to continue to rise in the next several years." The agency added that, although it's not contemplating action on the U.S. rating at this time, the time frame for possible future actions "appears to be shortening" and the probability of assigning a negative outlook in the coming two years is rising. The agency made the comments after rival Standard & Poor's downgraded Japan's long-term sovereign-credit rating AA minus from AA but reaffirmed the country's short term rating. The dollar index traded at 77.72, compared with 77.707 in late North American trading.

Japan’s credit rating was cut for the first time in nine years by Standard & Poor’s as persistent deflation and political gridlock undermine efforts to reduce a 943 trillion yen ($11 trillion) debt burden.
The world’s most indebted nation is now ranked at AA-, the fourth-highest level, putting the country on a par with China, which likely passed Japan last year to become the second-largest economy. The government lacks a “coherent strategy” to address the nation’s debt, the rating company said in a statement. The outlook for the rating is stable, S&P said.

Federal Reserve held its key interest rate at a record low 0% to 0.25% range and said it will continue its $600 billion Treasury-buying program.

Bearishness among retail stock investors rose in the week through Wednesday, according to the American Association of Individual Investors. The latest AAII Sentiment Survey released Thursday shows that 34.3% of investors are wary of the stock market over the next six months, up 5.2 percentage points and above the long-term average of 30%. Meanwhile, 42% of investors say they're bullish about the market, a sharp decrease of 8.7 percentage points but still above the long-term average of 39%. The percentage of investors describing themselves as neutral toward stocks rose 3.5 percentage points to 23.7%.

Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

The U.S. budget deficit will hit nearly $1.5 trillion in 2011, the Congressional Budget Office estimated Wednesday. In its budget and economic outlook for fiscal years 2011 to 2021, the CBO also said the U.S. economy will grow by 3.1% this year. Unemployment, meanwhile, will fall to 9.2% in the fourth quarter of 2011, the report said.

Sales of new single-family homes rose in December to an annual rate of 329,000 on a seasonally adjusted basis, the highest level since April when a federal tax credit gave the market a temporary boost. The Commerce Department reported on Wednesday that about 85% of the new sales took place in the South and West. Nationwide sales in November, however, were revised down to 280,000 from an initial reading of 290,000. Economists polled by MarketWatch had forecast new home sales to rise to 299,000 in the final month of 2010. For the full year, new home sales totaled 321,000, down 14.4% compared to 2009. The median price of new homes climbed to $241,500 in December from $215,500 in November. The supply of new homes available fell to 6.9 months at the current sales rate from 8.4 months in the prior month, the lowest level since April.

Abbott Laboratories said early Wednesday that it plans to eliminate 1,900 jobs, or about 2% of its workforce. The company employs around 90,000 worldwide, according to an Abbott spokeswoman. In a statement issued in conjunction with the release of its 2010 earnings report, Abbott attributed the restructuring to "changes in the healthcare industry, including healthcare reform and the challenging regulatory environment."

Microsoft Corp. said Thursday its fiscal second-quarter net income fell to $6.63 billion, or 77 cents a share, from $6.66 billion, or 74 cents a share in the same period a year earlier. The Redmond, Wash. software giant said revenue for the period ended Dec. 31 rose to $19.95 billion from $19 billion. Analysts polled by FactSet Research had expected Microsoft to report second-quarter earnings of 68 cents a share, and $19.2 billion in revenue.

- Pending home sales rose 2.0% in December for the fifth increase in the past six months, according to an index released Thursday. The National Association of Realtors said its pending home sales index rose to 93.7 from a downwardly revised 91.9 in November. The index is still 4.2% below the level in December 2009, however. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales.

Orders for U.S.-made durable goods sank in December, falling 2.5% on weaker demand for airplanes, vehicles, and computers, machinery, the Commerce Department reported Thursday. Excluding transportation, orders rose 0.5%. The decrease was unexpected. Economists polled by MarketWatch expected a 1.0% rise in durables. This is the fourth drop in durables in the last five months. Transportation orders had the largest decline, falling 12.8%. Shipments rose 1.4% in December. Orders for core capital goods rose 1.4% in the month.

Commodities

2011-01-25T13:19:00.001-08:00

1/25/2011 Commodities

Crude-oil futures settled at an eight-week low on Tuesday, pressured by ongoing concerns of more supply from the Organization of the Petroleum Exporting Countries and a stronger dollar for most of the day. Crude for March delivery was off $1.68, or 1.9%, to settle at $86.19 a barrel on the New York Mercantile Exchange, oil's lowest finish since Nov. 30. Natural-gas for February declined 11 cents, or 2.3%, to $4.47 per million British thermal units.

Gold futures retreated 0.9% on Tuesday as investors preferred to bet on equities and other investments considered riskier, and the dollar was stronger. Gold for February delivery lost $12.20 to $1,332.30 an ounce, the metal's lowest settlement since Oct. 27.

President Barack Obama is expected to propose an overall budget freeze and call on lawmakers to stop earmarking funds for pet projects during his State of the Union address late Tuesday, ABC News reported. Obama is also expected to propose spending for innovation, education and infrastructure but those increases will be constrained within the broader budget freeze, ABC said.

An index of U.S. consumer confidence jumped to 60.6 in January, reaching the highest level since May, with more consumers optimistic about income and jobs, as well as current business conditions, the Conference Board reported Tuesday. Economists polled by MarketWatch had expected a confidence reading of 54.8. "Consumers rated business and labor-market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead," said Lynn Franco, director of Conference Board's consumer research center, in a statement. "Although pessimists still outnumber optimists, the gap has narrowed." Confidence in December reached an upwardly revised 53.3, compared with a prior estimate of 52.5. A barometer of consumers' expectations rose to 80.3 in January from 72.3 in December. Meanwhile, consumers' assessment of the present situation increased to 31 - the highest level in more than a year -- from 24.9. 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.

Google to hire more than 6,200

Home prices are falling across most of America's largest cities, and average prices in eight major markets have hit their lowest point since the housing bust.
The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday fell 1.6 percent in November from October. All but one city, San Diego, recorded monthly price declines.
Eight others sank to their lowest levels since prices peaked in 2006 and 2007: Atlanta, Charlotte, N.C., Las Vegas, Miami, Portland, Ore., Seattle, Tampa, Fla., and Detroit, which saw the largest drop at 2.7 percent from the previous month.
Millions of foreclosures are forcing prices down, and many people are holding off making purchases because they fear the market hasn't hit bottom yet. Many analysts expect home prices to keep falling through the first six months of this year.
"With these numbers, more analysts will be calling for a double-dip in home prices," said David Blitzer, chairman of S&P's Index Committee.

Only 47% of working age Americans have full time jobs

John Hussman: "In any event, it is clear that with regard to risky securities, the enthusiasm and rhetoric about QE2 has caused a reduction in the willingness of sellers to sell, and an increase in the eagerness of buyers to buy. That imbalance of eagerness between buyers and sellers has clearly affected prices of risky assets, but it does not generate new cash flows - it simply raises the valuation that the market places on existing streams of future cash flows, and thereby lowers the subsequent rate of return on holding those securities. I suspect this will end badly, but that's not the topic of this discussion.....In any event, it is clear that with regard to risky securities, the enthusiasm and rhetoric about QE2 has caused a reduction in the willingness of sellers to sell, and an increase in the eagerness of buyers to buy. That imbalance of eagerness between buyers and sellers has clearly affected prices of risky assets, but it does not generate new cash flows - it simply raises the valuation that the market places on existing streams of future cash flows, and thereby lowers the subsequent rate of return on holding those securities. I suspect this will end badly, but that's not the topic of this discussion."

Part Time Employed

2011-01-24T15:46:00.000-08:00

1/24/2011 Part Time Employed

Facebook today announced that its widely-reported deal with Goldman Sachs, which values the company at $50 billion, has closed. The funding included $500 million raised from Goldman and previous investor Digital Sky Technologies in December, as well as another $1 billion raised from Goldman clients outside the United States.

Doug Noland: "For now, QE2 reliably generates additional liquidity for the liquidity-dependant markets. Somewhat ironically – yet altogether Bubble-like - rising bond yields and unfolding problems in municipal finance have bolstered flows into equities. And on the back of ongoing federal spending excess, economic prospects look ok and earnings appear swell. Yet recent developments do beckon for heightened diligence when it comes to monitoring for fissures developing below the surface of our fragile financial system. At least from my perspective, one can now discern unsettling parallels to early 2008."

The Automatic Earth: "108.616 million people in America are either unemployed, underemployed or "Not in the labor force". This represents 45.5% of working age Americans.

If you count the "Part time employed for non-economic reasons", you get 126.8 million Americans who are unemployed, underemployed, working part time or "Not in the labor force". That represents 53% of working age Americans.

So only 47% of working age Americans have full time jobs. While the official unemployment rate is 9.4%. Something's missing somewhere."

The amount of U.S. debt subject to the country's legal maximum has topped $14 trillion for the first time.

Crude-oil futures ended lower Monday on fears of increased production by the Organization of the Petroleum Exporting Countries. Oil for March delivery retreated $1.24, or 1.4%, to $87.87 a barrel on the New York Mercantile Exchange. Saudi Arabia's oil minister said Monday OPEC could ramp up production to meet increased global demand.

Hungary's central bank said Monday it raised its base rate by 25 basis points to 6.00%. The move will be effective from Jan. 25. The rate hike was in line with market expectations.

Venture capitalists came raging back in 2010, putting $26.2 billion into 2,799 venture deals, a spike of 11 percent from 2009 and a major sign that formerly wary VCs have begun to come off the sidelines, according to a study by Dow Jones VentureSource released today.

ZeroHedge: "the US stock market is about to become awash with another $25 billion in suddenly free cash every single week, until the entire $200 billion SFP buffer is depleted. In other words, take the liquidity impact of POMO, which is roughly $25-30 billion a week, and double it! We are confident the US Treasury will announce that beginning with the week of February 14, it will no longer roll maturing 56-Day Cash Management Bills, which means that for the ensuing 8 weeks, one on every single Thursday, there will be a total of $200 billion in incremental liquidity flooding the market, and probably sending stocks, commodities, and everything else that is not nailed down into the stratosphere all over again."

Google

2011-01-20T16:15:00.000-08:00

1/20/11 Google

Google Inc said Thursday its fourth-quarter net income rose to $2.54 billion, or $7.81 a share, from $1.97 billion, or $6.13 a share in the same period a year earlier. The Mountain View, Calif.-based Internet search giant said net revenue for the period ended in December came in at $6.37 billion. Excluding one-time items, Google said earnings for the period were $8.75 a share. Analysts polled by FactSet Research had expected Google to report earnings excluding items of $8.06 a share, and $6.05 billion in net revenue.

Gold for February delivery retreated $23.70, or 1.7%, to $1,346.50 an ounce on the Comex division of the New York Mercantile Exchange.

(Bloomberg) -- Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.
Housing starts fell 4.3 percent to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 550,000 rate. A jump in building permits, a proxy for future construction, may reflect attempts to get approval before changes in building codes took effect at the beginning of this year.
BUILDING PERMITS Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 635,000. This is 16.7 percent (±2.1%) above the revised November rate of 544,000, but is 6.8 percent (±2.8%) below the December 2009 estimate of 681,000. Single-family authorizations in December were at a rate of 440,000; this is 5.5 percent (±2.3%) above the revised November figure of 417,000. Authorizations of units in buildings with five units or more were at a rate of 172,000 in December.

The number of Americans filing first-time claims for unemployment insurance payments fell more than forecast last week, adding to evidence the labor market is healing.
Applications for jobless benefits decreased 37,000 in the week ended Jan. 15, the biggest decline since February 2010, to 404,000, Labor Department figures showed today. Economists forecast 420,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls fell, while those getting extended payments rose.

The index of manufacturing activity in the Philadelphia region dipped slightly in January, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed business condition index fell to 19.3 in January from 20.8 in December. The decline was a bit weaker than expected. Below the headline, the report had some strong signals. The index for new orders jumped to 23.6 in January from 10.6 in December. The index for employment also jumped to 17.6 from 4.3 in the prior month.

The economy's expansion is expected to continue, though there are "some strong headwinds" in the medium-term, the Conference Board said Thursday as it reported that its leading economic index rose 1% in December. "Overall, economic activity is likely to continue to gain momentum in 2011," said Ken Goldstein, economist at the Conference Board, in a statement. Six of the 10 indicators included in the LEI made positive contributions in December, led by building permits, the interest rate spread, and average weekly initial claims for unemployment-insurance benefits. In November, the LEI gained 1.1%. The LEI is a weighted gauge of 10 indicators that are designed to signal business cycle peaks and troughs. There have been widespread strengths among the indicators in recent months, according to the Conference Board. For the six months through December, the LEI gained 3.3%, up from 2.4% in the prior six months.

The amount of U.S. debt subject to the country's legal maximum has topped $14 trillion for the first time.

China’s economic growth accelerated to 9.8 percent as industrial production and retail sales picked up, sending stocks lower from Asia to Europe on concern Chinese policy makers will raise interest rates and stem the expansion.
The fourth-quarter expansion exceeded the 9.4 percent median estimate in a Bloomberg News survey of 22 economists and the 9.6 percent annual gain in the previous three months, a statistics bureau report showed. Consumer-price inflation eased to 4.6 percent in December. Citigroup Inc. and Credit Suisse Group AG say inflation may peak at as much as 6 percent in the first half.

Brazil has raised rates to 11¼%

The Bond Buyer reports that the new "Vallejo Plan Would Give Unsecured Creditors 5 to 20 Cents on the Dollar."

Sales of existing homes jumped 12.3% in December, an encouraging end to the worst year since 1997, as the collapse in house prices and a wave of foreclosures depressed activity over the 12-month period. The National Association of Realtors on Thursday said existing-home sales rose from November's upwardly revised 4.7 million rate to a seasonally-adjusted annualized rate of 5.28 million, considerably beating the MarketWatch-compiled economist estimate of 4.88 million. The jump in the mortgage rate to 4.8%, a rise of roughly a half percentage point from depths, has helped induce on-the-fence buyers back into the market, said Lawrence Yun, chief economist of the NAR. The improving economy also helped confidence, Yun said. The annual tally of sales was 4.91 million, a drop of 4.8%, based on preliminary data. The median price of existing homes in December decreased 1.0% to $168,800, the lowest since February, and November prices were marginally revised lower to $170,200. Over the year, prices edged up 0.3% to $173,000, which was well below the $198,100 of 2008 and the $219,000 price in 2007.

ZeroHedge: "The US Dollar devaluation will come in the form of an increase in the prices of all products. In reality it will represent the uniform cost push effects of inflation. The US can expect it on all Chinese based products of one form or another. The timing of the change is set to arrive with the products on the US shores in the summer of 2011."

In the week ended January 12, domestic equity funds per ICI saw an inflow of $3,765 million following last week's outflow of $4,229.

Natural-gas futures added to gains Thursday after a government report showed a larger-than-expected decline in the nation's supplies of the product for the week ended Jan. 14. Natural gas for February delivery was up 11 cents, or 2.4%, to $4.67 per million British thermal units. The Energy Information Agency reported a decline of 243 billion cubic feet. Analysts polled by Platts had expected a decline between 231 and 235 billion cubic feet.

Apple

2011-01-18T16:36:00.001-08:00

1/18/11 Apple

Bloomberg: "China told banks to set aside more deposits as reserves for the fourth time in two months, stepping up efforts to rein in liquidity after foreign-exchange reserves rose by a record and lending exceeded targets."

Bloomberg (Madelene Pearson and Jay Shankar): "Record imports of gold by India show the central bank may be losing the battle to tame inflation, spurring investors to sell government bonds. Shipments into Asia's third-biggest economy may have increased to 800 metric tons from 557 tons in 2009 and exceeding the previous all-time high of 769 in 2007, according to Ajay Mitra, managing director for... the World Gold Council... 'Gold is being used as a store of value to protect against never-ending inflation,' Ritesh Jain, the... head of fixed income at Canara Robeco Asset Management...said 'Inflation is the biggest concern in the minds of investors and savers.'"

Doug Noland: "It is a major Issue 2011 that U.S. federal government debt will for the third straight year account for all - or at least the vast majority - of total system Credit creation. I would argue (confidently) that this dynamic is dysfunctional. U.S. government debt is being mispriced, over-issued, and misdirected - ensuring only deeper economic maladjustment and financial vulnerability. Tough decisions and tough economic adjustments are only being postponed.
It is a fundamental issue that total system Credit creation is originating from chiefly non-productive marketable debt of the - not especially efficient or productive - governmental sector. It is an Issue 2011 that our recovery is entirely dependent upon a favorable global macro and market backdrop necessary to ensure the ongoing massive issuance of increasingly Credit-challenged U.S. government debt obligations....The possibility for a surprising jump in Treasury bond yields is a major Issue 2011. On the one hand, Treasury is not interest rate sensitive; the marketplace doesn't have to fear much of an issuance impact from a moderate jump in borrowing costs. On the other hand, this dynamic would imply that yields are poised to surprise on the upside when the markets eventually force borrowing restraint. It doesn't take a wild imagination to envisage a market problem leading to an economic problem, to additional "TARP," more bailouts and a jump in borrowing costs - all combining for a dramatic deterioration in our nation's debt position.
That borrowing restraint is being imposed upon U.S. muni finance is a major Issue 2011. The year has commenced with municipal bond yields adding to Q4's surprising jump. Today, state and local finance is our Credit system's weak link. What began in ("subprime") Greece has made its way to Illinois, California, New York, New Jersey, Florida and elsewhere. Throughout the country, governments will now be forced into the messy proposition of getting their books in order. After ignoring this issue for too long, a global marketplace keen to structural debt issues has commenced the disciplining process."

(Dow Jones)--Foreign financial firms have sold $36.4 billion of investment-grade bonds in the U.S. so far in 2011, the most ever recorded in the first two weeks of any year since at least 1995, according to data provider Dealogic.
The so-called Yankee bonds--dollar-denominated debt sold in the U.S. by firms based outside the country--have come in 53 separate offerings, a 112% jump on last year's 25 deals up to this point, Dealogic added.
Including issuers other than banks, Yankee high-grade debt issuance in the U.S. totals $45.3 billion so far this year, accounting for more than 70% of the U.S. investment-grade bonds marketed overall. Financial institutions accounted for 81% of all Yankee high-grade bonds in the year to date.
One explanation for the surge of overseas issuers is the attractiveness of selling debt in dollars and swapping the cash flows back into euros, instead of selling debt directly in Europe, according to credit strategists at Barclays Capital.
In a market commentary Friday, the strategists said it was costlier for European firms to issue debt in their own markets because of the "relatively higher risk aversion" among investors stemming from the region's sovereign debt crisis.
The euro/dollar cross-currency basis swap spread--a measure of how much it costs to exchange cash flows in the two currencies--is now minus-26 basis points for a five-year swap. That means a European bank needing five-year funding in euros would save 0.26% on every dollar sold and swapped back in order to create the synthetic funding in euros, compared with what it would cost to issue in euros.

Zero Hedge reports: "Initial Claims Surge To 445K, Not Seasonally Adjusted Claims Surge By 191,686 To 770,413 In One Week".

John Hussman: "It will come as no surprise that we continue to anticipate poor 10-year total returns for the S&P 500 over the coming decade. Our present estimate is about 3.3% annually, which includes dividends. That is about 1% less than the 10-year total return that we estimated just a few months ago, but this should make sense: historically, to the extent that the S&P 500 appreciates at an annualized rate of more than about 6% (which is about the long-term growth rate of revenues, nominal GDP and other smooth fundamentals), the expected future total return for the index declines as the market advances. Just like bonds. It is easily understood, but often ignored, that a short-term market advance of 10% - leaving fundamentals relatively unchanged in the interim - cuts about 1% annually off of subsequent 10-year market returns. This can be demonstrated both algebraically and in historical data."

Sales for the most recent quarter jumped to $26.74 billion, from $15.683 billion a year ago.
Both the earnings and topline beat expectations. Analysts who follow Apple forecast the company reporting a profit of $5.40 a share on sales of $24.433 billion, according to a consensus estimate compiled by Thomson Reuters.
Apple reported a profit of $6.43 a share in its fiscal first quarter, up from $3.67 a share last year.
All of the company's key product lines exceeded expectations. In the most recent quarter Apple sold 7.33 million iPads, 19.45 million iPods and 4.13 million Macs. Sales of the iPhone jumped 86 percent to 16.24 million units.
Gross margin for the quarter came in 38.5 percent.

IBM released strong fourth quarter earnings today, posting record revenue of $29 billion, up 7 percent from the fourth quarter in 2009, and surpassing analyst expectations. EPS were $4.18, up 16 percent; an increase of 16 percent from the same quarter in 2009.
Big Blue also posted record net income in the fourth quarter, $5.3 billion, compared with $4.8 billion in the fourth quarter of 2009, up 9 percent. Net income for the year came in at $14.8 billion compared with $13.4 billion in 2009, an increase of 10 percent. Diluted earnings were $11.52 per share compared with $10.01 per diluted share in 2009, an increase of 15 percent. Revenues for 2010 totaled $99.9 billion, an increase of 4 percent (3 percent, adjusting for currency), compared with $95.8 billion in 2009.
IBM’s CEO Samuel J. Palmisano said in a statement: “We completed an outstanding year, with record profit and free cash flow, and exceeded the high end of our 2010 earnings per share roadmap objective…We also capped a decade in which our shift to high-value businesses, our global integration of IBM, our investment in research and development of almost $60 billion and our acquisition of 116 companies have helped us to nearly triple our EPS and return more than $100 billion to shareholders.”
IBM ended the fourth-quarter of 2010 with $11.7 billion of cash on hand, which is a little bit more than the $11.1 billion leftover in third-quarter earnings. IBM’s acquisition spree tapered off in the fourth quarter but Big Blue bought a number of companies earlier in the year, including Initiate Systems, Cast Iron Systems, Sterling Commerce, Coremetrics, BigFix, Datacap, Unica, OpenPages, Netezza and most recently, Blade Network Technology for $400 million.

The euro has lost an average of 22% of its purchasing power since the introduction of European Monetary Union in 1999, citing a poll that Allianz SE conducted. The purchasing power of one euro fell to about 82 cents in Germany, slightly below 81 cents in France, 76 cents in Italy and 71 cents in Spain.

The Boeing Company on Tuesday pushed back the first delivery of its 787 Dreamliner to the third quarter, hoping that the delay will give it enough time to finish a jetliner that is more than three years behind schedule.

Chinese President Hu Jintao arrived in the United States on Tuesday for a four-day state visit peppered by U.S. complaints about Beijing's currency policies but sweetened by a series of business deals.

Agribusiness giant Cargill Inc plans to spin off its majority stake in Mosaic Co (MOS.N), a move that could eventually lead to takeover offers for the world's second largest fertilizer producer.
The distribution of the 64 percent stake in Mosaic, worth about $24 billion, will allow Cargill to maintain its private company status while enabling Cargill family trusts to diversify their assets, Cargill said on Tuesday.

status

2011-01-15T14:44:00.000-08:00

I was rushed to the hospital on 1/3 and discharged on 1/14. I am an outpatient taking radiation for my renal cancer and doing well! As my health returns, I will be able to
post my blog once again. I appreciate all the wonderful wishes I have received.

Destruction

2011-01-03T14:17:00.001-08:00

1/3/11 Destruction

A magnitude-7.1 earthquake shook southern Chile on Sunday, prompting tens of thousands to flee the coast for higher ground amid fears it could generate a tsunami like the one that ravaged the area last year.
There were no reports of deaths or damage, and Vicente Nunez, head of the National Emergency Office, said no tsunami alert was issued.

John Hussman: "We enter 2011 at a point where investors have pushed risk assets to a speculative extreme, on the belief that the Fed has provided a "backstop" against losses. While there's no assurance that we won't see a further extension of this over the short-term, we've found more often than not that speculative setups in the financial markets are followed by a striking degree of subsequent resolution in the opposite direction....One of the striking features of the market here is the extent to which large-cap, high-quality has underperformed speculative sectors of the market, creating what we view as a multi-year "setup" in favor of high quality issues."

"Another great evil arising from this desire to be thought rich; or rather, from the desire not to be thought poor, is the destructive thing which has been honored by the name of "speculation"; but which ought to be called Gambling."
William Cobbett

The Clorox Co. said Monday it expects second-quarter adjusted earnings in a range of 57 cents a share to 63 cents a share. Wall Street analysts expect the company to earn 74 cents a share, according to a survey by FactSet Research. Clorox said second-quarter sales will fall 3% to 4% from the year-ago period. "Slowing category consumption experienced in the company's fiscal first quarter continued to impact shipments into the second quarter," the company said. Including the impact of a goodwill impairment, Clorox expects to report a second-quarter loss from continuing operations of $1.25 a share to a loss of $1.15 a share. The company expects to report GAAP earnings of a penny a share, to 11 cents a share.

China wants to work with Spain to help it overcome the current financial crisis, and deepen long-term cooperation between the two countries, said the Chinese ambassador to Spain, Zhu Bangzao. The ambassador made the comments in a written interview with state-run Xinhua news agency ahead of Chinese Vice Premier Li Keqiang's visit to Spain from Jan. 4 to 6. Zhu said the visit will raise bilateral trade and economic cooperation between the two countries. Li is scheduled to hold talks with Spanish Finance Minister Elena Salgado and as Prime Minister Jose Luis Rodriguez Zapatero, and will hold a breakfast meeting with Chinese and Spanish entrepreneurs to discuss ways of deepening bilateral trade and economic cooperation. Zhu also reportedly said tehre would be a series of cooperation agreements in finance, energy, telecommunications, tourism and food.

Authorities in Beijing have hiked the minimum wage in the capital by about 20 percent for the second time in six months amid soaring food costs, rising property prices and China's widening wealth gap.
The minimum monthly salary in the city will be increased to 1,160 yuan from 960 yuan on January 1, according to a statement posted on the government's website Tuesday.
In July, Beijing increased the minimum wage by 20 percent to 960 yuan.

The new year hasn't changed the outlook of SocGen's famous bear Albert Edwards.
In a new profile up at The Guardian, Edwards takes aim at China, where he predicts a collapse that will take down markets around the world.
To him the country is a "freak economy" with a ridiculously high and persistent investment-to-GDP ration, and he fears that everyone is just taking Chinese growth for granted in forecasting strong demand helping the rest of the world's economies.

Goldman Sachs Invests $450 Million In Facebook At A $50 Billion Valuation

Devastating flood waters across the Australian state of Queensland may not recede for weeks, the state's Premier Anna Bligh has warned.

At more than 10 million barrels a day, Russian oil production in 2010 was the highest of any year since the collapse of the Soviet Union.

In the early trading oil trades at 92+ and silver at 31+.

Fred Mishkin: "A rising oil price creates economic headwinds via numerous channels particularly if the increase is sudden. A decline in disposable incomes, reduced consumer confidence, lower levels of travel, a decline in demand for gas-guzzling larger autos and an upward bias to inflationary expectations are all spin off effects on the consumer of a rapid ascent in the price of oil."

Dollar General Corp. said Monday it plans to hire 6,000 workers in 2011 as part of its effort to open 625 stores.

The euro fell by the most in more than two weeks against the dollar amid concern the region’s debt crisis will hamper efforts by governments and banks to raise funds this year.

Snow and ice have closed the main highway between Southern and Central California, stranding many motorists overnight, as a winter storm brings chilly weather and treacherous roads.

The Institute for Supply Management on Monday said its index of factory activity rose to 57.0% in December from 56.6% in November. Prices index 72.5 vs. 69.5 prior. Employment 55.7 vs. 57.5. Inventories 51.8 vs. 56.7. New orders 60.9 vs. 56.6.

Construction spending rose 0.4%, slightly higher than economists' expectations of about a 0.2% gain. Spending on public-sector and private projects increased in November. Outlays are still down 6% compared with a year earlier.

The Dow Jones Industrial Average gained 93.24 points, or 0.8%, to 11,670.75, marking its highest close since August 2008 and its biggest jump since early December. The S&P 500 index rose 14.23 points, or 1.1%, to 1,271.87, led by a 2.3% jump in the financial sector. The Nasdaq Composite gained 38.65 points, or 1.5%, to 2,691.52. The three biggest gains in the past five months -- and 5 of the 25 biggest rallies in 2010 --occurred on the first trading day of the month.

Jack H. Barnes: "The Chinese economy is heading toward an economic hard landing; it will overshoot to the downside and become the economic Black Swan event of 2011-2012. Inflation, yes both types, will be the story in China in the coming months." (via ZeroHedge)

Natural-gas futures made their biggest one-day gain since October on forecasts for colder weather. Natural-gas futures rallied 25 cents, or 5.6% to $4.65 per million British thermal units.

ZeroHedge: "As of December 31, 2010, the US now has $14,025,215,218,708 and 52 cents in debt (incidentally this is an increase of $154 billion in debt on the US balance sheet overnight). As a reminder the debt ceiling is 14,294,000,000,000. Which means at a run rate of $125 billion in net monthly issuance, the US may not even get to the end of March at the current burn rate. Which also means Congress better start the discussion on raising the debt ceiling as soon as February. Which means someone is about to [win/lose] some serious cash on the Feb 28 debt ceiling hike InTrade contracts."

Home prices will continue to decline for several years, Mort Zuckerman, the chairman and CEO of Boston Properties, told CNBC Monday.
“I’m pessimistic about residential real estate,” said Zuckerman.

Debt

2011-01-02T08:34:00.001-08:00

1/2/11 Debt

Bo Diddley: "Don't let your mouth write no check that your tail can't cash."

The Baltic state of Estonia early Saturday became the 17th European Union member to adopt the joint European currency, the euro.

Hu Xiaolian, vice-governor of the People’s Bank of China, said: “Once a reserve currency’s value becomes unstable, there will be quite large depreciation risk for assets.”

Central banks cannot include renminbi holdings as official reserves under International Monetary Fund guidelines. Maybe this will change in 2011.

TrimTabs' Charles Biderman: "No amount of QE will be able to keep the current stock market bubble from bursting eventually."

China’s manufacturing grew at the weakest pace in three months in December after the government tightened monetary policy to restrain inflation and closed factories to meet energy-efficiency targets.
The Purchasing Managers’ Index fell to 53.9 from 55.2 in November, the first decline in five months, a report from the China Federation of Logistics and Purchasing showed yesterday. That was less than the median estimate of 55 in a Bloomberg News survey of 13 economists. A measure of manufacturers’ input costs also fell.
Premier Wen Jiabao is seeking to choke off the fastest inflation in more than two years and limit asset bubbles without undermining growth in the economy that led the recovery from the global financial crisis. Central bank Governor Zhou Xiaochuan pledged Dec. 31 to try to keep prices “basically stable” this year, after a second interest-rate increase in three months on Christmas Day.

Mike Burk: "The market is overbought and due for a correction, but seasonality is likely to dominate again next week.
I expect the major averages to be higher on Friday January 7 than they were on Friday December 31."

"If home prices continue on this pace down, I think the economy has serious reasons to worry," Yale economist Robert J. Shiller -- and co-creator of the Case-Shiller Index -- told the Wall Street Journal in a recent interview.

The Automatic Earth: "The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices....Furthermore, our forecast of another 20% fall in house prices may be conservative. Prices may well end up back on their long- term trendline, but fall below in the meanwhile. Just as they way overshot the trend on the way up, they may do so on the way down, as is often the case in cycles. Furthermore, another big house price decline will spike delinquencies and foreclosures leading to more REO sales by lenders, which will further depress prices. Our analysis indicates that a further 20% drop in prices will push the number of homeowners who are under water from 23% to 40%, resulting in more strategic defaults, more REO, etc.
At that point, the remaining home equity of those with mortgages would be wiped out on average. That, in turn, would impair already-depressed consumer confidence and their willingness and ability to spend, to say nothing of residential construction."

Bloomberg:"Former Bank of England policy maker Willem Buiter sparked the biggest debate at the Federal Reserve’s annual mountainside symposium, saying the central bank pays too much heed to the concerns of financial institututions“The Fed listens to Wall Street and believes what it hears,” Buiter said yesterday in a paper presented to the Fed’s conference in Jackson Hole, Wyoming. “This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous.”

John Adams:"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation."

Disconnect

2011-01-01T08:31:00.001-08:00

1/1/11 Disconnect

According to the latest Rasmussen poll, almost 2/3 of Americans polled are pessimistic about 2011 and believe
the recession will not end in 2011. By comparison, the sentiment on Wall Street for 2011 is the most bullish
it's been in years. Quite a disconnect. They cannot both be right. Take your pick.

Bloomberg (Charles Penty): “Spain has between 700,000 and 1.1 million unsold homes, an amount that will drag on a recovery in the housing market as prices will probably keep falling in 2011, the Bank of Spain said.” This sounds like the U.S.

Sigmund Freud: "Just as no one can be forced into belief, so no one can be forced into unbelief."

Doug Noland: "The CRB commodities index closed the year at the high since 2008. And by the end of the year it was clear that China, India and greater Asia had serious inflation and “hot money” issues. Cautious little baby step policy moves aren’t going to get the job done....From my bearish perspective, the marketplace has been disregarding some important developments. For starters, despite the massive $4 trillion increase in government liabilities in just nine quarters, an extended period of near zero interest rates, and unprecedented Federal Reserve quantitative easing, the unemployment rate will end the year near 9.8%. And despite extremely low mortgage yields, our nation’s housing market is barely treading water. Developments – or lack of them – in the real economy are disconcerting and support the secular bear thesis.
There is also the important issue of rising global yields. Moreover, the debt markets have become increasingly discriminating. A few months back – in the heat of the euphoric “endless liquidity for everybody forever” backdrop – the markets were content to readily finance just about any borrower. More recently, in somewhat of a return to sobriety, the marketplace has looked increasingly askance at borrowers such as Ireland, Spain and U.S. municipalities. This is a serious development for the global government finance Bubble – but perhaps not as serious in the short-term.
The U.S. financial system these days is being completely dominated by the expansion of federal borrowings. This creates different financial and economic dynamics than we’re used to analyzing. In contrast to when mortgage Credit was playing a predominate role during that Bubble period, a rise in market yields today will have virtually no near-term impact on the quantity of (government) Credit being issued. And especially with the extension of Bush era tax cuts along with additional stimulus measures – the speculative U.S. stock market has taken great comfort from the seeming sustainability of the tepid (government-dominated) U.S. economic recovery...The Bernanke Fed certainly ensured that financial speculation gained at the expense of savers. And the municipal debt market now confronts the dilemma resulting from Bubble-related risk distortions, misperceptions and investor disappointment – and a problematic flow reversal out of the sector."

“There Will Be Head Fakes”
-chessNwine 12/31/10
Accordingly, please use caution headed into the next several weeks. There is nothing wrong with taking a wait-and-see approach to start the year."

Robert Fritz: "If you limit your choices only to what seems possible or reasonable, you disconnect yourself from what you truly want, and all that is left is compromise."

Wishing You a Happy and Healthy New Year

2010-12-31T15:20:00.000-08:00

12/31/10 Wishing You a Happy and Healthy New Year

Aisha Elderwyn
"Every new year people make resolutions to change aspects of themselves they believe are negative. A majority of people revert back to how they were before and feel like failures. This year I challenge you to a new resolution. I challenge you to just be yourself."

(Bloomberg) -- South African bonds lured more foreign inflows in 2010 than shares for the first time after the fall of apartheid in 1994 as yields more than double those of 10-year U.S. Treasuries boosted the appeal of the debt. “South African bonds offer some of the highest yields around,” said Leon Myburgh, a fixed-income strategist for sub- Saharan Africa at Citigroup Inc.’s Johannesburg-based unit. “Slowing inflation and declining interest rates made them a very attractive investment.”
The debt-buying spree will continue through 2011, said Jacques Theron, a portfolio manager at Johannesburg-based Absa Asset Management Private Clients, a unit of the nation’s largest retail bank. With its benchmark interest rate at 5.5 percent and inflation near a five-year low, South Africa’s central bank is among a few worldwide that have room to cut rates, he said.

U.S. stocks ended 2010 with strong gains, advancing for the second year in a row, as stimulus measures from the Federal Reserve and the government and recent signs of improvement in the economy encouraged investors' spirits. The Dow Jones Industrial Average closed the year at 11,577.51 on Friday, up 7.8 points for the session, and less than 10 points below a two-year high it reached on Wednesday. The Dow jumped 5.2% in December and is up 11% for the year. The S&P 500 index fell 0.24 point to 1,257.64 on Friday. The broad index still jumped 6.5% for the month and is up 12.8% in 2010. The Nasdaq Composite fell 10.11 points, or 0.4%, to 2,652.87 Friday, leaving it with 6.2% advance in December and a 16.9% gain for the year.

Oil prices hit a 26-month high over $92 a barrel on Friday, closing the year up 15 percent on expectations that the economic recovery will drive demand growth next year and send prices into triple digits.

Bill Gross: "avoid dollar-denominated government debt" (US Treasuries)

Howard Davidowitz

2010-12-31T07:14:00.001-08:00

12/31/10 Howard Davidowitz

The Chinese yuan strengthened for a second straight day Friday to hit a fresh record high, with the gain coming in the wake of a high-profile forecast for the currency. The U.S. dollar slipped to 6.6227 yuan, inching down from Thursday's 6.6229 yuan after Beijing lowered the trading band slightly. The advance followed a day after a report that a leaked U.S. diplomatic cable cited China Construction Bank senior economist Hwa Erh-cheng as predicting a 5% rise in the yuan against the dollar for 2011. The news was reported by Agence France-Presse, based on a cable released by the WikiLeaks website.

Disruptions in coal production from Australian floods may help raise the price of coal 20% or more, to the benefit of Canadian miners.

Michael Pento: "The Fed's lucky streak of luring bond investors with low interest rates may be drawing to a close. Nevertheless, the extended period of low borrowing costs has bred a new breed of investor. To the bulls and bears, we can now add the ostriches - those who bury their heads in the sand of declining debt service ratios while refusing to face up to intractable levels of total US government debt. If these ostriches were to actually look at the numbers, they would realize that it is their investments which are made of sand."

The last time sentiment levels were this extreme was 1987.

A foot of snow in Prescott, Arizona!

Money market mutual fund assets rose by $22.4 billion to $2.8 trillion in the week ended yesterday, the Investment Company Institute reported Thursday.

On calendar 2011 shipment potential, Caris forecasts 53.6 million tablets, with 36.1 million Apple iPad's, Samsung targets 8 million Galaxy Tabs, while our November Asia checks showed expectations for 40 million to 60 million units.

China's first round of rare earth export quotas for next year were actually cut by about half from first round quotas for 2010, citing an official.

The Oil Drum: "LA PAZ, Bolivia – Protests against a sharp increase in fuel prices intensified and turned violent in Bolivia on Thursday, as thousands of demonstrators demanded President Evo Morales' government repeal the hike.
Demonstrators filled the streets in La Paz and other cities to protest the higher prices, which were announced suddenly on Sunday. Gasoline prices immediately soared by 73 percent and diesel prices went up by 83 percent, leading to a rapid increases in transport and food prices in the Andean country."

CVS Caremark Corp. agreed to buy the Medicare Part D business of Universal American Financial Corp. for about $1.25 billion, more than doubling the size of its program after pharmacy-benefits.

Alexander Herzen: “This socialism will develop in all its phases until it reaches its own extremes and absurdities. Then once again a cry of denial will break from the titanic chest of the revolutionary minority and again a mortal struggle will begin, in which socialism will play the role of contemporary conservatism and will be overwhelmed in the subsequent revolution, as yet unknown to us.”

Venezuela will devalue its "strong bolívar" currency on New Year's Day, the government said Thursday, the second such devaluation within a year and at least the fifth major devaluation during the decade-long populist government of President Hugo Chávez.

Howard Davidowitz: "If interest rates go up a point Bernanke's bankrupt. Everything he's bought is underwater. All the MBS are underwater, the whole country is underwater."

Marc Faber

2010-12-30T15:10:00.000-08:00

12/30/10 Marc Faber

The 111th Congress left town without passing a 2011 budget that began October 1st 2010. This is the first time a budget has not been passed since 1974.

Summary of Weekly Petroleum Data for the Week Ending December 24, 2010
U.S. crude oil refinery inputs averaged 14.9 million barrels per day during the week ending December 24, 3 thousand barrels per day above the previous week’s average. Refineries operated at 87.8 percent of their operable capacity last week. Gasoline production decreased last week, averaging 9.3 million barrels per day. Distillate fuel production increased last week, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 8.8 million barrels per day last week, up by 72 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.6 million barrels per day, 663 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 775 thousand barrels per day. Distillate fuel imports averaged 251 thousand barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.3 million barrels from the previous week. At 339.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.3 million barrels last week and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.2 million barrels and are just above the upper limit of the average range for this time of year. Propane/propylene inventories decreased by 2.4 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 9.2 million barrels last week.
Total products supplied over the last four-week period has averaged 20.3 million barrels per day, up by 6.1 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged 9.3 million barrels per day, up by 2.9 percent from the same period last year. Distillate fuel demand has averaged 3.9 million barrels per day over the last four weeks, up by 4.9 percent from the same period last year. Jet fuel demand is 0.1 percent higher over the last four weeks compared to the same four-week period last year.
Source: EIA

The Dow Jones Industrial Average finished down 15.67 points, or 0.1%, at 11,569.71, with 23 of its 30 components ending lower. The S&P 500 index fell 0.2% to 1,257.88, weighed down by its financials and healthcare sectors. The Nasdaq Composite lost 0.2% to 2,662.98.

Marc Faber: Treasurys Are A "Suicidal Investment"...The worst investment is in U.S. long-term bonds....By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.”

Seasonally Adjusted

2010-12-30T07:35:00.000-08:00

12/30/10 Seasonally Adjusted

Analysts and traders surveyed by Dow Jones Newswires expect this week's storage data to show a decline of 146 bcf, more than the five-year average draw for the week of 118 bcf. The expected draw would leave stockpiles 7.9% above the five-year average.

The number of U.S. workers filing new applications for jobless benefits fell 34,000 to a seasonally adjusted 388,000 in the week ended Dec. 25, hitting the lowest level since July of 2008, the Labor Department reported Thursday. Economists polled by MarketWatch had expected initial claims of 413,000. The four-week average of new claims, which is smoother than the weekly data, fell 12,500 to 414,000, also reaching the lowest level since July of 2008. The level of claims helps observers to analyze the health of the labor market, and economists say claims would have to remain below 400,000 before there's a substantial gain in hiring. Analysts also note that claims are difficult to seasonally adjust near the holidays. In the week ended Dec. 18, the number of people who continued to receive benefits under state unemployment programs rose 57,000 to a seasonally adjusted 4.13 million. The four-week average of these continuing claims fell 37,250 to 4.12 million, the lowest level since November of 2008. Altogether, about 8.87 million people received some kind of unemployment-insurance benefit in the week ended of Dec. 11, on an unadjusted basis. That level was down about 35,000 from the prior week.

The average 30-year fixed mortgage rose to 5.02%, according to Bankrate.com's weekly national survey released Thursday. The average 15-year fixed mortgage rose to 4.39% and the larger jumbo 30-year fixed rate rose to 5.64%. Adjustable rate mortgages also went up, with the average 5-year ARM rising to 4% and the average 7-year ARM reaching 4.43%.

Manufacturing activity in China fell to a three-month low in December but soaring raw material costs continued to fan inflationary pressures in the economy, an independent survey said Thursday.
The HSBC China Manufacturing PMI, or purchasing managers' index, slipped to 54.4 in December from 55.3 in November as output and new business increased at the slowest pace in three months, the British banking giant said.

The yuan hit a record high against the dollar on Thursday after the People's Bank of China set a higher mid-point, sparking expectations of more appreciation in the first quarter of next year.
Spot yuan hit an intraday high of 6.6000, the highest level since its revaluation and accompanying forex reforms in July 2005. That was up 0.3 percent from Wednesday's close, the biggest daily percent rise in around seven weeks. The yuan has now risen 1.2 percent from a low hit on Dec. 20, marking one of its fastest series of gains since the currency was depegged from the dollar in mid-June. It has now gained 3.4 percent since the depegging.

Rice futures rose the most allowed by the Chicago Board of Trade on expectations for lower production from Thailand, the world’s biggest exporter, because of flooding. Output from Thailand’s main harvest, which started in October, may drop 5.3 percent, the Office of Agricultural Economics said last week.

After 33 Consecutive Weeks of Outflows, ICI Reports First Inflow into US Equity Funds as Bond Outflows Persist.

The stock market rallied after 1929, but then crashed in a double dip.

Chinese academic Guo Tianyong said the country has room to raise interest rates once or twice in the first half of 2011. Guo is head of the China Banking Research Center at the Central University of Finance and Economics.

John Taylor: "We see the health of world economy as being driven by the implied strength of three economic centers: the US, China, and the Eurozone...Each of these three centers has a problem in that the amount of debt is too high and the assets against that debt are unable to throw off enough cash to support it, much less retire it."

More banks failed in 2010 than any year since the savings-and-loan crisis ended in 1992. So far this year, the 157 banks that failed had total assets of $92.1 billion compared to 140 bank failures with total assets of $169.7 billion in 2009.

The Chicago PMI climbed to 68.6 in December, compared to November's reading of 62.5.

Pending home sales rose 3.5% in November, according to an index released Thursday. The National Association of Realtors said its pending home sales index rose to 92.2 from a downwardly revised 89.1 in October. The index is still 5% below November 2009 levels. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales.
NAR chief economist Lawrence Yun last week estimated there were about 4.5 million distressed properties that could potentially reach the market in coming months.
Housing permits fell in November to the third-lowest level on record.

The American Petroleum Institute late Wednesday said crude-oil inventories rose 3.1 million barrels in the week ended Dec. 24. Gasoline stocks fell 3.1 million barrels, while distillate stocks gained 1.38 million barrels, the trade group estimated.

Natural Gas Storage Report

week ending: 12/24/2010
east 1671
west 444
producing 1117
total 3232
change -136

Foreclosures

2010-12-29T13:51:00.001-08:00

12/29/10 Foreclosures

BJ's Wholesale Club Inc., the Natick, Mass., warehouse retailer, may face a hostile takeover attempt from the private-equity firm Leonard Green & Partners in the next few weeks if it does not auction itself, the New York Post reported, citing sources. Leonard Green recently agreed to acquire Jo-Ann Stores and it partnered with TPG on a bid for J. Crew. The sources told the Post that Leonard Green still was looking to invest about $5.3 billion that it had raised for a buyout fund. The Post had earlier reported that BJ's in November had hired Morgan Stanley to explore strategic alternatives for the retailer, including a possible sale

The People's Bank of China has raised the interest rate it charges banks on some funding facilities, after the central bank increased bank deposit and lending rates by a quarter-point over the weekend, according to reports Wednesday. The PBOC raised its one-year refinancing rate, or the interest rate at which it lends to banks, by 0.52 percentage points to 3.85%, Dow Jones Newswires reported. The central bank also lifted the rediscount rate -- or the rate banks pay when they borrow from the central bank by selling commercial bills -- by 0.45 points to 2.25%, the PBOC said. The adjustments were made on Sunday, and were announced in a statement dated Monday, the report said.

The yuan is fixed to the dollar, but floats against most other currencies. Citing the real's 37% gain against the yuan as causing a surge in Chinese imports, Brazil nearly doubles tariffs against China on several different toys.

Taiwan may increase interest rate to damp prices after countering inflows.

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 17, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 18.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 20.0 percent compared with the previous week The Refinance Index decreased 24.6 percent from the previous week. The Refinance Index has declined six straight weeks and is at its lowest level since the week ending April 30, 2010. The seasonally adjusted Purchase Index decreased 2.5 percent from one week earlier. The unadjusted Purchase Index decreased 4.9 percent compared with the previous week and was 8.4 percent lower than the same week one year ago.

Billed as the world's biggest defense deal, India and Russia signed a $30 billion agreement for the development of fifth-generation warplanes.

Charles Hugh Smith: "Cash may yet be king, and his reign may last a lot longer than many think possible. When one asset class in a highly correlated group rolls over, then maybe the entire group rolls over with it. Maybe not, but the possibility of losing 25% in being wrong makes me cautious.
I don't know what will happen, but I can sleep being in cash in Q1 2011. If I miss all the spectacular rallies that everyone sees as sure things, so be it. I prefer to let things settle out before making any bets or predictions."

A spending splurge from upper-income Americans led the way to strong self-reported consumer spending during Christmas week 2010, Gallup says - $183/day on average during the week ending Dec. 26, up from $126 Y/Y.

(Bloomberg) -- At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.
What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free.

(Reuters) - China has raised fresh international trade concerns after slashing export quotas on rare earths minerals, risking action from the United States at the World Trade Organization.
China, which produces about 97 percent of the global supply of rare earth minerals, cut its export quotas by 35 percent for the first half of 2011 versus a year ago, saying it wanted to preserve ample reserves, but warned against basing its total 2011 export quota on the first half figures.
The U.S. Trade Representative's office was "very concerned" about China's export restraints on rare earths and had raised its concerns with China, a spokeswoman said on Tuesday.
A European Commission spokesman said the European Union "notes the latest quota figures and expects China to respect its recent assurance of a guarantee of rare earth supplies to Europe."
U.S. makers of high-tech products such as Apple Inc's iPads, along with Japanese companies have been scrambling to secure reliable supplies of the minerals outside of China as Beijing steadily reduces export allocations.

According to DigiTimes, the house of Jobs has ordered 65 million 9.7-inch iPad screens for 2011. If true, this means Apple is confident that 2011 will be a banner year for the iPad. Most estimates put iPad sales in the neighborhood of 45-48 million units for 2011.

Snowstorms that pounded the Northeast and much of the East Coast hurt retailers’ sales by an estimated 10% on Sunday and Monday, likely postponing about $1 billion that otherwise would have ended up in their cash registers, according to mall-traffic tracker ShopperTrak. The two days after Christmas generally account for about $10 billion in sales, ShopperTrak estimated.

The Treasury Department sold $29 billion in 7-year notes on Wednesday at a yield of 2.83%, the highest since April. Bidders offered to buy 2.86 times the amount of debt sold compared to an average of 2.96 times at the last four monthly sales. Indirect bidders, a group which includes foreign central banks, bought 64.2% of the sale, the highest allotment since June 2009 and well above the average of 49.9% of recent sales. Direct bidders, a class which includes domestic money managers, purchased 4.6%, down from 9.1%, on average. Primary Dealers were left with just 31.2% of the take down.

Newly initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from a year ago, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in their quarterly mortgage report.
The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago, according to the regulators.

Italy's 10 yr yield is rising to the highest since Jan '09, Greece is just shy of a new record high and French yields are just below the highest since April. Also, Australia's 10 yr yield is rising to the highest since May.

The recent runup in Treasury yields is just the tip of the iceberg, according to Russ Koesterich, global chief investment strategist at BlackRock's iShares Group.

The weather will be “colder-than- normal” in January, according to Matt Rogers, a forecaster with Commodity Weather Group LLC in Bethesda, Maryland.

Silver closed near its highest levels in almost 30 years on Wednesday, while gold and industrial metals also gained as the dollar lost ground. Silver for March delivery rose to end at $30.70 an ounce, up from $30.32 on Tuesday and near its highest levels since 1980, according to news reports. Gold for February delivery closed at $1,413.50 an ounce, up $7.90 and the highest since Dec. 6. January platinum rose to $1,754.20 an ounce, the highest since early November. Palladium for March delivery rose to $793.40 an ounce, the highest level since 2001. March copper closed at $4.31 a pound, down slightly from Tuesday's record close.

The Dow Jones Industrial Average rose 9.84 points, or 0.09%, to 11,585.38, while the S&P 500 Index added 1.27 points, or 0.1%, to 1,259.78. The Nasdaq Composite Index rose 0.15%.

"I am one of those who do not believe the national debt is a national blessing...it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country." —Andrew Jackson, letter, April 26, 1824

Treasurys

2010-12-28T14:13:00.001-08:00

12/28/10 Treasurys

Newark Liberty International Airport in New Jersey has arrival delays of more than eight hours, and New York City’s John F. Kennedy International Airport has delays of more than five hours because of snow and ice, the U.S. Federal Aviation Administration said on its website.

An overnight freeze hit several central Florida citrus growing areas, icing up fruit and raising fears of damage to the leaves and small twigs of trees, growers said Tuesday.

The Treasury Department sold $35 billion in 5-year notes on Tuesday at a yield of 2.149%, the highest since April. Bidders have offered to buy 2.61 times the amount of debt sold, compared to an average of 2.82 times at the last four sales of the securities. Indirect bidders, a group which includes foreign central banks, purchased 35.6%, versus an average of 43% of recent sales. Direct bidders, a group which includes domestic money managers, bought another 6.2%, compared to 11.2%, on average. After the auction, the broader bond market moved sharply lower, pushing yields higher. Yields on 10-year notes rose 11 basis points to 3.45%, after trading at 3.39% before the auction.

China and Russia have already cut their US Treasury holdings by 3% and 9% respectively year over year.

"It's pretty clear the housing market has already double dipped," says Roubini. "And the rate of decline is stronger than in previous months," he said of the new housing data. He said 'Housing Prices Can Only Move Down'.

S&P 500 short interest at 4.15%, lowest since December 2007.

The dollar set a record low against the Swiss franc and hit a 6-1/2-week low against the yen on Tuesday after Japan reported its factory output rose in November for the first time in six months. A 1 percent jump in Japanese factory output, the first rise in six months, "certainly has provided a bid to the yen across the board," said Dean Popplewell, chief strategist of FX brokerage OANDA in Toronto

The Dow ended at 11.575.5, up 0.18%, while the Nasdaq lost 0.16% to end at 2,622.88. The S&P 500 crept up 0.08%, to end at 1258.51.

Gold for February delivery closed at $1,405.60 an ounce, gaining $22.70 -- its biggest one-day rise since early November. Sugar climbed to a 30-year high.
Silver jumped 1.06 to $30.315. Copper rose 4.45 to $432.450.

The 10-year yield rose 16 basis points to 3.49 percent at 4 p.m. in New York. The two-year Treasury yield climbed seven basis points to 0.75 percent and the yield on the existing five-year note increased 14 basis points to 2.16 percent. The 30-year yield rose to 4.53%.
Seven-year notes were last down 26/32 in price to yield 2.85 percent, up from 2.72 percent late Monday. The notes traded at yields of 2.88 percent in the
"when-issued" market which indicates where traders expect the new debt to price.

Credit cards that give cash back prompt consumers to spend more and accrue more debt, according to researchers at the Federal Reserve Bank of Chicago.

Prime Minister Nouri al-Maliki ruled out any U.S. troops in Iraq after the end of 2011, saying his new government and the country's security forces were capable of confronting any remaining threats to the country's security.

Conference Board Consumer Confidence: "Those saying jobs are "plentiful" decreased to 3.9 percent from 4.3 percent, while those stating jobs are "hard to get" edged up to 46.8 percent from 46.3 percent."

CSM: "The Stuxnet malware has infiltrated industrial computer systems worldwide. Now, cyber security sleuths say it's a search-and-destroy weapon meant to hit a single target. One expert suggests it may be after Iran's Bushehr nuclear power plant."

Home Prices and Consumer Confidence Suck

2010-12-28T07:05:00.000-08:00

12/28/10 Home Prices and Consumer Confidence Suck

Prices of single-family homes fell almost double the expected pace in October, the fourth straight decline.
October home prices dropped 1.3% on a non-seasonally-adjusted monthly basis, according to the S&P/Case-Shiller report releaed Tuesday. Home prices decreased in all 20 metropolitan areas followed by the report. Six cities made new lows, the report said. Home prices are dropping in the nation's largest cities and are expected to fall through next year, with the worst declines coming in areas with high numbers of foreclosures. The 20-city index has risen 4.4 percent from their April 2009 bottom. But it remains 29.6 percent below its July 2006 peak. Six cities set new lows for the period since the 2006 peaks.
“The double-dip is almost here,” said David Blitzer, chairman of the index committee at S&P. Sales aren’t “giving any sense of optimism.” Housing permits fell in November to the third-lowest level on record.

An index of U.S. consumer confidence declined to 52.5 in December on concerns about jobs in the present and future, the Conference Board reported Tuesday. Economists polled by MarketWatch had expected confidence to rise to 56.9. "Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious," said Lynn Franco, director of Conference Board's consumer research center, in a statement. However, she added that signs suggest a continuation next year of the economy's expansion, "but that the pace of growth will remain moderate." Confidence for November was revised higher to 54.3 from a prior estimate of 54.1. A barometer of consumers' expectations fell to 71.9 in December from 73.6 in November, while consumers' assessment of the present situation decreased to 23.5 from 25.4.

(Bloomberg) -- China cut its rare earths export quotas by 11 percent in the first round of permits for 2011, threatening to worsen a global shortage of the minerals needed for smartphones, hybrid cars and guided missiles.
The government allotted 14,446 metric tons of rare earth exports split among 31 companies, the Ministry of Commerce said in a statement. That compares with the first round this year of 16,304 tons and the second round of 7,976 tons, according to previous ministry statements. The government usually issues two rounds of export quotas every year.
China, which accounts for more than 90 percent of world supplies, slashed export quotas by 72 percent in the second half of this year, sparking a surge in prices. Japan, the biggest user, has sought alternate supplies with companies including Hitachi Metals Ltd. and Toyota Motor Corp. seeking cooperative ventures at home and abroad to secure the minerals.
“This is in line with government officials’ comments that we need to protect the environment and resources,” said Chen Jiazuo, an analyst at metals researcher Beijing Antaike Information Development Co. “Controlling domestic production capacity, output and exports will continue to be the theme.”

The national price for regular gasoline increased 7 cents from the previous week to an average of $3.05 per gallon, as rising crude oil prices bolstered fuel costs. This is the highest price since October 2008.

Ron Paul: "Courage begins with a commitment to see things as they are, rather than how we wish they were. When it comes to Social Security, we must understand that the system does not represent an old age pension, an "insurance" program, or even a forced savings program. It simply represents an enormous transfer payment, with younger workers paying taxes to fund benefits. There is no Social Security trust fund, and you don't have an "account." Whether you win or lose the Social Security lottery is a function of when you happened to be born and how long you live to collect benefits. Of course young people today have every reason to believe they will never collect those benefits."

The Automatic Earth: "Large swaths of unproductive private and public debt will not be repaid, and sovereign countries will default on their obligations. International monetary, political or strategic unions that rely on economic stability, mutual trust and confidence will not be preserved in any meaningful form. Citizens of the developed world will not stand in a single-file line and receive their bitter dose of austerity in an orderly fashion. These things are almost 100% certain, and no amount of conscious planning or top-down decision-making will make them less likely to occur."

China central bank adviser Li Daokui said more adjustments in China's deposit rate, lending rate, and reserve requirement ratio are "very necessary" in 2011, especially in the first half, citing an interview.

China's consumer price increases may exceed 5% in 2011, citing Liu Yuhui, a researcher with the Chinese Academy of Social Sciences.

About 40% of the additional dollars issued by the Federal Reserve through its purchases of U.S. Treasuries, or quantitative easing, may have flown into China, increasing inflationary pressure for the nation, citing Zheng Xinli, deputy director of China Center for International Economic Exchanges.

PetroChina agreed on Tuesday to sell its stake in a gas pipeline operator to the Kunlun Energy Company for $2.85 billion, the latest in a flurry of energy deals.

Calculated Risk: "The post-Depression record for consecutive months with the unemployment rate above 9% was 19 months in the early '80s. That record will be broken this month, and it is very possible that the unemployment rate will still be above 9% in December 2011. This high level of unemployment - and the number of long term unemployed - is an economic tragedy."

Chris Whalen: "
"We understand what the problem is for Bank of America. They are insolvent. They still have huge losses to take on their mortgage book, and balance sheet. They also have to deal with everyone wanting them to buy-back mortgages."
"By this time next year the majority of home sales will be involuntary - more foreclosure sales than normal sales."
"We haven't seen the peak of foreclosures yet. That will come 12 months from now."
"California will default on its debt."
"A whole slew of sovereign defaults in Europe. There is no growth."
"QE and QE2 are just hidden subsidies for the big banks."
"Bank of America is in the worst shape of any U.S. bank."
"Bank of America senior bondholders will have to take a hit, convert debt into equity."
"There is no doubt they will have to be restructured."
"Ireland is small. Wait until we get to Spain."
Charles Hugh Smith: "The conventional wisdom is that boosting consumer borrowing and spending (same old, same old) will magically create millions of new jobs. As usual, the conventional wisdom is dead-wrong: America's job-creation machinery is hollowed out."

The City of Beijing will limit the number of new license plates issued in 2011 to 240,000 to help control traffic congestion. Xinhua reported that car buyers in Beijing will have to draw lots before obtaining a vehicle license plate. This is truly bad news for GM.

ZeroHedge: "1 out of 3 Americans has zero in any retirement account (not one slowly eroding dollar). Half of Americans have $2,000 or less which puts them one month away from needing government assistance. With the volatile job market and turbulent Wall Street middle class Americans are feeling the once prided stability being slowly washed away."

The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.
"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.

2-year treasury notes

2010-12-27T14:15:00.000-08:00

12/27/10 2-year treasury notes

The U.S. Treasury awarded $35.00 billion in two-year notes at Monday's auction at a high rate of 0.740%, the highest level since June.
The Treasury received bids totaling $129.87 billion and accepted $35.00 billion. Primary dealers were awarded $20.00 billion, while indirect bidders--a category that includes foreign central bankers--were awarded $7.84 billion.
Indirect bidders got 23% of the total competitive amount accepted; direct bidders received 20%.
The bid-to-cover ratio, an indication of demand, was 3.71, Treasury said.
Tenders submitted at the high yield were allotted 68.25%.

Russian central bank raises deposit rates by 25 bps, leaves REFI rate on hold.

Ahead of tomorrow’s S&P/Case-Shiller home price index data, at least one prominent economist is warning that the housing market could suffer a double-dip next year, in stark contrast to bullish expectations for the overall economy in 2011. David Rosenberg, chief economist at Gluskin Sheff, said that investors are not being realistic about the likelihood of a major price declines next year. In a recent research note, Rosenberg, who correctly predicted the housing collapse of 2007-2008, wrote that “the potential for a significant down-leg in home prices is being underestimated. The unsold existing inventory is still 80 percent above the historic norm at 3.7-million.”

The Dow Jones Industrial Average was down 18.88 points to 11,554.61. The Standard & Poor's 500 Index was up nearly 1 point at 1,257.62. The Nasdaq Composite added 3.95 points to 2,669.55.

Mish: "China, everyone's favorite promised land, has a hard landing. China will grow at perhaps 5% to 6% but that's nowhere near as much as China wants, or the world expects. Tightening in China will crack its property bubble and more importantly pressure commodities. The longer China holds off in tightening, the harder the landing."

Governor Mitch Daniels (R-Indiana) says he supports a plan that would allow local governments to declare bankruptcy and allow for a state takeover.

Municipal bankruptcy is a rare phenomenon, spurned by state and local leaders as an admission of failure that could wreak havoc on the municipal bond markets, the Times reports. Some states have laws that require an elaborate approval process before a city can head to bankruptcy court and at least one state, Georgia, bans municipal bankruptcies.
All told, fewer than 250 cities, towns, and counties have filed for bankruptcy in the last 30 years, the Times reports, quoting Chapman & Cutler bankruptcy lawyer James Spiotto.
But with tax revenue likely to remain pinched in the coming year many localities may have no choice but to consider filing for bankruptcy.
“We can make it until March 1 — maybe,” said William Cooper, the city manager for Hamtrack, Mich., a city near Detroit that has pleaded with the state to let it declare bankruptcy, according to the Times.
Cooper said that bankruptcy could allow the city to “start over” with its labor contracts.
While no city in Michigan has ever filed for bankruptcy that could change, said Rick Snyder, who is due shortly to be sworn in as governor of Michigan. “We could have a large number of jurisdictions facing insolvency,” he said.

Seasonality

2010-12-27T08:17:00.001-08:00

12/27/10 Seasonality

About 75 percent of the $85.5 billion that people saved in taxes from the mortgage-interest deduction in 2008 went to individuals or couples making $100,000 or more, according to an analysis by the congressional Joint Committee on Taxation of the latest data available.
Based on those numbers, taxpayers who took the mortgage deduction saved, on average, $2,330 in 2008. But the average savings were nearly triple that amount for those reporting incomes of at least $200,000.

The WSJ: nearly 100 U.S. banks that got TARP funds from the federal government in Q4 2008 are in danger of going bankrupt.

John Hussman: "The problem with this outcome is that the speculative factors being rewarded over the short-term have nothing to do with the characteristics that have historically been rewarded over the long-term. Despite various periods where valuation is out-of-favor, value has been the clear winner over time. Moreover, it has been destructive to discard valuation in preference for chasing momentum and relative strength after the fact. In contrast, chasing high beta or momentum has conferred no durable benefit for investors."

Mike Burk: "Seasonality is likely to dominate next week.
I expect the major averages to be higher on Friday December 31 than they were on Friday December 24."

The Oil Drum: "Most of China's resource production bases, including coal and and oil, are either concentrated in the northern or western provinces, away from the key demand areas located in the southern and eastern region, such as Shanghai and Guangdong. Any supply shortfall could prompt a surge in import demand as utilities and firms seek alternative fuel supplies to feed their power plants."

The yield on the 2-year treasury rises to 0.72% and that's up from 0.33% about one month ago. At that time I discussed the risk/reward on this debt instrument. I took the view that the short side on the 2-year was the most attractive risk/reward in the bond, equity, commodity, and currency markets at that time.

The Treasury Department is expected to sell $35 billion in 2-year debt, ending at 1 p.m. Eastern.

More people than ever before received unemployment benefits this year in Washington state, a dismal and costly record.
The state’s Employment Security Department expects by New Year’s Eve, that more than 500,000 people will have collected unemployment benefits throughout the year. A total of 475,000 people received benefits in 2009 while 290,000 received benefits in 2008.
The state expects to pay about $4.7 billion in unemployment benefits by the end of the year, compared to the $4 billion that was paid out in 2009 and the $1.2 billion that was distributed in 2008, according to the Employment Security Department. Those who are out of work will have collected unemployment benefits for an average of 41 weeks, up from an average of 28 weeks in 2009.

There is a risk of another recession next year, protectionism could cause major problems in 2011 and recent stock market strength could be curtailed, Roger Nightingale, strategist at Pointon York, told CNBC Monday. Many parts of the world are beginning to tighten liquidity in a bid to tackle inflation, Nightingale said after China raised its key interest rate over the weekend.
"That which has been fueling the rally is going to be withdrawn … the capacity for the market to rise will be diminished," he said.

Guy Lerner: "It doesn't take a rocket scientist (or Wall Street analyst ~ a downgrade?) to figure out that investors are extremely bullish on the equity markets. Such extremes in sentiment will usually (85% of the time) lead to better risk adjusted buying opportunities in the future. In other words, the next best time to be a buyer of equities will be when investors are bearish not bullish as they are now. The markets don't have to go down just because everyone is bullish, but if you are a "believer" and buyer at these levels, then you will need to identify a market top and get to the exits before the next guy to extract profits. This is a very crowded trade and identifying the top is a tall order."

Hu Xiaolian, a deputy governor, said China had been normalizing policy and will explore new ways to manage excess cash, which is seen as a major driver behind 28-month high inflation.
Her remarks reinforced statements from China's top leaders that the task of taming inflation will be a priority for Beijing next year.
"An implementation of prudent monetary policy is helpful in strengthening the management of inflationary expectations and in fending off asset bubbles," Hu said.

The Dallas Fed's December Texas Manufacturing Index came at 12.8, down from expectations of 17, and a drop from the November print of 13.1.

Julian Assange has signed book deals worth more than £1 million ($1.5 million) in the US and UK.

Apple is telling component suppliers it wants 20-21 million iPhones for the first quarter of 2011, DigiTimes reports. This is an increase over its original request, says DigiTimes.

Merry Christmas

2010-12-25T07:32:00.000-08:00

12/25/10 Merry Christmas

China raised interest rates for the second time in just over two months after consumer prices jumped the most in 28 months and the government forecast “relatively high” inflation in the first half of 2011.
The benchmark one-year lending rate will rise by 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, effective tomorrow, the People’s Bank of China said in a one-sentence statement on its website today. A Morgan Stanley economist notes that today's bump will have more of an effect than a hike after the New Year because of the way adjustable loans are reset in China.

There are no quick fixes for Europe's debt crisis and China must be on the alert for any escalation of the problem, especially in January and February, China's Commerce Minister Chen Deming was quoted as saying on Friday.

“China needs to return to a ‘prudent monetary policy’ to curb prices and control total money supply, the People’s Bank of China said…”.

Air traffic returned to nearly normal in France, the U.K., Belgium and Germany on Saturday, although there were cancellations in Frankfurt and Zurich. A spokeswoman for London's Heathrow Airport said only a handful of flights would be canceled on Christmas Day.

With a rare white Christmas in parts of the Southeast and snow predicted for the nation's capital, airlines canceled hundreds of flights and urged travelers to rethink their plans, while travel authorities warned of potentially dangerous roads.

Bloomberg (Ben Livesey and Ken McCallum): “Bank of England Markets Director Paul Fisher said U.K. interest rates will rise ‘to a normalized position’ of about 5%, the Daily Telegraph reported… The central bank won’t ‘be putting up rates so quickly’ as to cause ‘negative reaction’ and will only tighten policy quickly if the strength of the economy demands it, Fisher said…”

New Jersey's pension gap grew to $53.9 billion in the last fiscal year, up from $45.8 billion, thanks to market losses and a lack of state funding, according to figures released Thursday.

The global economy can withstand an oil price of $100 a barrel, Kuwait's oil minister said on Saturday, as other exporters indicated OPEC may decide against increasing output through 2011 as the market was well supplied.

The Organization of Petroleum Exporting Countries isn't worried about oil prices rising above $90 a barrel as they are largely driven by seasonal forces, Qatar Oil Minister Abdullah bin Hamad Al Attiyah said Friday.
"They are largely affected by the cold snaps in Europe and in some areas in North America," Al Attiyah told Dow Jones Newswires.

Jesse's Cafe Americain: "I hope everyone has the opportunity to see "Inside Job" in the months ahead.

The issue is not settled. As someone who watches the markets closely every day, often tick by tick, and speaks to market participants around the world, I see an accident waiting to happen in the US financial system. And it is surprising, almost shocking, that it receives so little attention while there is so much focus on the relatively trivial.

We have just witnessed one of the greatest financial frauds in modern history. Where are the indictments? Where is the reform?

It concerns me greatly because it is such a important economy. Such a failure would have unsettling collateral damage on the rest of the world not only because of its size, but through the transmission mechanism of the dollar reserve currency which is pervasive in trade and in most central bank holdings.

Like its cronies on Wall Street, the government in Washington thinks it is Too Big To Fail. It may very well be. But propping it up is probably too great of a task for the rest of the world to bear indefinitely. And so we may have an uneasy year or two ahead."

Happy Holidays

2010-12-24T13:50:00.001-08:00

12/24/10 Happy Holidays

Prichard, Alabama sought bankruptcy protection twice and is flat broke. It faces a choice of paying to keep city services like police and garbage running or pay pensions. It selected the former.

(Bloomberg) -- China’s government failed to draw enough demand at a bill sale for the second time in a month as seasonal demand for funds and higher reserve-requirement ratios left banks with less cash.

Charles Hugh Smith: "the purchasing power of American wage-earners reached a plateau around 1973 and has been declining ever since."

Floyd Norris: "The year now ending will be the fourth consecutive year in which mutual funds that invest primarily in American stocks experienced net outflows of funds, meaning that investors as a group withdrew more money than they put in."

The National Retail Federation predicts that holiday spending will reach $451.5 billion this year, up 3.3 percent over last year.
That would be the biggest increase since 2006, and the largest total since a record $452.8 billion in 2007. And a strong week after Christmas could make this shopping season the biggest of all time. Final figures won't be available until next week.

It's time to recap my investments in 2010:

Good ones: long gold, silver, soybeans, cotton, and sugar.
Bad ones: short copper and long natural gas.
Good ones: short BP at 50 and long at 27.
Good ones: short and long the dollar; short and long the euro.
Good one: trading the flattening yield curve.

What will take place in 2011? A significant decline in equities and the growing possibility of an upward
spike in interest rates. This will be the year with a window to a depression.

Rigged

2010-12-23T16:48:00.001-08:00

12/23/10 Rigged

ZeroHedge: "A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying. In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest. So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market."

Working gas in storage was 3,368 Bcf as of Friday, December 17, 2010, according to EIA estimates. This represents a net decline of 184 Bcf from the previous week. Stocks were 56 Bcf less than last year at this time and 264 Bcf above the 5-year average of 3,104 Bcf. In the East Region, stocks were 27 Bcf above the 5-year average following net withdrawals of 117 Bcf. Stocks in the Producing Region were 204 Bcf above the 5-year average of 934 Bcf after a net withdrawal of 56 Bcf. Stocks in the West Region were 33 Bcf above the 5-year average after a net drawdown of 11 Bcf. At 3,368 Bcf, total working gas is within the 5-year historical range. Weather last week was 3% colder than a year earlier and 13% colder than normal, triggering a run on storage gas to meet heating demand, according to Jefferies & Co.

Oil for February delivery recently traded up 92 cents, or 1%, at $91.40 a barrel. Every $1 rise in oil reduces US GDP by $100 billion. Every penny increase in gas prices lowers disposable income by $600 million.

Fitch Ratings lowered its ratings on Portugal's debt to A+ from AA-. The agency also downgraded Portugal's short-term currency rating to F1 from F1+. The Associated Press said that Fitch cited a slow reduction in Portugal's deficit and a tougher financing environment as reasons for the downgrade.

Sugar jumped to a 30-year high as Pakistan said it may import 700,000 metric tons to ease domestic shortages. Coffee and cocoa gained, while orange juice declined.
Sugar production in Asia’s third-largest user “will reach 3.3 million tons,” in the year ending June 30, short of demand of 4.2 million tons, Farm Minister Nazar Muhammad Gondal said. Record rainfall in Australia, the third-largest exporter, will curb production and shipments next season for a second year, according to Queensland Sugar Ltd.

the Dow Jones Industrial Average managed a small session gain. The S&P 500 lost 2.07 points, or 0.2%, to 1,256.77. The Nasdaq Composite fell 5.88 points, or 0.2%, to 2,665.60 for the session.

Package bombs exploded at the Swiss and Chilean embassies in Rome, injuring two employees, according to police and government officials.

Online retail sales during the 2010 holiday season rose a healthy 15.4 percent from last year to $36.4 billion, with strength across all categories, according to MasterCard's SpendingPulse eCommerce Index, which monitors actual spending across the entire spectrum of online transactions.

Mish

2010-12-23T07:20:00.000-08:00

12/23/10 Mish

Mish Shedlock’s 10 Themes for 2011 include a major U.S. municipal bankruptcy creating a "huge stir" in the muni bond market, a worsening eurozone debt crisis, property bubbles bursting in Australia and Canada, and China overheating. "2010 was a lull in the global economic crisis," Mish warns. "Don't expect 2011 to be the same."

The number of U.S. workers filing new applications for jobless benefits fell slightly last week to 420,000, the Labor Department reported Thursday. Economists polled by MarketWatch had expected initial claims in the week of Dec. 18 to total about 421,000 on a seasonally adjusted basis. The prior week's number was revised up by 2,000 to 423,000. The four-week average of new claims rose 2,500 to 426,000. The moving average is considered a more accurate barometer of employment trends because it smoothens out quirks in the weekly data. In the week of Dec. 11, meanwhile, the number of people who continued to receive benefits under state unemployment programs dropped 103,000 to a seasonally adjusted 4.06 million. Altogether, 8.88 million people received some kind of state or federal benefits in the week of Dec. 4, on an unadjusted basis. That was down 308,338 from the prior week.

Orders for U.S.-made durable goods declined 1.3% in November, led down by transportation-equipment orders, the Commerce Department reported Thursday. Economists polled by MarketWatch had expected a decline of 0.5%. Excluding transportation, new orders rose 2.4%. Core durable-goods orders, which are orders for capital goods excluding defense and aircraft, rose 2.6% in November after a 3.6% decline in October. Shipments of durable goods fell 0.3% in November, while inventories rose 0.6%. Durable-goods orders in October were revised to a decline of 3.1% from a prior estimate of a 3.4% drop. Durable goods are expensive items designed to last three years or longer, and while the data is volatile from month to month, analysts see a trend in orders as a valuable leading economic indicator.

Year-over-year core inflation remained at 0.8% in November, matching the record low reached in the prior month, the Commerce Department reported Thursday. The data go back to 1960. The core personal consumption expenditure price index excludes food and energy. This core gauge of inflation rose 0.1% in November, as expected by economists polled by MarketWatch. The overall inflation gauge rose 0.1% in November, after a 0.2% gain in October. This overall inflation is up 1% in the past year, the lowest since October of 2009. The government's inflation gauges are broad based, and consumers may be more sensitive to price changes of particular items that are frequently purchased, such as gasoline. Also Thursday, the Commerce Department reported that personal incomes rose 0.3% in November, compared with 0.2% expected by economists. Spending gained 0.4%, while Wall Street had expected a gain of 0.5%. Real disposable incomes rose 0.2% in November.

Shares of Jo-Ann Stores Inc. soared 34% in premarket trade Thursday on news that the fabrics and crafts retailer will be acquired by an affiliate of private-equity firm Leonard Green & Partners LP for about $1.6 billion, or $61 a share, in cash. Jo-Ann's board has approved the deal and is recommending that shareholders adopt the agreement. The acquisition is expected to close in the first half of calendar 2011, subject to customary closing conditions. Under terms of the agreement, the retailer's board will also be allowed to solicit other proposals through Feb. 14. Shares of Jo-Ann Stores closed Wednesday at $45.63.

Consumer spending rose for a fifth straight month in November and incomes rose slightly more than expected, government data showed on Thursday, reinforcing views of a solid economic growth pace in the fourth quarter.
The Commerce Department said spending rose 0.4 percent after increasing by an upwardly revised 0.7 percent in October.
Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.5 percent last month after a previously reported 0.4 percent gain in October.
The report also showed the Federal Reserve's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy -- rose 0.1 percent after being flat for four straight months.
In the 12 months through November, the core PCE index rose 0.8 percent, the same margin as in October and still the smallest year-on-year gain since records started in 1960.

The Irish Government takes over Allied Irish Banks, the country's second largest bank.

In November employers took 1,586 mass layoff actions involving
152,816 workers. Layoff events decreased by 65 from the prior month,
while initial claims increased by 4,757. Manufacturing accounted for
354 events, resulting in 39,465 initial claims.

A jump in crude oil prices has pushed gasoline to $3 a gallon nationwide. The Gulf Oil CEO says the physical gasoline market is "tight."

John Browne: "2011 likely will open with a deepening recession, increasing austerity, and falling asset prices. If this is met by a new round of inflation creation and yuan revaluation, then investors should weigh whether to redeploy assets in anticipation of potential rising commodity prices. I expect these developments not to happen gradually, but to come in great waves. Smart investors will tie their fate to an investment vessel with a solid hull, because in these seas, even a hint of rot could tear a ship asunder."

The Energy Department on Thursday is expected to report a decline of 178 billion to 182 billion cubic feet of natural gas in storage for the week ended Dec. 17, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

David Rosenberg of Gluskin-Sheff is on Bloomberg this morning. He's keying off comments from Barclays' Bomb Diamond about the possibility of a Euro breakup, which Rosenberg sees as perfectly possible.
It's a matter of "when" not "if" noting that it was actually Germany that first breached its debt limits, and pointing out that the history of monetary unions is horrible, with the exception of the United States. All others have failed.

(Bloomberg) -- Soybeans jumped to a two-year high on concern that dry weather may threaten crops in Brazil and Argentina as Chinese demand increases.
Dry weather caused by a La Nina event, which has already hurt crops, will return to Argentina from Dec. 25 and persist through next week, according to a report from AccuWeather.com. Brazil and Argentina are the top suppliers of soybeans and corn after the U.S., data from the U.S. Department of Agriculture show.

Hungary was just downgraded by Fitch to BBB-, and still kept its rating outlook negative.

Bob Bronson: "The headline on the Chicago National Activity Index (CFNAI) a composite measure that closely tracks real U.S. GDP – thus it is a coincident economic indicator – came in at -0.46 (consensus was 0.00) and the prior monthly reading was at -0.25.
The index is now down four months in a row, something not seen since mid-2009 when the U.S. economy was hitting the recession’s depth. On a three-month basis, the more “smoothed” index remains at -0.4 for the past two months (-0.41 in November and -0.42 in October).
This has now been negative since May, portraying a pace of economic activity that is well below potential and therefore continues to be consistent with both (a) a continuing ultimately deflationary economic Supercycle Bear Market Period, or Winter, and (b) our working model for after-shock, double double-dip business cycle contractions over the next four years."

Baltic Dry Index Drops Another 1.9%, Hits 1,795.

A gauge of U.S. consumer sentiment rose to 74.5 in late December from 71.6 in November, according to media reports on Thursday of the Reuters/University of Michigan index. The December reading matched expectations of economists polled by MarketWatch. Despite the gain in December, the gauge is below pre-recession levels of more than 80. While there have been some signs of improvement in the economy, consumers remain concerned about jobs.

Italy has the second-highest public debt ratio after Greece.

ZeroHedge: "According to the December 23 AAII sentiment survey, the bullish mood soared from 50.23% to 63.28%, the highest reading since November 18, 2004. Bearish sentiment plunges from 27.15% to 16.41%, the lowest since November 24, 2005. The difference between bullish and bearish sentiment is 46.87%: the highest since April 15, 2004."

Sales of new single-family homes climbed 5.5% in November, a government report said Thursday, as the housing market continues to show stability at weak levels. The Commerce Department said new-home sales rose to a seasonally-adjusted annual rate of 290,000, from a downwardly revised 275,000 in October. The sales level missed the MarketWatch-compiled economist estimate of 295,000, and the initial government report said October sales were 283,000. The pace of sales is 21.2% below that of November 2009. The median sales price of new houses sold in November was $213,000, up 8% on October but 2.6% below year-earlier levels.

(Bloomberg) -- Rio Tinto Group, the world’s third- biggest mining company, offered A$3.9 billion ($3.9 billion) for Australian coking coal developer Riversdale Mining Ltd. to gain reserves in Mozambique, splitting Riversdale's board.
Rio offered A$16 a share, the London-based company said today in a statement. Riversdale shares climbed 1.6 percent to close A$16.57 in Sydney, 3.6 percent more than Rio’s offer, which was recommended by all of Riversdale’s board, bar the director appointed by Tata Steel Ltd., its largest shareholder.

South Korea's president said on Thursday the military should launch a "merciless counterattack" if the North tries to repeat the kind of surprise aggression on the South as shelling on an island in November.
Lee Myung-bak also told troops at a forward Army unit near the military border with the North that the South must never loosen vigilance against the North, adding: "We had believed patience would ensure peace on this land, but that was not the case."

Wed Afternoon Notes

2010-12-22T15:07:00.001-08:00

12/22/10 Wednesday Afternoon Notes

The Energy Department may report a larger-than-average reduction in gas inventories this week because of cold weather last week in the eastern and central U.S., analysts predict.
The department may say Dec. 23 that 180 billion cubic feet of gas were withdrawn from storage during the week ended Dec. 17, according to the median of seven analyst estimates compiled by Bloomberg. The five-year average withdrawal from inventories is 136 billion.

On Thursday, Shui On Land Ltd., a Hong Kong-based company controlled by businessman Vincent Lo that develops real estate in China, said it raised three billion yuan ($450.8 million) through an issue of three-year bonds denominated in China's currency. It is the largest yuan-denominated corporate bond issued outside of mainland China.
Except that it isn't, really: Investors are paying for the bonds in dollars, they receive their coupons in dollars, and the bonds will ultimately be redeemed for dollars when they come due. Any coupon payments and redemptions are done at the prevailing exchange rate, which means investors benefit if the yuan—widely known as the renminbi—rises in value against the dollar over the period in which they hold the bonds.
"They're appealing to an investor base that wants the upside of the [yuan]," said Sundeep Bhandari, regional head of global markets for Northeast Asia at Standard Chartered PLC, one of the bond's three underwriters. The others were Deutsche Bank AG and UBS AG.

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New Zealand's gross domestic product declined 0.2% in the quarter ended Sep. 30, Statistics New Zealand reported Thursday. Economists had expected a reading of 0.1%, according to data compiled by Dow Jones Newswires. "The decline in GDP this quarter was due to weakness in the primary and goods-producing industries," the statistics agency said. In the June quarter, GDP rose 0.1%. On an annual basis, GDP rose 1.4%.

The Dow Jones Industrial Average closed up 26.33 points, or 0.2%, at 11,559.49, its highest close since Aug. 28, 2008. The S&P 500 rose 4.24 points, or 0.3%, to 1,258.84, its highest close since Sept. 8, 2008, and its fifth straight day of gains. The Nasdaq Composite ended up 3.87 points, or 0.2%, to 2,671.48.

(Reuters) - France wants all 16 euro zone governments and any other interested European Union members to coordinate their economic policy more closely in the future, Economy Minister Christine Lagarde told a German newspaper.
"The crisis showed us that it is not sufficient to limit public debt as foreseen in the Maastricht Treaty. Ireland stuck to these criteria and finds itself nevertheless in difficulty," Lagarde said in an interview with the Sueddeutsche Zeitung.
"The EU must not look just at the budgets, it must monitor how the economies in the member states develop."

ZeroHedge: "ICI has just reported that in the week ended December 15, not only was there another massive outflow, the 33rd in a row, from domestic equity mutual funds to the tune of $2.4 billion, but taxable and municipal bonds saw a stunning $8.6 billion in outflows, including another record $4.9 billion in muni outflows....NYSE margin debt has surged to $269 billion, an increase of $13 billion from the prior month, and the highest since September 2008 when it was at $299 billion, and subsequently tumbled as investors rushed to get out of all margined positions. And this has happened even free cash credit accounts and credit balance in margin accounts remained relatively flat."

Oil

2010-12-22T07:53:00.001-08:00

12/22/10 Oil

According to ValuEngine's Richard Suttmeier, looking out into 2011, he warns residential housing could fall another 15-30%. "The housing market is still overpriced relative to where we began the new millennium," he tells Aaron in this segment. "Prices are still about 50% higher than where we were at the end of 1999."

Adolph Hitler: "The size of the lie is a definite factor in causing it to be believed, for the vast masses of a nation are in the depths of their hearts more easily deceived than they are consciously and intentionally bad. The primitive simplicity of their minds renders them a more easy prey to a big lie than a small one, for they themselves often tell little lies, but would be ashamed to tell big lies."

"The law has been perverted, and the powers of the state have become perverted along with it. The law has not only been turned from its proper function, but made to follow an entirely contrary purpose. The law has become a tool for every kind of greed. Instead of preventing crime, the law itself is guilty of the abuses it is supposed to punish. If this is true, it is a serious matter, and moral duty requires me to call the attention of my fellow-citizens to it."
Frederick Bastiat, The Law, 1853

Garth Turner: "[TD bank] is registering all its new home loans as collateral mortgages, rather than conventional ones. If you have no idea what that means, you’re normal. A collateral mortgage is a loan which is backed by a promissory note which is in turned backed by security. A conventional mortgage, as you know, is just a loan secured by a house. Normally the only people who are asked to sign collateral mortgages are folks who use their houses to arrange lines of credit with balances that can balloon, not a regular mortgage with a fixed amount owing and a standardized payment.
With a conventional mortgage there are strict rules about how much you can borrow determined by the value of the property when you take the loan. Not so with a collateral mortgage, because it’s actually a loan which is backed by your promissory note. That means you can borrow more than your house is worth.
Yes, just like those old fast-talking Ditech.com TV commercials offering American homeowners mortgages worth 125% of their home’s value – the ones we used to snicker at. Well, giggle no longer. TD is now shopping 125% collateral mortgages.
In fact, bank customers (I’m told) are being encouraged to 'register' for 125% mortgages when they sign up, even if they don’t need all that money. It’s just there, the pitch goes, if you ever need it. Kinda like a built-in line of credit you don’t need to reapply for. (Of course, it should be lost on nobody that the bank just found a way around guidelines on loan-to-value ratios.)" (via The AutomaticEarth).

After days of relentless rain, Southern California is awaiting the most intense storm system yet, with evacuations ordered, rescue crews on standby and residents anxiously eyeing already saturated mountainsides denuded by wildfires.
Forecasters expected more rain across the state Wednesday, but the focus clearly was on Southern California where a monster storm was expected to bring torrential rain, thunderstorms, flooding, hail and possible tornadoes and water spouts. Forecasters warned of possible rainfall rates of .75 inch to 1 inch an hour and thunderstorm rates of 2 inches an hour in the region.
Steady rain began falling late Tuesday and was expected to intensify into early Wednesday.

The U.S. economy expanded at a 2.6% pace in the third quarter, slightly faster than previously reported, mainly because of a higher inventory buildup, the Commerce Department said Wednesday. The government previously reported third-quarter growth of 2.5% on an annualized basis. The final report released Wednesday incorporates data not immediately available in two earlier readings of the economy. The MarketWatch survey of economists had expected growth to be revised up to 3.0%, but an upward revision in imports partly explains the smaller increase in the final third-quarter report. Imports subtract from GDP. Importantly, there was a
downward revision to personal consumption expenditures and corporate profits were up a slim 0.2%. The latter two points should be a red flag for 2011 estimates.

Mortgage applications tumbled to their lowest level in nearly a year as a six-week-long rise in interest rates took a significant toll on demand, an industry group said on Wednesday.
The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended December 17 decreased 18.6 percent, reaching its lowest level since the week ended January 1.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.8 percent.

Microsoft Corp is working on a version of its core Windows operating system for devices such as tablets, according to media reports on Tuesday, and the company said its Windows Phone 7 software is making headway in the booming smartphone market.
Microsoft plans to unveil a version of its operating software that runs for the first time on processors designed by UK-based ARM Holdings PLC, the Wall Street Journal and Bloomberg reported. ARM's processors dominate the tablet and handheld device market.

(Bloomberg) -- Treasuries fell, extending their biggest monthly loss in a year, on speculation data showing the recovery is gaining momentum will fuel concern that debt supply will overwhelm demand as inflation accelerates.

George Ure:The
number of people in the workforce and holding a job, is 138.888 million and the amount of federal debt per worker is: $97,011."
Since we know that M2 at the Federal Reserve is going up 3.3 percent on a 12-month annualized basis, 2.6% up for GDP while M2 is up 3.3 means 1.3% deflation may be in the works, so the CPI should continue to be constrained."

Agence Press France is reporting:
Assange also confirmed that WikiLeaks was holding a vast amount of material about Bank of America which it intends to release early next year.

More on Airgas' rejection of Air Products' $70/share offer: Airgas believes the company is worth at least $78/share. Investors may not agree: ARG shares are -2.9% premarket to $61.40.

Mike Shedlock: "The big problems are military spending, public unions, and entitlements. However, problems big and small are everywhere you look, and the process of buying votes and seeking special favors is generally smack in the midst of it all.
Republicans keep campaigning for "small government". It certainly would be nice if they delivered for a change. Unfortunately, Republicans will not give in on military spending (nor will Obama quite sadly), and Democrats won't budge on entitlements.
Compromise in D.C. most often means taxpayers get the worst of what each party has to offer."

China is riding to Portugal's rescue with plans to buy up to €5 billion (£4.2 billion) of the troubled country's sovereign debt in the first quarter of next year, a report in the Jornal de Negocios said today.
China already owns more than $900 billion (£582 billion) of US government debt but this would be the first time it has taken such a significant stake in a European country's debt.

Europe’s spreading sovereign debt crisis is making it tougher for Spain to pay electricity bills, and that’s infecting corporate bonds beyond its borders.

The price of fuel is up 13.6% from last December and 76% higher from December 2008, according to a new study from the Oil Price Information Service. Nationwide, drivers are estimated to spend $305 on gasoline in December.

Telegraph: New START Treaty: The Obama Administration is Dancing to Moscow's Tune. Moscow has every reason to like it. As I noted in a previous post, the treaty fundamentally undercuts US national security by giving Russia a huge say over American plans for a global missile defense system:

If property sales decline 20% in China, how will that impact their weakening banking system?

The Baltic Dry Index has plunged close to 1800. Yet crude sits at $90.

The EIA said oil inventories fell 5.3 million barrels for the week ending Dec. 17. Gasoline inventories rose 2.4 million barrels, while distillate fuel inventories fell 600,000. Analysts polled by Dow Jones Newswires were expecting a 2.3 million-barrel-drop in crude inventories and a 900,000 barrel gain in gasoline inventories.

ZeroHedge: "every $1 rise in oil decreases U.S. GDP by $100 billion per year and every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year. The move in oil in the past week alone has almost entirely wiped out the most recent stimulus."

Platts - China's apparent oil demand* in November surged to an all-time high of 38.09 million metric tons (mt), or an average 9.3 million barrels per day (b/d), according to a just-released Platts analysis of official data from the People's Republic of China. This analysis is based on a data series of Chinese oil demand which Platts has been reporting since 2005.

Sales of existing homes rose 5.6% to a seasonally-adjusted annualized rate of 4.68 million, the National Association of Realtors said Wednesday, a figure that was pretty close to the MarketWatch-compiled economist poll of 4.66 million. Even so, sales were still 27.9% below prior-year levels and below the 5.26 million in June when a homebuyer tax credit existed. In November 2009, activity was sparked by anticipation - incorrect, as it turned out - that the tax credit was due to expire. Lawrence Yun, the NAR's chief economist, said current sales are back to levels before the existence of the tax credit but said they won't be "sustainable" until they get back to 2000 levels of about 5.2 million. The median price edged up 0.4% to $170,600.

Nine Swiss insurers fail Swiss solvency test to be introduced by market regulator Finma in January.

Credit Ratings

2010-12-21T14:38:00.000-08:00

12/21/10 Credit Ratings

Aristotle: "The three aims of the tyrant are, one, the humiliation of his subjects; he knows that a mean-spirited man will not conspire against anybody; two, the creation of mistrust among them; for a tyrant is not to be overthrown until men begin to have confidence in one another -- and this is the reason why tyrants are at war with the good; they are under the idea that their power is endangered by them, not only because they will not be ruled despotically, but also because they are too loyal to one another and to other men, and do not inform against one another or against other men -- three, the tyrant desires that all his subjects shall be incapable of action, for no one attempts what is impossible and they will not attempt to overthrow a tyranny if they are powerless."

ICSC forecast December same-store sales to rise 3% to 3.5%. Given the strong November performance and promising trends in early December, ICSC has raised its November-December holiday-season sales forecast by 0.5 percentage points to a range of 3.5% to 4% or potentially a tad above that range. It sees holiday store-sales growth to be the strongest since at least 2006.

Portugal was put on notice on Tuesday that its credit rating could be cut and fellow euro zone debtor Spain had to pay more to issue new debt, suggesting the currency bloc's crisis will rage unabated in 2011.
China, the world's new economic powerhouse, urged European policymakers to demonstrate as a matter of urgency that they can contain the euro zone's debt problems and pull the bloc around.
Ratings agency Moody's said it may cut Portugal's credit rating by one or two notches within three months, citing weak growth prospects as the government seeks to cut its debt, and climbing borrowing costs, although it said its solvency was not in question.

Italy’s finance police seized 22 million euros ($29 million) from six lenders including Bank of America Corp. amid allegations of fraud in a probe focusing on the sale of derivatives to five municipalities in central Italy.
Police said they took 15 million euros from Bank of America, and 1.7 million euros each from Deutsche Bank AG and UBS AG, according to an e-mailed statement. The remainder was seized from Natixis SA, Dexia Crediop SpA and Banca Monte Paschi di Siena SpA.

China urged European authorities to back their tough talk with action on Tuesday by showing they can contain the euro zone's simmering debt problems and pull the bloc out of its crisis soon.
China, which has invested an undisclosed portion of its $2.65 trillion reserves in the euro, said it backed steps taken by European authorities so far to tackle the region's debt problems, but made clear it would like to see the measures having more effect.
China offers help to debt-hit Lisbon China offers EU a hand on financial reform

(Bloomberg) -- Lower state and local spending, which accounts for 12 percent of the national economy, may reduce U.S. gross domestic product growth by about half a percentage point next year, Goldman Sachs Group Inc. said.
Municipal budgets will likely increase by no more than 1 percent in 2011 after adjusting for inflation as local governments receive less state aid and home-price declines put a drag on property-tax collections, the bank said in a note to clients. That is about 2 percentage points less than average.

The number of food stamp recipients increased 16% over last year. This means that 14% of the population is now living on food stamps. That's about 43 million people, or about one out of every seven Americans.

The UK Guardian: "Overdrawn American cities could face financial collapse in 2011, defaulting on hundreds of billions of dollars of borrowings and derailing the US economic recovery. Nor are European cities safe – Florence, Barcelona, Madrid, Venice: all are in trouble. $2 billion debt crisis threatens to bring
down 100 U.S. cities."

Meredith Whitney: "at least- between 50 and 100 municipal and county defaults in the US within the next year. "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults...."The lack of transparency with the state disclosure is the worst I have ever seen." "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."

Debt protection costs rise across eurozone peripherals. The cost of insuring against a German government default on its debt has reached a new high for the year, with credit default swaps (CDS) rising from 56 basis points at end of trading on Friday, December 17 to 57bp at 1.00pm London time today. Greece saw its CDSs fall from 989bp to 952bp, but otherwise CDSs on peripheral eurozone debt rose over the weekend. Five-year CDSs on Portugal increased from 469bp on Friday to 479bp today. The cost of insuring against an Irish default rose marginally from 581bp to 583bp over the same period. Meanwhile CDSs on Italian sovereign debt widened from 204bp to 212bp. The cost of default insurance against Spanish debt increased from 333bp on Friday to 345bp today, while CDSs on Hungary crept up from 375bp to 378bp, according to data provider Markit. Today, Moody's announced its decision to downgrade the ratings of several Irish financial institutions, including Allied Irish Bank and Bank of Ireland. This follows its downgrade of Irish government bond ratings from Aa2 to Baa1 on December 17.

Dutch group DSM, the world's largest vitamins maker, is buying U.S. baby food ingredients maker Martek Biosciences Corporation for an agreed $1.1 billion. DSM said on Tuesday the offer price of $31.50 per Martek share was a 35 percent premium to its Dec. 20 closing price.

Nearly one in three working families earned less than 200% of poverty line last year, as a bad economy pushed 250,000 families below that threshold, according to a new analysis of Census Bureau data.
The recession’s effects extended beyond the millions who lost jobs, according to a report released Tuesday by the Working Poor Families Project, which researches and advocates for working families. Among those who were working, more than 10 million families earned less than 200% of the poverty level, which the researchers considered “low income.” The low-income threshold for a family of four with two children last year was $43,512.
“Working families are taking it hard during the great recession,” said Brandon Roberts, one of the report’s authors. “We’ve got a whole lot of middle-income families, middle-class families that have now fallen back into low-income working families.”

Charles Hugh Smith: "The global fantasy that euphoric stock markets reflect the real economy is about to be tested by its nemesis, reality.
Beneath the surface, all central banks and governments have pursued a single fantasy the past two years: that massive injections of borrowed capital to "extend and pretend" and inflate new asset bubbles will magically restart global growth...Global markets have returned to their pre-global meltdown levels. Too bad the same can't be said of the real economies."

Toronto-Dominion Bank will buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3 billion.

The Federal Open Market Committee of the U.S. Federal Reserve on Tuesday said it's extending through Aug. 1, 2011 its U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The swap arrangements, established in May, had been authorized through Jan. 2011. The swap lines with the ECB, BOE, SNB and BOJ will provide these central banks with the capacity to conduct tenders of U.S. dollars in their local markets at fixed local rates for full allotment, similar to arrangements that had been in place previously. They are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, the Fed says.

Copper futures hit a record high on Tuesday, which analysts attributed to reports that one of the world's largest copper mines, Collahuasi in Chile, has declared force majeure and can't export its goods. "Copper has continued to rise this morning on supportive Chinese trade data and news that Collahuasi had called force majeure on concentrate shipments," analysts at Barclays Capital wrote in a note. High-grade copper for March delivery rose 1.5%, or 6 cents, to $4.27 a pound. It touched $4.29 a pound early in the U.S. trading session, according to FactSet Research.

The Fed has now monetized $1 trillion of U.S. debt!

AP - Parliament swore in a new Iraqi government Tuesday after nine months of bitter political haggling, solidifying the grip that Shiites have held on political power since Saddam Hussein's ouster while leaving open the question of whether the country's disgruntled Sunni minority will play a meaningful role.

Demographers believe the official 2010 count will be 308.7 million or lower, putting U.S. growth at around 9 percent, the lowest since the 1940 census. That is the decade in which the Great Depression slashed the population growth rate by more than half, to 7.3 percent.

Fitch Ratings on Tuesday placed Greece's BBB-long-term foreign- and local-currency issuer default ratings on downgrade review, raising the possibility that Greece's sovereign rating may be cut to junk in the near future. "A Rating Watch Negative indicates that there is a heightened probability that Greece's sovereign ratings will be downgraded," said Fitch in a statement. The review is expected to be completed in January and will focus on Greece's fiscal sustainability, the country's economic outlook and the political will of the government to carry out reforms, Fitch said.

Genzyme Corp is more willing to discuss price with Sanofi-Aventis SA , which is trying to acquire the U.S. biotechnology company for $18.5 billion, or $69 a share, according to the Wall Street Journal.

The Dow Jones Industrial Average closed up 55.03 points, or 0.5%, at 11,533.16. The S&P 500 ended up 7.52 points, or 0.6%, to 1,254.6. The Nasdaq Composite ended up 18.05 points, or 0.7%, to 2,667.61.

A new nuclear-arms treaty with Russia cleared a procedural hurdle when the Senate voted 67-28 to end debate on the matter, setting the stage for a ratification vote Wednesday.

Hermann Goering: "Why of course the people don't want war. Why should some poor slob on a farm want to risk his life in a war when the best he can get out of it is to come back to his farm in one piece? Naturally the common people don't want war neither in Russia, nor in England, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country."

Flee

2010-12-20T14:30:00.001-08:00

12/20/10 Flee

Peter Morici: "With the new tax cuts, rating agencies should downgrade U.S.
government debt to junk....As Washington spends and borrows, the Treasury will
have to offer higher rates on new 20 and 30 year bonds, making comparable
securities issued in 2010 and earlier worth less in the resale market.
That interest rate risk makes U.S. Treasury securities lousy investments.
For rating agencies, Washington’s monopoly on printing dollars makes difficult
assigning a conventional rating between AAA and D on its bonds. Those can’t
default but investors’ capital is still at grave risk...Perhaps a special
grade: “F” –flee now before you get stuck—is appropriate for the junk sold by
the U.S. Treasury."

John Hussman: "Investors dangerously underestimate the risk of an abrupt and
possibly severe equity market plunge....Downside risk tends to be elevated
precisely when risk premiums and volatility indices reflect the most
complacency....We did not avoid a second Great Depression because we bailed out
financial institutions. Rather, the collapse in the economy and the surge in
unemployment were the direct result of a gaping hole in the U.S. regulatory
structure that prevented the rapid restructuring of insolvent non-bank
financials. Policy makers then inappropriately extended the "too big to fail"
doctrine to ordinary banks. Following a striking loss of public confidence that
resulted from arbitrary policy responses, coupled with fear-mongering by
exactly those who stood to benefit from public handouts, the self-fulfilling
crisis was contained by a change in accounting rules that effectively disabled
capital requirements for all financial companies. We are now left with a Ponzi
scheme. "

Bloomberg News reported that Sara Lee recently rejected a JBS offer as too
low. The report cited two unnamed people with knowledge of the situation.
Bloomberg said neither company would comment on the report.

(Bloomberg) -- France risks losing its top AAA grade as Europe’s debt crisis
prompts a wave of downgrades that threatens to engulf the region’s highest-rated

borrowers, with Belgium also facing a possible cut.

After a wait of 372 years, sky gazers are in for a special celestial treat as
winter solstice coincides with total lunar eclipse on Tuesday.

The last time the two astronomical events coincided was on December 21, 1638,
Geoff Chester of U.S. Naval Observatory said.

Swathes of Britain skidded to a halt today as the big freeze returned -
grounding flights, closing rail links and leaving traffic at a standstill.
And tonight the nation was braced for another 10in of snow and yet more
sub-zero temperatures - with no let-up in the bitterly cold weather for at
least a month, forecasters have warned.

The Arctic conditions are set to last through the Christmas and New Year bank
holidays and beyond and as temperatures plummeted to -10c (14f) the Met Office
said this December was ‘almost certain’ to become the coldest since records
began in 1910.

China's stocks plunge most in month.

Hungary's central bank on Monday increased the base rate by 25 basis points to
5.75%, effective from Tuesday.

The European Commission on Monday said its preliminary consumer-confidence
indicator for the 16-nation euro zone fell to -11.0 in December from -9.4 in
November, ending six months of rising readings. Economists surveyed by Dow
Jones Newswires had forecast a rise in the indicator to -9.0.

Applied Signal Technology saw its shares jump nearly 8% Monday morning after
the company announced that Raytheon Co.agreed to acquire the company for $38 per
share, or about $490 million, net of Applied's cash on hand. The price
represented a premium of 37% compared to Applied's market value prior to Oct.
21, the date at which the company announced that it was evaluating strategic
options. The transaction is expected to close in the first quarter of 2011.

The Federal Reserve said it will limit purchases to 70 percent of any single
Treasury security as part of its plan to expand its balance sheet that’s known
as quantitative easing.

Danaher, Thermo Fisher considers bid for Beckman Coulter, Bloomberg reports.

Moody's downgrades various Irish covered bonds Monday.

“We’re in a period where uncertainty seems to be going on forever,” said David
Autor, an economist at the Massachusetts Institute of Technology. “So this
period of temporary employment seems to be going on forever.”

The European Central Bank released data showing it sharply reduced its
purchases of European government bonds in the latest week, according to media
reports.

The Dow Jones Industrial Average ended lower, however, dragged down by a 3.4% drop in American Express Co. shares. The S&P 500 ended up 3.17 points, or 0.3%, at 1,247.08, led by rising energy and homebuilding stocks. The Nasdaq Composite gained 6.59 points, or 0.3%, to 2,649.56. The Dow fell 13.78 points, or 0.1%, to 11,478.13. The Nasdaq hit a 3-year high.

ZeroHedge: "If anyone thought that $14 trillion in 2010 debt is bad, just wait until we hit $24.5 trillion in total US national debt in 2015. And it gets even more surreal: total US Unfunded Liabilities are estimated at $144 trillion, roughly $1.2 million per taxpayer."

Total Global Exposure

2010-12-19T07:54:00.000-08:00

12/19/10 Total Global Exposure

(Bloomberg) -- The extra yield Treasury investors demand to hold 10-year notes
over 2-year securities touched the widest since February on speculation an
extension of tax cuts will spur growth and increase deficits.

Travellers are being warned to expect severe travel disruptions all day
Saturday across Europe because of heavy snow and freezing temperatures.

China and Pakistan concluded nearly 15 billion US dollars' worth of deals on
Saturday, as Chinese Premier Wen Jiabao said Beijing would "never give up" on
the troubled nuclear-armed Muslim country.

Mike Burk: "Seasonality is likely to dominate the rest of the year. Monday and
Tuesday could be weak, but, after that, the pattern is likely to be a modest
upward bias on very low volume.
I expect the major averages to be higher on Friday December 24 than they were
on Friday December 17."

Seeking Alpha: "In Barron's 2011 stock market outlook, strategists expect to see an average 10% rise in the S&P 500 and a sustainable economic recovery taking root. Stocks will outperform bonds, especially Treasurys. Companies sitting on cash piles will look towards M&A, R&D and shareholder-friendly moves."

Martin Hutchinson: "When bond traders come to view U.S. Treasury bonds as a serious default risk, the U.S. economy may well enter not merely a second dip but a chasm."

South Korea is pushing ahead with a U.S.-backed artillery test in a rare direct challenge to North Korean threats, prompting an emergency session of the U.N. Security Council and calls for calm from Asian neighbors. Russia calls for a U.N. Security Council meeting to prompt both sides to tone down the rhetoric.

Dominic Gates Seattle Times aerospace reporter: "As Boeing prepares to announce yet another delay for the 787 Dreamliner — at least three months, possibly six or more — the crucial jet program is in even worse shape than it appears.
The problems go well beyond the latest setback, an in-flight electrical fire last month that has grounded the test planes.
A year after the airplane's first flight, the cascade of systems failures caused by that fire, as well as two major problems since summer with the 787's Rolls-Royce engine, have raised red flags with aviation regulators.
A top Federal Aviation Administration (FAA) official 10 days ago warned Boeing that without further proof of the plane's reliability, it won't be certified to fly the long intercontinental routes that airlines expect it to serve."

Harry Wilson at the Daily Telegraph:
"Lloyds writes off half of Irish loan. Lloyds Banking Group and Royal Bank of Scotland shares tumbled on Friday after Lloyds said it had effectively written-off more than half of its outstanding loans to Irish borrowers. Lloyds shares closed down 3.6pc at 66.5p, while RBS's fell 5.7pc to 37.82p as the market."

John Mauldin: "The PIIGS collectively owe over $2 trillion to European and US banks. German, French, British, Dutch, and Spanish banks are owed some $1.5 trillion of that by Portugal, Ireland, Spain, and Greece by the end of June, 2010. That figure is down some $400 billion so far this year, which means that the ECB is taking on that debt, helping banks push it off their balance sheets."

The Automatic Earth: "It is derivative exposure to European banks that is a very major concern for the world and the US in particular. It is not just a European problem.....If we add Portuguese and Greek debt to the mix, and we look at total exposure to the four biggest EU problem cases, and potential losses from it, we see that German banks' exposure totals $512.7 billion, and losses at 54% write-offs $276.8 billion, French banks' exposure totals $410.2 billion, with losses at 54% write-offs $221.5 billion, British' banks exposure totals $370 billion, losses at 54% write-offs $199.8 billion, US banks' exposure total $352.9 billion, with losses at 54% write-offs $190.6 billion.
Is there anyone out there who wishes to claim that German banks can absorb $276.8 billion in losses, French banks $221.5 billion, and British $199.8 billion, and still the whole shebang can live happily ever after? If there is, please let us know who you think lives at the North Pole.
Total global exposure to Ireland, Portugal, Spain and Greece is $2.281 trillion. A 54% write-off would mean a $1.23 trillion loss for the international banking system. And that's for the exposure to the debt of just four countries, which have a total population of no more than 75 millon people! Let that sink in! And let's not forget the timeframe, either: as quoted above from the Telegraph: "German, French, British, Dutch, and Spanish banks are owed some $1.5 trillion [of that] by Portugal, Ireland, Spain, and Greece by the end of June, 2010". Also, once again, keep in mind that Lloyds already sees a further 10% downgrade before the end of 2010 (!!), and dark prospects going forward."

Koch Pipeline Co. LP will build a new pipeline into Karnes County to connect refineries in Corpus Christi with Eagle Ford shale producers.
The company said Thursday it received shareholder approval for the new 16-inch line, which will create the capacity to move an additional 120,000 barrels per day in 2012.
The Eagle Ford shale of South Texas is considered one of the hottest oil and gas prospects in the country.
“It not only allows us to ship more crude oil to Corpus Christi refiners and to the Flint Hills Resources waterborne terminal at Ingleside, but it also improves our efficiency and reliability as this project includes new tanks and a new truck station,” Kim Penner, president of Koch Pipeline, said in a prepared release.
The new line will have future expansion capability of more than 200,000 barrels per day and will include direct connections to producer tank batteries in Karnes and DeWitt counties.

Federal Borrowings

2010-12-18T07:31:00.000-08:00

12/18/10 Federal Borrowings

"It is dangerous to be right when the government is wrong."
-- Voltaire

Doug Noland: "This year will mark the second consecutive year where federal borrowings will have actually expanded more than the growth of total Non-financial borrowings. Nothing similar to this has happened in the post-WWII period. For perspective, even during the deficit-prone 1970s, total federal borrowings were only 16% of total Non-financial debt growth during the decade (the annual high was 1975’s 50.8%). Federal borrowings equaled 22% of total Non-financial debt growth during the eighties (1982 high of 42.9%). The nineties saw total federal borrowings for the decade drop to 14.4% of total Non-financial debt growth (1991 high at 66.8%)....In just 9 quarters, total federal liabilities have ballooned $4.013 TN, or 60%. After doubling mortgage Credit in less than 7 years, our system is now on track to double federal debt in about four years. Federal expenditures jumped to a record SAAR $3.760 TN during the third quarter, up 6.4% from Q3 2009; up 19% from Q3 2008; and 29% higher than Q3 2007. Federal expenditures increased to 25.5% of GDP during the quarter, up from 20.8% in Q3 2007. During the quarter, combined federal and state&local expenditures reached almost 40% of GDP (vs. 34.4% during Q3 2007)....I saw nothing in the Q3 Flow of Funds that is counter to my thesis of a very problematic inflation of government finance – with an inevitable crisis of confidence and fiscal train wreck. And as one would expect from such a historic Bubble Dynamic, the longer this Bubble is prolonged the greater the unavoidable financial, economic and social dislocation. "

What country can preserve its liberties if its rulers are not warned from time to time that their people preserve the spirit of resistance?-Thomas Jefferson

Michael Santoli: "Since World War II, there have been 10 back-to-back double-digit advances. Only twice (1951 and 1994) did the streak run to a third year, and the average return in the third year was 1.7%."

John C. Danforth: "I have never seen more senators express discontent with their jobs. ... I think the major cause is that, deep down in our hearts, we have been accomplices to doing something terrible and unforgivable to this wonderful country. Deep down in our hearts, we know that we have bankrupted America and that we have given our children a legacy of bankruptcy. ... We have defrauded our country to get ourselves elected."

Regulators shuttered six banks holding a total of $1.23 billion in assets, including three in Georgia and one each in Arkansas, Minnesota and Florida, as real-estate losses drive this year’s bank failures to 157.

Democracy is two wolves and a lamb voting on what to have for lunch.
Liberty is a well-armed lamb contesting the vote.
Benjamin Franklin 1759

The Federal Reserve is currently creating out of thin air about $1,000 a month for every household in the US.

Hindenburg Omen

2010-12-17T14:06:00.000-08:00

12/17/10 Hindenburg Omen

Robert McHugh: "But we have an official Hindenburg Omen as of August 20th,
2010.
We got a second official confirmed Hindenburg Omen observation Wednesday,
December 15th, 2010 after getting a first observation Tuesday, December
14th, 2010, meaning we are now on the clock watching for a stock market
crash, and at the very least a significant decline. There is a much higher
than normal probability of a stock market crash starting sometime over the
next four months. All criteria were met Tuesday and Wednesday, December
14th and 15th, 2010. December 14th's observation saw 17 NYSE New 52 Week
Highs, and 113 NYSE New 52 Week Lows according to the Wall Street Journal,
the lower of the two coming in at 3.58 percent, above the 2.2 percent
threshold required for a Hindenburg Omen observation. Total NYSE issues
traded were 3,158. New Highs were not more than twice New Lows, the
McClellan Oscillator was negative at negative -16.23, and the 10 Week
Moving Average is rising. The second observation on December 15thth has
occurred within the required 36 day period necessary for a cluster (two or
more observations) to occur. December 15th's observation saw 156 NYSE New
52 Week Highs, and 89 NYSE New 52 Week Lows according to the Wall Street
Journal, the lower of the two coming in at 2.83 percent, above the 2.2
percent threshold required for a Hindenburg Omen observation. Total NYSE
issues traded were 3,143. New Highs were not more than twice New Lows, the
McClellan Oscillator was negative at negative -68.80, and the 10 Week
Moving Average is rising.
Now that we have a second observation, we have an official confirmed Hindenburg

Omen. This is the first Hindenburg Omen since August 2010, and only the
second since 2008, which of course led to the massive stock market crash
in the autumn 2008, and the fourth since the Bear Market started in 2007
(we got one in 2007, one in 2008 and two here in 2010). We got crashes
after both the October 2007 and June 2008 Hindenburg Omens.

Natural gas futures on Friday fell 1.6% to $3.98 per million British thermal
units, dropping below $4 for the first time since Nov. 19. Phil Flynn of
commodities trading firm PFG Best said it's also the first time that natural
gas has fallen below $4 in the month of December since 2001. "If you go back
over the last few years, in December it's cold and the prices go up," Flynn
said. "To be under $4 is almost unheard of." Normally, demand rises during the

onset of winter, but this year, plentiful supplies of natural gas from U.S.
domestic production have helped keep prices down, Flynn said. Also on Friday,
crude oil futures fell 0.6% to $87.20 a barrel. Oil has been on a downward path

since early this week, when the U.S. Federal Reserve signaled no new stimulus
under its quantitative easing plan, cooling off demand for some commodities.

The extension for unemployment benefits that is part of the compromise tax deal

is good news for many of the unemployed, but it won’t provide aid to anyone
who’s been out of a job over 99 weeks.

Canada's BMO Financial said on Friday that it is buying Milwaukee-based banking
firm Marshall & Ilsley for US$ 7.75 a share in a stock for stock transaction
worth a total of US$4.10 billion. The firms expect the deal to close by the end

of July 2011. "The acquisition is consistent with our strategy to strengthen
our North American businesses," BMO CEO Bill Downe said in a press release.
Downe added that, "It also increases scale and provides strong entry into other

attractive markets, including Minnesota, Missouri, and Kansas, and expansion in

Indiana and Wisconsin." Marshall and Ilsley shares jumped 27% on the deal.

Moody's cut Ireland's rating to Baa1 with a negative outlook from Aa2 and
warned further downgrades could follow if Dublin was unable to stabilize its
debt situation, caused by a banking crash after a decade-long property bubble
burst.
"While a downgrade had been anticipated, the severity of the downgrade is
surprising," Dublin-based Glas Securities said In the tax cut extension passed
in the House last night, private equity firms

and hedge funds win their battle against carried interest provisions that would
have taxed their earnings at ordinary income rates rather than as capital
gains. But small businesses lose their push for 1099 relief that would have
eased the requirement to issue IRS forms to vendors receiving $600 or more in
a year.

The Oil Drum: "The price of natural gas and electricity will be low over the
next quarter-century, and crude oil will become more expensive but not
radically so, the Energy Department predicted on Thursday, in a report that
contradicts widely held notions.
And even without a national global warming law, American carbon dioxide
emissions will not inexorably set new records; they will stay below the rate of

2005 for the next 15 years because of economic forces, the forecast said." When

was the last time a government forecast was accurate?

Moody's places the ratings of six Greek banks on review for possible
downgrade.

A "mild pickup" could be in store the economy following a slow winter, the
Conference Board said Friday as it reported that its leading economic index
rose 1.1% in November, the largest gain since March. "Continuing strength in
financial indicators is now joined by gains in manufacturing and consumer
expectations, but housing remains weak," said Ataman Ozyildirim, economist at
the Conference Board, in a statement. "Possible clouds" on the medium-term
horizon are ongoing weakness in housing and jobs, the Conference Board added.
Nine of the 10 indicators included in the index rose in November, with the
largest positive contribution from the index of supplier deliveries. Building
permits were the only negative contributor. November's result matched Wall
Street's expectations. October's LEI was revised down to 0.4%, from a prior
estimate of 0.5%. The LEI is a weighted gauge of 10 indicators that are
designed to signal business cycle peaks and troughs.

ZeroHedge: "Now that all recent bond auctions have settled, and with no further
bond auctions scheduled until the rest of the year, we can look at the final
tally of US total debt: the number - $13,879,785,000,000. This represents a
$1.568 trillion increase in total US debt held by the public for 2010, and
$4.388 trillion since the collapse of Lehman. This is in essence the cost to US

taxpayers to keep the financial system solvent, as the US has become the
biggest marginal leveraging actor in the world, with everyone else, notably US
consumers, and Europe, doing all they can to strip as much debt as they
possible can. Of course, since this money does not have to be repaid any time
soon, or ever, nobody seems to mind, especially not the politicians in
Washington. As we have said before, and pro forma for the Obama tax deal, we
expect total debt issuance in 2011 to accelerate once again, and to hit just
under $2 trillion, putting total US debt at the end of next year at around $16
trillion. We also fully expect the Fed to monetize the bulk of that issuance.
We can't wait to hear the positive spin on this one."

Reuters: "U.S. state and local governments faced the realization on Friday that

in just 14 days they will no longer be able to sell taxable Build America
Bonds, the federally subsidized debt created in the economic stimulus plan to
fund infrastructure projects and create jobs.
Investors, analysts, underwriters and federal policy-makers also confronted a
future without taxable BABs, which made up more than a quarter of all new
municipal debt sold this year and which have been largely credited with
restarting stalled municipal credit markets.
As a result, prices of tax-free municipal bonds, particularly with longer
maturities, are apt to fall, along with capital spending by states and local
governments.
President Barack Obama once called for the BABs program to be made permanent.
But the program will expire at year end after Obama decided against including
its extension in a tax deal he cut with Republicans in Congress."

Sara Lee Corp. is considering a sale to Brazil's JBS SA and the two companies
have been holding talks on and off for several months, the Wall Street Journal
reported Friday on its website. However, no final decision have been made, the
newspaper said, citing people familiar with the matter. Sara Lee has been
exploring various strategic options after its chief executive, Brenda Barnes,
stepped down in August following a stroke, the Journal said.

The Dow Jones Industrial Average fell 7.34 points, or 0.1%, to 11,491.91, but
gained 0.7% for the week. The S&P 500 rose 1.04 points, or 0.1%, to 1,243.91 and
gained 0.3% for the week. The Nasdaq Composite advanced 5.7 points, or 0.2%, to
2,642.97, up 0.2% for the week. The S&P 500 and Dow have risen for three
straight weeks; the Nasdaq is up four.

The unemployment rate rose in 21 states and Washington D.C. in November, up from the 14 states that showed increases the month before, according to government data released Friday. Fifteen states did report decreases in jobless rates in November, while 14 states remained unchanged.

Hang Seng index closes near 10 week low.

JS Kim

2010-12-16T15:26:00.000-08:00

12/16/10 JS Kim

JS Kim: "The government and bankers laud a rising stock market as proof that the
economy is recovering. They go on record stating that inflation is less than 2%
when in reality it is more than four times higher. They state unemployment is
less than 10% when it is nearly 23%. Thus, to many people, the economy appears
as the Sampoong department store’s exterior appeared to the public right before
its collapse, structurally sound and with a solid exterior. This is the reason
why 40,000 people a day visited the department store despite its fatal
structural integrity problems. The government and bankers are just like the
Sampoong department store owners, actively concealing all warning signs from the
public and selling them an illusion that all is okay when instead, the economy
is heading for collapse. Just as the Sampoong department store owners
constructed a crappy building destined to collapse due to excessive greed,
bankers with the help of government officials, constructed dozens of financial
derivative products destined to collapse due to their excessive greed as well.”
(via ZeroHedge)

The MOVE Index, Merrill Lynch's reading on bond market volatility, jumped 7.25%
today, rising 44% in the last five weeks as 10-year yields pile up 100 basis
points.

Based just on Kinect sales, Jefferies is raising Microsoft's holiday quarter
estimate 3 cents to $0.69/share.

Nic Lenoir: "my concern is not slow growth but civil war."

ZeroHedge: "That ICI has just confirmed the 32nd consecutive outflow from
domestic equity mutual funds is not surprising. After all, we have long been
saying that retail's love affair with stocks has gone straight to the bitter
divorce stage. That the amount of outflows was a massive $2.7 billion is a
little more surprising: after all last week was just $1.7 billion, and the
market really surged since then in its last ditch attempt to get the dumbest
money in. It failed (and total outflows year to date are not $96 billion: we
expect $100 billion through the end of the year). But what is truly surprising,
and what debunks every myth that investors are now rotating out of bonds and
into stocks, is that in the last week in addition to a surge in domestic
equity
outflows, for the first time in what seems forever, there was also an outflow
of $401 million in taxable bond funds (in addition to $1.3 billion in outflows
from muni bonds)."

Iran on Wednesday accused the United States, Britain and Israel of involving in
the deadly suicide bomb attack in the country which left 39 killed and more
than 50 others wounded.

Wal-Mart Stores Inc., the world’s largest retailer, raised prices on hundreds of
toys this month, squeezing more out of sales during the biggest shopping period
of the year. “In previous years Wal-Mart has come out and hammered everyone with
unbelievably low toy prices,” said Eric Johnson, director of the Center for
Digital Strategies at the Tuck School of Business at Dartmouth in Hanover, New
Hampshire. “They stepped away from that this year, and after Thanksgiving their
prices have crept back up.”
The price increases were due to temporary discounts on products, including toys,
that ended Nov. 30, Ravi Jariwala, a spokesman for Bentonville, Arkansas-based
Wal-Mart, said in an interview. He declined to elaborate on the message’s
reference to a successful financial month.

The U.S. current-account deficit widened to $127.2 billion in the third
quarter from $123.2 billion in the second quarter, the Commerce Department
reported Thursday. As a share of gross domestic product, the deficit increased
to 3.5% in the third quarter -- the largest share since the fourth quarter of
2008 -- from 3.4% in the second quarter. The overall deficit widened as the
deficit on goods hit $171.2 billion in the third quarter, compared with $169.6
billion in the second quarter. The current account is the broadest measure of
international flows of goods, services and capital in and out of the United
States. Net financial inflows rose to $181.6 billion in the third quarter from
$31 billion in the second quarter, with a pick up from foreign-owned assets in
the United States.

Construction of new U.S. homes rose 3.9% to a seasonally adjusted annualized
rate of 555,000 in November, the Commerce Department reported Thursday. The
November rate matched forecasts from analysts polled by MarketWatch. Housing
starts for October were revised higher to a rate of 534,000 from a prior
estimate of 519,000. Permits for new construction fell 4% to an annualized rate
of 530,000 in November, reaching the lowest level since April of 2009. With
persistent weakness in the housing market, homebuilders have been cautious.

First-time claims for state unemployment benefits fell unexpectedly in the
latest week, the Labor Department reported Thursday. The number of initial
claims in the week ending Dec. 11 fell 3,000 to 420,000. The consensus forecast
of Wall Street economists was for claims to inch higher. The four-week average
fell 5,250 to 422,750.Claims in the previous week were revised to a decrease of
15,000 to 423,000 compared with the initial estimate of a decline of 17,000 to
421,000. Meanwhile, the number of Americans receiving state jobless benefits
held steady rose 22,000 to 4.14 million in the week ending Dec. 4. The
four-week moving average of continuing claims fell 47,250 to 4.19 million.

European Union leaders will be warned on Thursday that a rolling debt crisis
poses a systemic threat to the euro zone as they seek to paper over divisions
at a summit on how to restore confidence.
European Commission President Jose Manuel Barroso will tell the 27 leaders
that the crisis requires new steps by the whole single currency area and specific
measures by member states such as Spain and Portugal to put their finances in
order.
"The current sovereign crisis has now become systemic in nature, and is driven
not only by budgetary fundamentals but also by the mispricing of credit risk by
investors and short-term herding behavior in the markets," Barroso will say,
according to speaking notes obtained by Reuters.

FedEx reported a quarterly profit and revenue that missed Wall Street
estimates, but raised its full-year outlook on stronger-than-expected holiday
volume and an improved economic forecast.

The Nation reports, “that the $700 billion Treasury Department bank
bailout…signed into law under President George W. Bush in 2008 was a small down
payment on an secretive ‘backdoor bailout’ that saw the Fed provide roughly
$3.3 trillion in liquidity and more than $9 trillion in short-term loans and
other financial arrangements.”

Foreclosures will surge to new highs in 2011, beating even the 1.2 million home
seizures expected for 2010 and the 900,000 recorded in 2009, RealtyTrac's Rick
Sharga has been telling reporters.

China may raise interest rates up to six times by the end of next year as
inflation becomes more entrenched in the economy, according to Mizuho Research
Institute Ltd. China’s central bank has relied on reserve-requirement ratios to
help control liquidity, and with levelsnear 20 percent there’s little room for
increases, said Takamoto Suzuki, a senior economist at the unit of Japan’s
third-largest bank. “A rate hike will be inevitable,” Tokyo-based Suzuki said.
“It wouldn’t be surprising if the central bank lifts interest rates by about
1.5 percentage points by the end of next year.”Consumer prices climbed 5.1
percent in November from a year earlier, the fastest since July 2008, the
statistics bureau said on Dec. 11. The People’s Bank of China this month
announced its sixth increase in reserve-requirement ratios, making major banks
to set aside 18.5 percent of deposits. The PBOC raised borrowing costs in
October for the first time since December 2007, increasing the one-year deposit
rate to 2.5 percent and the lending rate to 5.56 percent.

Iraqi authorities have obtained confessions from captured insurgents who claim
al Qaeda is planning suicide attacks in the U.S. and Europe during the
Christmas season, two senior Iraqi officials said Wednesday. A U.S. official
familiar with the matter confirmed the threat as credible. "People are looking
at this very closely," the U.S. official said. "We take it very seriously."

John Williams: "The various European crises remain an intermittent foil for the
U.S. dollar, pulling market attention away from the unfolding solvency crisis
in the United States and a likely move to massive selling against the U.S.
currency. Accordingly, high risk of the early stages of a hyperinflation
beginning to unfold by mid-2011 continues.
Rising inflation should become increasingly broad, reflecting an increasingly
serious problem in the first-half of 2011.”

The Philadelphia Fed's manufacturing survey unexpectedly improved in December,
climbing to 24.3 from 22.5 in November. Economists polled by MarketWatch
expected a drop to 17.5. "All of the broad indicators remained positive and
suggest an expansion of activity. Increases in input prices were more
widespread this month, and more firms reported increases in prices for their
manufactured goods," the Philly Fed said. "The survey's broad indicators of
future activity suggest that optimism among the region's manufacturing
executives also continues to improve." From 34 in November, the Price Paid index
surged to 51.2!

New building permits fell 4.0 percent to a 530,000-unit pace last month, the
lowest since April 2009, after a 0.9 percent increase in October. Permits were
dragged down by a 23 percent plunge in the volatile multi-family segment.
Permits for single-family homes rose 3 percent last month.

Analysts had expected overall building permits to rise to a 560,000-unit pace in
November.

Working natural gas in storage was 3,561 Bcf as of Friday, December 10, 2010,
according to EIA estimates. This represents a net decline of 164 Bcf from the
previous week. Stocks were 35 Bcf less than last year at this time and 321 Bcf
above the 5-year average of 3,240 Bcf. In the East Region, stocks were 60 Bcf
above the 5-year average following net withdrawals of 111 Bcf. Stocks in the
Producing Region were 237 Bcf above the 5-year average of 967 Bcf after a net
withdrawal of 42 Bcf. Stocks in the West Region were 25 Bcf above the 5-year
average after a net drawdown of 11 Bcf. At 3,561 Bcf, total working gas is
within the 5-year historical range. Analysts polled by Platts were looking for
a reduction of between 159 and 163 billion cubic feet for the week ended Dec.
10. Natural gas prices fell to a 4-week low. Some analysts are projecting a
milder winter. That was not the case a year ago.

2-year Treasury yield rises to 0.68%.

Cotton surged the exchange limit in New York.

Albert Edwards:"I’ve been doing this job long enough to recognise when the
markets are entering a new phase of madness that leaves me scratching my head
with bemusement. The notion that we are in a sustainable economic recovery is
as ludicrous as it was in 2005-2007. But investors are back on the dance floor,
waltzing their way towards the next, inevitable implosion – yet another they
will no doubt claim in retrospect was totally unpredictable!"

President Barack Obama has signed into law legislation that delays for one year
a cut in Medicare pay to doctors.
The 25 percent reduction in physician payments had been scheduled to kick in
Jan. 1, potentially disrupting care for the nation's seniors.
Delaying the cut will cost the government an estimated $19 billion.
The money will be shifted from the health care overhaul law, mostly by
tightening rules on tax credits intended to prevent waste.

Shanky's Technical Analysis: "The charts look nasty. If the Fed can be
distracted by the bond markets and the EU bailouts there are not enough funds
to save all. They can't print it fast enough and the Ponzi will finally die.
All of this is happening now. I have come to the conclusion that there is a
good chance that the top is set. At this time we have to consider the only two
scenarios left - top is set or there is one more pop left in their arsenal.
Those waiting on a failed treasury auction to mark the top will be too late.
That will be the final shot to destroy the Fed and treasury's Ponzi economic
system."

The Dow Jones Industrial Average ended up 41.78 points, or 0.4%, at 11,499.25. The S&P 500 closed up 7.64 points, or 0.6%, at 1,242.87, led by industrial stocks. The Nasdaq Composite gained 20.09 points, or 0.8%, to 2,637.31.

David Stockman

2010-12-15T13:24:00.000-08:00

12/15/10 David Stockman

Conditions for New York manufacturers improved in December after a rough
November, according to survey released by the New York Fed on Wednesday. The
Empire State manufacturing survey for December rose 22 points to +10.6 after a
negative reading in November. Economists polled by MarketWatch had expected a
+3 reading. The new orders and shipments subcomponents returned to positive
territory, while the unfilled orders index remained negative. The inventories
index also was negative, indicating they declined during the month, the New
York Fed said.

The consumer price index ticked up 0.1% in November, as prices for food and
energy gained, the Labor Department reported Wednesday. Food prices rose 0.2%.
Energy prices also gained 0.2% in November, the smallest change since June. Led
by increases for shelter and airline fares, the core CPI, which excludes food
and energy costs, rose 0.1%, for its first gain since July. Economists polled
by MarketWatch had expected the overall and core gauges of inflation to each
rise 0.1%. In the past year, the overall CPI has increased 1.1%, below the
Federal Reserve's target of about 1.6% to 2%. Meanwhile, the core gauge has
gained 0.8% over the past year. On Tuesday, Federal Reserve reiterated concerns
that "measures of underlying inflation are somewhat low." In October, the
overall CPI rose 0.2%, while core prices were unchanged. fuel oil was up 11.1
percent year-on-year.

World markets drop after Moody's says it might downgrade Spain's credit rating.
Yesterday it was Belgium.

Nov. Real Earnings: -0.1% for real average hourly earnings M/M, +0.6% Y/Y. Real
avg. weekly earnings -0.1% M/M, +1.7% Y/Y. Avg. workweek unchanged.

Applications for U.S. home mortgages declined last week as home loan interest
rates rose for a fifth consecutive week, to seven month highs, an industry
group said on Wednesday.

Power provider Dynegy Inc. has accepted a buyout offer from investor Carl Icahn
that values the company at about $665 million.

Confidence among Japan’s largest manufacturers worsened for the first time
since the end of the financial crisis last year as a stronger yen eroded export
gains and the effect of government stimulus measures faded. The quarterly
Tankan index of sentiment at large manufacturers dropped to 5 in December from 8
in September, the Bank of Japan said in Tokyo.

U.S. retail gasoline demand fell 2.7 percent last week as prices rose to their
highest level this year, MasterCard Advisors' SpendingPulse report showed on
Tuesday.

David Stockman: ""We have had a Fed engineered serial bubble, that has created
the appearance of wealth, that has caused people to consume beyond their means
through borrowing, and that has flushed the income and wealth of our society up
to the top, as a result of the Fed turning the financial markets into a casino.
These are pure casinos, they are not capital markets, they are not adding to
the productive capacity of our economy, they simply are a bunch of robots
trading with each other by the millisecond as a result of the Fed giving them
zero cost overnight money, and giving them all kinds of hand signals on what to
front-run. The Fed is destroying prosperity by funding demand that we can't
support with earnings and productions, causing massive current accounts
deficits and the flow of funds overseas and the build up in China, OPEC and
Korea of massive dollar reserves which is a totally unsustainable,
unsupportable system, and we are coming near the edge of where that can
continue to remain stable."

Crude-oil futures turned higher Wednesday after the Energy Information
Administration showed a surprise drop in U.S. crude-oil inventories last week.
The EIA said stockpiles fell 9.9 million barrels for the week ended Dec. 10.
Analysts polled by Dow Jones Newswires were expecting a decline of 2.7 million
barrels, and the American Petroleum Institute late Tuesday had also reported a
more modest drop, of 1.4 million barrels. The EIA said gasoline inventories
rose 800,000 barrels versus forecasts of an increase of 1.9 million barrels.
And distillate inventories increased 1.1 million barrels, countering
expectations for a 200,000 barrel-drop. A steeper drop in inventories suggests
more demand. Oil for January delivery rose 61 cents to $88.90 a barrel.

Industrial output rose 0.4 percent in November, its biggest gain since July and
the latest sign of a firmer end to the year for the world's largest economy, a
report showed on Wednesday.
The increase was above a median forecast of 0.3 percent in a Reuters poll, and
followed a downward revision of October's reading from flat to a drop of 0.2
percent.
Output rose 5.4 percent compared to one year earlier, according to the Federal
Reserve data. A spike in utilities partly offset a sharp 6.0 percent decline in
the production of motor vehicles and parts.
Capacity use, a measure of how fully firms are using their resources, rose to
75.2 in November from a revised 74.9 in October, but remained substantially
below its long term average.

Novartis AG wrapped up its long-awaited buyout of the remainder of U.S.-listed
eyecare group Alcon Inc for $12.9 billion, after sweetening its original offer
with cash.
The Swiss drugmaker is hoping the Alcon deal, worth some $52 billion in total,
will help it diversify and give it protection against patent losses on
big-selling medicines such as blood pressure drug Diovan.
Novartis has been trying to clinch 100 percent ownership of Alcon since the
start of the year, but its original all-paper offer of 2.8 shares for each
Alcon share met stiff resistance from Alcon's Independent Director Committee
(IDC), which repeatedly dismissed it as "grossly inadequate."
The merger consideration will now include up to 2.8 Novartis shares and will be
topped up, if necessary, with cash to ensure Alcon shareholders receive $168
per share, the average price Novartis paid earlier this year for Nestle's 77
percent stake in Alcon.

About 52 percent of U.S. households use natural gas for heating, according to
the Energy Department.
The Energy Department may report tomorrow that 164 billion cubic feet of gas
were withdrawn from storage in the week ended Dec. 10, above the five-year
average of 153 billion, according to the median of 14 analyst estimates
compiled by Bloomberg.
U.S. gas stockpiles totaled 3.725 trillion cubic feet in the week ended Dec. 3,
9.8 percent above the five-year average for that week and 1.5 percent below the
year-earlier level.

2-year Treasury yield at 0.65%, the 10-year at 3.52% and the 30-year at 4.59%.

Mortgage expert Mark Hanson:"In order to sell and re-buy, a homeowner must
receive enough proceeds from the sale to 1) pay off the mortgage(s), 2) pay a
Realtor 5-6 percent and 3) put a 3.5-20 percent down payment on a new vintage
loan," begins Hanson, and those alone may be too financially off-putting in
today's economy for many potential buyers.
"Effective negative-equity is the big weight on housing that has no easy or
quick cure," continues Hanson.

The Dow closes down 19, the Nasdaq down 10, and the S&P down 6 points.
Gold got clipped for $21.

Twitter Inc. said Wednesday that it has raised a new round of funding, led by venture capital firm Kleiner Perkins Caufield & Byers. Twitter did not disclose the size of the funding round, though the AllThingsD blog reported that it was $200 million, valuing the firm at $3.7 billion. As part of the funding round, Twitter said it has added two new board members: Flipboard CEO Mike McCue and former Google Inc. executive David Rosenblatt. The company said it now employs more than 350 people, and that it has added over 100 million new registered accounts in the past year.

Treasuries

2010-12-14T13:08:00.001-08:00

12/14/10 Treasuries

Amgen announced pivotal Phase 3 '147 study meets primary endpoint; XGEVA
(Denosumab) Significantly Improved Bone Metastasis-Free Survival in Men With
Prostate Cancer Co announced top-line results from a Phase 3 trial evaluating
XGEVA (denosumab) versus placebo in 1,432 men with castrate-resistant prostate
cancer. The trial, known as the '147 study, demonstrated that XGEVA
significantly improved median bone metastasis-free survival by 4.2 months
(HR=0.85, 95 percent CI 0.73-0.98, p=0.03) compared to placebo (primary
endpoint), and significantly improved time to first occurrence of bone
metastases (secondary endpoint). Overall survival was similar between the XGEVA
and placebo groups (secondary endpoint).

Thermo Fisher Scientific, the maker of laboratory and diagnostic equipment, said
on Monday that it had agreed to buy Dionex for $2.1 billion in cash.
Dionex, based in Sunnyvale, Calif., makes ion chromatography systems, which
analyze water for inorganic compounds. They are used for medical research,
environmental services and by water companies. It has more more than 1,600
employees in 21 countries.
Under the terms of the agreement, Thermo Fisher will commence a tender offer to
acquire all of the outstanding shares of Dionex for $118.50 a share in cash.
That is 21 percent above Dionex’s closing share price on Friday and 32 percent
above its average closing share price over the last 60 trading days.

According to Bloomberg, China's government this weekend set a goal this week to
expand the money supply by 16% next year while at the same time reducing
inflation to 4% and maintaining GDP growth in the 8% range.

U.S. retail sales rose in November for the fifth straight month as consumers
spent more money on gas, clothes, hobby items and online goods. Retail sales
expanded last month by 0.8% overall, or by 1.2% excluding the volatile
automotive sector, the Commerce Department reported Tuesday. Economists
surveyed by MarketWatch had forecast total sales to rise by 0.6%, or by 0.7%
minus the automotive segment. Auto sales often swing sharply from month to
month and can mask underlying retail trends. Retail sales in October,
meanwhile, were revised up to 1.7% from an original reading of 1.2%. And
September retail sales were revised up to 0.9% from 0.7%. Over the past three
months retail sales have risen at a 7.8% annual pace.

Led higher by energy goods, U.S. producer prices rose a seasonally adjusted
0.8% in November, the biggest gain since March, the Labor Department reported
Tuesday. Prices for finished energy goods rose 2.1%, as gasoline prices gained
4.7%. Meanwhile, food prices rose 1% in November, as prices for fresh fruits
and melons gained 13.6%. Over the past year, overall producer prices are up
3.5%. Core producer prices, which exclude volatile food and energy costs, rose
0.3% in November, the largest gain since July, as prices for passenger cars
rebounded from the prior month. Over the past year, core prices are up 1.2%.
For November, economists surveyed by MarketWatch had expected overall producer
prices to rise 0.7%, and for the core to gain 0.3%. In October, overall
producer prices rose 0.4%, while the core fell 0.6%. The government also
reported that prices for intermediate goods rose 1.1% in November, while prices

for crude goods gained 0.6%.

Best Buy Co. said Tuesday that its fiscal third-quarter profit fell to $217
million, or 54 cents a share, from $227 million, or 53 cents, a year earlier.
Sales in the quarter ended Nov. 27 dropped to $11.9 billion from $12.02
billion. Analysts, on average, estimated Best Buy to earn 60 cents a share on
sales of $12.5 billion, according to FactSet. The company forecast profit for
the year to be $3.20 to $3.40 a share, below its previous forecast range.
Analysts surveyed by FactSet estimated profit of $3.58 a share. Best Buy shares

fell 10% in premarket trading. Q3 comp sales down 3.3%; domestic Q3 comp sales
down 5.0%. Online sales declined to year-over-year growth of 7 percent, down
from 15 percent in the second quarter and 21 percent in the first quarter.

Yahoo Inc plans to lay off more than 600 employees as early as Tuesday, two
sources familiar with the situation said on Monday.

Sorcha Faal: "A new report circulating in the Kremlin today prepared for
President Medvedev by Russian Space Forces (VKS) 45th Division of Space Control
says that an upcoming WikiLeaks release of secret US cables details that the
Americans have been “engaged” since 2004 in a “war” against UFO’s based on or
near the Continent of Antarctica, particularly the Southern Ocean.
According to this report, the United States went to its highest alert level on
June 10, 2004 after a massive fleet of UFO’s [photo 2nd left, click for video
here] “suddenly emerged” from the Southern Ocean and approached Guadalajara,
Mexico barely 1,600 kilometers (1,000 miles) from the American border. Prior to

reaching the US border, however, this massive UFO fleet is said in this report
to have “dimensionally returned” to their Southern Ocean “home base”.

The fears of the Americans regarding these Southern Ocean UFO’s began, this
report says, during the unprecedented events of July 11, 1991 (referred to as
7/11) when during the Solar Eclipse these mysterious aircraft appeared by the
hundreds over nearly all of Mexico, even their Capital city. Most notable about

the events of 7/11 were that as millions of Mexicans were watching on their
televisions the National broadcasts [click for video here] of these UFO’s over
Mexico City, the American media refused to allow their people to view it.

Since 2004, this report continues, fleets of Southern Ocean UFO’s have continued

to emerge from their bases, with the latest such event being this Friday past
when another of their massive fleets was sighted over the South American Nation
of Chile."

Japan's government announced it would cut the country's hefty corporate tax
rate by 5 percentage points, in a bid to stimulate the economy and help
Japanese businesses stay competitive.
The step announced late Monday is aimed at promoting investment, employment
and

salary increases at home so that Japan can exit deflation, Prime Minister Naoto
Kan said.

“If you were looking at buying a house a few weeks ago, the same house, to you,

looks as much as 9 percent more expensive,” he said. The effects of higher
mortgage rates, along with climbing gasolineprices, will offset much of the tax

package’s intended stimulative effects, according to Gluskin Sheff & Associates

Chief Economist David Rosenberg. The average rateon a typical 30-year
fixed-rate mortgage has climbed for four weeks, to an average of 4.61 percent
last week, according to Freddie Mac, pushing the monthly cost of a $300,000
loan to $1,540, from $1,462.

The Baltic Dry Index, a measure of commodity-shipping costs, fell to the lowest

level in more than four months on a surplus of ships. The index declined 19
points, or 0.9 percent, to 2,076 today, according to data from the Baltic
Exchange in London. That’s the lowest since Aug. 6.

iBankCoin: "Although the major indices are making new 52 week highs on a daily
basis, they are doing so in a very nonchalant way, dribbling higher. The areas
of the market where the “hot money” is welcomed with arms wide open are growing

smaller. While many traders may perceive the above analysis as an invitation to

get aggressively short, I contend that strategy is flawed. Just because the
indices have gone much higher in a relatively short amount of time, it does not

necessarily mean that they will give most or all of it back. Thus, I am not
convinced that the risk/reward profile is conducive for net shorts for anything

more than a one or two day trade, if that.
In addition, the marquee names are still basing out (some have been doing so
for seven weeks) with tight price candles and without heavy selling volume.
These include: $AAPL $AMZN $BIDU $GOOG $PCLN. Although the consolidations in
those stocks have been of the bullish variety, they still need to be monitored
closely to see in which direction they eventually break.
In sum, a little skepticism about whether Santa Claus is coming this year could
go a long way, literally and figuratively."

On Dec. 16, 100K Facebook shares will go on sale at website SharesPost with a
minimum bid of $23/share, says a source. The auction is open only to accredited
investors worth more than $1M.

Global investor sentiment continues to improve, according to a survey released
Tuesday by Bank of America Merrill Lynch. A net 44% of respondents think the
world's economy will strengthen in 2011, up from 35% the previous month. The
study also found that a net 16% of fund managers surveyed are overweight U.S.
stocks, up from a net 1% in November. A net 36% said they expect the dollar to
appreciate next year, up from a net 14% who thought so in November. The survey
of 209 fund managers also found that energy is the favorite sector, displacing
technology, which had been the favorite for the previous 11 months.

Copper fluctuated near a 31-month high in New York and a record in London amid
renewed investor concerns about cooling measures in China and as the Federal
Reserve prepares to discuss interest rates and bond purchases.

Cotton futures in New York soared by the daily limit for a second day, advancing

to a one-month high after a government report estimated U.S. inventories will
drop to a 14-year low.

Shares of HCP Inc. rose Tuesday after the real-estate investment trust said it
has agreed to buy all of the real-estate assets of nursing-home operator HCR
ManorCare Inc. in a transaction valued at $6.1 billion.

Inventories at U.S. businesses rose 0.7% in October, below expectations and
slower than the 1.4% increase in sales, the Commerce Department said Tuesday.
The inventory-to-sales ratio, an indication of demand, slipped to 1.27 in
October from 1.28 in September. Economists had been expecting the nation's
inventories to rise 0.8% in October. One new piece of information was retail
inventories, which fell 0.6% in October compared with a 1.8% increase in sales.
The inventory-to-sales ratio in retail fell to 1.35 in October from 1.38 in
September. It was at 1.38 a year ago. Inventories in September were revised up
to a 1.3% gain from the previous estimate of a 0.9% increase. This could lift
GDP estimates for the July-September quarter higher than the current estimate
of a 2.5% gain.

30-year Treasury yield at 4.55% and the 10-year at 3.46%, both 7-month high yields. Mortgage rates are
moving higher.

The Federal Reserve Tuesday left its key interest rate and the size of its bond purchase program unchanged, as widely expected. The central bank's rate-setting Open Market Committee maintained the target range for the federal funds rate at its all-time low range of 0 to 0.25%, where it has stood since December 2008. It kept its bond purchase program, nicknamed QE2, at $600 billion. In its statement, the Fed said that the economy recovery is continuing "though at a rate that has been insufficient to bring down unemployment." Thomas Hoenig, the president of the Kansas City Fed, dissented again, warning that the large stimulus could cause inflation expectations to rise and choke off a recovery.

The Justice Department on Wednesday is expected to seek to join civil lawsuits resulting from the Gulf of Mexico oil spill, the first major federal legal action in the probe of the disaster, according to people familiar with the matter.
Dozens of private-party lawsuits have been consolidated in so-called multidistrict litigation in federal court in New Orleans, representing claims against BP PLC and its contractors for damages from the worst oil spill in U.S. history.

Dow closes up 48 points, Nasdaq up 2 points, and the S&P 500 plus 1 point.

Treasuries

2010-12-14T13:08:00.000-08:00

Extreme Overbought

2010-12-13T14:06:00.000-08:00

12/13/10 Extreme Overbought

General Electric Co has agreed to buy British oil drilling pipe-maker
Wellstream Holdings Plc for 800 million pounds ($1.3 billion), as GE continues
its push into the offshore oil services industry.
The deal is the latest in a series of GE buys in the oil services sector in
recent years and shows that, despite the BP oil spill in the Gulf of Mexico
this summer, the industry expects deep water drilling to continue apace.

Selling pressure on 10-year U.S. Treasuries drove yields to fresh six-month
highs on Monday as investors threatened to undo this year's bond rally on signs
of global economic recovery and deeper U.S. deficits.

John Hussman: "In recent weeks, the U.S. stock market has been characterized by
an overvalued, overbought, overbullish, rising-yields syndrome that has
historically been hostile to stocks. Last week, the situation became much more
pointed. Past instances have been associated with such uniformly negative
outcomes that the current situation has to be accompanied by the word
"warning."
The following set of conditions is one way to capture the basic "overvalued,
overbought, overbullish, rising-yields" syndrome:

1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller P/E greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's
Intelligence)"

Bespoke: "Friday's close puts the S&P 500 into ’extreme overbought’ territory
(2+ standard deviations above 50-DMA) and at its most overbought level since
November 2009."

The percentage of bulls has now exceeded the peak which marked the precise top
of the 2010 rally in early May. From that peak, stocks swooned over 15% in the
next few months.

ZeroHedge: "At a time of record deficits, when the Fed will soon own over $1
trillion in Treasurys, the smallest marginal moves on rates will have a
disastrous impact on what is already an unsustainable deficit. Add to this the
fact that we now anticipate that the debt ceiling will have to be raised not
once but twice in 2011, and we, just like everyone else who is not a sellside
Koolaid peddler, are scratching our heads as to just how it is possible that
stocks continue to show the kind of dogged momentum chasing determination that
virtually every buysider realizes will sooner or later end in tears."

Dell's deal values Compellent at $27.75 a share.

Copper futures climbed to a 31-month high in New York and a record in London
after China refrained from raising borrowing costs, while higher copper output
and imports by the largest consumer boosted the demand outlook.

Stephen Rosenman in Q1 predicts Apple will sell 43.7M devices to earn $5.5B, or
$6.05/share.

Banks' total exposure to Ireland and the southern rim of the euro zone has been
greater than previously thought, according to data from the Bank for
International Settlements. The data illustrates how costly it would be if
Greece or Ireland were forced to restructure their debts as part of a bailout.

"Signs of a top in bond prices could set the tone for investors in 2011. The
government may start having trouble funding its debt, taking away the Fed's
printing press." Bill Fleckenstein

A new McClatchy/Marist Poll released over the weekend found Obama's job approval rating at just 42 percent — the lowest number of his presidency. One reason Obama's numbers have taken a turn for the worse: The president has lost ground with Democrats in recent weeks.

The Dow Jones Industrial Average rose 18.24 points, or 0.2%, to 11,428.56.The S&P 500 index gained 0.06 point to 1,240.46, led by gains in its energy and materials sectors. The Nasdaq Composite fell 12.63 points, or 0.5%, to 2,624.91.

The Shadow Knows

2010-12-12T07:51:00.000-08:00

12/12/10 The Shadow Knows

One bank failure in Pennsylvania and one in Michigan brought the year's tally
of failures to 151, according to the Federal Deposit Insurance Corp. Friday.
Regulators closed Paramount Bank of Farmington Hills, Mich., and Earthstar Bank
of Southampton, Pa. Level One Bank of Farmington Hills, Mich., will take over
Paramount's $252.7 million in assets and $213.6 million in deposits; and
Polonia Bank of Huntingdon Valley, Pa. will take over Earthstar's $112.6
million in assets and $104.5 million in deposits. The total cost to the FDIC
deposit insurance fund is $113.1 million.

"If you're trapped in the dream of the other, you're fucked."
— Gilles Deleuze

Mike Burk: "Since the late August lows the DJIA has rallied 14% while the
Russell 2000 (R2K) is up 30%. Since their November lows the DJIA is up 3.7%
while the R2K is up 10.1%. The market is overbought. Breadth indicators are
mixed, those derived from NASDAQ data are strong while those derived from NYSE
data are weak.
I expect the major averages to be lower on Friday December 17 than they were
on Friday December 10."

Andrew Gavin Marshall:"If Wikileaks is a psy-op, it is either the stupidest or most intelligent psychological operation ever undertaken. But one thing is for sure: systems and structures of power are in the process of being exposed to a much wider audience than ever before. The question for the alternative media and critical researchers, alike, is what will they do with this information and this opportunity?"

“WikiLeaks is a not-for-profit media organisation. Our goal is to bring important news and information to the public. We provide an innovative, secure and anonymous way for sources to leak information to our journalists (our electronic drop box).”

"The technocrat is the natural friend of the dictator—computers and dictatorship; but the revolutionary lives in the gap which separates technical progress from social totality, and inscribed there his dream of permanent revolution. This dream, therefore, is itself action, reality, and an effective menace to all established order; it renders possible what it dreams about. "
— Gilles Deleuze

478,000 full-time jobs were lost in November. In November, state and local governments cut 11,000 jobs.

“The money power preys upon the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods, or throw light upon its crimes. It can only be overthrown by the awakened conscience of the nation."
William Jennings Bryan

Natural gas prices may rebound next year as producers cut output for the first time in six years amid record stockpiles and an expanding U.S. economy. A 21 percent drop in prices this year will contribute to a decline in drilling for the fuel sold to factories, power plants and homeowners, the Energy Department said in its monthly Short- Term Energy Outlook on Dec. 7.

ZeroHedge:"As of September 30, Bernanke has successfully stopped the net decline of monetary aggregates even when including the massive shadow banking system....As of Q3 2009, the sequential change in shadow and traditional bank liabilities was net positive by $3.8 billion: this is the first time this number has posted an increase since December 2008! This fact should send a wedge of terror into the hearts of all those, both deflationists and inflationsts, who realize the significance of this inflection point: it appears that Bernanke has finally succeeded at offsetting the drop in the shadow banking system."

Moneyness

2010-12-11T07:19:00.001-08:00

12/11/10 Moneyness

(Bloomberg) -- China’s inflation accelerated to the fastest pace in 28 months in November, building the case for Premier Wen Jiabao to raise interest rates again.
Consumer prices rose a more-than-forecast 5.1 percent from a year earlier, a statistics bureau report showed in Beijing today. Producer-price inflation was 6.1 percent, higher than any of 28 economists surveyed by Bloomberg News had estimated.

Doug Noland: "Importantly, the Federal Reserve’s zero-rate policy and massive monetization program have been instrumental in maintaining the perception of “moneyness” in the face of unprecedented Treasury debt issuance. I can’t envisage a more powerful Bubble Dynamic: The Fed intervenes and manipulates the Treasury market – the predominant debt market underpinning fixed income and securities markets more generally. Enormous fiscal stimulus then works to stabilize system incomes, corporate cash flows, state & local tax receipts, and asset prices more generally. In the final analysis, Trillions of dollars of government-created purchasing power ensure that a structurally maladjusted U.S. economy has, at the minimum, the appearance of viability – and the stock market booms....We are in the midst of another sordid episode. John Law’s experimentation with paper “money” in France ended with the spectacular bursting of the Mississippi Bubble in 1720. Today’s backdrop is much more complex: The Fed and global central bankers are working diligently to control an experiment in electronic “money” and Credit gone terribly awry. If it were only the printing press, it would be easier to appreciate what was developing and how to administer some restraint. Instead, the Fed has banked everything on its capacity to inflate marketplace liquidity, sustain massive government debt issuance, and maintain market perceptions of moneyness."

Tim W. Wood: "So, the fact that we are now in a rate hiking cycle and interest rates are beginning to move up no doubt begs the question as to whether this will be good or bad for equities. But, my take is rather than to draw an erroneous conclusion, we should look at the markets independently. Until my Fed model changes, I know that the bias for rates is to the upside. As for equities, I have identified a common cyclical DNA Marker/trait that has occurred at every major top since 1896. Thus, it is my opinion that the answer to the question with interest rates and the market lies in simply taking the markets independently of one another and to implement the tools that we have and in doing so these tools will tell us."

A law enforcement official tells NBC and The Associated Press that a son of Bernard Madoff has been found dead in New York City of an apparent suicide.

Protests will be held around the world today against the detention of Julian Assange, the founder of WikiLeaks. Demonstrations are planned in the capitals of Spain, the Netherlands, Colombia, Argentina, Mexico and Peru to demand Assange's release.

Pragmatic Capitalism: "Christopher Whalen makes a remarkably convincing case for why we’ve simply kicked the can down the road and why the banks could be in for a repeat of their 2008 nightmares in 2011. If Mr. Whalen is right the banking sector is in for a whole new round of government intervention, takeovers, likely nationalizations and general disaster:The U.S. banking industry is entering a new period of crisis where operating costs are rising dramatically due to foreclosures and defaults. We are less than ¼ of the way through the foreclosure process. Laurie Goodman of Amherst Securities predicts that 1 in 5 mortgages could go into foreclosure without radical action. Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue. BAC, JPM, GMAC foreclosure moratoriums only the start of the crisis that threatens the financial foundations of the entire U.S. political economy."

OPEC on Saturday readied an agreement to leave oil production restraints in place, despite a recent surge in crude prices to $90 a barrel.

Richard Russell

2010-12-10T15:00:00.001-08:00

12/10/10 Richard Russell

Richard Russell: "As I write the dividend yield on the Dow is 2.56%. I go
along with Charles Dow's 'rule' - a dividend yield under 3.5% is risky if not
dangerous."Based on history and based on the current dividend yield, stocks are
not now priced to produce profits over coming years."

U.S. import prices rose 1.3% in November, the Labor Department said, the
largest monthly advance since a 1.5% increase in November 2009. October's
prices were revised to a 1% advance from a prior estimate of a 0.9% gain.
Expectations were for a 0.7% advance in import prices in November. Rising
prices for fuel and nonfuel imports contributed to both the November and
October increases. It was the first time since May and June 2009 that import
prices rose by at least 1% in consecutive months.

The U.S. trade deficit narrowed by 13.2% in October to $38.7 billion, the
Commerce Department said Friday. This is the lowesst deficit since January. The

narrowing of the trade deficit surprised analysts. The consensus forecast of
Wall Street economists polled by MarketWatch expected a deficit of $44.3
billion. Exports rose while imports declined slightly in October, the
government said. The U.S. trade deficit with China widened to $25.5 billion in

compared with $22.7 billion in the same month last year. But the bilateral
deficit was lower than the $27.8 billion deficit in September. The U.S.
exported a record amount of goods and services to China in October. The
government also revised the deficit in September to $44.6 billion from $44.0
billion. As a result the deficit for the year now totals $614 billion, up more
than 100% from $302.5 billion in the same period in 2009. Exports were the
strongest since August 2008 as Mexico and China bought record amounts of U.S.
products.

Shares of Beckman Coulter Inc jumped 25% in Friday preopen trade after a news
report said the firm has put itself up for sale. The Brea, Calif., provider of
laboratory tests, systems and supplies, has put itself up for sale, people
familiar with the matter told The Wall Street Journal. Beckman Coulter's
market

value as of Thursday's closing price, $57.09, was just under $4 billion. In a
late-Thursday report the Journal said the people familiar with the matter said
BEC could draw bids exceeding $5 billion.

The People's Bank of China on Friday announced a 0.5 percentage point increase
in commercial banks' reserve requirement ratio for its sixth such increase this

year. The increase will be effective Dec. 20. The increase comes a day ahead
of

Beijing's release of a slew of economic data for November, including inflation,

which is expected by economists to have accelerated 4.6% from the year-earlier
period, compared to a 4.4% increase in October. Some economists, including
those at HSBC, said an interest rate increase was also imminent.

WSJ: Nearly 6 million Americans looked for work but weren’t able to find
employment at all last year,... an increase of 2.7 million from a year
earlier.

The lowest percentage of shoppers in the 27-year-history of a national survey
said they used credit cards over the Thanksgiving weekend. After the
Thanksgiving shopping weekend, the group found that just about 17 percent were
paying with credit — just over half of last year’s level.

Sumitomo and Molycorp entered into a Memorandum of Understanding where Sumitomo
will assemble an equity and debt financing package that comes to $130 million to

be used to complete its rare earth “mine-to-magnets” manufacturing supply
chain.
As a part of the pact, Molycorp will provide Sumitomo with several rare earth
products over the next seven years in quantity. Sumitomo will purchase $100
million of Molycorp’s common stock and it will provide Molycorp $30 million in
debt financing at a low interest rate.

One out of every seven Americans relies on food stamps.

China’s economy is history’s biggest bubble and may be headed for collapse,
according to Richard Duncan, chief economist at Blackhorse Asset Management
Pte. who predicted a credit boom would trigger a global recession. A more than
50 percent surge in China’s money supplysince 2008 helped fuel economic growth
in excess of 9 percent per year, even as trading partners sank into recession.
The expansion also saddled the country with factories that produce three times
more goods than can be bought by China’s workers, 80 percent of whom make less
than $5 a day, said Duncan. “China has the greatest economic bubble in
history,” said Duncan, author of “The Dollar Crisis” first published in 2003.
“There’s a real risk it’s going to collapse in a Great Depression-style
scenario.”

Vitaliy Katsenelson, chief investment officer at Investment Research Associates

in Denver: "We're not Japan quite yet but...we need to man up and let the
economy work itself out."

November gross trade in China hit a record $283.8 billion, with exports greater
than imports by $22.9 billion.

The TJX Companies Inc. said Friday it would cut 4,400 jobs, nearly half of
which are part-time, as part of a move to eliminate A.J. Wright stores. The
Framingham, Mass. store operator will close down 71 stores and convert 91 A.J.
Wright stores to T.J. Maxx stores.

Americans have at least $3 trillion invested in bond funds, according to the
Investment Company Institute. A lot of that is backed by one issuer: the U.S.
Treasury.

A gauge of U.S. consumer sentiment rose to 74.2 in early December from 71.6 in

November, according to media reports on Friday of the Reuters/University of
Michigan index. Economists surveyed by MarketWatch had expected a December
result of 72.9. Despite the gain in December, the gauge is below pre-recession
levels of more than 80. While there have been some signs of improvement in the
economy, consumers remain concerned about jobs.

The A&P supermarket chain may file Chapter 11 bankruptcy. A&P operates 428
grocery stores in eight mid-Atlantic states. Its regional banners include
Pathmark, Food Emporium, and Super Fresh.

ZeroHedge: "And for another confirmation that the Nasdaq is now at the same
extreme "irrational exuberance" levels last seen during the dot com crash, we
read courtesy of sentimenttrader.com that the Rydex Nasdaq 100 bull/bear ratio
is now the highest it has been since just before the dot com crash. "Traders in
the Rydex mutual fund family have poured into the Nasdaq 100 long fund at the
expense of the inverse fund on the same index. These traders now have 34 times
more money invested in the long fund vs. the inverse fund, which is the highest
ratio since the bubble days of 2000 and early 2001." And what is scarier, is
that unlike during the dot com, investors are using leveraged methods to
express their exuberance: "The Bull / Bear Ratio for the leveraged funds isn't
quite as extreme...but it's close (on a relative basis)."

The Dow Jones Industrial Average rose 40.26 points, or 0.4%, to end at 11,410.32. For the week, the Dow rose 0.3%. The broad S&P 500 index gained 7.40 points, or 0.6%, at 1,240.40, a two-year high. It gained 1.3% for the week. The Nasdaq Composite rose 20.87 points, or 0.8%, to 2,637.54, tallying a 1.8% weekly gain.

The U.S. government ran a $150.39 billion budget deficit in November, the Treasury Department reported Friday. A year ago in November the deficit was $120.29 billion. Income was $148.96 billion in November, the Treasury said, about $15 billion higher than receipts in November 2009. Spending was $299.35 billion. This is $45 billion higher compared with outlays a year earlier. The November deficit was $8 billion above a congressional estimate.

David Rosenberg: "One of the most pronounced macro risks is another leg down in U.S. home prices, which actually seems to be underway but is currently receiving very little attention."

Unadjusted

2010-12-09T13:57:00.000-08:00

12/9/10 Unadjusted

The number of U.S. workers filing new applications for unemployment benefits
fell by 17,000 last week to 421,000, the Labor Department reported Thursday.
Economists polled by MarketWatch had expected initial claims in the week of
Dec. 4 to fall to a seasonally adjusted 425,000. Last week's number was revised
up by 2,000 to 438,000. Continuing claims, which reflect people already
receiving unemployment checks, declined 191,000 to a seasonally adjusted 4.1
million. Some 8.3 million people received a form of state or federal benefits
in the week of Nov. 20, down 611,944 on an unadjusted basis.
The Seasonally unadjusted number increased by a near record 169k, and the NSA
unemployment rate jumped from 2.9% to 3.3% in one week.

(Bloomberg) -- U.S. home values are poised to drop by more than $1.7 trillion
this year amid rising foreclosures and the expiration of homebuyer tax credits,
said Zillow Inc., a closely held provider of home price data.

This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings
the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based
company said today in a statement.
More than half of Americans want Fed reined In or abolished: Bloomberg survey.

Another 17 U.S. billionaires, including Facebook co-founders Mark Zuckerberg
and Dustin Moskovitz, have pledged to give away at least half their fortunes in
a philanthropic campaign led by Warren Buffett and Bill Gates.A total of 57
billionaires now have joined The Giving Pledge, which was launched by Microsoft
founder Gates and investor Buffett in June. The campaign announced the new
pledges in a statement late on Wednesday.

"WikiLeaks themselves have said they'll continue leaking the documents and,
if you want to stop us, you'll probably have to shut down the Internet." --BBC
World News, December 8, 2010".

Google's vice president of engineering Andy Rubin sent out his second tweet,
this time announcing the company is now activating 300,000 Android phones each
day.

Dell and Compellent Technologies Inc. Thursday said they are in "advanced
discussions" on a potential merger that would value Compellent at $27.50 a
share in a cash deal. "There can be no assurances that an agreement will be
reached or that a transaction will be consummated," the companies said in a
press release. "Dell and Compellent do not intend to comment further until an
agreement is reached or discussions are terminated." Shares of Compellent,
which closed Wednesday at $33.65, dropped 16% on premarket action on heaving
trading.

England keeps its key rate at 0.5%.

Costco’s comparable-store sales for the quarter rose 7%, reflecting a
comparable sales growth of 5% at its U.S. locations and 14% at its
international divisions. The results were favorably impacted by rising gasoline

prices and a weaker U.S. dollar.
Excluding the effects of gasoline prices and a softer dollar, Costco’s
comparable-store sales rose 5%, with U.S. comparable sales up 4%, while
international comparable sales were up 10%.

(Bloomberg) -- Build America Bond yields rose to the highest in 11 months as
the federal program subsidizing state and local government borrowing costs is
set to expire at year- end unless lawmakers extend it.

The average yield on the taxable securities climbed to 6.35 percent yesterday,
the most since Jan. 7, as investors demanded a larger premium to buy the debt,
according to a Wells Fargo index. Signs that the global economic recovery is
gathering pace also pushed down Build America Bond prices, which move inversely
to yields, along with U.S. Treasuries and other fixed-income markets.

ZeroHedge: "Yet another distortion in this Fed-controlled market has been
captured by SentimentTrader who has noticed that the Arms (TRIN) index is at
its most extreme deviation since 1956. As a reminder the Arms index is an
indicator of market breadth which essentially tracks lemming like
momentum-chasing behavior with respect to volume. Sentiment Trader's
commentary: "While influenced by some of the high-volume, low-priced stocks
such as Citigroup, the Arms Index is showing an abnormal level of Up Volume
versus Up Issues. The chart we show on the site uses bands around a six-month
average to define extremes, and right now the 10-day average is more than 35%
away from that average. With the S&P at a 52-week high, this is the
most-extreme deviation in the Arms Index since 1956." For those who foolishly
believe that technical indicators "indicate" anything anymore in a market in
which there is just one player left, may want to be concerned - all the other
times such an extreme deviation has occurred, any short-term gains were erased
during the months ahead. Those dates were 4/5/43, 2/5/45, 6/20/45, 5/14/48,
4/19/50 and 3/14/56."

Costco to stop selling Apple products, Seattle Times reports.

Working gas in storage was 3,725 Bcf as of Friday, December 3, 2010, according
to EIA estimates. This represents a net decline of 89 Bcf from the previous
week. Stocks were 57 Bcf less than last year at this time and 332 Bcf above the
5-year average of 3,393 Bcf. In the East Region, stocks were 81 Bcf above the
5-year average following net withdrawals of 51 Bcf. Stocks in the Producing
Region were 236 Bcf above the 5-year average of 1,010 Bcf after a net
withdrawal of 17 Bcf. Stocks in the West Region were 15 Bcf above the 5-year
average after a net drawdown of 21 Bcf. At 3,725 Bcf, total working gas is
within the 5-year historical range. Analysts polled by Platts had expected to
see a decline between 82 billion and 86 billion cubic feet last week, according
to a Platts survey.

Air Products and Chemicals Inc on Thursday raised its offer for Airgas Inc. to
$70 a share in what it called its "best and final offer." Air Products last
offered $65.50 a share, which Airgas called "grossly inadequate."

U.S. households reduced their debt for the 10th straight quarter while
businesses continued to stockpile record amounts of cash, underscoring a lack
of demand holding back the U.S. economy, according to new data from the Federal
Reserve. The central bank's so-called "flow of funds" report showed that
household debt fell at an annual rate of 1.75% in the third quarter to $13.4
trillion. Net household wealth rose slightly, up $1.2 trillion to $54.9
trillion, largely because of rising stock prices. U.S. companies, meanwhile,
stored $1.93 trillion in cash and short-term assets at the end of the third
quarter, up from $1.8 trillion. Debt at the local, state and federal levels
increased. Local and state debt climbed 5.5% and federal debt jumped 16%. Total
government debt rose to $11.5 trillion from $11.1 trillion in the second
quarter.

The Commerce Department said wholesale sales rose 2.2 percent to a seasonally
adjusted $362.1 billion -- far ahead of Wall Street expectations - following a
0.5 percent September gain.
Inventories were up 1.9 percent in October to $427.1 billion after a 2.1 percent
rise.

The House on Wednesday approved a $1.2 trillion bill to fund the federal
government through the remaining nine and a half months of fiscal 2011.
The spending package incorporates a request from President Barack Obama for a
two-year pay freeze for federal employees, though members of the military are
exempted.

The Dow Jones Industrial Average fell 2.42 points to end at 11,370.06.The S&P 500 index rose 4.72 points, or 0.4%, to 1,233, led by a 1.3% gain in the financials sector. The Nasdaq Composite rose 7.51 points, or 0.3%, to 2,616.67.

Treasury Yields

2010-12-08T14:53:00.001-08:00

12/8/10 Treasury Yields

ZeroHedge: "Today's consumer credit release tells you all you need to know about
who continues to fund the economy (deficit commission be damned indeed). The
all important revolving credit number declined by $5.6 billion in the month,
which just happens to be the 26th consecutive drop in revolving credit, as in
the stuff that Americans use to actually buy stuff with using their credit
cards. And while October total consumer credit rose to $3.4 billion from a
downward revised $1.2 billion in September (previously $2.1 billion), all of it
was due to non-revolving credit, which rose by $9 billion, and more
specifically due to a whopping $31.9 billion increase in Federal Government debt
used to fund student loans (the latest industry recently nationalized by the US
government). Ex-federally funded student loans, consumer credit declined by
about $28 billion."

Treasury prices fell again on Wednesday, pushing to 10-year yields up to
3.34%. The yield on the 2-year jumped to .63% and the 30-year to 4.48%.

The Treasury Department sold $21 billion in 10-year notes on Wednesday at a
yield of 3.34%, the highest since May.

Randall W. Forsyth: "THE BIGGEST LOSERS in President Obama's deal with the
Republican on taxes aren't the Democrats. It's the bond market.
Yields soared in the wake of the plan that will add upwards of $900 billion to
the federal deficit, sending bond prices tumbling, especially in the municipal
market."

London-based private equity group Apax Partners has entered exclusive talks to
buy ISS, the Danish cleaning, security and catering group, in a potential
$8.5bn deal that would be the biggest leveraged buy-out since the financial
crisis started.
ISS, one of the world’s biggest private sector employers with more than half a
million staff, was put up for sale this year by its private equity owners
Goldman Sachs and EQT, the buy-out arm of Sweden’s Wallenberg family.

Data logs showed that before the Deepwater Horizon drilling rig exploded, more
mud was flowing out of BP's Macondo well than was going in - a possible
indication that hydrocarbons were building up in the well.

(Bloomberg) -- U.S. states are preparing for more budget cuts next year as tax
revenue isn’t likely to rebound enough to replace almost $38 billion in aid that

will be gone as federal economic stimulus ends, according to a report.
At least 31 states and Puerto Rico are forecasting deficits of $82.1 billion in
the next fiscal year even as tax receipts are picking up, the National
Conference of State Legislatures said today. Under a temporary mandate since
2009, the U.S. has provided economic aid to states, helping to pay government
workers and shoulder the cost of the Medicaid program to provide health care for

the poor. That aid will be gone, the group said.
“Although a recovering national economy is helping to stabilize state revenues
in fiscal year 2011, serious budget challenges await state lawmakers in the new
year,” the group said today in the report. “This largely stems from fewer
federal stimulus funds available for next year’s budgets.”
The report, which says states will get $37.9 billion less in stimulus money in
fiscal 2012 compared with 2011, is the second in as many weeks to warn of
renewed financial pressure on states as the funding winds down. Last week,
Raymond Scheppach, executive director of the National Governors Association,
said states may confront $175 billion in budget gaps through June 2013, forcing
leaders to weigh spending cuts and tax increases.
"It now look as if December 2010 is probably going to be the most expensive
month for gasoline in the U.S. since September 2008," says Tom Kloza, chief oil
analyst at Wall, N.J.-based Oil Price Information Service.

Consumer Credit has fallen 3.5% compared with Q3 of 2009.

David Einhorn, president of hedge- fund operator Greenlight Capital Inc., said
the global economy will face a sovereign debt crisis after governments around
the world increased spending to deal with the fallout from the financial
crisis.

Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan
rates jumped to their highest levels in almost six months, suggesting borrowing
costs will continue to climb from record lows.

Johnson & Johnson made a formal bid on Wednesday for Crucell, offering to pay
1.75 billion euros ($2.3 billion) for the rest of the Dutch biotechnology
company.

The number of rigs drilling for gas rose by 8 to 961 last week, according to
data published Dec. 3 by Baker Hughes Inc. The total of oil and natural-gas rigs

operating in the U.S. jumped to a 23-month high, gaining 26 to 1,713, according
to Baker Hughes.

.Iceland Cuts Benchmark Rate to 4.5% as Inflation Declines to Six-Year Low

Respondents aged 50 to 59 have saved an average of only $29,000 for retirement.
Consequently, more than a third of respondents believe they will have to work
during retirement in order to afford the things they want or just to make ends
meet.
Many are also still relying on Social Security to fill the gap, though
confidence in this funding varies considerably by age.
Seventy-seven percent of respondents aged 50 to 59 believe that Social Security

will contribute to their retirement income, while only 22 percent of
30-somethings thought there would be enough left in the pot to fund their
retirement.
"Too many Americans have their heads in the sand in the face of obvious savings

deficits," said Laurie Nordquist, director of Wells Fargo Institutional
Retirement Trust. "Barring a miracle, a winning lottery ticket or a big
inheritance, they're going to be forced to dramatically cut back their
lifestyles after retirement."
"Too many Americans have their heads in the sand in the face of obvious savings

deficits," said Laurie Nordquist, director of Wells Fargo Institutional
Retirement Trust. "Barring a miracle, a winning lottery ticket or a big
inheritance, they're going to be forced to dramatically cut back their
lifestyles after retirement."

Natural gas futures rose to a four- month high on forecasts that cold weather
in the eastern and central U.S. will cause a bigger-than-average stockpile
decline.
Gas futures rose as the Energy Department may report tomorrow that 86 billion
cubic feet of gas were withdrawn from storage in the week ended Dec. 3,
according to the median of 12 analyst estimates compiled by Bloomberg. The
five-year average inventory reduction for the week is 74 billion.
“If we get an extended period of cold weather, it’s going to deplete some of
this storage and give prices an upward thrust,” said Mike Rose, the director of

energy trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “The market
trades with waves of cold.”

Phoenix Capital Research: "Many commentators have posited that the US Federal
Reserve will not hike interest for several years. It is my contention that the
Fed CANNOT raise rates EVER again. The reason for this is that some 80% of the
$600 TRILLION in over the counter derivatives market is based on interest
rates. If even 4% of this is “at risk” and 10% of it goes wrong you’ve wiped out

ALL The equity at the five largest banks in the US."
(via ZeroHedge)

EIA Petroleum Inventories: Crude -3.8M barrels vs. consensus of -1.2M. Gasoline
+3.8M vs. +0.1M.

Prieur du Plessis:The latest Advisors Sentiment report from Investors
Intelligence shows the bulls have edged up to 56.2% from 55.4% a week ago
and 29.4% at the end of August. This equals the high of three weeks ago just

prior to a stock market pull-back.
According to the report, the current data reflect "lots of funds have now been

committed" and calls for caution, especially as the current level for the
bulls is just below the 56.5% reading of December 2007. (As we know so well,
stock markets peaked in October 2007 when the bulls hit a high of 62%.)

"This tax agreement is a disaster for the U.S. fiscal situation," said Howard
Simons, strategist at Bianco Research in Chicago.

(Bloomberg) -- Europe, where a debt crisis prompted bailouts of Greece and
Ireland this year, remains in a “troubling” situation, the head of the
International Monetary Fund said.

The effects of the global financial turmoil “are far from over,” IMF Managing
Director Dominique Strauss-Kahn said today in Geneva, according to a copy of his
prepared remarks. “The situation in Europe remains troubling, and the future is
more uncertain than ever.”

The Dow Jones Industrial Average rose 13.32 points, or 0.1%, to end at 11,372.48. The S&P 500 index rose 4.53 points, or 0.4%, to 1,228.28. The Nasdaq Composite gained 10.67 points, or 0.4%, to 2,609.16.

Gold futures slumped Wednesday, hit by profit-taking, a stronger dollar, and fears China may raise interest rates sooner than anticipated. Gold for February delivery retreated $25.80, or 1.8%, to $1,383.20 an ounce on the New York Mercantile Exchange. Silver stumbled 5.1%, settling at $28.25 an ounce.

Economist Nouriel Roubini on Wednesday voiced concern over a compromise on extending tax cuts struck by US President Barack Obama and Republican leaders, saying the agreement could expose the US to bond vigilantes who will drive up bond yields.

China

2010-12-07T14:44:00.001-08:00

12/7/10 China

China is likely to raise interest rates in the coming days in a demonstration
of the government's resolve to tame inflation, an official newspaper said on
Tuesday.
In a banner headline across its front page, the China Securities Journal said
this weekend offered a "sensitive window" for a rate rise, which would be the
country's second after a surprise increase in October, the central bank's first
rate hike since 2007.
An increase in rates would also put flesh on the bones of Beijing's
announcement late last week that it was switching to a "prudent" monetary
policy from the "appropriately loose" stance of the past two years

European finance ministers ruled out immediate aid for Portugal and Spain or an
increase in the 750 billion-euro ($1 trillion) crisis fund, counting on
European Central Bank bond purchases to calm debt-spooked markets. A week after
handing Ireland an 85 billion-euro lifeline, the finance chiefs voiced
confidence that Spain and Portugal will tame their budget deficits and said the
existing credit line is enough to defend them in an emergency.

China's inflation cycle is at a "critical point," requiring "disciplined and
comprehensive policies," citing Stephen Roach, non-executive Asia chairman at
Morgan Stanley. The Asia nation needs to convince the market that its shift to
a "prudent" monetary policy "has teeth" by adopting tougher anti-inflationary
measures, Roach said.

AGL Resources Inc., the owner of Atlanta's natural-gas utility, agreed to buy
Nicor Inc. for $2.4 billion in cash and stock, almost doubling the number of
gas customers it serves.

The Justice Department is going to announce arrests in a huge crackdown on
investment fraud later today, says Bloomberg. The Department has apparently been

planning a crackdown on Ponzi schemes and stock market manipulations since
August, and arrests are coming soon.

BBC reports: "Customers of one of Ireland's largest banks have been unable to
access their cash accounts through ATMs or online."

"WikiLeaks coined a new type of journalism: scientific journalism. We work with

other media outlets to bring people the news, but also to prove it is true.
Scientific journalism allows you to read a news story, then to click online to
see the original document it is based on. That way you can judge for yourself:
Is the story true? Did the journalist report it accurately? Democratic
societies need a strong media and WikiLeaks is part of that media. The media
helps keep government honest. WikiLeaks has revealed some hard truths about the

Iraq and Afghan wars, and broken stories about corporate corruption." Julian
Assange, The Australian Op-Ed

WTI crude at 2 1/2 year high and silver climbs to 30.50 and gold at 1429.
10-year Treasury yields jump to 3.14%. The two-year note yield gained 11 basis points to 0.53 percent.
Copper surged to a 31-month high in New York and an all-time high in London.

China Buys Most Korean Bonds in 6 Months as Won Falls.

According to the Congressional Research Service, the cost of keeping the tax
cuts will be just over $5 trillion over the next 10 years.

US EIA sees US Natgas production up 3.5% in 2010 (Prev. up 2.5%), down 0.1% in
2011 (Prev. down 1.2%)

The Schork Report: the bottom line is that oil is high (which will adversely
impact demand elasticity for transportation fuels), natural gas values can only
go higher from here and corn values remain stubbornly strong.

Toronto-Dominion Bank is in talks to buy lender Chrysler Financial from private
equity firm Cerberus Capital Management, a source familiar with the matter said
Tuesday.

The American Petroleum Institute reported late Tuesday crude-oil inventories declined by 7.4 million barrels in the week ended Dec. 3. The decline contrasted with analyst expectations of a decline by 1.2 million barrels for the week, according to a Dow Jones Newswires survey of analysts. Gasoline stocks increased 4.8 million barrels, against expectations of an increase of 100,000 barrels. Stocks of distillates, which include heating oil and diesel, rose 1.7 million. They were seen falling by 600,000 barrels.

-U.S. consumers increased their debt in October by the largest amount since July 2008, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt increased $3.4 billion, or a 1.7% annualized rate, in October to $2.4 trillion. Economists had expected a decrease. September consumer credit was revised down to a 0.6% increase compared with the initial estimate of a 1.1% rise. The increase in October was led by non-revolving credit, such as auto loans, personal loans and student loans, which rose $9.0 billion or 6.8%. Revolving debt decreased $5.64 billion or 8.4%. This is the twenty-sixth straight monthly drop in credit card debt.

The Dow Jones Industrial Average finished down 3 points at 11,359, and the Nasdaq added 4 points to finish at 2,598. The S&P 500 closed up less than a point at 1,224, after hitting 1,235.05 earlier in the day, its highest level since 2008.

Julian Assange

2010-12-06T14:45:00.000-08:00

12/6/10 Julian Assange

John Hussman: "Don't take risk in overvalued, overbought, overbullish,
rising-yield environments" - is one of the single most important in terms of
avoiding major, sometimes catastrophic losses....I continue to view Bernanke's
apparent objective for QE2 - to create a "wealth effect" by encouraging
speculation in risk assets - to be dangerously misguided. Historically, the
elasticity of GDP to changes in the stock market is on the order of 0.03 to
0.05, and is transitory at that. In plain English, this means that even large
changes in the value of the stock market do not translate well into changes in
GDP. This is because consumers correctly consume on the basis of what they see
as their "permanent income," and are well aware that changes in volatile
assets tend to be transitory when they are not accompanied by growth in real
output and incomes. Bernanke is not thinking as an economist in this regard. He
is thinking like a witch doctor calling on animal spirits (ooh, eee,
ooh-aah-aah, ting, tang, walla-walla bing-bang)."

- Miner Rio Tinto made a $3.5 billion bid approach for Africa-focused
Riversdale Mining , sending the target firm's shares surging 16 percent and
setting up a potential takeover battle.
Rio's move on Australia's Riversdale is likely to spark a bidding war, as the
company has hard coking-coal projects in Mozambique that could eventually
supply 5-10 percent of the global market for the key steel-making material.

2010 e-commerce spending hit $16.8B over the weekend, up 12% from a year ago.
Bolstered by a record-breaking Cyber Monday, sales tapered off later in the
week, and comScore says the effects of heavy discounting and promotions could
result in soft numbers this week as well.

Jesse's Cafe Americain: "The US stock market as deflated by gold has never
really recovered from the financial crisis. This is a better reflection of the
real economy in which unemployment and underemployment is running at the 17+%
level.The only progress we have seen in stocks is due to the monetary expansion
of the Federal Reserve balance sheet. And most of that expansion has been
channeled to the financial sector where it is being consumed by bad debts,
enormous personal bonuses, and speculation."

AOL Inc, undergoing a radical transformation into the king of content on the
Internet, is actively exploring a breakup involving a complicated series of
transactions that may lead to a merger with Yahoo Inc, sources close to the
plans told Reuters.

Moody's Investors Service has today downgraded Hungary's foreign- and
local-currency government bond ratings by two notches to Baa3 from Baa1.

ZeroHedge: "When we first heard of the latest Wikileaks "cablegate" fiasco, we
speculated that Hillary Clinton may be forced to resign for what is rapidly
becoming the biggest crisis for US foreign policy since the Bay of Pigs. Today,
in an interview with Spanish El Pais, Julian Assange goes one better and says
that if it is proven that he approved the spying on UN officials, then Obama
should resign. As a reminder as per one of the released cables, US Secretary of
State Hillary Clinton asked for UN personnel's telephones, emails, credit card
details and frequent flier numbers. Let's recall that Nixon resigned to avoid
impeachment under somewhat comparable circumstances. The only difference is
that back then Woodward and Berstein were not on the receiving end of what is
becoming an endless barrage of death threats for doing their journalistic duty.
This time around, the "deep throat" is the target of an international witch
hunt, where however is moot: the early attempt by the like of Joe Lieberman to
censor the internet is doomed from the beginning. However, it does show that in
the past 40 years little has changed at the top echelons of power when the
sordid truth of "Standard Operating Procedures" are revealed. And,
unfortunately, things have only gotten worse. Also, keep in mind that Wikileaks
has so far released only a small fraction of the 250,000 cables that will
ultimately be declassified by Wiki. One wonders just how long the world can
maintain the damage control before foreign relations between both friends and
enemies are terminally frayed."

(Bloomberg) -- The biggest slump in copper inventories in six years is
compounding shortages as prices head toward record highs, making the metal a top
pick for Goldman Sachs Group Inc. and Morgan Stanley.
Demand will outpace supply by 367,500 metric tons next year, enough for wires,
pipes and appliances in about 1.8 million U.S. homes, according to the median
forecast of 12 analysts surveyed by Bloomberg. Stockpiles may drop to an
all-time low of less than one week’s usage, said Michael Widmer, a London-based
metals analyst at Bank of America Merrill Lynch. Global exchange inventories
have dropped 22 percent this year, heading for the largest slide since 2004,
data compiled by Bloomberg show.
"That China's GDP is not reliable, especially for local GDP, that is nothing
new," said an economist with a foreign bank who requested anonymity because of
the sensitivity of discussing top national leaders.
"Some of the volume data, such as power and rail freight and even (bank)
credit, are interesting because there is less incentive to massage them at the
local level. But they reveal only part of the truth, not the entire truth," he
said."This would be a useful measure for steel and cement production. I'm not sure
how well it would measure retail sales."

Google eBooks on Monday unveiled eBooks, its own version of digitalized books.
Google is offering more than 3 million titles through its Google eBookstore
and its independent bookseller partners. "With the new Google eBooks Web
Reader, you can buy, store and read Google eBooks in the cloud. That means you
can access your ebooks like you would messages in Gmail or photos in
Picasa-using a free, password-protected Google account with unlimited ebooks
storage," said Google in a statement. Titles on Google's bookstore site were
variously priced from $6.17 to $14.99 while some were also available at no
cost.

The U.S. economy is headed for a new recession, said John Taylor, chairman and
chief investment officer of FX Concepts, and that will likely benefit the
dollar and weigh on commodity prices.
"It's a new recession. We're already growing, but the numbers show that the
U.S. government is still the primary creator of this growth," said Taylor, who
runs the world's largest currency hedge fund with assets under management of
around $8.5 billion.
"I would argue that by the middle of next year, we will be in a recession and
our fiscal hands will be tied." Taylor said Portugal could be the next country
to seek a bailout after Ireland, with Spain after that. This will push the euro
to parity versus the dollar by next year, he forecast.

Gold jumps to 1420 and silver almost at 30. Copper at 402. Wheat rose to a
four-month high in Chicago on concern that unusually heavy rainfall in Australia
will cut the harvest and reduce grain quality, curbing supplies. How about the
damage caused by locusts in Australia.

The Dow Jones Industrial Average ended 19.9 points, or 0.2%, lower at 11,362.19. The S&P 500 lost 1.6 points, or 0.1%, to 1,223.12. The Nasdaq Composite ended 3.5 points, or 0.1%, higher at 2,594.92.

The country’s real estate problems are “underappreciated,” and banks could face another $1 trillion in housing-related losses, Mr. Roubini said in a phone interview with DealBook on Monday. At the same time, he played down the issues in Ireland, Greece, Portugal and Spain, calling the matter “contained” for now. The United States “real estate market, for sure, is double dipping,” Mr. Roubini said. “The apparent increase in prices has been fully reversed, demand is falling, and supply is going to increase.”

"Lawyer for WikiLeak's Julian Assange says arranging to meet police by consent." Earlier today it was announced that in lieu of a physical arrest, Julian Assange is currently undergoing a liquidity one, after earlier today first Swiss NZZ and subsequently the WSJ reported that the Australian's funds in Swiss PostFinance bank have been frozen: "In a statement Monday, WikiLeaks said there was €31,000 in the PostFinance account, belonging to the defense fund and to Mr. Assange personally. WikiLeaks described this money as "frozen."

Facts

2010-12-05T07:37:00.000-08:00

There is propaganda, and there are facts. For anyone seeking just one concise, definitive and completely true (as in fact-, not hope- based) explanation of what has happened to the American economy in the past 2 years, we suggest this presentation by former OMB director David Stockman, whose 10 minute appearance on the CNBC's strategy session left the hosts with absolutely nothing to retort. Among his observations: the government sector for the first time in history is shrinking: "the reason is that governments are broke... we are going to have to cut back government employment." And it gets scarier: "if you take core government plus the middle class economy (65 million jobs), that's the breadwinning economy, if we take some numbers - how many jobs in the "core economy" in November - zero; how many jobs since last December: net zero; how many jobs since the bottom of the recession in June 2009: still a million behind from when the recession ended." As to whether the economy can grow without employment growth: "I can't imagine how it can because employment growth generates income growth which is the basis for spending and saving ultimately and we are not getting income growth out of the middle class." And the stunner: the job "growth" has come almost exclusively from the part-time economy (two-thirds). Why is this a major problem: "there is 35 million jobs in that sector, with an average wage of $20,000 a year: that is not a breadwinning job, you can't support a family on that, you can't save on that. Those jobs will not generate income that will become self-feeding into spending." As for the biggest condemnation, it is reserved to what Zero Hedge has been claiming for two years now is a completely broken market: "I can't explain the market... I don't know what it is pricing today, I don't think the market discounts anything anymore, it is purely a daytraders' market that is trading off the Fed, trading off the headlines. One day it is manic, the next day it is depressive, and we can't draw any conclusions."

Risk/Reward

2010-12-04T07:44:00.001-08:00

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?

Discouraged

2010-12-03T14:18:00.001-08:00

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
consumer.

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
(re)recession."

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
action.

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%.

Unadjusted Unemployment Benefits

2010-12-02T15:46:00.000-08:00

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
Briefing.com.
“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
2009.

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 Amazon.com 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.

Seasonal Hiring

2010-12-01T15:20:00.000-08:00

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 SnagAJob.com 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
economists.

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.

Housing

2010-11-30T13:13:00.001-08:00

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
gauge.

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.

Plutocracy

2010-11-29T15:08:00.001-08:00

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
personnel.

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
ZeroHedge)

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.

Retail Sales

2010-11-28T07:41:00.000-08:00

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 Dealtaker.com, 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."

Small Business Saturday

2010-11-27T07:26:00.001-08:00

11/27/10 Small Business Saturday

"Small Business Saturday recognizes the importance of small businesses to the overall economy and local communities," the American Express website says. "It's a day to support the small, independently owned businesses we can't live without."
According to Civic Economics, for every $100 spent at local small businesses, $68 returns to the community. This return on investment makes it a win-win situation. Small business also provide half of all private sector jobs and represent 97 percent of all employer firms, according to the Small Business Administration. About 60 to 80 percent of jobs created each year for the last decade are attributed to small businesses.
American Express is offering their card members a $25 statement on their credit for a purchase of $25 made at a locally owned independent small business that accepts their credit card on Nov. 27. To redeem the offer register your card here.

The Department of Justice has filed a civil suit against Transocean, saying the drilling giant refuses to turn over documents requested as part of the investigation into the Deepwater Horizon accident.

DeMaurice Smith, the executive director of the National Football League players union, speaking in an interview on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend, said a player lockout next season is a “near certainty” and it would cost the U.S. economy an estimated $5 billion in lost wages, taxes and other revenue if the entire season is canceled.

The Internal Revenue Service's frequently misunderstood wash-sale rule, which is important for year-end tax planning, is on Nov. 30.
THE RULE DICTATES HOW INVESTORS who are long-term bulls on a specific stock, but have lost money on it, can sell the shares to realize a loss on their current year's taxes, yet also maintain the investment. The loss is disallowed if you buy the shares back before 31 days have passed.

Tim W. Wood: "I continue to believe, based on the evidence at hand, that the rally out the March 2009 low is a large scale bear market rally that should ultimately prove to separate Phase I from Phase II of the much larger and ongoing secular bear market. But, just as I told my subscribers before that low was even made, the longer this rally holds up, the more dangerous it becomes. Reason being, it becomes more and more convincing....As for interest rates, my interest rate model is currently telling me that the bias is to the upside in spite of the efforts to keep rates low. I suspect that the natural forces of the bond markets will also have their way over the manipulative efforts. In doing so, this too will have less than desirable impact on the economy. It may be that what my interest rate model is picking up on is the liquidity induced inflation as a result of QE2. Or, on the other hand, perhaps the model is picking up on the ultimate failure of the manipulative campaign. Regardless, until this model changes, the tidal forces for interest rates are now up and I do not see how that is positive for the engineered recovery." Speaking for myself, I continue to believe the best trade for next year is staying short 2-year Treasury bonds. I truly believe the low rate of 0.33% has been seen. It's time to be patient and let reality set in.

A 19-year-old has been arrested in connection with a plot to detonate a vehicle bomb at an annual Christmas tree lighting ceremony in Portland, Oregon, on Friday evening, the Justice Department announced.

Naked Capitalism: "Iceland has the world’s 112th biggest economy, Ireland the 38th, and Portugal the 36th. In contrast, Spain has the world’s 9th biggest economy, Italy the 7th and the UK the 6th. A failure by one of the latter 3 would be devastating for the world economy....Germany and France – the world’s 4th and 5th largest economies – have the greatest exposure to Portuguese and Spanish debt."

South Korea's Marine commander on Saturday vowed "thousand-fold" revenge for a North Korean attack that killed two servicemen and two civilians and prompted an unusual expression of regret from North Korea.

Shoppers who skipped the crowds on Black Friday gave online merchants a 16 percent spike in revenue, according to data released Saturday.
Online shoppers also spent more on the traditional opening day of the holiday shopping season, according to Web research company Coremetrics. The average order rose to $190,80. That's a 12 percent increase over $170.19 on the same day last year.
The solid increase adds to a 33 percent spending increase on Thanksgiving and signs of big crowds in stores.
Shopping on cell phones remained a small piece of the pie. Coremetrics says about 5.6 percent of people logged onto a retailer's website using a mobile device.

ZeroHedge: "A rather indicative poll released by Rasmussen earlier this week finds that a majority of Americans (44%) now believe that the government operates outside the confines of the Constitution, compared to just 39% who believe government does not take liberties with the precepts laid out by the founding fathers (and 17% were busy watching dancing with the stars to have an opinion either way). Some other unflattering findings on US democracy: "Earlier surveys have shown that just one-in-five voters believe that the government today has the consent of the governed. Forty-eight percent (48%) see the government as a threat to individual rights. According to the Declaration of Independence, governments are formed to protect certain inalienable rights." Not surprisingly, politicians are shown to not only be usurping and incompetent despots but biased as well: "As is often the case, there’s a wide gap between the perceptions of the Political Class and those of Mainstream voters when it comes to the federal government. Eighty-three percent (83%) of Political Class voters say the government now operates within constitutional limits, but 62% of those in the Mainstream don’t share that view." Most worryingly, "nearly two-out-of-three voters (65%) are at least somewhat angry at the current policies of the federal government, including 40% who are Very Angry." That's 65% with not even a whiff of austerity on the horizon.."

Black Friday

2010-11-26T13:50:00.000-08:00

11/26/10 Black Friday

The US needs to take urgent action to cut its debt in order to prevent the next
financial crisis, which may start in Washington, Sheila Bair, chair of the
Federal Deposits Insurance Corp. (FDIC) wrote in an editorial in the Washington
Post.

Del Monte Foodsagreed to be bought for $19 a share, or about $4 billion in cash,
by a group led byKohlberg Kravis Roberts, in one of the biggest private equity
deals of the year.

The euro zone's sovereign debt crisis escalated as the market homed in on Spain

as another potential weak spot, leaving officials scrambling to quell
investors' fears.

Rob Hanna: "Thanksgiving week has had some very bullish tendencies on both
Wednesday and Friday. Interesting about the current week is that both Monday

and Tuesday have closed down in the SPX. Going back to 1961 I looked at
performance on Wed through Fri after Mon and Tues were lower. There were only
eight other instances." Wednesday was strong but Friday is very weak in the
pre-opening market. China's Hang Seng was down more than 3/4th's of one percent,

Japan was down 4-10th's of a percent and Jakarta was down 1.6%...so a fair bit
of red in Asia. the UK was down almost 1.6%, France was down more than 1 3/4%
and even those thrifty Germans were down 1.3 percent.

North Korea warned Friday that U.S.-South Korean plans for military maneuvers
put the peninsula on the brink of war, and appeared to launch its own artillery

drills within sight of an island it showered with a deadly barrage this week.

Bullish sentiment, expectations that stock prices will rise over the next six
months, rose 7.4 percentage points to 47.4%. This was the 12th consecutive week

that bullish sentiment has been above its historical average of 39%.
Neutral sentiment, expectations that stock prices will remain essentially flat
over the next six months, edged up 0.4 percentage points to 27.9%. This was the

16th consecutive week that neutral sentiment has been below its historical
average of 31%.
Bearish sentiment, expectations that stock prices will fall over the next six
months, fell 7.8 percentage points to 24.7%. This is a four-week low for
bearish sentiment. The historical average is 30%.

Stock markets will close at 10 a.m. PST. Bond markets will close at 11 a.m. PST.

According to the London-based daily al-Hayat, the WikiLeaks release includes
documents that show Turkey has helped al-Qaeda in Iraq -- and that the United
States has supported the PKK, a Kurdish rebel organization that has been waging

a separatist war against Turkey since 1984, the Washington Post reported.

China's Dalian Commodity and Shanghai Futures Exchanges will hike margins on
virtually every single commodity traded in China.

China foreign minister meets North Korean ambassador, urges calm and dialogue
with South Korea - Chinese foreign minister.

Anglo Irish Bank Corp. had its long- term counterparty credit rating lowered to
below investment grade by Standard & Poor’s, which cited concerns about
sovereign support for the bank.

S&P lowered the Dublin-based lender’s rating six levels to B, or junk, from BBB,

it said in a statement today. The bank remains on CreditWatch with “negative
implications,” S&P said.

Seeking Alpha: "Sources say the first Chrome OS netbooks will ship in the next
few weeks, and they'll be Google-branded but built by a third-party hardware
maker. The Chrome netbook will be so fast it's expected to boot up in seconds,
making it the 'Mario Andretti' of the field."

An estimated 138M shoppers descend on stores this weekend - up 4M from 2009.

New accounting rules in Spain may cause a tripling of foreclosed homes next
year. Banks must now make provisions for bad loans after 12 months instead of
as long as 72 months, making it more likely they will try to unload
non-performing assets.

U.S. stock indexes fell about 1 percent at the open on Friday and weakness
continued on this shortened market. The Dow Jones Industrial Average fell 110.15 points, or 1%, to 11,077.13, with all but one of its 30 components trading lower. The S&P 500 index dropped 9 points, or 0.8%, to 1,189.56, weighed down the most by the materials sector. The Nasdaq Composite lost 12.25, or 0.5%, to 2,531.07.

FrontPoint Partners, a $7.5 billion hedge fund currently embroiled in the U.S. government's fast-moving insider trading probe, has been asked to return $3 billion to its investors.

Gold for December delivery fell $10.60, or 0.8%, to end at $1,362.40 an ounce. Among other metals, December silver fell 83 cents to $26.70 an ounce, while copper for delivery the same month ended down 1 cent at $3.75 a pound.

Happy Thanksgiving

2010-11-25T06:14:00.000-08:00

11/25/10 Happy Thanksgiving

(Bloomberg) -- South Korean Defense Minister Kim Tae Young resigned two days after North Korea fired artillery onto the South’s territory for the first time in half a century, as the country vowed to stiffen its defenses.
His resignation was accepted by President Lee Myung Bak and a replacement will probably be announced tomorrow, according to a statement on the website of the presidential office. Kim had offered to resign in May after the sinking of the South Korean warship Cheonan in March, according to the statement.

European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro.
“Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.”

BEIJING/SINGAPORE (Reuters) - China's crude oil imports from Saudi Arabia will likely rise 11 percent next year to hit one million barrels per day, a pace slightly faster than 2010 but off the heady increases in previous years, industry officials told Reuters.
China's refining expansion is expected to moderate next year and rising competition of mostly Russian oil via a Siberian pipeline means import growth for the high-sulphur Saudi oil would be limited, they said.

The U.S. Energy Information Administration reported that natural gas inventories fell by 6 billion cubic feet last week, more than the consensus estimate of a withdrawal of one billion cubic feet.
"Seeing a negative sign next to that number" was enough to send the market higher, said Cameron Horwitz, an analyst with Canaccord Genuity. Some traders have been counting on winter's withdrawals from storage lifting the market, which has been shackled by ample supplies for much of the year.
Working gas in storage was 3,837 Bcf as of Friday, November 19, 2010, according to EIA estimates. This represents a net decline of 6 Bcf from the previous week. Stocks were 2 Bcf higher than last year at this time and 334 Bcf above the 5-year average of 3,503 Bcf. In the East Region, stocks were 74 Bcf above the 5-year average following net withdrawals of 10 Bcf. Stocks in the Producing Region were 217 Bcf above the 5-year average of 1,032 Bcf after a net injection of 3 Bcf. Stocks in the West Region were 43 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,837 Bcf, total working gas is above the 5-year historical range.

For each new morning with its light,
For rest and shelter of the night,
For health and food, for love and friends,
For everything Thy goodness sends.
~Ralph Waldo Emerson

Ireland

2010-11-25T05:26:00.001-08:00

11/24/10 Ireland

A final figure for Ireland's proposed aid package from the European Union and
International Monetary Fund hasn't been determined, but a figure of around 85
billion euros ($113.8 billion) has been discussed, Irish Prime Minister Brian
Cowen told parliament on Wednesday, according to Reuters. "Negotiations are
continuing. These talks are proceeding as quickly as possible but we have to
see how it can be finalized before government can consider the matter further,"
Cowen said.

The Irish press was abuzz with reports Wednesday morning that the country's
government, fresh off its request for a bailout from the European Union, would
take control of Bank of Ireland, the last large Irish lender to stay outside
government control thus far.
The government already owns a 36 percent stake in Bank of Ireland, and The Irish
Independent, the daily with the largest circulation, said that the government
could act within 72 hours to take a majority stake.
Likewise, the state's controlling stake in Allied Irish Bank, the other of the
two large banks, may rise as high as 99.9 percent. The Irish finance ministry
was not immediately available for comment, while The Bank of Ireland declined
to say anything on what it called speculation, although stockbrokers in Dublin
confirmed the likelihood of the takeover to DealBook.

Ireland’s debt rating was lowered two steps by Standard & Poor’s and may be cut
again as the government prepares to unveil a four-year deficit-cutting plan and
contagion spread through the rest of the euro region.

Industrial new orders in the 16-nation euro zone fell 3.8% in September, the
European Union statistics agency Eurostat reported Wednesday. Compared to the
same month last year, orders were up 13.5%. Economists had forecast a 3%
monthly fall and a 15% year-on-year rise. The decline follows a
downwardly-revised 5.1% monthly gain in orders in August. Eurostat had
initially estimated a 5.3% rise in August orders.

Sales of new single-family homes fell 8.1% in October to a seasonally adjusted
annual rate of 283,000, according to data released Wednesday by the Census
Bureau and the Department of Housing and Urban Development. Economists polled
by MarketWatch had expected an annual rate of 310,000. The government
estimated that there was an 8.6-month supply of homes at the current sales
rate. The median sales price fell a record 14%, hitting $194,900 in October,
the lowest level since 2003. Sales fell in most regions, declining 23.9% in the
West, 20.4% in the Midwest and 12.1% in the Northeast. In the South sales
gained 3.1%.
U.S. house prices fell 0.7% on a seasonally adjusted basis from August to
September, reported the Federal Housing Finance Agency on Wednesday. The FHFA's
House Price Index for the July-to-August period was revised from an initial
estimate of an increase 0.4% to 0.0% or flat. U.S. house prices fell 1.6% in
the third quarter of 2010 from the second quarter, according to the FHFA's
purchase-only house price index. The HPI, calculated from home sales price
information from Fannie Mae and Freddie Mac-acquired mortgages, fell 3.2% from
the third quarter of 2009 to the third quarter of 2010.

The cost of insuring Spanish and Portuguese government debt against default
hit record levels Wednesday, while the cost of protecting Irish debt neared
levels seen ahead of Dublin's decision last weekend to seek a bailout. The
spread on five-year Portuguese credit default swaps, or CDS, widened 21 basis
points to 510 basis points, according to data provider Markit. That means it
would cost $510,000 annually to insure $10 million of Portuguese debt against
default, up from $489,000 on Tuesday. The Spanish CDS spread widened to 312
basis points from 310, Markit reported, while the Irish CDS spread widened 16
basis points to 595. The Belgian CDS spread also hit a record, widening to 155
basis points from 147.

The Ifo Institute's German business-climate index posted an unexpected jump in
November to 109.3 from a reading of 107.6 in October, news reports said.
Economists had forecast the reading to remain unchanged from October.

China and Russia will stop using the U.S. dollar to settle bilateral trade and
instead use the ruble or the yuan, though the move is not meant to signal a
challenge to the dollar, according to reports Wednesday. China's Premier Wen
Jiabao and Russian President Vladamir Putin made reference to the new currency
trade pact late Tuesday, following meetings in St. Petersburg that also saw the
signing of bilateral trade and energy-cooperation agreements, according to a
report in the state-run China Daily. "About trade settlement, we have decided
to use our own currencies," Putin told reporters, according to the report.

The Commerce Department reported year-over-year inflation rose 0.9% in
October. For September, the year-over-year rate for these core personal
consumption expenditures, which exclude food and energy, gained 1.2%. The
Commerce Department also reported Wednesday that personal income rose 0.5% in
October, compared with 0.3% as expected by economists polled by MarketWatch.
Spending gained 0.4%, matching, Wall Street's expectations. Real disposable
incomes rose 0.3% in October. The personal consumption expenditure price index
rose 0.2% in October, after a gain of 0.1% gain in September. This inflation is
up 1.3% in the past year. There was no change in the core PCE index for
October, as expected by economists.

U.S. online spending this holiday is now expected to rise by 11 percent over
last year, comScore said on Tuesday, marking the second time the analytics
firm has raised its closely watched view.

Today is the busiest day of the entire year for traveling.

Tiffany & Co's third-quarter results handily beat Wall Street's sales and
profit forecasts, benefiting from strong overseas growth and surging U.S.
luxury spending, and the upscale jeweler raised its full- year outlook, saying
it expects strong holiday sales.

The Mortgage Bankers Association's seasonally adjusted purchase applications
index jumped 14.4 percent to 205.0 in the week ended Nov. 19, the highest since
the week ending May 7, the MBA said on Wednesday. The refinancing index slumped
1 percent to 3,793.6.

The composite index, which includes loans for home purchases and refinancings,
increased 2.1 percent to 728.8, the MBA said.

"The increase in purchase applications last week aligns with other incoming
data suggesting that consumers are feeling somewhat more confident with their
financial situation," Michael Fratantoni, the MBA's vice president of research
and economics, said in a statement.

The number of workers who filed new claims for unemployment benefits dropped
34,000 last week to 407,000, the lowest level since July 2008, the U.S. Labor
Department reported Wednesday. There were no special factors or unusual events,
a Labor spokesman said. Economists polled by MarketWatch had expected claims to
fall to a seasonally adjusted 435,000 in the week ended Nov. 20. Before the
latest data claims in 2010 had ranged from a high of 504,000 to a low of
427,000. The four-week average of initial claims decreased by 7,500 to 436,000,
also a two-year low. 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 142,000 to
4.18 million in the week ended Nov. 13. Altogether, 8.53 million people were
getting some kind of state or federal benefit in the week ended Nov. 6, the
latest data available. That was down 316,400 from the prior week.
However, non-seasonally adjusted claims increased by 45k.

Orders for U.S.-made durable goods fell 3.3% in October -- the largest decline
since January of 2009 -- as transportation orders fell, the Commerce Department
reported Wednesday. Economists polled by MarketWatch had expected a decline of
0.2%. Excluding transportation, new orders fell 2.7% in October - the largest
decline since March of 2009. Core durable-goods orders, which are orders for
capital goods excluding defense and aircraft, fell 4.5% in October after a 1.9%
rise in September. Shipments of durable goods fell 0.9% in October, while
inventories rose 0.4%. Durable-goods orders in September were revised higher to
a gain of 5%, compared with a prior estimate of a 3.5% increase. Durable goods
are expensive items designed to last three years or longer, and while the data
is volatile from month to month, analysts see a trend in orders as a valuable
leading economic indicator.
"Inventories of manufactured durable goods in October, up ten consecutive
months, increased $1.3 billion or 0.4 percent to $316.7 billion. This followed
a 0.7 percent September increase."

ZeroHedge: "the admission by the IEA that we will not be achieving past levels
of energy growth should be the most gigantic red flag in history, at least to
those who might care that their money or other paper-based forms of wealth be
worth something in the future. What if that future growth does not emerge?
What happens when the collateral for a loan goes sour? The IEA report
indicates an enormous set of risks for an over-leveraged world reliant on
constant growth.
The bottom lines are these:
* The IEA now admits that conventional crude oil peaked in 2006.
Permanently. Any gains from here are due to contributions from unconventional
oil and natural gas-to-liquids.
* Under no scenario envisioned will future growth in fossil fuel supplies be
equal prior rates of growth.
* Energy from here on out is going to be (much) more expensive.
I cannot state this strongly enough: The WEO 2010 report is an official
admission that Peak Oil is not only real, but it's already here."
Today is the busiest day of the entire year for traveling.

Jessie's Cafe American: "These markets are riddled with control frauds, but they
are the works of men. So while they can be oppressive, they are hardly
omnipotent. "

Ed Harrison: "Dan Alpert, managing partner at Westwood Capital, thinks that
banks are under-reserving and that this will come back to haunt them when house
prices fall in "the final leg down" of the housing crisis. That is the right
view if you read between the lines of the last post from Annaly Capital
Management. I am in full agreement here that loan loss provisioning is
artificially boosting earnings (and bonuses) when more prudence would be
warranted. In an environment of permanent zero (PZ), this means trouble."

The IMF’s Strauss-Kahn warned that only half of bank losses have been
recognized and that many banks were undercapitalized. As of Sept, the IMF had
estimated that banks held $1.5 trillion in toxic assets.

Housing inventory decreased from September 2010 to October 2010, but inventory
increased 8.4% YoY in October. This is the largest YoY increase in inventory
since early 2008.

The nuclear-powered USS George Washington, which carries 75 warplanes and has a
crew of over 6,000, left a naval base south of Tokyo and would join exercises
with South Korea from Sunday to the following Wednesday, U.S. officials in
Seoul said.
"This exercise is defensive in nature," U.S. Forces Korea said in a statement.
"While planned well before yesterday's unprovoked artillery attack, it
demonstrates the strength of the ROK (South Korea)-U.S. alliance and our
commitment to regional stability through deterrence."
North Korea said the South was driving the peninsula to the "brink of war"
with "reckless military provocation" and by postponing humanitarian aid, the
North's official KCNA news agency said. The dispatch did not refer to the
planned military drills.

The University of Michigan/Reuters consumer sentiment index rose to 71.6 in
November from 67.7 in October.

Market talk of takeover speculation at Cliffs Natural Resources. We've had a
nice gain from the Spring of 2009. That was my top risk/reward/value at $15.
That was about a $105 drop in price at that point. Hard to believe.

Portugal will be forced to take a bailout, and then Spain will become a target,
as there's "little to stop the contagion" in the eurozone, says Morgan Stanley
economist Joachim Fels. It reaches a point where "governments will say ‘enough
is enough, and we will rather borrow from the EFSF at a sensible rate.'"

The ECRI's Weekly Leading Index rose to a 27-week high of 126.4, from 124.2.
Annualized growth rose to -3.1% from -4.5% last week.

China's current-account surplus widened in the third-quarter to slightly more than double its year-earlier level, the country's foreign-exchange regulator reportedly said in a statement Thursday. The July-September surplus totaled $102.3 billion, up 103% from the third quarter of 2009, according to several reports citing the State Administration of Foreign Exchange statement. The stated surplus represented 7.2% of gross domestic product, according to Dow Jones Newswires, and compared to the second-quarter surplus of $72.9 billion, which marked a 35% year-on-year rise.

North Korea on Thursday refused a proposal to hold military-to-military talks in the wake of Tuesday's artillery attack that left two civilians and two South Korean marines dead, according to a report from South Korea's Yonhap news agency. The proposal came Wednesday from the U.S.-led United Nations Command in South Korea.

North Korea warned Thursday it would launch more attacks on South Korea if its southern neighbor makes more "reckless military provocations," according to a Reuters report citing North Korean state media. The report quoted a statement from the North Korean military as saying Pyongyang "will wage second and even third rounds of attacks without any hesitation, if warmongers in South Korea make reckless military provocations again." South Korea and the U.S. are due to begin a long-planned military exercise on Sunday. The statement came as South Korean President Lee Myung Bak ordered more forces be deployed to five islands near the western border where North Korea's artillery attack occurred earlier in the week, according to the Kyodo news agency.

The Dow Jones Industrial Average jumped 150.91 points, or 1.4%, to end at 11,187.28. The S&P 500 index gained 17.62 points, or 1.5%, to 1,198.35, led by a 2% gain in industrials and consumer discretionary shares. The Nasdaq Composite rose 48.17 points, or 1.9%, to end at 2,543.12.

Korea

2010-11-23T14:08:00.001-08:00

11/23/10 Korea

North and South Korea exchanged artillery fire on Tuesday after dozens of shells
fired from the North struck a South Korean island near the countries’ disputed
maritime border, South Korean military officials said. Two South Korean
soldiers were killed, 15 were wounded and three civilians were injured, said
Kiyheon Kwon, an official at the Defense Ministry. The South Korean military
went to “crisis status,” and fighter planes were put on alert but did not take
off.

In Asia, the Hang Seng index fell 1.8%, extending a 1% opening fall. The
Shanghai Composite index was off 2.5%, with markets in broad retreat and banks
and housing-related stocks sharply lower. European markets also got off to a
weaker start.

National Economic Committee Deputy Director Diana Farrell and Treasury
Department Assistant Secretary for Financial Institutions Michael Barr are
planning on leaving their posts "within weeks." The departures would follow
those of Office of Management and Budget Director Peter Orszag and National
Economic Committee Director Lawrence Summers, who is slated to leave next
month.

J. Crew Group Inc. is on the verge of a takeover by private equity firms TPG
Capital and Leonard Green & Partners at $43.50 per share, or about $3 billion,

the Wall Street Journal reported late Monday. TPG is expected to acquire 75% of

the firm, with the rest to be held by Leonard Green, according to the report
which cited people familiar with the mater. A deal could be announced later in
the day, the report said. Shares of J. Crew closed at $37.65 Monday, but rose
to $38.00 in after-hours trade. The deal also includes a "go-shop" provision
where J. Crew can solicit higher offers through Jan. 15 beyond the holiday
season.

Hewlett-Packard Co raised fiscal 2011 results forecasts.

(Bloomberg) -- China’s biggest banks are close to reaching annual lending quotas

and plan to stop expanding their loan books to avoid exceeding the limits,
according to four people with knowledge of the matter.

Ireland's banks are effectively up for sale, central bank Governor Patrick
Honohan said on Tuesday as Dublin sought aid from the European Union and
International Monetary Fund to prop up its lenders.

Falling profits and tighter margins will prompt banks to close 5,000 branches
nationwide in the next 18 months, says Meredith Whitney, or roughly 6% of the
country's branches.

Premier Wen Jiabao’s cabinet last week announced it will sell grain, cooking-oil

and sugar reserves, ordered an end to tolls on trucks carrying produce and
threatened price controls to rein in a 10 percent inflation rate for food.
Because the measures would do nothing to counter the 54 percent surge in money
supply over the past two years, the risk is they will prove insufficient to cope

with the challenge.

“They are just not addressing the fundamental problem at all,” said Patrick
Chovanec, an associate professor at Beijing’s Tsinghua University. With the
expansion of credit and cash in the economy stemming from China’s response to
the global crisis, “you’re sitting on a volcano,” said Chovanec.

The Automatic Earth: "The leverage of a credit expansion creates excess claims
to underlying real wealth, and that means we are all playing a giant game of
musical chairs, with perhaps one chair for every hundred people. Extend and
pretend is the period of time when the music is still playing and everyone is
frantically dancing, even those who understand the game, as many of them are
arrogant enough to think they will be able to get out at a top. This will prove

not to be true for many, hence even many very wealthy people are going to be
ruined, as they were in the Great Depression. To use another analogy, cashing
out at a top bears some resemblance to a fire in a theatre, where everyone is
trying to get out at once through a small exit.
This is not going to play out slowly, although the build up can be tortuously
slow. People should be thinking of the extra time they have had as a result of
an extended rally as a precious gift, not as a reason for complaint.
Deleveraging will come soon enough, and when it does it will be devastating.
We

should appreciate every day we get before it begins in earnest, as an
opportunity to put our houses in order rather than to wring another ounce of
profit out of a dying system by continuing to play the game. We need to walk
calmly away from the game before the music stops in order to minimize the
consequences of being wrong. Early is fine, but late is not."

China is banning the hoarding of oil, coal and other key commodities, seeking
to ensure supplies and cool prices that have surged to politically volatile
levels despite repeated moves to curb inflation.

Ireland’s plan to seek a European rescue risks escalating, rather than
alleviating, the sovereign debt crisis as investors turn their focus to the
high budget- deficit nations of southern Europe.

China's Rare Earth Exports Dropped 77% in October After Export Quota Cut. Rare
earth exports from China, the world’s biggest supplier, dropped 77 percent in
October from a month earlier, the General Administration of Customs said.

"Spanish 3-month bill auction fail - debt agency sells €3.26bn vs €4-5bn
indicated, at avg yield of 1.743% vs 0.951% prior"

The Oil Drum: "In September the state of California hit a new high in food
stamp

benefits, crossing the 6 billion dollar mark on an annualized basis. Over the
past year in California alone the total number recipients of the federal SNAP
program (supplemental nutritional assistance program) rose by 16.3%. In many of

the big counties of California however, food stamp usage rose even faster.
As previous readers of this blog understand, it’s useful to look at the car
dependent regions of southern California as they are emblematic of the state’s
post peak-oil, economic breakdown. After all the food stamp program is really a

food and energy program, which frees up household cash for gasoline. In San
Bernardino County, for example, with its population of two million the number
of SNAP recipients has now crossed the 300,000 level. Yes, a full 15% of that
county is now on food stamps."

Submitted by Gonzalo Lira on Mon, 22 Nov 2010
In the United States, if a policeman stops you for a traffic violation, and you

offer him a $20 bill to forget about the whole thing, you’ll likely end up in
jail.
But if you leave your Federal government job and go work as a consultant to the

very industry you used to regulate, you won’t go to jail—you’ll grow
rich.Very rich.

Bernanke: “As currently constituted, the international monetary system has a
structural flaw: It lacks a mechanism, market based or otherwise, to induce
needed adjustments by surplus countries, which can result in persistent
imbalances.”

Gross domestic product growth was revised up to an annualized rate of 2.5
percent from 2.0 percent as exports, and consumer and government spending were
stronger than initially thought, the Commerce Department said in its second
estimate.
Economists had expected GDP growth, which measures total goods and services
output within U.S. borders, to be revised up to a 2.4 percent pace. The
economy expanded at a 1.7 percent rate in the second quarter. BLS: "The
acceleration in real GDP in the third quarter primarily reflected a sharp
deceleration in imports and accelerations in private inventory investment and
in PCE that were partly offset by a downturn in residential fixed investment
and decelerations in nonresidential fixed investment and in exports."

China started allowing the yuan to trade against the Russian rouble in the
interbank market from Monday as policymakers promote the currency's use in
global trade and finance.

Irish PM said the government will resign after passing the country’s
budget. German Chancellor Angela Merkel on Tuesday said the European single
currency faces a difficult challenge in the wake of Ireland's financial crisis,

news reports said. "We're in an extraordinarily serious situation, as far as
the situation of the euro is concerned," Merkel said.

The Markit euro-zone composite purchasing managers index rose to a three-month
high of 55.4 from 53.8 in October, topping expectations for a reading of 53.9.

Sales of existing homes fell 2.2% in October, according to a report released
Tuesday, with activity remaining mired near record lows as worries over prices,

a glut of foreclosed properties, restrictive credit and high unemployment
combine to weigh on the market. The National Association of Realtors reported
that sales fell to a seasonally-adjusted annualized rate of 4.43 million after
a 10% pick-up in September. Year-over-year, sales fell 25.9%. The number wasn't

a surprise as pending-home sales data suggested such a decrease; economists
polled by MarketWatch expected a pace of 4.45 million units in October.
“With high unemployment and falling home prices, there will likely continue to
be a large number of homeowners falling into default,” Michelle Meyer, a senior
U.S. economist at Bank of America Merrill Lynch Global Research in New York,
said before the report. “It will take years to equilibrate the housing market.”

Oct. Mass Layoffs: 1,651 mass layoff events (at least 50 workers), resulting in
148K job losses - up 121 layoff events from September. Associated initial
claims increased 9,389.

The nation’s workers may be struggling, but American companies just had their
best quarter ever.

American businesses earned profits of $1.66 trillion at an annual rate in the
third quarter, according to a Commerce Department report released Tuesday. That

is the highest figure recorded since the government began keeping track over 60

years ago, at least in nominal or non-inflation-adjusted terms.
The move will help "facilitate bilateral trade between China and Russia and
help develop yuan trade settlements," according to a statement published on the
website of the China Foreign Exchange Trade System (CFETS), a subsidiary of
the People's Bank of China.

Brazil's Bovespa index (BVSP) dropped 2.2%, facing its biggest percentage
decline since mid-October. Mexico's IPC (IPC) fell 0.9% and Chile's IPSA (IPSA)
lost 0.8%. Argentina's 14-stock Merval index (MERV) fell 2.5%. Trading in
Argentina was closed on Monday.

Doug Kass thinks terrorists send investors scrambling – not with guns or bombs
but using the Internet as a weapon. He tells the desk “I believe cyber crime is
going to explode exponentially next year as the web is invaded by hackers.”And
he thinks they target the foundation of capitalism.
”I think we see a specific attack on the NYSE,” he says. “The aftermath will
have a profound impact and cause a week-long hiatus in trading as well as a
slowdown in travel.” Yup, you read that right – a week long hiatus in trading.
How do you prepare for something like that?
”I’d make sure to have a large amount of cash in my portfolio,” he says.

St. Louis Fed's Track the GDP charts tell an interesting story: The current
expansion, which began in Q2 2009, is significantly weaker than average, mostly
due to massive cutbacks in consumption. The only real strength seems to be
coming from exports - likely thanks to a weak dollar.

Crude-oil inventories for the week ended Nov. 19 rose 5.2 million barrels, the American Petroleum Institute said late Tuesday. Inventories of gasoline declined 499,000 barrels, while stockpiles of distillates declined 311,000 barrels. The trade group data comes ahead of the more closely watched government report due Wednesday. Analysts polled by Dow Jones Newswires expect a 1.8 million-barrel decline for crude inventories, a drop of 1 million barrels for gasoline supplies, and a decline of 1.5 million barrels for inventories of distillates. Crude ended the day off 0.6% at $81.25 a barrel.

The Dow Jones Industrial Average fell 142.21 points, or 1.3%, to 11,036.37. The S&P 500 index dropped 17.11 points, or 1.4%, to 1,180.73, weighed down by its energy and materials sectors. The Nasdaq Composite fell 37.07 points, or 1.5%, to 2,494.95.

The Federal Reserve's governors and regional presidents have grown more sour on growth and unemployment, with some saying it could take more than six years for the jobless rate to return to normal levels, according to a summary of projections released Tuesday. Their "central tendency" is for the economy to grow 2.4% to 2.5% this year, down from expectations of 3% to 3.5% in June. Next year, they see the economy accelerating to 3% to 3.6% growth, followed by 3.6% to 4.5% growth in 2011 and 3.5% to 4.6% growth in 2013. The 2011 forecast is notably slower than the 3.5% to 4.2% prediction they made in June. And this muted growth won't do much to alter the unemployment rate. The Fed members see the jobless rate between 9.5% and 9.7% this year, 8.9% to 9.1% in 2011, 7.7% to 8.2% in 2012, and a still-elevated 6.9% to 7.4% in 2013. That compares to June projections of 9.2% to 9.5% unemployment in 2010, an 8.3% to 8.7% unemployment rate in 2011 and a 7.1% to 7.5% projection for 2012.

China

2010-11-22T14:01:00.001-08:00

11/22/10 China

China is seeking to curb rising coal prices through cooperation with coal
producers and by stopping provincial restrictions on coal shipments, according
to a state media report Monday. The National Development and Reform Commission,

China's economic planning body, called on the miners to "boost
self-discipline," according to a Xinhua news agency report. Local governments,
meanwhile, were told to allow the free sale of coal, as some had restricted
coal sales in an effort to integrate resources, or had even required those
shipping coal out of their province to apply for permission to do so, the
report said. "Domestic coal prices are now higher than the international price
due to the high profits of domestic coal producers. Some power-generators had
to import coal," the report quoted an unnamed NDRC source as saying.

China on Monday added the Russian ruble to the currencies traded against the
yuan in its onshore markets, according to reports. The Russian currency joined
the U.S. and Hong Kong dollars, the euro, yen, British pound and Malaysian
ringgit as units offered on the central bank's China Foreign Exchange Trade
System. Chinese officials said yuan/ruble forwards and swaps may be offered in
the future, according to Dow Jones Newswires. The yuan will be allowed to move
5% on either side of a daily parity rate with the ruble, the same limit as the
Chinese currency's moves against the U.S. dollar. The yuan changed hands at
4.6711 rubles in early Monday trading, according to Reuters.

Novell Inc. said on Monday that it has agreed to sell itself to Attachmate
Corp. for $6.10 a share, or about $2.2 billion in an all cash transaction. At
the same time, Novell said it will sell certain intellectual property assets to

CPTN Holdings LLC, a consortium of technology companies organized by Microsoft
Corp for $450 million in cash, "which cash payment is reflected in the merger
consideration to be paid by Attachmate," Novell said in a press release
unveiling the deal. The $6.10 a share buyout price is a 9% premium to Friday's
closing price and a 28% premium to the company's closing price ahead of a rival

buyout offer made on March 2, 2010, by Elliott Associates, L.P.

Rob Hanna: "Monday and Tuesday before Thanksgiving don’t seem to carry a
sizable

edge. Monday’s total return was actually negative until 2008 when it posted a
gain of over 6%. Wednesday and Friday surrounding Thanksgiving have shown
strong upside tendencies and the Monday after has shown a sizable downside
tendency."

John Hussman: "Investors have failed to recognize the wrong lesson that they
learned. With the exception of the market bubble that took the relationship
between yields and subsequent returns outside the oval, the historical evidence

is very consistent that low yields (elevated valuations) are accompanied by
dismal subsequent returns. At present, the yield on the S&P 500 is just 1.95%.
This level can be expected to be followed with S&P 500 total returns of about
2.2% annually over the coming decade, with a confidence interval that easily
includes zero. Based on normalized earnings, our projections are somewhat
better, at about 4.8%. Meanwhile, our estimate based on forward operating
earnings (see Valuing the S&P 500 Using Forward Operating Earnings) gives a
10-year total return projection of about 4.7% annually. Again, this is not
simply a dividend story."

Google is in advanced talks to buy coupon site Groupon for around $2.5
billion, The Post has learned. “It will probably happen in the next month,” a
source close to the talks said.

Chinese central bank adviser Xia Bin said the nation should further tighten
monetary policy next year because of pressure of excess liquidity at home and
abroad. China should also tighten capital control and change real interest
rates to positive from negative at an appropriate time, Xia said.

Chinese inflation may reach 6.3% sometime next year, citing Tao Dong, a Credit
Suisse Group AG economist in Hong Kong. China may raise interest rates and the
reserve requirement ratio by at least 150 basis points each over the next year
to fight inflation, Tao said.

Wal-Mart Stores Inc said it will match rivals' prices on "Black Friday,"
upping the ante in the battle to win sales on what is considered to be the
kick-off to the U.S. holiday shopping season and a gauge of how overall holiday
retail sales will shape up.

RealtyTrac: "The potential liability of the GSEs is a matter of debate but
there's little doubt that the final total will be enormous.”

China's Finance Ministry to Sell $1.2 Billion of Yuan Bonds in Hong Kong.

The Dow Jones Industrial Average fell 24.97 points, or 0.2%, to 11,178.58. Shares of Hewlett-Packard, up 1.8%, led the gain among blue-chips, ahead of the computer maker's earnings afer the close. The S&P 500 fell 1.89 points, or 0.2%, to 1,197.84. The Nasdaq Composite rose 13.90 points, or 0.6%, to 2,532.02.

ZeroHedge: "Overall, selling by S&P500 insiders was 8,279.5x times greater than buying (per Bloomberg). There were 5 insider buys for a total of $150,673, and 117 sales for a total of $1,247,500,249.

Ireland

2010-11-21T07:40:00.000-08:00

11/21/10 Ireland

Doug Noland: "I find it embarrassing - to blame our trade partners and Creditors
for our predicament. Worse yet, it is frightening that there is obviously no
plan of attack for dealing with our nation's structural issues. The
Geithner/Bernanke "global rebalancing" gimmick is to have China and the
"developing" economies inflate domestic demand and stimulate imports. In the
meantime, we stay the course with massive deficits, monetization and near-zero
interest rates. This approach has no chance of rectifying our deep structural
impairment nor resolving global imbalances. It does, however, increase the
odds of a crisis of confidence in our debt markets and currency....It is my
view that a world financial apparatus dominated by marketable debt instruments
is inherently unstable. Implement a monetary policy regime to manage
marketplace liquidity and asset prices at your own peril. Be prepared for market
dependency and ever-increasing liquidity injection requirements. Such a regime
will reward the savviest speculators and ensure acute systemic vulnerability.
To be sure, recent notions of perpetual QE inflated global markets
indiscriminately. The "liquidity trade" threw caution to the wind. Liquidity
overabundance also pushed inflationary forces in China and throughout Asia
into the danger zone....Our policymakers are acting to the detriment of our
Creditors. They speak in a tone that does not inspire confidence and may
likely antagonize. The Chinese, in particular, can be counted on to act in
what they perceive as their own best interest. They today confront serious
inflation, "hot money" and overheating issues. As such, what has appeared as
favorable prospects for continued global liquidity overabundance now look a
lot less certain. Global yields were on the rise again this week, with
heightened attention to structural debt issues. U.S. municipal bonds were
hammered. My premise has been that the markets will inevitably discipline
Washington. This may occur after it works its way up the food chain."

Traffic to the huge social network, with 500 million users worldwide, now
accounts for nearly 25% of all internet pages viewed in the United States.
According to online research firm Hitwise,
The amount of content consumption taking place on the popular social network
has also grown substantially where nearly 1 in 4 page views in the US took
place on Facebook.com for the week ending November 13, 2010
>The market share of page views for Facebook.com was 24.27% last week, 3.8x the
>volume of the 2nd ranked website YouTube.com with 6.93%. More than one of ten
>internet visits are to Facebook which demonstrates the huge number of pages
>viewed by each visitor. The numbers do not include mobile traffic.
>
>
>Anthony Ha: "Looks like it isn’t just employees who are cashing out on their
>Facebook shares. TechCrunch reported earlier today that Accel Partners sold
>“very significant chunks” of its stake in the company (while also holding on to
>the vast majority of its shares), and I’ve confirmed the news with a source.
>My source said that Accel sold its shares at a $34 billion valuation and that
>those shares added up to less than 20 percent of Accel’s total stake. Contrary
>to TechCrunch’s report, my source told me that Accel remains the largest
>venture shareholder in Facebook.
>I couldn’t get any information on who was doing the buying. TechCrunch doesn’t
>sound too sure about the details, but says it heard that Technology Crossover
>Ventures bought $200 million worth of shares, while Andreessen Horowitz bought
>$80 million."
>
>
>NATO endorsed a plan on Saturday to hand control of security in Afghanistan to
>Afghan forces by the end of 2014 and the alliance's leader said he expected
>foreign troops to cease combat operations by then.

The International Monetary Fund, European Union and European Central Bank are preparing a 120-billion-euro ($164 billion) bailout of Ireland, requiring the country to raise taxes and nationalize more banks, the Sunday Times of London reported.

Mike Burk: "On average Thanksgiving week begins weak and ends strong on very low volume. We have an ideal setup for an average week. Last week ended with 3 consecutive up days so the market is a little overbought. Monday and Tuesday could easily be down working off the overbought condition setting up for a seasonal rally Wednesday and Friday.
I expect the major averages to be higher on Friday November 26 than they were on Friday November 19."

How is it possible for the economy improving with 43 million Americans on food stamps?

Zachary A. Goldfarb and Jerry Markon
Washington Post Staff Writers
Sunday, November 21, 2010
Federal prosecutors in New York are in the advanced stages of an extensive insider-trading investigation that could lead to criminal charges against Wall Street traders and executives, federal law enforcement officials said Saturday.
Authorities had been preparing to file charges in the probe within weeks, but that timetable could be accelerated after an article about the investigation appeared in the Wall Street Journal on Saturday, the officials said.
The investigation, conducted by the U.S. Attorney's Office in Manhattan and the FBI, has been underway for several years and extends far beyond Wall Street to financial offices across the country, the paper reported. Officials would not discuss specific companies or individuals under scrutiny or provide further details. The Securities and Exchange Commission is conducting a parallel civil probe, officials said.

Friday

2010-11-20T06:10:00.000-08:00

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
Watsonville.
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
done.

"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 have....my 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.