4/28/10 Purchasing Power
A Texas lawmaker says she plans to push for a law similar to Arizona's get-tough immigration measure. Mexico has issued a travel warning over the Arizona law.
Greece's government bond market was under renewed pressure Wednesday, a day after Standard & Poor's cut the country's credit rating to junk status. The yield on two-year Greek government bonds was at 20.8% in recent action.
The cost of insuring Greek and Portuguese government debt against default continued to soar Wednesday amid the deepening euro-zone debt crisis. The spread on five-year Greek credit default swaps widened to 871.5 basis points from 824 basis points late Tuesday, according to CMA DataVision. That means it would now cost an unprecedented $871,500 a year to insure $10 million of Greek government debt against default for five years. The Portuguese five-year CDS spread rose to a record 421 basis points from a close Tuesday of 386 basis points.
George Ure: "
CNNMoney reported the price of gasoline in March 2003 at $1.72 a gallon. So if I'd taken $145,000 (the 2003 price of a 20-City Index home back then - and bought gasoline - instead of the house, I could have bought 84,302 gallons of gasoline.Fast forward to the present: the price of gasoline - even here at the ranch which is a one lane county road from a 600 acre oil production patch, and we're paying $3.17 a gallon for premium. But let's use apples - to -apples and apply the Triple A $2.87 a gallon this week.
If I had the $145,000 from a house sale I'd get only 50,522 gallons of gas. In terms of purchasing power of gasoline, I'd be down about 40%."
Shares of Buffalo Wild Wings Inc fell almost 21 percent after the restaurant chain reported a decline in April same-store sales.
Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,050,000 barrels versus a +1,894,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +800,000 barrels versus a +3,587,000 barrel gain the prior week. Distillate inventories are expected to rise by +1,500,000 barrels versus a +2,096,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to remain unch. versus a +.34% gain the prior week.
Minyanville: "The Baltic Dry index surged 6% closing over 3,203. According to Gregory Lewis from Credit Suisse the rally was caused by a, “20% upward move in Cape rates driven by strength in the Atlantic basin.” Yesterday’s rally came after the index had been range bound for almost a month."
A euro-zone/International Monetary Fund aid package for Greece could be worth between 100 billion to 120 billion euros ($159 billion) over three years, according to Juergen Trittin, a leader for the German opposition Green Party said, as reported by news station N-TV. The existing package is 45 billion euros this year.
Frank Holmes: "Nearly 30 percent of Taiwan’s total exports, accounting for 15 percent of its GDP, now go to the mainland. A quarter of South Korea’s exports (10 percent of GDP) are China-bound. For both of these countries, and others as well, China is more than twice as important as the United States in terms of exports."
China’s policy makers have indicated they are waiting for clearer signs of a sustained global rebound before deciding to allow gains in the yuan, which has been pegged at about 6.83 per dollar since July 2008. Evidence of a “very certain” recovery is needed before China can roll back stimulus measures adopted during the crisis, central bank Governor Zhou Xiaochuan said last month.
China’s 10-year government bonds fell after the finance ministry failed to draw enough bids in its planned 28 billion yuan ($4.1 billion) one-year bond auction as Chinese banks, faced with lending curbs, favored higher returns offered from longer-dated debt.
Crude +1.96M barrels vs. consensus of +800K. Gasoline -1.24M vs. consensus of +600K. Distillates +2.94M vs. consensus of +1.2M. Crude futures -0.22% to $82.26.
PPL Corp. is close to buying a unit of E.ON AG for $7 billion, CNBC’s David Faber reported.
24/7WallSt: "Problems with supply chain and parts shortages have caused Boeing to yet again delay building some of its 787 Dreamliners . The company said it would halt the building of the 23rd and 24th airplanes for a month and the shipment of fuselages would be kept in abeyance. The estimate of a month may turn out not to be true. Most other forecasts from Boeing about 787 schedule have been wrong."
Standard & Poors ratings agency delivered more bad news by cutting Spain's rating to AA from AA+.
The Dow Jones Industrial Average ended up 53.28 points, or 0.5%, to 11,045.27. The S&P 500 rose 7.65 points, or 0.7%, to 1,191.36. The Nasdaq Composite rose 0.26 point, or 0.01%, to 2,471.73.
ExxonMobil and Chevron both raised their quarterly dividends.
Hewlett-Packard Co. said it has agreed to buy Palm Inc. in a $1.2 billion deal. H-P said Palm shareholders will receive $5.70 in cash for each share of Palm common stock. H-P said the boards of both companies have approved the transaction.
The Federal Reserve kept its benchmark interest rate at a record low level Wednesday and made no changes to the key "extended period" policy pledge. The Fed's policy statement, released after a closed-door meeting, said the economic situation is "likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed's description of the economy was a little more upbeat but still very cautious. It said that the "labor market is beginning to improve," but quickly noted that employers are still reluctant to add to payrolls. The statement repeated that inflation is likely to be subdued. The Fed statement made no mention of asset sales. Thomas Hoenig, the president of the Kansas City Federal Bank dissented, saying that the extended period language was "limiting the Fed's flexibility to begin raising rates modestly."
Thursday's U.S. government report on natural gas in storage is expected to show a 72 to 76 billion cubic feet increase in the week ended April 23, analysts surveyed by Platts said Wednesday. Such an increase would compare to a 77 bcf injection during the same week last week and a five-year average of a 66 bcf, Platts said. Natural gas for June delivery, the most active contract, added 5 cents, or 1.2%, to $4.37 per million British thermal units on Comex.
Wednesday, April 28, 2010
Tuesday, April 27, 2010
Greece and Portugal
4/27/10 Greece and Portugal
Ford Motor Co. reported a $2.1 billion quarterly profit, raised its forecast for the year and boosted its second-quarter North America production by another 30000 vehicles. Ford expects 2010 U.S. industry sales will be in the range of 11.5 million to 12.5 million and that European industry volume will be in the 14 million to 15 million range, somewhat higher than previous guidance.
For April, ICSC continues to expect monthly retail sales to be flat to down 3%.
MMM raised its full-year profit outlook to a range of $5.40 to $5.60 a share, from a prior view of $4.90 to $5.10 a share. Shares of 3M rose 3% to $90.20.
U.S. Feb. Case-Shiller home prices fall 0.9%.
The developer of the luxury Bravern complex in downtown Bellevue, WA, bowing to new market realities, is converting one of the project's two nearly finished condo towers to apartments.
Bellevue's supply of high-end high-rise condos still exceeds demand, said Dan Ivanoff, managing investment partner at Bravern's developer, Schnitzer West. "So we're shorting the supply," he said.
The switch isn't permanent, Ivanoff added: The 236 units now for lease in the southern tower will be put up for sale as condos again if the housing market recovers.
Schnitzer West also said prices will be reduced for the 215 remaining condo units in the northern tower but didn't give details.
ZerroHedge: "The US is turning into Japan. As a silver tsunami of 80 million baby boomers retires, they will be followed by only 65 million from generation "X". The intractable problems that unhappy Japan is facing will soon arrive at our shores. Boomers, therefore, better not count on the next generation to buy them out of their homes at nice premiums, especially if they are still living in the basement, and not paying any rent. They are looking at best at an "L" shaped recovery, which is a polite way of saying no recovery at all. What are the investment implications of all of this? Get your money out of America and Japan, and pour it into Vietnam, China, India, Brazil, Mongolia and other emerging markets with healthy population pyramids. You want the wind behind your investment sails, not in your face with hurricane category five violence. Use any serious dip to load the boat with the emerging market ETF (EEM)."
Cost of insuring Greece's debt against default soared to a new record. Germany says country may have to leave the Eurozone. Worries that Greece's fiscal crisis will spread to other debt-strapped euro-zone countries continued to rise Tuesday, with the cost of insuring Greek, Portuguese and Spanish government debt against default through credit default swaps hitting new record highs. Standard & Poor's cut Greece's credit rating to junk status. The spread on five-year CDS neared 800 basis points following the announcement, according to Markit. That means it would cost nearly $800,000 a year to insure $10 million of Greek debt against default for five years. The spread had widened to a record 760 basis points earlier in the session before narrowing toward 700 basis points.
Portugal's five-year CDS widened to 355 basis points from 314, while Spain widened to 203 basis points from 187.
A budget expert from Germany's ruling party pressured private banks to accept a discount on the Greek debt they own, spreading the pain of an international bailout.
Germany is to almost double its underground storage capacity for natural gas, most .of which is imported by pipeline from Russia.
U.S. April consumer confidence 57.9 vs. 52.3 March.
Bernanke said Congress and the White House will have to choose among modifying programs like Social Security, restraining federal spending and accepting higher taxes. "In the absence of further policy actions, the federal budget appears set to remain on an unsustainable path," Bernanke said.
US oil and gas completions dropped in the first quarter, ending 6 months of growth, the American Petroleum Institute said on Apr. 23. The estimated 7,663 oil and gas wells and dry holes that were drilled was 24% lower than 2009’s first 3 months, API said in its latest quarterly report.
“This drop in drilling activity was somewhat unexpected. Looking at the rig activity, we expected first-quarter completions to at least maintain their fourth-quarter 2009 level,” said Hazem Arafa, director of API’s statistics department.
IBM on Tuesday said its board approved hiking the quarterly dividend by 18% to 65 cents a share and buying back $8 billion in shares. With the new stock buyback plan, IBM will have about $10 billion at its disposal to repurchase stock. The technology giant expects to request additional share buyback authorization in October.
Macy's Inc said Tuesday that it raised its 2010 earnings outlook to $1.75 to $1.80 a share from $1.55 to $1.60 while same-store sales are expected to rise by 3% to 3.5% versus 1% to 2% previously.
For those with a set of cohones: Greek 10-year bonds mature on May 19 and now sell for 98.7. That's a yield of about 30% to maturity.
Standard & Poor's Ratings Services on Tuesday lowered Portugal's long-term local and foreign currency sovereign issuer credit ratings to A- from A+. "The two-notch downgrade reflects our view of the amplified fiscal risks Portugal faces.
Wall Street's so-called fear gauge, the CBOE Market Volatility Index (VIX), finished with a surge of 30.6% on Tuesday, its biggest percentage leap since Oct. 22, 2008 when the index closed up 31.1%. The VIX jumped as a sell-off in U.S. stocks was spurred by ratings cuts of Greece and Portugal by Standard & Poor's, moves that heightened worries about a fresh round of global financial problems. The Dow Jones Industrial Average slid 213 points to 10,991.99, the biggest one-day decline for the blue-chip average since Feb. 4. The S&P 500 Index fell 2.3% to 1,183.71. The Nasdaq Composite fell 51.48 points, or 2%, to 2,471.47.
The euro bought as little as $1.3165, down 1.4% from late in the prior session. Against the yen, the euro fell more than 2% to 122.8 yen. The dollar index added to gains, rising to 82.313 for a 1.1% daily gain.
Ford Motor Co. reported a $2.1 billion quarterly profit, raised its forecast for the year and boosted its second-quarter North America production by another 30000 vehicles. Ford expects 2010 U.S. industry sales will be in the range of 11.5 million to 12.5 million and that European industry volume will be in the 14 million to 15 million range, somewhat higher than previous guidance.
For April, ICSC continues to expect monthly retail sales to be flat to down 3%.
MMM raised its full-year profit outlook to a range of $5.40 to $5.60 a share, from a prior view of $4.90 to $5.10 a share. Shares of 3M rose 3% to $90.20.
U.S. Feb. Case-Shiller home prices fall 0.9%.
The developer of the luxury Bravern complex in downtown Bellevue, WA, bowing to new market realities, is converting one of the project's two nearly finished condo towers to apartments.
Bellevue's supply of high-end high-rise condos still exceeds demand, said Dan Ivanoff, managing investment partner at Bravern's developer, Schnitzer West. "So we're shorting the supply," he said.
The switch isn't permanent, Ivanoff added: The 236 units now for lease in the southern tower will be put up for sale as condos again if the housing market recovers.
Schnitzer West also said prices will be reduced for the 215 remaining condo units in the northern tower but didn't give details.
ZerroHedge: "The US is turning into Japan. As a silver tsunami of 80 million baby boomers retires, they will be followed by only 65 million from generation "X". The intractable problems that unhappy Japan is facing will soon arrive at our shores. Boomers, therefore, better not count on the next generation to buy them out of their homes at nice premiums, especially if they are still living in the basement, and not paying any rent. They are looking at best at an "L" shaped recovery, which is a polite way of saying no recovery at all. What are the investment implications of all of this? Get your money out of America and Japan, and pour it into Vietnam, China, India, Brazil, Mongolia and other emerging markets with healthy population pyramids. You want the wind behind your investment sails, not in your face with hurricane category five violence. Use any serious dip to load the boat with the emerging market ETF (EEM)."
Cost of insuring Greece's debt against default soared to a new record. Germany says country may have to leave the Eurozone. Worries that Greece's fiscal crisis will spread to other debt-strapped euro-zone countries continued to rise Tuesday, with the cost of insuring Greek, Portuguese and Spanish government debt against default through credit default swaps hitting new record highs. Standard & Poor's cut Greece's credit rating to junk status. The spread on five-year CDS neared 800 basis points following the announcement, according to Markit. That means it would cost nearly $800,000 a year to insure $10 million of Greek debt against default for five years. The spread had widened to a record 760 basis points earlier in the session before narrowing toward 700 basis points.
Portugal's five-year CDS widened to 355 basis points from 314, while Spain widened to 203 basis points from 187.
A budget expert from Germany's ruling party pressured private banks to accept a discount on the Greek debt they own, spreading the pain of an international bailout.
Germany is to almost double its underground storage capacity for natural gas, most .of which is imported by pipeline from Russia.
U.S. April consumer confidence 57.9 vs. 52.3 March.
Bernanke said Congress and the White House will have to choose among modifying programs like Social Security, restraining federal spending and accepting higher taxes. "In the absence of further policy actions, the federal budget appears set to remain on an unsustainable path," Bernanke said.
US oil and gas completions dropped in the first quarter, ending 6 months of growth, the American Petroleum Institute said on Apr. 23. The estimated 7,663 oil and gas wells and dry holes that were drilled was 24% lower than 2009’s first 3 months, API said in its latest quarterly report.
“This drop in drilling activity was somewhat unexpected. Looking at the rig activity, we expected first-quarter completions to at least maintain their fourth-quarter 2009 level,” said Hazem Arafa, director of API’s statistics department.
IBM on Tuesday said its board approved hiking the quarterly dividend by 18% to 65 cents a share and buying back $8 billion in shares. With the new stock buyback plan, IBM will have about $10 billion at its disposal to repurchase stock. The technology giant expects to request additional share buyback authorization in October.
Macy's Inc said Tuesday that it raised its 2010 earnings outlook to $1.75 to $1.80 a share from $1.55 to $1.60 while same-store sales are expected to rise by 3% to 3.5% versus 1% to 2% previously.
For those with a set of cohones: Greek 10-year bonds mature on May 19 and now sell for 98.7. That's a yield of about 30% to maturity.
Standard & Poor's Ratings Services on Tuesday lowered Portugal's long-term local and foreign currency sovereign issuer credit ratings to A- from A+. "The two-notch downgrade reflects our view of the amplified fiscal risks Portugal faces.
Wall Street's so-called fear gauge, the CBOE Market Volatility Index (VIX), finished with a surge of 30.6% on Tuesday, its biggest percentage leap since Oct. 22, 2008 when the index closed up 31.1%. The VIX jumped as a sell-off in U.S. stocks was spurred by ratings cuts of Greece and Portugal by Standard & Poor's, moves that heightened worries about a fresh round of global financial problems. The Dow Jones Industrial Average slid 213 points to 10,991.99, the biggest one-day decline for the blue-chip average since Feb. 4. The S&P 500 Index fell 2.3% to 1,183.71. The Nasdaq Composite fell 51.48 points, or 2%, to 2,471.47.
The euro bought as little as $1.3165, down 1.4% from late in the prior session. Against the yen, the euro fell more than 2% to 122.8 yen. The dollar index added to gains, rising to 82.313 for a 1.1% daily gain.
Monday, April 26, 2010
Great Britain
4/26/10 Great Britain
Brutal choices over British deficit
By Chris Giles, Alex Barker and Nicholas Timmins
Published: April 25 2010 22:10 | Last updated: April 25 2010 22:10
The next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the axe to programmes such as school building and road maintenance – or make a set of equally politically perilous choices, according to an analysis by the Financial Times.
Packages of measures such as these are already under consideration in the Treasury and will be needed if further big tax rises are to be avoided as the next chancellor seeks, at a minimum, to halve the deficit by 2014 – a goal to which all the main parties are signed up.
The spending choices are so difficult that senior officials believe that an incoming chancellor may be forced to resort to additional tax increases.
One senior Whitehall official pointed out that the tax burden rose almost 5 percentage points in both the 1980s and the 1990s when Britain last reduced budget deficits that were large, but much smaller than the £163bn of borrowing the government has had to resort to this year.
Without similar increases, it might be difficult to reduce borrowing sufficiently over the coming years, the official said. Under current plans, which include the national insurance increase that the Conservatives say they would largely reverse, a rise in the tax burden of less than half of that is envisaged.
At the very least, Treasury officials believe the next government must bring down the cost of social security benefits to prevent drastic cuts in the areas of government activity that the parties have said they will not protect. “If you take 25 per cent out of defence, you would not have much of an army left,” one official said.
FT costings of a range of the choices that the next chancellor will face show that almost the whole population would be hit as the new government makes £30bn-£40bn of cuts in real terms to halve the deficit.
An online simulator, developed by the FT using government figures, suggests a saving of that scale would require all of the following: a 5 per cent cut in public sector pay; freezing benefits for a year; means-testing child benefit; abolishing winter fuel payments and free television licences; reducing prison numbers by a quarter; axing the two planned aircraft carriers; withdrawing free bus passes for pensioners; delaying Crossrail for three years; halving roads maintenance; stopping school building; halving the spend on teaching assistants and NHS dentistry; and cutting funding to Scotland and Wales by 10 per cent."
Caterpillar said it raised its profit outlook to $2.50 to $3.25 a share, from a prior view of about $2.50 a share. Wall Street is looking for 2010 earnings of $2.65 a share. The company said it would ramp up its production rates to meet higher demand. Shares of Caterpillar rose 2% premarket to $70.51.
U.S. car rental firm Hertz Global Holdings Inc had agreed to buy smaller rival Dollar Thrifty Automotive Group Inc for about $1.2 billion to boost its presence in the leisure rental market.
The deal marks a significant consolidation for the car rental industry, which is starting to recover from the global economic downturn helped by a pickup in travel and the used car market.
The cash-and-stock offer of $41 per share is at a 5.5 percent premium to Dollar Thrifty's Friday close of $38.85.
The cost of insuring Greek debt against default jumping to a new record.
Mike Burk: "All of the major indices closed at recovery highs on Friday and those highs were led by the secondaries and confirmed by most of the indicators. The implication is there will be more highs in the near future. On the other hand the market is about as overbought as it has ever been.
I expect the major averages to be lower on Friday April 30 than they were on Thursday April 23."
Rob Hanna: "The NDX has now had a remarkable streak of 50 closes above the 10ma. That’s over 2 months without even a mild pullback. This is the longest streak since the index’s inception in 1986.....The general finding was that such persistent upmoves have a very strong tendency to continue up after the 1st pullback occurs. Rarely will you see an abrupt end to these kind of moves."
The most recent rail traffic numbers are still down 12.4% compared with where things were in 2007.
Venezuela May Nationalize Gold Mining, Says Chavez.
Bill Gross: "In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like. It's a game that can never be finished."
ZeroHedge: "The Greek bond holiday is here. Greece's bond pricing administration HDAT has withdrawn bond prices as spreads have hit 650 bps. Greece acknowledges it is game over as 10 Years are at 10%, and 3 Years at 13%. Stock liquidation are rampant as Greeks are on the verge of panic: the ASE is down 3% and investors are now widely expecting a 10% correction to below 1,700 on the ASE. And Portugal is now officially part of the party Portuguese - CDS just hit 310 bps.In the meantime Germany is starting to feel the burn - German FinMin Schaeuble has stated he is determined to defend the stability of the euro by asking that Greek talks with IMF conclude by weekend. He also said that he anticipates that Euro zone and IMF want to free up Greek aid simultaneously and does not favour idea of granting Greece moratorium on debt. Alas, the time for speeches is over. Making matters worse, Germany’s SPD says will not back accelerated parliamentary process to approve Greek aid, rendering all rhetoric useless. Lastly, Angela Merkel will make a statementon Greece at 13:00 GMT. We can't wait to hear the powerlessness in her voice."
John Hussman: "As of last week, our most comprehensive measure of market valuation reached a price-to-normalized earnings multiple of 19.1, exceeding the peaks of August 1987 (18.6) and December 1973 (18.3). Outside of the valuations achieved during the late 1990's bubble and the approach to the 2007 market peak, the only other historical observation exceeding the current level of valuation was the extreme of 20.1 reached just prior to the 1929 crash. The corollary to this level of rich valuation is that our projection for 10-year total returns for the S&P 500 is now just 5.3% annually."
The cost of insuring Portuguese government debt against default jumped to a record high on concern that it could be next to suffer a Greek- style debt crisis.
Earthfiles: "Cryptcoccus gattii fungus, native to Papua New Guinea,
Australia and parts of South America, is now spreading airborne in Oregon
and has killed six of twenty-one infected people, or about 25%. Currently,
there is no vaccination or other preventative measure available
for this new lethal fungus. Symptoms of severe cough and shortness
of breath do not develop until months after exposure. The fungus has
also infected domestic and wild animals."
Jon Markman says contrary to popular sentiment, consumers are not deleveraging; "The consumer is releveraging," he says.
The number of vacant housing units in the United States increased to a record 19 million in the first quarter of the year, up from 18.9 million in the fourth quarter, the Commerce Department reported Monday. About 14.5% of homes were vacant, with 4.4 million available to be rented and 2 million available to be sold. The vacancy rate for rentable units fell to 10.6% from 10.7% in the fourth quarter. The vacancy rate for homes ready to be sold was steady at 2.7%. In the past year, the housing inventory rose by 1.14 million to 130.9 million, while occupied homes increased by 1.07 million to 111.9 million.
Active traders are less bullish about the stock market than they were in December, according to a survey released Monday. Only 28 percent expressed a bullish outlook for the market in the next six months, down from 50 percent in the previous survey.Another key finding was that 40 percent of traders polled are hedging their portfolios against risk by trading options.
Analysts polled by Platts expect an increase of 1.4 million barrels of oil in U.S. inventories in the week ended April 23, Platts said Monday. The analysts surveyed also expect an increase of 500,000 barrels in gasoline stocks and an increase of 1.2 million barrels in inventories of distillates, which include heating oil and diesel.
The Dow Jones industrial average edged up 0.75 point, or 0.01 percent, to close at 11,205.03. The Standard & Poor's 500 Index dropped 5.23 points, or 0.43 percent, to 1,212.05. The Nasdaq Composite Index lost 7.20 points, or 0.28 percent, to 2,522.95.
On the New York Stock Exchange, nearly eight shares fell for every seven that rose, while on the Nasdaq, decliners beat advancers by a ratio of about 14 to 13.
Brutal choices over British deficit
By Chris Giles, Alex Barker and Nicholas Timmins
Published: April 25 2010 22:10 | Last updated: April 25 2010 22:10
The next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the axe to programmes such as school building and road maintenance – or make a set of equally politically perilous choices, according to an analysis by the Financial Times.
Packages of measures such as these are already under consideration in the Treasury and will be needed if further big tax rises are to be avoided as the next chancellor seeks, at a minimum, to halve the deficit by 2014 – a goal to which all the main parties are signed up.
The spending choices are so difficult that senior officials believe that an incoming chancellor may be forced to resort to additional tax increases.
One senior Whitehall official pointed out that the tax burden rose almost 5 percentage points in both the 1980s and the 1990s when Britain last reduced budget deficits that were large, but much smaller than the £163bn of borrowing the government has had to resort to this year.
Without similar increases, it might be difficult to reduce borrowing sufficiently over the coming years, the official said. Under current plans, which include the national insurance increase that the Conservatives say they would largely reverse, a rise in the tax burden of less than half of that is envisaged.
At the very least, Treasury officials believe the next government must bring down the cost of social security benefits to prevent drastic cuts in the areas of government activity that the parties have said they will not protect. “If you take 25 per cent out of defence, you would not have much of an army left,” one official said.
FT costings of a range of the choices that the next chancellor will face show that almost the whole population would be hit as the new government makes £30bn-£40bn of cuts in real terms to halve the deficit.
An online simulator, developed by the FT using government figures, suggests a saving of that scale would require all of the following: a 5 per cent cut in public sector pay; freezing benefits for a year; means-testing child benefit; abolishing winter fuel payments and free television licences; reducing prison numbers by a quarter; axing the two planned aircraft carriers; withdrawing free bus passes for pensioners; delaying Crossrail for three years; halving roads maintenance; stopping school building; halving the spend on teaching assistants and NHS dentistry; and cutting funding to Scotland and Wales by 10 per cent."
Caterpillar said it raised its profit outlook to $2.50 to $3.25 a share, from a prior view of about $2.50 a share. Wall Street is looking for 2010 earnings of $2.65 a share. The company said it would ramp up its production rates to meet higher demand. Shares of Caterpillar rose 2% premarket to $70.51.
U.S. car rental firm Hertz Global Holdings Inc had agreed to buy smaller rival Dollar Thrifty Automotive Group Inc for about $1.2 billion to boost its presence in the leisure rental market.
The deal marks a significant consolidation for the car rental industry, which is starting to recover from the global economic downturn helped by a pickup in travel and the used car market.
The cash-and-stock offer of $41 per share is at a 5.5 percent premium to Dollar Thrifty's Friday close of $38.85.
The cost of insuring Greek debt against default jumping to a new record.
Mike Burk: "All of the major indices closed at recovery highs on Friday and those highs were led by the secondaries and confirmed by most of the indicators. The implication is there will be more highs in the near future. On the other hand the market is about as overbought as it has ever been.
I expect the major averages to be lower on Friday April 30 than they were on Thursday April 23."
Rob Hanna: "The NDX has now had a remarkable streak of 50 closes above the 10ma. That’s over 2 months without even a mild pullback. This is the longest streak since the index’s inception in 1986.....The general finding was that such persistent upmoves have a very strong tendency to continue up after the 1st pullback occurs. Rarely will you see an abrupt end to these kind of moves."
The most recent rail traffic numbers are still down 12.4% compared with where things were in 2007.
Venezuela May Nationalize Gold Mining, Says Chavez.
Bill Gross: "In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like. It's a game that can never be finished."
ZeroHedge: "The Greek bond holiday is here. Greece's bond pricing administration HDAT has withdrawn bond prices as spreads have hit 650 bps. Greece acknowledges it is game over as 10 Years are at 10%, and 3 Years at 13%. Stock liquidation are rampant as Greeks are on the verge of panic: the ASE is down 3% and investors are now widely expecting a 10% correction to below 1,700 on the ASE. And Portugal is now officially part of the party Portuguese - CDS just hit 310 bps.In the meantime Germany is starting to feel the burn - German FinMin Schaeuble has stated he is determined to defend the stability of the euro by asking that Greek talks with IMF conclude by weekend. He also said that he anticipates that Euro zone and IMF want to free up Greek aid simultaneously and does not favour idea of granting Greece moratorium on debt. Alas, the time for speeches is over. Making matters worse, Germany’s SPD says will not back accelerated parliamentary process to approve Greek aid, rendering all rhetoric useless. Lastly, Angela Merkel will make a statementon Greece at 13:00 GMT. We can't wait to hear the powerlessness in her voice."
John Hussman: "As of last week, our most comprehensive measure of market valuation reached a price-to-normalized earnings multiple of 19.1, exceeding the peaks of August 1987 (18.6) and December 1973 (18.3). Outside of the valuations achieved during the late 1990's bubble and the approach to the 2007 market peak, the only other historical observation exceeding the current level of valuation was the extreme of 20.1 reached just prior to the 1929 crash. The corollary to this level of rich valuation is that our projection for 10-year total returns for the S&P 500 is now just 5.3% annually."
The cost of insuring Portuguese government debt against default jumped to a record high on concern that it could be next to suffer a Greek- style debt crisis.
Earthfiles: "Cryptcoccus gattii fungus, native to Papua New Guinea,
Australia and parts of South America, is now spreading airborne in Oregon
and has killed six of twenty-one infected people, or about 25%. Currently,
there is no vaccination or other preventative measure available
for this new lethal fungus. Symptoms of severe cough and shortness
of breath do not develop until months after exposure. The fungus has
also infected domestic and wild animals."
Jon Markman says contrary to popular sentiment, consumers are not deleveraging; "The consumer is releveraging," he says.
The number of vacant housing units in the United States increased to a record 19 million in the first quarter of the year, up from 18.9 million in the fourth quarter, the Commerce Department reported Monday. About 14.5% of homes were vacant, with 4.4 million available to be rented and 2 million available to be sold. The vacancy rate for rentable units fell to 10.6% from 10.7% in the fourth quarter. The vacancy rate for homes ready to be sold was steady at 2.7%. In the past year, the housing inventory rose by 1.14 million to 130.9 million, while occupied homes increased by 1.07 million to 111.9 million.
Active traders are less bullish about the stock market than they were in December, according to a survey released Monday. Only 28 percent expressed a bullish outlook for the market in the next six months, down from 50 percent in the previous survey.Another key finding was that 40 percent of traders polled are hedging their portfolios against risk by trading options.
Analysts polled by Platts expect an increase of 1.4 million barrels of oil in U.S. inventories in the week ended April 23, Platts said Monday. The analysts surveyed also expect an increase of 500,000 barrels in gasoline stocks and an increase of 1.2 million barrels in inventories of distillates, which include heating oil and diesel.
The Dow Jones industrial average edged up 0.75 point, or 0.01 percent, to close at 11,205.03. The Standard & Poor's 500 Index dropped 5.23 points, or 0.43 percent, to 1,212.05. The Nasdaq Composite Index lost 7.20 points, or 0.28 percent, to 2,522.95.
On the New York Stock Exchange, nearly eight shares fell for every seven that rose, while on the Nasdaq, decliners beat advancers by a ratio of about 14 to 13.
Sunday, April 25, 2010
Trouble Brewing
4/25/10 Trouble Brewing
Jeremy Grantham: "Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors. There is nothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get. Under Greenspan's incredible leadership he managed to give us the tech bubble, and by keeping interest rates at negative levels for three years drove up the housing bubble, and finally the risk bubble. And Bernanke has happily picked up the mantle, and seems totally unconcerned about creating yet another bubble. He has interest rates so low banks can't possible not make a fortune. Savers are being penalized, anyone who wants to buy cash faces a painful experience, and so we are all tempted into speculating, which is apparently what he wants and we've just had one of the great speculative rallies in history, second only to 1932-33."
Market Oracle: "Released in March, before the passage of the Obama administration’s health care legislation, a survey entitled “Health Care Reform—Can’t Live With It, or Without It” indicates that 92 percent of Americans give the national economy a negative rating. No fewer than 70 percent of the respondents report having suffered job-related and financial problems in the past year, an increase from 59 percent the year before. Fifty-four percent report someone in their home has been without a job and looking for work in the past year, up from 39 percent in 2009.
The poll saw an aggravation of conditions in every area of economic life studied the year before. Increasing numbers of people are reporting difficulty receiving or affording medical care (26 percent) or paying their rent or mortgage payments (24 percent). More Americans faced problems with collections and credit agencies (21 percent), or had mortgages, loans or credit card applications denied (19 percent).
As could be expected, the poorest Americans are suffering the most. Some 44 percent of those making $30,000 per year or less report difficulty obtaining medical care, compared to 11 percent of those making $75,000 per year or more. A similar gap can be found in the category of rents and mortgages, with 37 percent of those making $30,000 or less reporting difficulty making rent or mortgage payments, compared to 11 percent of those making $75,000 or more. However, the percentage of those facing difficulties paying rent has increased dramatically for both groups since 2009.
Large numbers of workers polled in the study say they have little confidence in job security and prospects for the future, with almost half (49 percent) saying it is “very or somewhat likely” they will suffer “job-related financial stress” in the next year. Twenty-five percent of workers say they expect to be forced to take a pay cut this year, while 24 percent expect to be laid off.
The Pew survey found that 85 percent of Americans reported difficulty finding jobs in their communities. This and other statistics revealing the increasingly dismal employment opportunities facing millions of Americans are provided context in another study released this month by the Pew Economic Policy Group.
“A Year or More: The High Cost of Long-Term Unemployment” reports that no fewer than 44 percent of unemployed Americans met or exceeded the standard measure of long-term unemployment (six months or more) in March 2010. This marks the highest rate for long-term unemployment levels since World War II.
In addition to this, the Pew study reports that “23 percent of the nearly 15 million Americans who are unemployed have been jobless for a year or more.” This translates to 3.4 million people, “roughly equivalent,” the study points out, “to the population of the state of Connecticut.”
These alarming numbers should be considered along with findings in another recent Pew research study entitled “The People and Their Government,” released April 18. This report finds that “by almost every conceivable measure Americans are less positive and more critical of government these days.”
Only 22 percent of Americans say their government can be trusted, according to the new survey. The report puts this among the lowest measures of trust in the government in half a century."
ZeroHedge: "The rally, which is driven purely by Primary Dealers recycling money they lend to the treasury which in turn is repoed back by the Fed, so that the banks can buy 100x P/E risky stocks with the same money used to keep the treasury curve diagonal. This is nothing but Fed-sponsored monetary pornography at its NC-17 best. Of course, those who grasp it are few and far between, while the rest of the population is ignorant in its hopes that S&P 1,500 is just over the horizon, without a resultant crash back to 0 on the other side of the bubble."
The gap between the cost of renting a modest apartment and the wages of working families continues to widen, according to a report released last week from the National Low Income Housing Coalition.
Out of Reach 2010 paints a gloomy picture for the nation's nearly 38 million renters, who make up a third of U.S. households.
On average, a family must earn $38,355 a year, $18.44 an hour, to afford a simple two-bedroom apartment at the 2010 national average fair market rent of $959.
However, the average wage for U.S. renters is $14.44 an hour, down from $14.69 last year. Further, more than 60 percent of U.S. renters live in counties where even the average one-bedroom fair market rent of $805 isn't affordable for average wage earners, the study found.
Minimum wage earners are at the greatest disadvantage. Under the standard measure of affordability — housing costs should account for no more than 30 percent of income — full-time minimum wage earners can't afford one-bedroom apartments in any county in the country, even though Congress hiked the minimum wage from $6.55 an hour to $7.25 last year.
Rescuers spread out Sunday to scour Mississippi neighborhoods a day after a tornado sliced through the state and killed 10 people, including three children.
Arizona Gov. Jan Brewer on Friday signed a law making it a state crime to be an illegal immigrant.
World Bank members have agreed to pour more capital into the lender and give developing countries a greater voice in running the bank, Treasury Secretary Timothy Geithner said on Sunday.
The head of the International Monetary Fund said Sunday that talks on a big emergency loan for Greece, crippled by soaring borrowing costs, were accelerating and he expressed optimism about a deal before a large debt payment comes due for Athens next month.
Jeremy Grantham: "Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors. There is nothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get. Under Greenspan's incredible leadership he managed to give us the tech bubble, and by keeping interest rates at negative levels for three years drove up the housing bubble, and finally the risk bubble. And Bernanke has happily picked up the mantle, and seems totally unconcerned about creating yet another bubble. He has interest rates so low banks can't possible not make a fortune. Savers are being penalized, anyone who wants to buy cash faces a painful experience, and so we are all tempted into speculating, which is apparently what he wants and we've just had one of the great speculative rallies in history, second only to 1932-33."
Market Oracle: "Released in March, before the passage of the Obama administration’s health care legislation, a survey entitled “Health Care Reform—Can’t Live With It, or Without It” indicates that 92 percent of Americans give the national economy a negative rating. No fewer than 70 percent of the respondents report having suffered job-related and financial problems in the past year, an increase from 59 percent the year before. Fifty-four percent report someone in their home has been without a job and looking for work in the past year, up from 39 percent in 2009.
The poll saw an aggravation of conditions in every area of economic life studied the year before. Increasing numbers of people are reporting difficulty receiving or affording medical care (26 percent) or paying their rent or mortgage payments (24 percent). More Americans faced problems with collections and credit agencies (21 percent), or had mortgages, loans or credit card applications denied (19 percent).
As could be expected, the poorest Americans are suffering the most. Some 44 percent of those making $30,000 per year or less report difficulty obtaining medical care, compared to 11 percent of those making $75,000 per year or more. A similar gap can be found in the category of rents and mortgages, with 37 percent of those making $30,000 or less reporting difficulty making rent or mortgage payments, compared to 11 percent of those making $75,000 or more. However, the percentage of those facing difficulties paying rent has increased dramatically for both groups since 2009.
Large numbers of workers polled in the study say they have little confidence in job security and prospects for the future, with almost half (49 percent) saying it is “very or somewhat likely” they will suffer “job-related financial stress” in the next year. Twenty-five percent of workers say they expect to be forced to take a pay cut this year, while 24 percent expect to be laid off.
The Pew survey found that 85 percent of Americans reported difficulty finding jobs in their communities. This and other statistics revealing the increasingly dismal employment opportunities facing millions of Americans are provided context in another study released this month by the Pew Economic Policy Group.
“A Year or More: The High Cost of Long-Term Unemployment” reports that no fewer than 44 percent of unemployed Americans met or exceeded the standard measure of long-term unemployment (six months or more) in March 2010. This marks the highest rate for long-term unemployment levels since World War II.
In addition to this, the Pew study reports that “23 percent of the nearly 15 million Americans who are unemployed have been jobless for a year or more.” This translates to 3.4 million people, “roughly equivalent,” the study points out, “to the population of the state of Connecticut.”
These alarming numbers should be considered along with findings in another recent Pew research study entitled “The People and Their Government,” released April 18. This report finds that “by almost every conceivable measure Americans are less positive and more critical of government these days.”
Only 22 percent of Americans say their government can be trusted, according to the new survey. The report puts this among the lowest measures of trust in the government in half a century."
ZeroHedge: "The rally, which is driven purely by Primary Dealers recycling money they lend to the treasury which in turn is repoed back by the Fed, so that the banks can buy 100x P/E risky stocks with the same money used to keep the treasury curve diagonal. This is nothing but Fed-sponsored monetary pornography at its NC-17 best. Of course, those who grasp it are few and far between, while the rest of the population is ignorant in its hopes that S&P 1,500 is just over the horizon, without a resultant crash back to 0 on the other side of the bubble."
The gap between the cost of renting a modest apartment and the wages of working families continues to widen, according to a report released last week from the National Low Income Housing Coalition.
Out of Reach 2010 paints a gloomy picture for the nation's nearly 38 million renters, who make up a third of U.S. households.
On average, a family must earn $38,355 a year, $18.44 an hour, to afford a simple two-bedroom apartment at the 2010 national average fair market rent of $959.
However, the average wage for U.S. renters is $14.44 an hour, down from $14.69 last year. Further, more than 60 percent of U.S. renters live in counties where even the average one-bedroom fair market rent of $805 isn't affordable for average wage earners, the study found.
Minimum wage earners are at the greatest disadvantage. Under the standard measure of affordability — housing costs should account for no more than 30 percent of income — full-time minimum wage earners can't afford one-bedroom apartments in any county in the country, even though Congress hiked the minimum wage from $6.55 an hour to $7.25 last year.
Rescuers spread out Sunday to scour Mississippi neighborhoods a day after a tornado sliced through the state and killed 10 people, including three children.
Arizona Gov. Jan Brewer on Friday signed a law making it a state crime to be an illegal immigrant.
World Bank members have agreed to pour more capital into the lender and give developing countries a greater voice in running the bank, Treasury Secretary Timothy Geithner said on Sunday.
The head of the International Monetary Fund said Sunday that talks on a big emergency loan for Greece, crippled by soaring borrowing costs, were accelerating and he expressed optimism about a deal before a large debt payment comes due for Athens next month.
Saturday, April 24, 2010
Overconfident
4/24/10 Overconfident
Mike Santoli: "The 25-day average of put versus call volume last week fell to a multi-year low, implying that the bulls were feeling overconfident, and the bears worn down by the grinding advance. Surveys of professional traders show worrisome levels of optimism, though retail investors far less so. While never a great timing tool, corporate-insider selling has been quite heavy for the past couple of weeks, as seen in Insider Transactions. And Robin Carpenter of www.CarpenterAnalytix.com calculates that futures-trading hedge funds' exposure to stocks is higher now than it's been in all but 5% of all weeks since the Beginning of 2000."
Dennis Slothower is one of the world’s leading technical analysts. He’s one of the few advisors whose readers completely avoided ALL losses during the disaster that was 2008.
And now he’s issuing another dire warning.
His technical indicators suggest that the market manipulation we’ve seen over the last several months is about to come to an end…and that means thousands of investors are about to get clobbered.
It’s spring, and this spring a young man’s fancy lightly turns to thoughts of speculation. The Fed’s promises look good and, as long as you’re not a small business, you can borrow to invest or speculate at no cost. The market has had a near record rally, sprinting far past our estimated fair value of 875 for the S&P 500. Bernanke is, in fact, begging us to speculate, and is being mean only to conservative investors like pensioners who cannot make a penny on their cash. Collectively, we forego hundreds of billions of potential interest, but at least we can feel noble because we are helping to restore the financial health of the banks and bankers, who under these conditions could not fail to make a fortune even if brain dead. We are also lucky to have a tiny fraction of our foregone interest returned by the banks as loan repayments with “profit.” Some profit! Oh, for the good old days when we could just settle for a normal market-clearing rate of interest. But that, I suppose, would be wicked capitalism, and we had better get used to bank- and speculator-benefiting socialism. - Jeremy Grantham, GMO
California state and local governments have $325 billion in unfunded pension liabilities, the Los Angeles Times reported.
Doug Noland: "The small cap Russell 2000 index has gained 18.6% so far this year, slightly ahead of the S&P400 Mid-Cap’s rise of 16.9%. The S&P 500 Homebuilding index has surged 38.6%, and the Morgan Stanley Cyclical Index has advanced 16.5%. The Morgan Stanley Retail Index has jumped 28.0%, trading today to a new record high.
The bullish contingent is these days increasingly confident that there is much more to the recovery than a mere stimulus-induced “sugar high.” The marketplace now comfortably disregards bearish developments - and becomes further emboldened by “market resiliency”. The market this week brushed aside issues with Greece, China, Goldman and financial reform.
Complacency abounds, in true Bubble fashion. The U.S. stock market dismisses that there could be meaningful ramifications from the unfolding Greek debt crisis. Chinese authorities’ recent determination to restrict mortgage Credit barely garners a headline. And while the Goldman allegations generate great interest and discussion, few believe they will have much general market impact. Financial reform, well, it’s an afterthought when the market is open. Market participants are enamored with the notion that the securities markets and real economy are now conjoined in the initial phase of a big bull cycle.
Count me a subscriber of the “sugar high” thesis. The combination of double-digit (to GDP) deficits, protracted near-zero rates, and the Fed’s unprecedented Trillion-plus monetization has worked wonders. Government stimulus stabilized the Credit system, asset prices, system incomes and economic output. The bulls today believe that a new expansionary cycle has commenced, and fundamentals and prospects couldn’t be much more encouraging from their point of view. Surging stock prices have the optimists disregarding the possibility of a systemic addiction to massive government spending, ultra-low rates, and overabundant marketplace liquidity. Potential issues in the area of risk intermediation are not on the radar screen....In the current stock market frenzy, the economy’s structure and the prospects for private-sector Credit hardly seem relevant. The underlying fragility of private-sector Credit is masked. The markets are buoyant, while economic recovery gains momentum. Apparently, there’s no reason to focus on Greek debt woes, China’s vulnerable Bubble, Goldman’s and Wall Street’s trust issues, or the uncertainties associated with financial reform – not with corporate earnings surging and many stocks in virtual melt-up. Expectations have adjusted sharply higher, with most now believing the markets are discounting quite favorable economic prospects. I would instead hold the view that reflated securities markets are again nurturing financial and economic vulnerability.
Recent issues in Greece, China, Wall Street and Washington should not be dismissed. Importantly, this confluence of developments holds the potential to further restrict the capacity and stability of private-sector Credit. The Greek debt crisis appears to have created dislocation in the Credit default swaps marketplace. This will likely increase market volatility, along with heightened susceptibility for market yields to lurch higher, while perhaps hurting liquidity in government debt markets generally. This may not be an issue for Treasuries today, but it could foster debt market vulnerability going forward and make the inevitable bear market even more challenging....In the current stock market frenzy, the economy’s structure and the prospects for private-sector Credit hardly seem relevant. The underlying fragility of private-sector Credit is masked. The markets are buoyant, while economic recovery gains momentum. Apparently, there’s no reason to focus on Greek debt woes, China’s vulnerable Bubble, Goldman’s and Wall Street’s trust issues, or the uncertainties associated with financial reform – not with corporate earnings surging and many stocks in virtual melt-up. Expectations have adjusted sharply higher, with most now believing the markets are discounting quite favorable economic prospects. I would instead hold the view that reflated securities markets are again nurturing financial and economic vulnerability.
Recent issues in Greece, China, Wall Street and Washington should not be dismissed. Importantly, this confluence of developments holds the potential to further restrict the capacity and stability of private-sector Credit. The Greek debt crisis appears to have created dislocation in the Credit default swaps marketplace. This will likely increase market volatility, along with heightened susceptibility for market yields to lurch higher, while perhaps hurting liquidity in government debt markets generally. This may not be an issue for Treasuries today, but it could foster debt market vulnerability going forward and make the inevitable bear market even more challenging."
WSJ: "103: The number of months it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales."
"In the depths of the 2008 crisis it was the governments that stepped in to provide a guarantee on financial assets. It was the governments that backed our savings accounts, money market funds, day-to-day business banking accounts, as well as debt issued by US banks. But what happens when confidence in the government guarantee begins to erode? We’ve seen what happened to Greece. Leverage inherent in the banking system elevated a bank run, equivalent to a mere 3.6 percent of deposits, into another full blown banking crisis. In our view it’s time for investors to acknowledge sovereign risk. The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold. " Eric Sprott
Goldman Sachs made big profits betting against the mortgage market even though it stated in its 2009 annual report to investors that it “did not generate enormous net revenues by betting against residential related products”, according to initial findings of a Senate investigation into the bank
Lloyd Blankfein, the chairman and chief executive of Goldman, said in a November 2007 email exchange with other top executives that was released: “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts.” He then added: “Also, it’s not over, so who knows how it will turn out ultimately.”
Mike Santoli: "The 25-day average of put versus call volume last week fell to a multi-year low, implying that the bulls were feeling overconfident, and the bears worn down by the grinding advance. Surveys of professional traders show worrisome levels of optimism, though retail investors far less so. While never a great timing tool, corporate-insider selling has been quite heavy for the past couple of weeks, as seen in Insider Transactions. And Robin Carpenter of www.CarpenterAnalytix.com calculates that futures-trading hedge funds' exposure to stocks is higher now than it's been in all but 5% of all weeks since the Beginning of 2000."
Dennis Slothower is one of the world’s leading technical analysts. He’s one of the few advisors whose readers completely avoided ALL losses during the disaster that was 2008.
And now he’s issuing another dire warning.
His technical indicators suggest that the market manipulation we’ve seen over the last several months is about to come to an end…and that means thousands of investors are about to get clobbered.
It’s spring, and this spring a young man’s fancy lightly turns to thoughts of speculation. The Fed’s promises look good and, as long as you’re not a small business, you can borrow to invest or speculate at no cost. The market has had a near record rally, sprinting far past our estimated fair value of 875 for the S&P 500. Bernanke is, in fact, begging us to speculate, and is being mean only to conservative investors like pensioners who cannot make a penny on their cash. Collectively, we forego hundreds of billions of potential interest, but at least we can feel noble because we are helping to restore the financial health of the banks and bankers, who under these conditions could not fail to make a fortune even if brain dead. We are also lucky to have a tiny fraction of our foregone interest returned by the banks as loan repayments with “profit.” Some profit! Oh, for the good old days when we could just settle for a normal market-clearing rate of interest. But that, I suppose, would be wicked capitalism, and we had better get used to bank- and speculator-benefiting socialism. - Jeremy Grantham, GMO
California state and local governments have $325 billion in unfunded pension liabilities, the Los Angeles Times reported.
Doug Noland: "The small cap Russell 2000 index has gained 18.6% so far this year, slightly ahead of the S&P400 Mid-Cap’s rise of 16.9%. The S&P 500 Homebuilding index has surged 38.6%, and the Morgan Stanley Cyclical Index has advanced 16.5%. The Morgan Stanley Retail Index has jumped 28.0%, trading today to a new record high.
The bullish contingent is these days increasingly confident that there is much more to the recovery than a mere stimulus-induced “sugar high.” The marketplace now comfortably disregards bearish developments - and becomes further emboldened by “market resiliency”. The market this week brushed aside issues with Greece, China, Goldman and financial reform.
Complacency abounds, in true Bubble fashion. The U.S. stock market dismisses that there could be meaningful ramifications from the unfolding Greek debt crisis. Chinese authorities’ recent determination to restrict mortgage Credit barely garners a headline. And while the Goldman allegations generate great interest and discussion, few believe they will have much general market impact. Financial reform, well, it’s an afterthought when the market is open. Market participants are enamored with the notion that the securities markets and real economy are now conjoined in the initial phase of a big bull cycle.
Count me a subscriber of the “sugar high” thesis. The combination of double-digit (to GDP) deficits, protracted near-zero rates, and the Fed’s unprecedented Trillion-plus monetization has worked wonders. Government stimulus stabilized the Credit system, asset prices, system incomes and economic output. The bulls today believe that a new expansionary cycle has commenced, and fundamentals and prospects couldn’t be much more encouraging from their point of view. Surging stock prices have the optimists disregarding the possibility of a systemic addiction to massive government spending, ultra-low rates, and overabundant marketplace liquidity. Potential issues in the area of risk intermediation are not on the radar screen....In the current stock market frenzy, the economy’s structure and the prospects for private-sector Credit hardly seem relevant. The underlying fragility of private-sector Credit is masked. The markets are buoyant, while economic recovery gains momentum. Apparently, there’s no reason to focus on Greek debt woes, China’s vulnerable Bubble, Goldman’s and Wall Street’s trust issues, or the uncertainties associated with financial reform – not with corporate earnings surging and many stocks in virtual melt-up. Expectations have adjusted sharply higher, with most now believing the markets are discounting quite favorable economic prospects. I would instead hold the view that reflated securities markets are again nurturing financial and economic vulnerability.
Recent issues in Greece, China, Wall Street and Washington should not be dismissed. Importantly, this confluence of developments holds the potential to further restrict the capacity and stability of private-sector Credit. The Greek debt crisis appears to have created dislocation in the Credit default swaps marketplace. This will likely increase market volatility, along with heightened susceptibility for market yields to lurch higher, while perhaps hurting liquidity in government debt markets generally. This may not be an issue for Treasuries today, but it could foster debt market vulnerability going forward and make the inevitable bear market even more challenging....In the current stock market frenzy, the economy’s structure and the prospects for private-sector Credit hardly seem relevant. The underlying fragility of private-sector Credit is masked. The markets are buoyant, while economic recovery gains momentum. Apparently, there’s no reason to focus on Greek debt woes, China’s vulnerable Bubble, Goldman’s and Wall Street’s trust issues, or the uncertainties associated with financial reform – not with corporate earnings surging and many stocks in virtual melt-up. Expectations have adjusted sharply higher, with most now believing the markets are discounting quite favorable economic prospects. I would instead hold the view that reflated securities markets are again nurturing financial and economic vulnerability.
Recent issues in Greece, China, Wall Street and Washington should not be dismissed. Importantly, this confluence of developments holds the potential to further restrict the capacity and stability of private-sector Credit. The Greek debt crisis appears to have created dislocation in the Credit default swaps marketplace. This will likely increase market volatility, along with heightened susceptibility for market yields to lurch higher, while perhaps hurting liquidity in government debt markets generally. This may not be an issue for Treasuries today, but it could foster debt market vulnerability going forward and make the inevitable bear market even more challenging."
WSJ: "103: The number of months it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales."
"In the depths of the 2008 crisis it was the governments that stepped in to provide a guarantee on financial assets. It was the governments that backed our savings accounts, money market funds, day-to-day business banking accounts, as well as debt issued by US banks. But what happens when confidence in the government guarantee begins to erode? We’ve seen what happened to Greece. Leverage inherent in the banking system elevated a bank run, equivalent to a mere 3.6 percent of deposits, into another full blown banking crisis. In our view it’s time for investors to acknowledge sovereign risk. The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold. " Eric Sprott
Goldman Sachs made big profits betting against the mortgage market even though it stated in its 2009 annual report to investors that it “did not generate enormous net revenues by betting against residential related products”, according to initial findings of a Senate investigation into the bank
Lloyd Blankfein, the chairman and chief executive of Goldman, said in a November 2007 email exchange with other top executives that was released: “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts.” He then added: “Also, it’s not over, so who knows how it will turn out ultimately.”
More Banks Shut
4/23/10 More Banks Shut
Greece said on Friday it was tapping an EU/IMF aid mechanism aimed at rescuing the euro zone member from a debt crisis.
Orders for durable goods fell 1.3% in March to a seasonally adjusted $176.7 billion after a 1.1% gain in February. Excluding transportation goods, however, new orders rose 2.8% to $136.5 billion in March, the fastest growth since the recession began in December 2007. Orders for core capital equipment goods - the kinds of equipment businesses invest in to maintain or expand their productive capacity - rose 4%, the largest increase since June.
China's foreign exchange regulator may reduce the amount of short-term foreign debt the nation's commercial banks can hold in the current year, as part of efforts to curb currency market speculation, according to a Reuter's report Friday which cited three sources familiar with the situation. The report said many economists believe short term debt is an indicator of fund flows betting on appreciation the yuan, and that by reducing the foreign debt quota, authorities are seeking to close a loop hole that enables hot money flows.
"The financial market rally may not be over. There is a chance of a melt-up before any meltdown. Riding an irrational price bubble is sometimes an optimal investment strategy for even rational investors As an unnamed banker told Charles MacKay, author of the 1841 book, “Extraordinary Delusions and the Madness of Crowd” (1841): “When the rest of the world is mad, we must imitate them in some measure.”
Governments may introduce provide further support if economic and financial setbacks occur. Further fiscal stimulus packages are likely to be unveiled. Credit Suisse’s Neil Soss summed up the monetary policy position succinctly: “Central banks … have maxed out the amount of ‘love’ they're willing/able to give. … They probably won't take away much, if any, of the "love" they're giving us now in terms of low short-term interest rates and large central bank balance sheets for quite some time, but the change in momentum from ‘more love’ to ‘no incremental love’ is palpable and bound to influence markets.”
The risk of policy errors is ever present. Inopportune withdrawal of support or policy mistakes has the potential to be destabilising. High levels of volatility are likely to persist.
Governments and central banks continue to inject liberal amounts of botox to cover up problems, at least, while supplies exist. In absence of any definite solutions, policymakers are deferring dealing with the problems, rolling them forward. This means that the unavoidable adjustment when it occurs will be more severe and more painful. The ability of policymakers to cushion the adjustment will be restricted by constrained balance sheets.
In the words of David Bowers of Absolute Strategy Research: “It’s the last game of pass the parcel. When the tech bubble burst, balance sheet problems were passed to the household sector [through mortgages]. This time they are being passed to the public sector [through governments’ assumption of banks’ debts]. There’s nobody left to pass it to in the future.”
The exact trigger to end the current period of optimism is unpredictable. While several areas of stress are apparent, as Keynes observed: “The inevitable never happens. It is the unexpected always.”
The summary of 2009 and the outlook for 2010 may be the logo on a black T-shirt worn by Lisbeth Salander, the heroine of Steig Larsson’s “Girl with the Dragon Tatoo”: “Armageddon was yesterday – Today we have a serious problem.”
Satyajit Das
Eric Fry: “Total US corporate profits rose 30.6% year-over-year in the fourth quarter, a huge swing from the -25.1% trend a year ago,” observes The Daily Reckoning’s favorite economist, David Rosenberg. “But almost the entire story is in the financial sector, where profits have soared 240%, which is unprecedented… Financial sector profits have accounted for 85% of the overall increase in corporate earnings. Total non-financial earnings are up a grand total of 5.2% year-over-year."
Economic Disconnect: "
I offer this:
IF
-If 10% of this working country can have no job, but be paid by the government to be calm
-If a record number of people need food assistance to stay calm
-If a never before seen number of people are losing their homes but remain calm due to various help programs or just free living to stay calm
-If the stock market, which is the EASIEST thing to goose, looks good many may remain calm
-If tax breaks which bite you in the butt can entice fools to buy cars and homes not only remain calm but get excited
THEN
-How many more can "remain calm" under the same process?
Right now this all works because, and let's stop playing nice, the world has to get down on their knees and "service" the United States due to this dollar reserve currency thing (too long to get into). Can the US be the engine for world growth if our central bank prints cash to pay all the "remain calm" types, buys our own debt and pretends its "temporary", runs deficits that makes no sense by any honest reckoning, and gets the biggest free ride of all time?
It will until it does not.
I have been so wrong on so many things. I admit that. It happens. I guess I figured people could think, but they just believe. Huge difference. Huge.
Now go buy Amazon (AMZN) on the dip and buy a GM car and then a house to park over the car. Might as well go all out, what could stop you? Above all, remain calm."
A 5.9 magnitude earthquake shook Chile Friday near the city heavily damaged in a devastating February quake, but there were no immediate reports of damage.
Residents in Bio-Bio region were woken up by the tremor that lasted 25 seconds, Radio Cooperativa reported.
A Senate panel investigating the causes of the nation's financial crisis on Thursday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages because of the fees they earned for giving such investment-grade ratings.
Greece expects to receive before May 19 the first tranche of funds under a 45 billion euro ($60.49 billion) EU/IMF aid package it has formally requested, Finance Minister George Papaconstantinou said on Friday.
Sales of newly built U.S. single-family homes rebounded strongly in March to touch their highest level in eight months as buyers rushed into the market to take advantage of a homebuyer tax credit, a government report showed on Friday.
The Commerce Department said sales surged 26.9 percent, the largest advance since April 1963, to a 411,000 unit annual rate, breaking a four-month slide. February new home sales were revised up to a 324,000-unit pace from 308,000 units previously.
Foreign governments advised citizens to avoid nonessential travel to Bangkok on Friday, expanding earlier travel warnings a day after explosions killed one person and injured dozens in the city’s main financial district.
Shops, offices and banks were closed amid growing anxiety that a political standoff between protesters and the government of Prime Minister Abhisit Vejjajiva had reached a more volatile and violent phase.
Many of the 87 people injured, including at least 4 foreigners, were bystanders who appeared to have no role in the rival political crowds that have taunted each other across a makeshift barricade in recent days.
The American Embassy advised its citizens to forgo “nonessential travel to Bangkok,” adding that the possibility of more attacks could not be ruled out. Similar warnings were issued by the Australian and British Embassies.
Nokia has slashed prices of its cellphones across its portfolio this week, with the deepest cuts of around 10 percent seen for some smartphone models, data seen by Reuters showed on Thursday.
Seven U.S. banks were closed by regulators Friday, bringing the total number of bank failures for the year to 57. The seven banks are all based in Illinois, and include Wheatland Bank, Peotone Bank and Trust Company, Lincoln Park Savings Bank, New Century Bank, Citizens Bank & Trust Company of Chicago, Amcore Bank and Broadway Bank. Broadway Bank is run by the family of U.S. Senate candidate Alexi Giannoulias. The seven bank failures combined will cost the federal deposit insurance fund $973.9 million, according to the Federal Deposit Insurance Corp.
The Dow Jones Industrial Average rose 69.99 points, or 0.6%, to 11,204.28. For the week, the Dow gained 1.7%, marking the 8th straight week of gains for the blue-chip average, its longest winning streak since the 8 weeks ended Jan. 16, 2004. The S&P 500 index gained 8.61 points, or 0.7%, to 1,217.28, while the Nasdaq Composite rose 11.08 points, or 0.4%, to 2,530.15. For the week, the Nasdaq rose 2%, also the 8th straight week of gains for the tech-heavy benchmark. The S&P 500 gained 2.1% for the week, after falling 0.2% last week.
Greece said on Friday it was tapping an EU/IMF aid mechanism aimed at rescuing the euro zone member from a debt crisis.
Orders for durable goods fell 1.3% in March to a seasonally adjusted $176.7 billion after a 1.1% gain in February. Excluding transportation goods, however, new orders rose 2.8% to $136.5 billion in March, the fastest growth since the recession began in December 2007. Orders for core capital equipment goods - the kinds of equipment businesses invest in to maintain or expand their productive capacity - rose 4%, the largest increase since June.
China's foreign exchange regulator may reduce the amount of short-term foreign debt the nation's commercial banks can hold in the current year, as part of efforts to curb currency market speculation, according to a Reuter's report Friday which cited three sources familiar with the situation. The report said many economists believe short term debt is an indicator of fund flows betting on appreciation the yuan, and that by reducing the foreign debt quota, authorities are seeking to close a loop hole that enables hot money flows.
"The financial market rally may not be over. There is a chance of a melt-up before any meltdown. Riding an irrational price bubble is sometimes an optimal investment strategy for even rational investors As an unnamed banker told Charles MacKay, author of the 1841 book, “Extraordinary Delusions and the Madness of Crowd” (1841): “When the rest of the world is mad, we must imitate them in some measure.”
Governments may introduce provide further support if economic and financial setbacks occur. Further fiscal stimulus packages are likely to be unveiled. Credit Suisse’s Neil Soss summed up the monetary policy position succinctly: “Central banks … have maxed out the amount of ‘love’ they're willing/able to give. … They probably won't take away much, if any, of the "love" they're giving us now in terms of low short-term interest rates and large central bank balance sheets for quite some time, but the change in momentum from ‘more love’ to ‘no incremental love’ is palpable and bound to influence markets.”
The risk of policy errors is ever present. Inopportune withdrawal of support or policy mistakes has the potential to be destabilising. High levels of volatility are likely to persist.
Governments and central banks continue to inject liberal amounts of botox to cover up problems, at least, while supplies exist. In absence of any definite solutions, policymakers are deferring dealing with the problems, rolling them forward. This means that the unavoidable adjustment when it occurs will be more severe and more painful. The ability of policymakers to cushion the adjustment will be restricted by constrained balance sheets.
In the words of David Bowers of Absolute Strategy Research: “It’s the last game of pass the parcel. When the tech bubble burst, balance sheet problems were passed to the household sector [through mortgages]. This time they are being passed to the public sector [through governments’ assumption of banks’ debts]. There’s nobody left to pass it to in the future.”
The exact trigger to end the current period of optimism is unpredictable. While several areas of stress are apparent, as Keynes observed: “The inevitable never happens. It is the unexpected always.”
The summary of 2009 and the outlook for 2010 may be the logo on a black T-shirt worn by Lisbeth Salander, the heroine of Steig Larsson’s “Girl with the Dragon Tatoo”: “Armageddon was yesterday – Today we have a serious problem.”
Satyajit Das
Eric Fry: “Total US corporate profits rose 30.6% year-over-year in the fourth quarter, a huge swing from the -25.1% trend a year ago,” observes The Daily Reckoning’s favorite economist, David Rosenberg. “But almost the entire story is in the financial sector, where profits have soared 240%, which is unprecedented… Financial sector profits have accounted for 85% of the overall increase in corporate earnings. Total non-financial earnings are up a grand total of 5.2% year-over-year."
Economic Disconnect: "
I offer this:
IF
-If 10% of this working country can have no job, but be paid by the government to be calm
-If a record number of people need food assistance to stay calm
-If a never before seen number of people are losing their homes but remain calm due to various help programs or just free living to stay calm
-If the stock market, which is the EASIEST thing to goose, looks good many may remain calm
-If tax breaks which bite you in the butt can entice fools to buy cars and homes not only remain calm but get excited
THEN
-How many more can "remain calm" under the same process?
Right now this all works because, and let's stop playing nice, the world has to get down on their knees and "service" the United States due to this dollar reserve currency thing (too long to get into). Can the US be the engine for world growth if our central bank prints cash to pay all the "remain calm" types, buys our own debt and pretends its "temporary", runs deficits that makes no sense by any honest reckoning, and gets the biggest free ride of all time?
It will until it does not.
I have been so wrong on so many things. I admit that. It happens. I guess I figured people could think, but they just believe. Huge difference. Huge.
Now go buy Amazon (AMZN) on the dip and buy a GM car and then a house to park over the car. Might as well go all out, what could stop you? Above all, remain calm."
A 5.9 magnitude earthquake shook Chile Friday near the city heavily damaged in a devastating February quake, but there were no immediate reports of damage.
Residents in Bio-Bio region were woken up by the tremor that lasted 25 seconds, Radio Cooperativa reported.
A Senate panel investigating the causes of the nation's financial crisis on Thursday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages because of the fees they earned for giving such investment-grade ratings.
Greece expects to receive before May 19 the first tranche of funds under a 45 billion euro ($60.49 billion) EU/IMF aid package it has formally requested, Finance Minister George Papaconstantinou said on Friday.
Sales of newly built U.S. single-family homes rebounded strongly in March to touch their highest level in eight months as buyers rushed into the market to take advantage of a homebuyer tax credit, a government report showed on Friday.
The Commerce Department said sales surged 26.9 percent, the largest advance since April 1963, to a 411,000 unit annual rate, breaking a four-month slide. February new home sales were revised up to a 324,000-unit pace from 308,000 units previously.
Foreign governments advised citizens to avoid nonessential travel to Bangkok on Friday, expanding earlier travel warnings a day after explosions killed one person and injured dozens in the city’s main financial district.
Shops, offices and banks were closed amid growing anxiety that a political standoff between protesters and the government of Prime Minister Abhisit Vejjajiva had reached a more volatile and violent phase.
Many of the 87 people injured, including at least 4 foreigners, were bystanders who appeared to have no role in the rival political crowds that have taunted each other across a makeshift barricade in recent days.
The American Embassy advised its citizens to forgo “nonessential travel to Bangkok,” adding that the possibility of more attacks could not be ruled out. Similar warnings were issued by the Australian and British Embassies.
Nokia has slashed prices of its cellphones across its portfolio this week, with the deepest cuts of around 10 percent seen for some smartphone models, data seen by Reuters showed on Thursday.
Seven U.S. banks were closed by regulators Friday, bringing the total number of bank failures for the year to 57. The seven banks are all based in Illinois, and include Wheatland Bank, Peotone Bank and Trust Company, Lincoln Park Savings Bank, New Century Bank, Citizens Bank & Trust Company of Chicago, Amcore Bank and Broadway Bank. Broadway Bank is run by the family of U.S. Senate candidate Alexi Giannoulias. The seven bank failures combined will cost the federal deposit insurance fund $973.9 million, according to the Federal Deposit Insurance Corp.
The Dow Jones Industrial Average rose 69.99 points, or 0.6%, to 11,204.28. For the week, the Dow gained 1.7%, marking the 8th straight week of gains for the blue-chip average, its longest winning streak since the 8 weeks ended Jan. 16, 2004. The S&P 500 index gained 8.61 points, or 0.7%, to 1,217.28, while the Nasdaq Composite rose 11.08 points, or 0.4%, to 2,530.15. For the week, the Nasdaq rose 2%, also the 8th straight week of gains for the tech-heavy benchmark. The S&P 500 gained 2.1% for the week, after falling 0.2% last week.
Thursday, April 22, 2010
Greece
4/22/10 Greece
The number of people filing an initial claim for unemployment benefits declined by 24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks, the Labor Department reported Thursday. The number of people collecting regular state benefits dropped by 40,000 to a seasonally adjusted 4.65 million in the week of April 10. All told, in the week of April 3, 10.54 million people were collecting some type of unemployment benefits, down 538,000 from the previous week's 11.08 million.
Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday. The producer price index has risen by 6% in the past year, led by a 23% rise in energy prices, the government agency said. Excluding often-volatile food and energy prices, the core PPI increased 0.1% in March and is up 0.9% compared with a year earlier. The big story in the March PPI was wholesale food prices, which rose 2.4%, matching the biggest gain in 26 years. Prices of fresh and dried vegetables soared 49.3%, the most in 16 years.
Rural phone company CenturyTel Inc said it will buy Qwest Communications International Inc for about $10.6 billion in stock.
The deal combines two of the largest landline telephone companies in the United States. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock they own.
The European Union said Greece’s budget deficit last year was worse than previously forecast and may top 14 percent of gross domestic product, fueling investor concern about a default and sending its bond yields soaring.
The EU’s statistics office said Greece’s deficit was 13.6 percent of GDP last year, topping the government’s two-week-old forecast of 12.9 percent and the EU’s November prediction of 12.7 percent. “Uncertainties” about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said.
Barry Ritholtz: "It doesn’t matter until it does. Now it does in terms of the market reaction to what’s going on in Greece. Greek yields are blowing out again with the 10 yr yield up 46 bps to 8.53% and their curve has gone firmly inverted as the 2 yr yield is up 140 bps to 9.2%. 5 yr CDS is skyrocketing by 71 bps to 559 and 1 yr CDS is higher by 105 bps to 745 bps. Italy, Portugal, Spain and Ireland are all feeling the heat as bond yields are all higher and CDS is wider. These countries have a combined $4.8T of GDP, 35% of Euro zone GDP and European banks have sizeable exposure and large sovereign bond holdings as part of their capital. The EU said Greece’s deficit to GDP in ‘09 was 13.6% vs their previous forecast of 12.7%. Greece seems to be headed to a debt restructuring where haircuts are going to have to be taken as it seems the only way out for them as it’s impossible for their economy to grow out of their debt obligations. The Euro zone cannot guarantee Greek debt as who would buy a German bund yielding 3.05."
In today's (April 21) NYT, David Leonhardt writes that rent ratios - the market price of a house divided by the annual rent of a comparable house - are suggesting that in many regions of the country, the purchase of a house makes more economic sense than renting a comparable house (In Sour Home Market, Buying Often Beats Renting). According to Leonhardt, when the rent ratio is above 20, renting makes more economic sense. When the rent ratio is below 20, a home purchase makes more economic sense. "In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago."
The National Association of Realtors calculates a Housing Affordability Index (HAI). This index is a function of the level of mortgage rates and the ratio of house prices to household income. The lower the level of mortgage rates and the lower the house price-income ratio, the more affordable is a home purchase (i.e., the higher is the value of the HAI). The HAI index =100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter market. Chart 1 shows the history of the HAI from January 1971 through February 2010. The highest reading for the HAI was 184 in January 2009. The February 2010 reading was 176. The HAI is sending a signal similar to the Leonhardt's rent ratio - owner-occupied housing is a buy.
The Energy Department on Thursday is expected to report an increase of 76 billion to 80 billion cubic feet of natural gas storage inventories for the week ended April 16, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
George Ure: "
The so-called “shrinking” money supply that arises when adjusting for the loss of purchasing power from inflation is a characteristic portending imminent hyperinflation. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
I first explained this phenomenon in September 2007 and questioned then whether the dollar would eventually hyperinflate because Ben Bernanke would follow the footsteps of Herr Havenstein. I quoted an insightful section from Murray Rothbard’s excellent book, The Mystery of Banking, that explicitly explains the consequences of the inflation-adjusted money supply. Here is the relevant part of that quote:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
As the Globe & Mail observes, these circumstances prevail today. Prices of goods and services are rising, but as it warns, the quantity of dollars in circulation is “shrinking, after taking into account inflation.” This “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in its hyperinflationary whirlwind.
Rothbard provides his usual brilliant insight to explain what happens once the “Havenstein moment’ is reached. There are two alternatives.
“If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]”
Weimar Germany took the second alternative.
The dollar has now reached its ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and ‘tighten its belt’? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
No need to ponder these two alternatives. The Federal Reserve must ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend, which consequently has put the dollar on a hyperinflationary course."
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report. "They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down."
The WSJ reports that the American Institute of Architects’ Architecture Billings Index increased to 46.1 in March from 44.8 in February. Any reading below 50 indicates contraction.
Reggie Middleton: "Greece is ever closer to default (a default that is damn near guaranteed) while Ireland is probably in worse shape!!! Financial contagion begets economic contagion which breeds more financial contagion."
Working gas in storage was 1,829 Bcf as of Friday, April 16, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 95 Bcf higher than last year at this time and 286 Bcf above the 5-year average of 1,543 Bcf. In the East Region, stocks were 146 Bcf above the 5-year average following net injections of 34 Bcf. Stocks in the Producing Region were 72 Bcf above the 5-year average of 624 Bcf after a net injection of 31 Bcf. Stocks in the West. Region were 68 Bcf above the 5-year average after a net addition of 8 Bcf. At 1,829 Bcf, total working gas is
Existing Home Sales in March Rose 6.8% to 5.35M Rate, Inventories at 8.0 Months Supply.
An oil pipeline, which carries a quarter of Iraq’s total crude exports to Turkey, was damaged in a bomb attack in Iraq’s northern province of Nineveh, Reuters reported April 22. According to Iraqi North Oil Company officials, the oil flow will resume in three days and currently 650,000 barrels are stored in Ceyhan port in Turkey’s Mediterranean coast, where it could be pumped to tankers and sent to Europe.
The Nasdaq Composite Index which had been down 36 points, was up 14 points to 2,519. And the Standard & Poor's 500 Index was up 3 points to 1,209. The index had been down as many as 16 points. The Dow Jones industrials, down as many as 108 points right after the open, closed up 9 points at 11,134. The major averages all fell to their 20-day moving averages today and immediately bounced higher.
11.6% of Greece's GDP goes to pension coverage. Moody's downgrades their debt.
Microsoft shares were down 2.9% to $30.50 from a regular close of $31.39. The company said it earned 45 cents a share in earnings, up from 39 cents a year ago. Revenue of $14.5 billion was up 6.2% from a year ago and slightly ahead of the Street estimate of $14.47 billion. Microsoft said the results included a $305 million revenue deferral related to a promotional program for its Office suite of applications.
Amazon.com shares were down 4.3% to $144 from a regular close of $150.49. The online retailer reported 66 cents a share in earnings per share, up from 41 cents a share a year ago and ahead of the consensus estimate of 60 cents. Revenue was up 46% to $7.13 billion and ahead of the consensus view of $6.85 billion.
American Express shares rose 1.8% after hours to $47.60 from a regular close of $46.77. The company earned $895 million, or 73 cents a share, up 103% from a year ago. Revenue of $6.6 billion was up 11% from a year ago. Earnings beat the Street estimate of 64 cents. Revenue was ahead of the Street estimate of $6.35 billion.
UAL Corp.’s United Airlines and Continental Airlines Inc. are considering a stock-for-stock merger with no market premium, said two people with knowledge of the talks, creating a company valued at more than $6 billion.
4/22/10 Greece
The number of people filing an initial claim for unemployment benefits declined by 24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks, the Labor Department reported Thursday. The number of people collecting regular state benefits dropped by 40,000 to a seasonally adjusted 4.65 million in the week of April 10. All told, in the week of April 3, 10.54 million people were collecting some type of unemployment benefits, down 538,000 from the previous week's 11.08 million.
Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday. The producer price index has risen by 6% in the past year, led by a 23% rise in energy prices, the government agency said. Excluding often-volatile food and energy prices, the core PPI increased 0.1% in March and is up 0.9% compared with a year earlier. The big story in the March PPI was wholesale food prices, which rose 2.4%, matching the biggest gain in 26 years. Prices of fresh and dried vegetables soared 49.3%, the most in 16 years.
Rural phone company CenturyTel Inc said it will buy Qwest Communications International Inc for about $10.6 billion in stock.
The deal combines two of the largest landline telephone companies in the United States. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock they own.
The European Union said Greece’s budget deficit last year was worse than previously forecast and may top 14 percent of gross domestic product, fueling investor concern about a default and sending its bond yields soaring.
The EU’s statistics office said Greece’s deficit was 13.6 percent of GDP last year, topping the government’s two-week-old forecast of 12.9 percent and the EU’s November prediction of 12.7 percent. “Uncertainties” about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said.
Barry Ritholtz: "It doesn’t matter until it does. Now it does in terms of the market reaction to what’s going on in Greece. Greek yields are blowing out again with the 10 yr yield up 46 bps to 8.53% and their curve has gone firmly inverted as the 2 yr yield is up 140 bps to 9.2%. 5 yr CDS is skyrocketing by 71 bps to 559 and 1 yr CDS is higher by 105 bps to 745 bps. Italy, Portugal, Spain and Ireland are all feeling the heat as bond yields are all higher and CDS is wider. These countries have a combined $4.8T of GDP, 35% of Euro zone GDP and European banks have sizeable exposure and large sovereign bond holdings as part of their capital. The EU said Greece’s deficit to GDP in ‘09 was 13.6% vs their previous forecast of 12.7%. Greece seems to be headed to a debt restructuring where haircuts are going to have to be taken as it seems the only way out for them as it’s impossible for their economy to grow out of their debt obligations. The Euro zone cannot guarantee Greek debt as who would buy a German bund yielding 3.05."
In today's (April 21) NYT, David Leonhardt writes that rent ratios - the market price of a house divided by the annual rent of a comparable house - are suggesting that in many regions of the country, the purchase of a house makes more economic sense than renting a comparable house (In Sour Home Market, Buying Often Beats Renting). According to Leonhardt, when the rent ratio is above 20, renting makes more economic sense. When the rent ratio is below 20, a home purchase makes more economic sense. "In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago."
The National Association of Realtors calculates a Housing Affordability Index (HAI). This index is a function of the level of mortgage rates and the ratio of house prices to household income. The lower the level of mortgage rates and the lower the house price-income ratio, the more affordable is a home purchase (i.e., the higher is the value of the HAI). The HAI index =100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter market. Chart 1 shows the history of the HAI from January 1971 through February 2010. The highest reading for the HAI was 184 in January 2009. The February 2010 reading was 176. The HAI is sending a signal similar to the Leonhardt's rent ratio - owner-occupied housing is a buy.
The Energy Department on Thursday is expected to report an increase of 76 billion to 80 billion cubic feet of natural gas storage inventories for the week ended April 16, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
George Ure: "
The so-called “shrinking” money supply that arises when adjusting for the loss of purchasing power from inflation is a characteristic portending imminent hyperinflation. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
I first explained this phenomenon in September 2007 and questioned then whether the dollar would eventually hyperinflate because Ben Bernanke would follow the footsteps of Herr Havenstein. I quoted an insightful section from Murray Rothbard’s excellent book, The Mystery of Banking, that explicitly explains the consequences of the inflation-adjusted money supply. Here is the relevant part of that quote:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
As the Globe & Mail observes, these circumstances prevail today. Prices of goods and services are rising, but as it warns, the quantity of dollars in circulation is “shrinking, after taking into account inflation.” This “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in its hyperinflationary whirlwind.
Rothbard provides his usual brilliant insight to explain what happens once the “Havenstein moment’ is reached. There are two alternatives.
“If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]”
Weimar Germany took the second alternative.
The dollar has now reached its ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and ‘tighten its belt’? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
No need to ponder these two alternatives. The Federal Reserve must ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend, which consequently has put the dollar on a hyperinflationary course."
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report. "They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down."
The WSJ reports that the American Institute of Architects’ Architecture Billings Index increased to 46.1 in March from 44.8 in February. Any reading below 50 indicates contraction.
Reggie Middleton: "Greece is ever closer to default (a default that is damn near guaranteed) while Ireland is probably in worse shape!!! Financial contagion begets economic contagion which breeds more financial contagion."
Working gas in storage was 1,829 Bcf as of Friday, April 16, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 95 Bcf higher than last year at this time and 286 Bcf above the 5-year average of 1,543 Bcf. In the East Region, stocks were 146 Bcf above the 5-year average following net injections of 34 Bcf. Stocks in the Producing Region were 72 Bcf above the 5-year average of 624 Bcf after a net injection of 31 Bcf. Stocks in the West. Region were 68 Bcf above the 5-year average after a net addition of 8 Bcf. At 1,829 Bcf, total working gas is
Existing Home Sales in March Rose 6.8% to 5.35M Rate, Inventories at 8.0 Months Supply.
An oil pipeline, which carries a quarter of Iraq’s total crude exports to Turkey, was damaged in a bomb attack in Iraq’s northern province of Nineveh, Reuters reported April 22. According to Iraqi North Oil Company officials, the oil flow will resume in three days and currently 650,000 barrels are stored in Ceyhan port in Turkey’s Mediterranean coast, where it could be pumped to tankers and sent to Europe.
The Nasdaq Composite Index which had been down 36 points, was up 14 points to 2,519. And the Standard & Poor's 500 Index was up 3 points to 1,209. The index had been down as many as 16 points. The Dow Jones industrials, down as many as 108 points right after the open, closed up 9 points at 11,134. The major averages all fell to their 20-day moving averages today and immediately bounced higher.
11.6% of Greece's GDP goes to pension coverage. Moody's downgrades their debt.
Microsoft shares were down 2.9% to $30.50 from a regular close of $31.39. The company said it earned 45 cents a share in earnings, up from 39 cents a year ago. Revenue of $14.5 billion was up 6.2% from a year ago and slightly ahead of the Street estimate of $14.47 billion. Microsoft said the results included a $305 million revenue deferral related to a promotional program for its Office suite of applications.
Amazon.com shares were down 4.3% to $144 from a regular close of $150.49. The online retailer reported 66 cents a share in earnings per share, up from 41 cents a share a year ago and ahead of the consensus estimate of 60 cents. Revenue was up 46% to $7.13 billion and ahead of the consensus view of $6.85 billion.
American Express shares rose 1.8% after hours to $47.60 from a regular close of $46.77. The company earned $895 million, or 73 cents a share, up 103% from a year ago. Revenue of $6.6 billion was up 11% from a year ago. Earnings beat the Street estimate of 64 cents. Revenue was ahead of the Street estimate of $6.35 billion.
UAL Corp.’s United Airlines and Continental Airlines Inc. are considering a stock-for-stock merger with no market premium, said two people with knowledge of the talks, creating a company valued at more than $6 billion.
The number of people filing an initial claim for unemployment benefits declined by 24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks, the Labor Department reported Thursday. The number of people collecting regular state benefits dropped by 40,000 to a seasonally adjusted 4.65 million in the week of April 10. All told, in the week of April 3, 10.54 million people were collecting some type of unemployment benefits, down 538,000 from the previous week's 11.08 million.
Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday. The producer price index has risen by 6% in the past year, led by a 23% rise in energy prices, the government agency said. Excluding often-volatile food and energy prices, the core PPI increased 0.1% in March and is up 0.9% compared with a year earlier. The big story in the March PPI was wholesale food prices, which rose 2.4%, matching the biggest gain in 26 years. Prices of fresh and dried vegetables soared 49.3%, the most in 16 years.
Rural phone company CenturyTel Inc said it will buy Qwest Communications International Inc for about $10.6 billion in stock.
The deal combines two of the largest landline telephone companies in the United States. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock they own.
The European Union said Greece’s budget deficit last year was worse than previously forecast and may top 14 percent of gross domestic product, fueling investor concern about a default and sending its bond yields soaring.
The EU’s statistics office said Greece’s deficit was 13.6 percent of GDP last year, topping the government’s two-week-old forecast of 12.9 percent and the EU’s November prediction of 12.7 percent. “Uncertainties” about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said.
Barry Ritholtz: "It doesn’t matter until it does. Now it does in terms of the market reaction to what’s going on in Greece. Greek yields are blowing out again with the 10 yr yield up 46 bps to 8.53% and their curve has gone firmly inverted as the 2 yr yield is up 140 bps to 9.2%. 5 yr CDS is skyrocketing by 71 bps to 559 and 1 yr CDS is higher by 105 bps to 745 bps. Italy, Portugal, Spain and Ireland are all feeling the heat as bond yields are all higher and CDS is wider. These countries have a combined $4.8T of GDP, 35% of Euro zone GDP and European banks have sizeable exposure and large sovereign bond holdings as part of their capital. The EU said Greece’s deficit to GDP in ‘09 was 13.6% vs their previous forecast of 12.7%. Greece seems to be headed to a debt restructuring where haircuts are going to have to be taken as it seems the only way out for them as it’s impossible for their economy to grow out of their debt obligations. The Euro zone cannot guarantee Greek debt as who would buy a German bund yielding 3.05."
In today's (April 21) NYT, David Leonhardt writes that rent ratios - the market price of a house divided by the annual rent of a comparable house - are suggesting that in many regions of the country, the purchase of a house makes more economic sense than renting a comparable house (In Sour Home Market, Buying Often Beats Renting). According to Leonhardt, when the rent ratio is above 20, renting makes more economic sense. When the rent ratio is below 20, a home purchase makes more economic sense. "In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago."
The National Association of Realtors calculates a Housing Affordability Index (HAI). This index is a function of the level of mortgage rates and the ratio of house prices to household income. The lower the level of mortgage rates and the lower the house price-income ratio, the more affordable is a home purchase (i.e., the higher is the value of the HAI). The HAI index =100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter market. Chart 1 shows the history of the HAI from January 1971 through February 2010. The highest reading for the HAI was 184 in January 2009. The February 2010 reading was 176. The HAI is sending a signal similar to the Leonhardt's rent ratio - owner-occupied housing is a buy.
The Energy Department on Thursday is expected to report an increase of 76 billion to 80 billion cubic feet of natural gas storage inventories for the week ended April 16, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
George Ure: "
The so-called “shrinking” money supply that arises when adjusting for the loss of purchasing power from inflation is a characteristic portending imminent hyperinflation. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
I first explained this phenomenon in September 2007 and questioned then whether the dollar would eventually hyperinflate because Ben Bernanke would follow the footsteps of Herr Havenstein. I quoted an insightful section from Murray Rothbard’s excellent book, The Mystery of Banking, that explicitly explains the consequences of the inflation-adjusted money supply. Here is the relevant part of that quote:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
As the Globe & Mail observes, these circumstances prevail today. Prices of goods and services are rising, but as it warns, the quantity of dollars in circulation is “shrinking, after taking into account inflation.” This “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in its hyperinflationary whirlwind.
Rothbard provides his usual brilliant insight to explain what happens once the “Havenstein moment’ is reached. There are two alternatives.
“If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]”
Weimar Germany took the second alternative.
The dollar has now reached its ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and ‘tighten its belt’? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
No need to ponder these two alternatives. The Federal Reserve must ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend, which consequently has put the dollar on a hyperinflationary course."
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report. "They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down."
The WSJ reports that the American Institute of Architects’ Architecture Billings Index increased to 46.1 in March from 44.8 in February. Any reading below 50 indicates contraction.
Reggie Middleton: "Greece is ever closer to default (a default that is damn near guaranteed) while Ireland is probably in worse shape!!! Financial contagion begets economic contagion which breeds more financial contagion."
Working gas in storage was 1,829 Bcf as of Friday, April 16, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 95 Bcf higher than last year at this time and 286 Bcf above the 5-year average of 1,543 Bcf. In the East Region, stocks were 146 Bcf above the 5-year average following net injections of 34 Bcf. Stocks in the Producing Region were 72 Bcf above the 5-year average of 624 Bcf after a net injection of 31 Bcf. Stocks in the West. Region were 68 Bcf above the 5-year average after a net addition of 8 Bcf. At 1,829 Bcf, total working gas is
Existing Home Sales in March Rose 6.8% to 5.35M Rate, Inventories at 8.0 Months Supply.
An oil pipeline, which carries a quarter of Iraq’s total crude exports to Turkey, was damaged in a bomb attack in Iraq’s northern province of Nineveh, Reuters reported April 22. According to Iraqi North Oil Company officials, the oil flow will resume in three days and currently 650,000 barrels are stored in Ceyhan port in Turkey’s Mediterranean coast, where it could be pumped to tankers and sent to Europe.
The Nasdaq Composite Index which had been down 36 points, was up 14 points to 2,519. And the Standard & Poor's 500 Index was up 3 points to 1,209. The index had been down as many as 16 points. The Dow Jones industrials, down as many as 108 points right after the open, closed up 9 points at 11,134. The major averages all fell to their 20-day moving averages today and immediately bounced higher.
11.6% of Greece's GDP goes to pension coverage. Moody's downgrades their debt.
Microsoft shares were down 2.9% to $30.50 from a regular close of $31.39. The company said it earned 45 cents a share in earnings, up from 39 cents a year ago. Revenue of $14.5 billion was up 6.2% from a year ago and slightly ahead of the Street estimate of $14.47 billion. Microsoft said the results included a $305 million revenue deferral related to a promotional program for its Office suite of applications.
Amazon.com shares were down 4.3% to $144 from a regular close of $150.49. The online retailer reported 66 cents a share in earnings per share, up from 41 cents a share a year ago and ahead of the consensus estimate of 60 cents. Revenue was up 46% to $7.13 billion and ahead of the consensus view of $6.85 billion.
American Express shares rose 1.8% after hours to $47.60 from a regular close of $46.77. The company earned $895 million, or 73 cents a share, up 103% from a year ago. Revenue of $6.6 billion was up 11% from a year ago. Earnings beat the Street estimate of 64 cents. Revenue was ahead of the Street estimate of $6.35 billion.
UAL Corp.’s United Airlines and Continental Airlines Inc. are considering a stock-for-stock merger with no market premium, said two people with knowledge of the talks, creating a company valued at more than $6 billion.
4/22/10 Greece
The number of people filing an initial claim for unemployment benefits declined by 24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks, the Labor Department reported Thursday. The number of people collecting regular state benefits dropped by 40,000 to a seasonally adjusted 4.65 million in the week of April 10. All told, in the week of April 3, 10.54 million people were collecting some type of unemployment benefits, down 538,000 from the previous week's 11.08 million.
Higher prices for vegetables helped drive U.S. wholesale prices higher by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated Thursday. The producer price index has risen by 6% in the past year, led by a 23% rise in energy prices, the government agency said. Excluding often-volatile food and energy prices, the core PPI increased 0.1% in March and is up 0.9% compared with a year earlier. The big story in the March PPI was wholesale food prices, which rose 2.4%, matching the biggest gain in 26 years. Prices of fresh and dried vegetables soared 49.3%, the most in 16 years.
Rural phone company CenturyTel Inc said it will buy Qwest Communications International Inc for about $10.6 billion in stock.
The deal combines two of the largest landline telephone companies in the United States. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock they own.
The European Union said Greece’s budget deficit last year was worse than previously forecast and may top 14 percent of gross domestic product, fueling investor concern about a default and sending its bond yields soaring.
The EU’s statistics office said Greece’s deficit was 13.6 percent of GDP last year, topping the government’s two-week-old forecast of 12.9 percent and the EU’s November prediction of 12.7 percent. “Uncertainties” about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said.
Barry Ritholtz: "It doesn’t matter until it does. Now it does in terms of the market reaction to what’s going on in Greece. Greek yields are blowing out again with the 10 yr yield up 46 bps to 8.53% and their curve has gone firmly inverted as the 2 yr yield is up 140 bps to 9.2%. 5 yr CDS is skyrocketing by 71 bps to 559 and 1 yr CDS is higher by 105 bps to 745 bps. Italy, Portugal, Spain and Ireland are all feeling the heat as bond yields are all higher and CDS is wider. These countries have a combined $4.8T of GDP, 35% of Euro zone GDP and European banks have sizeable exposure and large sovereign bond holdings as part of their capital. The EU said Greece’s deficit to GDP in ‘09 was 13.6% vs their previous forecast of 12.7%. Greece seems to be headed to a debt restructuring where haircuts are going to have to be taken as it seems the only way out for them as it’s impossible for their economy to grow out of their debt obligations. The Euro zone cannot guarantee Greek debt as who would buy a German bund yielding 3.05."
In today's (April 21) NYT, David Leonhardt writes that rent ratios - the market price of a house divided by the annual rent of a comparable house - are suggesting that in many regions of the country, the purchase of a house makes more economic sense than renting a comparable house (In Sour Home Market, Buying Often Beats Renting). According to Leonhardt, when the rent ratio is above 20, renting makes more economic sense. When the rent ratio is below 20, a home purchase makes more economic sense. "In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago."
The National Association of Realtors calculates a Housing Affordability Index (HAI). This index is a function of the level of mortgage rates and the ratio of house prices to household income. The lower the level of mortgage rates and the lower the house price-income ratio, the more affordable is a home purchase (i.e., the higher is the value of the HAI). The HAI index =100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter market. Chart 1 shows the history of the HAI from January 1971 through February 2010. The highest reading for the HAI was 184 in January 2009. The February 2010 reading was 176. The HAI is sending a signal similar to the Leonhardt's rent ratio - owner-occupied housing is a buy.
The Energy Department on Thursday is expected to report an increase of 76 billion to 80 billion cubic feet of natural gas storage inventories for the week ended April 16, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
George Ure: "
The so-called “shrinking” money supply that arises when adjusting for the loss of purchasing power from inflation is a characteristic portending imminent hyperinflation. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
I first explained this phenomenon in September 2007 and questioned then whether the dollar would eventually hyperinflate because Ben Bernanke would follow the footsteps of Herr Havenstein. I quoted an insightful section from Murray Rothbard’s excellent book, The Mystery of Banking, that explicitly explains the consequences of the inflation-adjusted money supply. Here is the relevant part of that quote:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
As the Globe & Mail observes, these circumstances prevail today. Prices of goods and services are rising, but as it warns, the quantity of dollars in circulation is “shrinking, after taking into account inflation.” This “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in its hyperinflationary whirlwind.
Rothbard provides his usual brilliant insight to explain what happens once the “Havenstein moment’ is reached. There are two alternatives.
“If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]”
Weimar Germany took the second alternative.
The dollar has now reached its ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and ‘tighten its belt’? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
No need to ponder these two alternatives. The Federal Reserve must ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend, which consequently has put the dollar on a hyperinflationary course."
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report. "They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down."
The WSJ reports that the American Institute of Architects’ Architecture Billings Index increased to 46.1 in March from 44.8 in February. Any reading below 50 indicates contraction.
Reggie Middleton: "Greece is ever closer to default (a default that is damn near guaranteed) while Ireland is probably in worse shape!!! Financial contagion begets economic contagion which breeds more financial contagion."
Working gas in storage was 1,829 Bcf as of Friday, April 16, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 95 Bcf higher than last year at this time and 286 Bcf above the 5-year average of 1,543 Bcf. In the East Region, stocks were 146 Bcf above the 5-year average following net injections of 34 Bcf. Stocks in the Producing Region were 72 Bcf above the 5-year average of 624 Bcf after a net injection of 31 Bcf. Stocks in the West. Region were 68 Bcf above the 5-year average after a net addition of 8 Bcf. At 1,829 Bcf, total working gas is
Existing Home Sales in March Rose 6.8% to 5.35M Rate, Inventories at 8.0 Months Supply.
An oil pipeline, which carries a quarter of Iraq’s total crude exports to Turkey, was damaged in a bomb attack in Iraq’s northern province of Nineveh, Reuters reported April 22. According to Iraqi North Oil Company officials, the oil flow will resume in three days and currently 650,000 barrels are stored in Ceyhan port in Turkey’s Mediterranean coast, where it could be pumped to tankers and sent to Europe.
The Nasdaq Composite Index which had been down 36 points, was up 14 points to 2,519. And the Standard & Poor's 500 Index was up 3 points to 1,209. The index had been down as many as 16 points. The Dow Jones industrials, down as many as 108 points right after the open, closed up 9 points at 11,134. The major averages all fell to their 20-day moving averages today and immediately bounced higher.
11.6% of Greece's GDP goes to pension coverage. Moody's downgrades their debt.
Microsoft shares were down 2.9% to $30.50 from a regular close of $31.39. The company said it earned 45 cents a share in earnings, up from 39 cents a year ago. Revenue of $14.5 billion was up 6.2% from a year ago and slightly ahead of the Street estimate of $14.47 billion. Microsoft said the results included a $305 million revenue deferral related to a promotional program for its Office suite of applications.
Amazon.com shares were down 4.3% to $144 from a regular close of $150.49. The online retailer reported 66 cents a share in earnings per share, up from 41 cents a share a year ago and ahead of the consensus estimate of 60 cents. Revenue was up 46% to $7.13 billion and ahead of the consensus view of $6.85 billion.
American Express shares rose 1.8% after hours to $47.60 from a regular close of $46.77. The company earned $895 million, or 73 cents a share, up 103% from a year ago. Revenue of $6.6 billion was up 11% from a year ago. Earnings beat the Street estimate of 64 cents. Revenue was ahead of the Street estimate of $6.35 billion.
UAL Corp.’s United Airlines and Continental Airlines Inc. are considering a stock-for-stock merger with no market premium, said two people with knowledge of the talks, creating a company valued at more than $6 billion.
Wednesday, April 21, 2010
Earnings
4/21/10 Earnings
Edmunds.com is reporting that March 2010 saw a record number of
automobiles purchased with zero financing. The total of 22% of
transactions exceeded the previous high of 21% in July 2006. The stark
difference though of course is the total number of vehicle sales
between the two periods. In March 2010 the SAAR was 11.77mm (highest
since Sept ’08 ex clunkers) and in July 2006 it was 17.07mm.
McDonald's Corp.
said Wednesday that its first-quarter profit rose to $1.09 billion, or
$1 a share, from $979.5 million, or 87 cents a share, a year earlier.
Total revenue, including those from franchised restaurants, rose 10% to
$5.61 billion. Analysts, on average, estimated McDonald's to earn 96
cents a share on sales of $5.53 billion, according to FactSet. Global
comparable sales increased 4.2%, including a 1.5% increase in the U.S.,
a 5.2% jump in Europe and a 5.7% gain in Asia, Middle East and Africa.
Boeing lowered its earnings
expectations to a range of $3.50 to $3.80 a share, from a prior range
of $3.70 to $4 a share, due to the loss of the tax deduction.
China's apparent oil demand in March climbed 12.8% from a year ago to 35.25 million tonnes or about 8.12 million barrels per day (b/d), but fell below the all-time high of 8.5 million b/d estimated for February, according to a Platts analysis of official data just released.
Amid growing refining capacity in the country and high refinery utilization rates, March was also the seventh month in row the world's second-largest oil consumer after the US posted double-digit on-year growth in oil consumption.
The latest growth spurt goes back to September 2009, a month that saw Chinese oil consumption leap 12.6% on year to 28.41 million tonnes. However, the November 2009 high of an 18.7% on-year leap in demand remains unsurpassed.
For the first quarter of this year, Chinese petroleum demand averaged around 8.1 million b/d according to Platts estimates, up 16% versus the corresponding period of 2009.
UK unemployment at 16-year high.
Developed economies face the risk of deflation as central banks end programs to revive their financial systems, according to Pacific Investment Management Co., the biggest holder of inflation-linked Treasuries.
A slowdown in economic growth is adding to deflation pressures, said Mihir Worah, who oversees the $18 billion Pimco Real Return Fund. Pimco, which runs the world’s biggest bond fund, is “underweight” inflation-linked bonds in portfolios that focus on the debt, he wrote in a report.
“There is a near-term risk of flipping to deflation given our view that developed economies have not fully healed and consumers are not yet ready to stand on their own two feet,” Worah wrote on the Newport Beach, California-based company’s Web site.
ZeroHedge: "The April 19 Consumer Comfort Index number dropped back to -50, a 2010 low, just 4 points from its all-time low in 24 years of weekly polls, -54 in January 2009 and December 2008. 92% of those polled said the national economy’s in bad shape. The silver lining: "just 30 percent say it’s getting even worse, down from recent highs of 36 percent in January and 43 percent last September, much less a towering 82 percent as the economy fell into the abyss in October 2008." 25% said the economy’s getting better, while a little more than 4 in 10 say it’s staying the same: truly abysmal numbers when once look away from the wine and ambrosia flowing at the altar of Steve Jobs."
A 6.2-magnitude earthquake struck the Samoa Island region in the South Pacific Ocean Thursday morning local time, according to the U.S. Geological Survey. The epicenter was 123 miles from Apia, Samoa and 157 miles from Pago Pago, American Samoa.
The Dow Jones Industrial Average finished up 8 points, or 0.1%, to 11,124.92 for the third-straight session of gains. The S&P 500 slid 1 point, or 0.1%, to 1,205.94, weighed down by health-care and financial stocks. The Nasdaq Composite rose 4 points, or 0.2%, to 2,504.61.
Edmunds.com is reporting that March 2010 saw a record number of
automobiles purchased with zero financing. The total of 22% of
transactions exceeded the previous high of 21% in July 2006. The stark
difference though of course is the total number of vehicle sales
between the two periods. In March 2010 the SAAR was 11.77mm (highest
since Sept ’08 ex clunkers) and in July 2006 it was 17.07mm.
McDonald's Corp.
said Wednesday that its first-quarter profit rose to $1.09 billion, or
$1 a share, from $979.5 million, or 87 cents a share, a year earlier.
Total revenue, including those from franchised restaurants, rose 10% to
$5.61 billion. Analysts, on average, estimated McDonald's to earn 96
cents a share on sales of $5.53 billion, according to FactSet. Global
comparable sales increased 4.2%, including a 1.5% increase in the U.S.,
a 5.2% jump in Europe and a 5.7% gain in Asia, Middle East and Africa.
Boeing lowered its earnings
expectations to a range of $3.50 to $3.80 a share, from a prior range
of $3.70 to $4 a share, due to the loss of the tax deduction.
China's apparent oil demand in March climbed 12.8% from a year ago to 35.25 million tonnes or about 8.12 million barrels per day (b/d), but fell below the all-time high of 8.5 million b/d estimated for February, according to a Platts analysis of official data just released.
Amid growing refining capacity in the country and high refinery utilization rates, March was also the seventh month in row the world's second-largest oil consumer after the US posted double-digit on-year growth in oil consumption.
The latest growth spurt goes back to September 2009, a month that saw Chinese oil consumption leap 12.6% on year to 28.41 million tonnes. However, the November 2009 high of an 18.7% on-year leap in demand remains unsurpassed.
For the first quarter of this year, Chinese petroleum demand averaged around 8.1 million b/d according to Platts estimates, up 16% versus the corresponding period of 2009.
UK unemployment at 16-year high.
Developed economies face the risk of deflation as central banks end programs to revive their financial systems, according to Pacific Investment Management Co., the biggest holder of inflation-linked Treasuries.
A slowdown in economic growth is adding to deflation pressures, said Mihir Worah, who oversees the $18 billion Pimco Real Return Fund. Pimco, which runs the world’s biggest bond fund, is “underweight” inflation-linked bonds in portfolios that focus on the debt, he wrote in a report.
“There is a near-term risk of flipping to deflation given our view that developed economies have not fully healed and consumers are not yet ready to stand on their own two feet,” Worah wrote on the Newport Beach, California-based company’s Web site.
ZeroHedge: "The April 19 Consumer Comfort Index number dropped back to -50, a 2010 low, just 4 points from its all-time low in 24 years of weekly polls, -54 in January 2009 and December 2008. 92% of those polled said the national economy’s in bad shape. The silver lining: "just 30 percent say it’s getting even worse, down from recent highs of 36 percent in January and 43 percent last September, much less a towering 82 percent as the economy fell into the abyss in October 2008." 25% said the economy’s getting better, while a little more than 4 in 10 say it’s staying the same: truly abysmal numbers when once look away from the wine and ambrosia flowing at the altar of Steve Jobs."
A 6.2-magnitude earthquake struck the Samoa Island region in the South Pacific Ocean Thursday morning local time, according to the U.S. Geological Survey. The epicenter was 123 miles from Apia, Samoa and 157 miles from Pago Pago, American Samoa.
The Dow Jones Industrial Average finished up 8 points, or 0.1%, to 11,124.92 for the third-straight session of gains. The S&P 500 slid 1 point, or 0.1%, to 1,205.94, weighed down by health-care and financial stocks. The Nasdaq Composite rose 4 points, or 0.2%, to 2,504.61.
Tuesday, April 20, 2010
Goldman Sachs
4/20/10 Goldman Sachs
J&J updated its 2010 adjusted earnings forecast to $4.80 to $4.90 a share, down from $4.85 to $4.95 a share.
Goldman Sachs, facing a fraud lawsuit from U.S. regulators,
said first-quarter earnings surged 91 percent after fixed-income
trading revenue rose to a record. The Mannheim-based ZEW Center
for European Economic Research said its index of investor and
analyst expectations increased to 53 from 44.5 in March, while
Federal Reserve Bank of Chicago President Charles Evans said
late yesterday that the U.S. recession is “definitely over.”
By: Ty Andros :
"The global financial maelstrom continues to unfold as public serpents, central banks and crony capitalists continue to pour gas on the fires. It is set to continue. The collapse of FIAT paper wealth storage is unfolding with breathtaking speed. Asset bubbles continue to emerge in the emerging world and collapse in the developed world as capital FLEES. Today's missive covers the deep insolvencies in the developed world and the definitions of solvency of Austrian Economics. The inflationary depression still lies in our futures."
The Bank of Canada kept its key
lending rate at a record low 0.25 percent, and said it will
start raising interest rates because of faster-than-expected
economic growth and inflation.
“With recent improvements in the economic outlook, the
need for such extraordinary policy is now passing, and it is
appropriate to begin to lessen the degree of monetary
stimulus,” the central bank, led by Governor Mark Carney, said
in a statement today from Ottawa. “The extent and timing will
depend on the outlook for economic activity and inflation.”
The Treasury’s Home Affordable Modification Program,
or HAMP, “has made very little progress in stemming this onslaught,”
with 230,000 mortgage loans permanently modified in a year, according
to the report by Neil Barofsky, special inspector general for the
Troubled Asset Relief Program.
The report is the second in two weeks to criticize
the department’s $75 billion foreclosure-prevention program, which pays
lenders to modify troubled mortgages and lower homeowners’ monthly
payments. U.S. home foreclosures this year are on a course to exceed
the 2.8 million initiated in 2009, with more than 932,000 filings
during the first three months, the report said.
Borrowers helped by the programs continue to default
on their mortgages, threatening the effort’s success, Barofsky’s review
found. The Treasury estimates that 40 percent of HAMP- modified
mortgages will default.
Fed governor Elizabeth Duke:
"Despite the best efforts of bankers and regulators, small businesses are still finding it difficult to obtain credit. A recent study conducted by the National Federation of Independent Business (NFIB) found that only about half of the small employers who attempted to borrow in 2009 received all the credit they wanted. Nearly one-quarter received no credit at all. A similar study in 2005 found nearly 90 percent of small employers had most or all their credit needs met, and only 8 percent obtained no credit. Even though conditions in financial markets have continued to improve this year, access to credit remains restricted for many smaller businesses.
Several factors are contributing to the reduced supply of bank loans. For instance, in response to an increase in the number of delinquent and nonperforming loans, many banks have reduced existing lines of credit sharply and have tightened their standards and terms for new credit. In other cases, banks whose capital has been eroded by losses or who have limited access to capital markets may be reducing risk assets to improve their capital positions, especially amid continued uncertainty about the economic outlook and possible future loan losses. But the reduction in the availability of credit is not the whole story. There is also less demand for credit by sound firms. "
Saudis tightening Chinese energy ties to move away from dependence on US with about a fifth of China’s crude imports now coming from Saudi
Arabia, or about 1 million barrels a day compared with 455,000 barrels
a day in 2005, the kingdom is investing to expand Chinese capacity for
refining of Saudi heavy crude. China’s need for oil is prompting it to seek greater influence in the Middle East,
said Shi Yinhong, a professor of international relations at Renmin
University in Beijing. Increasing economic ties to Saudi Arabia “will
play some role in gradually eroding American preponderance over that
country.
ZeroHedge: "In the week ended April 16, the US Treasury collected $29.3 billion,
10% less than the comparable week in the prior year when $32.5 billion
was withheld. Cumulatively, the difference is now at an almost 2010
high, hitting a $16.7 billion difference between the YTD period and the
comparable period in 2009 (only highest cum total was in Week 2)."
April 19, 2010 - Iceland Volcano Erupts
Again with New 15,000-Foot-High Ash Cloud.
At least 8 million travelers around the world interrupted.
“The volcano eruption in Iceland has strengthened and a new
ash cloud is spreading south and east towards the U.K.”
- British National Air Traffic Controller
Greece announced today that its unemployment rate rose to 11.3%.
Goldman Sachs has hired a lawyer familiar to many in Washington: Former White House Counsel Greg Craig.
European Central Bank Governing Council member Axel Weber has told
German politicians that Greece may require assistance of up to 80
billion euros ($111.8 billion) in the coming years.
U.S. highway travel was down 2.9 percent in February from a year
earlier, falling 6.3 billion miles to 212.9 billion miles, the U.S.
Transportation Department said Tuesday.
When it comes to predicting the price of oil, Henry Groppe has made a long career out of zigging when others were
zagging. So why should he be any different when talking about natural gas.
Mr. Groppe – the octogenarian patriarch of Texas petroleum industry
analysts Groppe Long & Littell – doesn't buy the prevailing wisdom
that New York Mercantile Exchange natural gas prices are dead in the
water, stuck around $4 to $5 (U.S.) per million British thermal units
even as demand recovers, awash in supplies and with much more on the
way.
No, his analysis (and more than 50 years of experience) tells him that
gas inventories are about to get a lot tighter, that new supplies are
overstated, and that prices are headed north of $8 by the end of
summer.
Why is he so sure he's got it right and most everyone else has it wrong?
Because, he contends, shale gas – the previously unattainable source of
vast gas supplies that has been unlocked by new high-tech horizontal
drilling advancements – is not the holy grail it's been cracked up to
be. Not even close.
“Everyone thinks [shale gas] is going to solve all of our problems.
There are very optimistic estimates about the economically recoverable
volumes of gas from this new resource,” he said in an interview last
week in the Toronto offices of boutique fund manager Middlefield
Capital Corp., where he's a long-time consultant and is special adviser
to the nine-month-old Middlefield Groppe Tactical Energy mutual fund.
“That's dominating everyone's views about the gas supply picture – that we're going to be flooded with gas.”
The reality, he argues, is that shale gas deposits are a tiny part of
the North American production pool – and they are already depleting
fast.
Mr. Groppe says that while the average depletion rate in conventional
gas wells is about 25 per cent (in other words, if you didn't drill at
all for new wells, production would decline by a quarter each year),
shale gas shows even more rapid depletion – output tumbles, on average,
45 per cent in the first year for shale wells.“ We think that we're now having a continuous, rapid decline of gas in storage. By summer, it could get to be alarming.”
Drilling of shale plays has recovered rapidly from the slowdown during
the recession – indeed, the count of active horizontal drill rigs in
the United States has ramped up to record levels – which, because of
the high initial production volumes that are characteristic of shale
wells, has flooded the market with supplies and fuelled expectations of
continued rapid growth. But given Mr. Groppe's depletion numbers, the
high drilling pace may also be serving to drain the resource in the
major shale pools even faster than they would otherwise.
As for the shorter-term supply picture, Mr. Groppe notes that for all
that horizontal drilling frenzy, shale gas accounts for just 6 per cent
of U.S. natural gas production.
In the other 94 per cent – conventional gas – the rig count is 70 per cent below the pre-financial-crisis levels of September, 2008, as low prices and
high inventory levels have convinced producers to keep drills idled.
“With that extraordinary drop in drilling, the [production] decline
rate from all these [non-shale] sources is accelerating – and will be
much more than offset whatever increases you get in shale.”
Add to that the fact that consumption continues to grow as the
economy recovers, and he believes the glut in gas will prove strikingly
short-lived.
“We think that we're now having a continuous, rapid decline of gas in
storage,” he says. “By summer, it could get to be alarming.”
“We would expect gas prices to get above $8 in the August-September range.”
Why should we believe Henry Groppe? Well, he has a habit of disagreeing with the consensus view – and being right.
In 1980, when oil approached $40 a barrel and forecasters predicted
$100 oil was inevitable, Mr. Groppe said crude would fall below $15 by
the mid-1980s. It did.
In 1998, when crude dipped to barely above $10 and some prognosticators
were hailing a new era of cheap energy, Mr. Groppe said oil was set to
soar. By early 2000, it had topped $30 a barrel.
And two years ago, when it threatened to reach $150 a barrel and
forecasters said $200 and more were just over the horizon, Mr. Groppe
predicted we'd be back at $60-$70 in the second half of the year. By
October, he was right again.
Now, he says, a slow-but-gradual decline in North American natural gas
reserves – regardless of shale – means an average price in the $8 range
is inevitable to trigger the “demand destruction” necessary to keep the
supply-demand picture in balance. Eventually, he says, that price will
creep up toward $10 by the end of the decade, as gas production slowly
depletes.
Mr. Groppe credits his successes on a meticulous study of
supply-and-demand details – something, he says, many of the people who
disagree with him fail to do. He believes this is again the case in his
critics' misplaced faith that shale plays will permanently alter the
trajectory of North American natural gas supplies.
“When you take apart all the pieces from the bottom, there's absolutely
no way for that to take place,” he says.
The U.S. Travel Association said Tuesday that flight disruptions due to the erupting volcano in Iceland decreased travel-related spending in the U.S. by $650 million, and hurt federal tax receipts by $90 million. According to the lobbying group, every U.S.-bound flight accounts for about $450,000 in direct spending by international travelers in the country.
Apple sold almost 11 million iPods last quarter and doubled its iPhone sales from this time last year, selling 8.8 million smartphones during the quarter ended March 27.
Those sales helped Apple on Tuesday report a profit of $3.1 billion on revenue of $13.5 billion, blowing past Wall Street's expectations.
Yahoo! Inc. forecast sales that missed analysts' estimates after the company lost market share.
Washington-based trade group The American Petroleum Institute reported late Tuesday that crude-oil inventories declined by 741,000 barrels in the week ended April 16. Analysts polled by Platts expected the data to show an increase of 300,000 barrels. The API reported that gasoline stockpiles declined by 1.7 million barrels, and distillates inventories declined by 3.1 million barrels. The refinery utilization rate rose to 85.1%, whereas the Platts analysts expected a rise to 85.94%.
The Dow Jones Industrial Average climbed 25 points to end the day at 11,117, while the Nasdaq Composite Index rose 20 points to finish at 2,500. The S&P 500 Index tacked on almost 10 points to end the day's trading at 1,207.
Politicians in the United Kingdom and Germany are calling on their governments to cut ties with Goldman Sachs Group Inc. in the wake of its fraud charges, The Wall Street Journal reported Tuesday in its online edition. The newspaper reported that U.K. Liberal Democrat leader Nick Clegg said Goldman Sachs should be suspended as an adviser to the government until these allegations are looked into. A German lawmaker also said Berlin should put its business relationship with Goldman Sachs on hold for the time being, the newspaper said.
J&J updated its 2010 adjusted earnings forecast to $4.80 to $4.90 a share, down from $4.85 to $4.95 a share.
Goldman Sachs, facing a fraud lawsuit from U.S. regulators,
said first-quarter earnings surged 91 percent after fixed-income
trading revenue rose to a record. The Mannheim-based ZEW Center
for European Economic Research said its index of investor and
analyst expectations increased to 53 from 44.5 in March, while
Federal Reserve Bank of Chicago President Charles Evans said
late yesterday that the U.S. recession is “definitely over.”
By: Ty Andros :
"The global financial maelstrom continues to unfold as public serpents, central banks and crony capitalists continue to pour gas on the fires. It is set to continue. The collapse of FIAT paper wealth storage is unfolding with breathtaking speed. Asset bubbles continue to emerge in the emerging world and collapse in the developed world as capital FLEES. Today's missive covers the deep insolvencies in the developed world and the definitions of solvency of Austrian Economics. The inflationary depression still lies in our futures."
The Bank of Canada kept its key
lending rate at a record low 0.25 percent, and said it will
start raising interest rates because of faster-than-expected
economic growth and inflation.
“With recent improvements in the economic outlook, the
need for such extraordinary policy is now passing, and it is
appropriate to begin to lessen the degree of monetary
stimulus,” the central bank, led by Governor Mark Carney, said
in a statement today from Ottawa. “The extent and timing will
depend on the outlook for economic activity and inflation.”
The Treasury’s Home Affordable Modification Program,
or HAMP, “has made very little progress in stemming this onslaught,”
with 230,000 mortgage loans permanently modified in a year, according
to the report by Neil Barofsky, special inspector general for the
Troubled Asset Relief Program.
The report is the second in two weeks to criticize
the department’s $75 billion foreclosure-prevention program, which pays
lenders to modify troubled mortgages and lower homeowners’ monthly
payments. U.S. home foreclosures this year are on a course to exceed
the 2.8 million initiated in 2009, with more than 932,000 filings
during the first three months, the report said.
Borrowers helped by the programs continue to default
on their mortgages, threatening the effort’s success, Barofsky’s review
found. The Treasury estimates that 40 percent of HAMP- modified
mortgages will default.
Fed governor Elizabeth Duke:
"Despite the best efforts of bankers and regulators, small businesses are still finding it difficult to obtain credit. A recent study conducted by the National Federation of Independent Business (NFIB) found that only about half of the small employers who attempted to borrow in 2009 received all the credit they wanted. Nearly one-quarter received no credit at all. A similar study in 2005 found nearly 90 percent of small employers had most or all their credit needs met, and only 8 percent obtained no credit. Even though conditions in financial markets have continued to improve this year, access to credit remains restricted for many smaller businesses.
Several factors are contributing to the reduced supply of bank loans. For instance, in response to an increase in the number of delinquent and nonperforming loans, many banks have reduced existing lines of credit sharply and have tightened their standards and terms for new credit. In other cases, banks whose capital has been eroded by losses or who have limited access to capital markets may be reducing risk assets to improve their capital positions, especially amid continued uncertainty about the economic outlook and possible future loan losses. But the reduction in the availability of credit is not the whole story. There is also less demand for credit by sound firms. "
Saudis tightening Chinese energy ties to move away from dependence on US with about a fifth of China’s crude imports now coming from Saudi
Arabia, or about 1 million barrels a day compared with 455,000 barrels
a day in 2005, the kingdom is investing to expand Chinese capacity for
refining of Saudi heavy crude. China’s need for oil is prompting it to seek greater influence in the Middle East,
said Shi Yinhong, a professor of international relations at Renmin
University in Beijing. Increasing economic ties to Saudi Arabia “will
play some role in gradually eroding American preponderance over that
country.
ZeroHedge: "In the week ended April 16, the US Treasury collected $29.3 billion,
10% less than the comparable week in the prior year when $32.5 billion
was withheld. Cumulatively, the difference is now at an almost 2010
high, hitting a $16.7 billion difference between the YTD period and the
comparable period in 2009 (only highest cum total was in Week 2)."
April 19, 2010 - Iceland Volcano Erupts
Again with New 15,000-Foot-High Ash Cloud.
At least 8 million travelers around the world interrupted.
“The volcano eruption in Iceland has strengthened and a new
ash cloud is spreading south and east towards the U.K.”
- British National Air Traffic Controller
Greece announced today that its unemployment rate rose to 11.3%.
Goldman Sachs has hired a lawyer familiar to many in Washington: Former White House Counsel Greg Craig.
European Central Bank Governing Council member Axel Weber has told
German politicians that Greece may require assistance of up to 80
billion euros ($111.8 billion) in the coming years.
U.S. highway travel was down 2.9 percent in February from a year
earlier, falling 6.3 billion miles to 212.9 billion miles, the U.S.
Transportation Department said Tuesday.
When it comes to predicting the price of oil, Henry Groppe has made a long career out of zigging when others were
zagging. So why should he be any different when talking about natural gas.
Mr. Groppe – the octogenarian patriarch of Texas petroleum industry
analysts Groppe Long & Littell – doesn't buy the prevailing wisdom
that New York Mercantile Exchange natural gas prices are dead in the
water, stuck around $4 to $5 (U.S.) per million British thermal units
even as demand recovers, awash in supplies and with much more on the
way.
No, his analysis (and more than 50 years of experience) tells him that
gas inventories are about to get a lot tighter, that new supplies are
overstated, and that prices are headed north of $8 by the end of
summer.
Why is he so sure he's got it right and most everyone else has it wrong?
Because, he contends, shale gas – the previously unattainable source of
vast gas supplies that has been unlocked by new high-tech horizontal
drilling advancements – is not the holy grail it's been cracked up to
be. Not even close.
“Everyone thinks [shale gas] is going to solve all of our problems.
There are very optimistic estimates about the economically recoverable
volumes of gas from this new resource,” he said in an interview last
week in the Toronto offices of boutique fund manager Middlefield
Capital Corp., where he's a long-time consultant and is special adviser
to the nine-month-old Middlefield Groppe Tactical Energy mutual fund.
“That's dominating everyone's views about the gas supply picture – that we're going to be flooded with gas.”
The reality, he argues, is that shale gas deposits are a tiny part of
the North American production pool – and they are already depleting
fast.
Mr. Groppe says that while the average depletion rate in conventional
gas wells is about 25 per cent (in other words, if you didn't drill at
all for new wells, production would decline by a quarter each year),
shale gas shows even more rapid depletion – output tumbles, on average,
45 per cent in the first year for shale wells.“ We think that we're now having a continuous, rapid decline of gas in storage. By summer, it could get to be alarming.”
Drilling of shale plays has recovered rapidly from the slowdown during
the recession – indeed, the count of active horizontal drill rigs in
the United States has ramped up to record levels – which, because of
the high initial production volumes that are characteristic of shale
wells, has flooded the market with supplies and fuelled expectations of
continued rapid growth. But given Mr. Groppe's depletion numbers, the
high drilling pace may also be serving to drain the resource in the
major shale pools even faster than they would otherwise.
As for the shorter-term supply picture, Mr. Groppe notes that for all
that horizontal drilling frenzy, shale gas accounts for just 6 per cent
of U.S. natural gas production.
In the other 94 per cent – conventional gas – the rig count is 70 per cent below the pre-financial-crisis levels of September, 2008, as low prices and
high inventory levels have convinced producers to keep drills idled.
“With that extraordinary drop in drilling, the [production] decline
rate from all these [non-shale] sources is accelerating – and will be
much more than offset whatever increases you get in shale.”
Add to that the fact that consumption continues to grow as the
economy recovers, and he believes the glut in gas will prove strikingly
short-lived.
“We think that we're now having a continuous, rapid decline of gas in
storage,” he says. “By summer, it could get to be alarming.”
“We would expect gas prices to get above $8 in the August-September range.”
Why should we believe Henry Groppe? Well, he has a habit of disagreeing with the consensus view – and being right.
In 1980, when oil approached $40 a barrel and forecasters predicted
$100 oil was inevitable, Mr. Groppe said crude would fall below $15 by
the mid-1980s. It did.
In 1998, when crude dipped to barely above $10 and some prognosticators
were hailing a new era of cheap energy, Mr. Groppe said oil was set to
soar. By early 2000, it had topped $30 a barrel.
And two years ago, when it threatened to reach $150 a barrel and
forecasters said $200 and more were just over the horizon, Mr. Groppe
predicted we'd be back at $60-$70 in the second half of the year. By
October, he was right again.
Now, he says, a slow-but-gradual decline in North American natural gas
reserves – regardless of shale – means an average price in the $8 range
is inevitable to trigger the “demand destruction” necessary to keep the
supply-demand picture in balance. Eventually, he says, that price will
creep up toward $10 by the end of the decade, as gas production slowly
depletes.
Mr. Groppe credits his successes on a meticulous study of
supply-and-demand details – something, he says, many of the people who
disagree with him fail to do. He believes this is again the case in his
critics' misplaced faith that shale plays will permanently alter the
trajectory of North American natural gas supplies.
“When you take apart all the pieces from the bottom, there's absolutely
no way for that to take place,” he says.
The U.S. Travel Association said Tuesday that flight disruptions due to the erupting volcano in Iceland decreased travel-related spending in the U.S. by $650 million, and hurt federal tax receipts by $90 million. According to the lobbying group, every U.S.-bound flight accounts for about $450,000 in direct spending by international travelers in the country.
Apple sold almost 11 million iPods last quarter and doubled its iPhone sales from this time last year, selling 8.8 million smartphones during the quarter ended March 27.
Those sales helped Apple on Tuesday report a profit of $3.1 billion on revenue of $13.5 billion, blowing past Wall Street's expectations.
Yahoo! Inc. forecast sales that missed analysts' estimates after the company lost market share.
Washington-based trade group The American Petroleum Institute reported late Tuesday that crude-oil inventories declined by 741,000 barrels in the week ended April 16. Analysts polled by Platts expected the data to show an increase of 300,000 barrels. The API reported that gasoline stockpiles declined by 1.7 million barrels, and distillates inventories declined by 3.1 million barrels. The refinery utilization rate rose to 85.1%, whereas the Platts analysts expected a rise to 85.94%.
The Dow Jones Industrial Average climbed 25 points to end the day at 11,117, while the Nasdaq Composite Index rose 20 points to finish at 2,500. The S&P 500 Index tacked on almost 10 points to end the day's trading at 1,207.
Politicians in the United Kingdom and Germany are calling on their governments to cut ties with Goldman Sachs Group Inc. in the wake of its fraud charges, The Wall Street Journal reported Tuesday in its online edition. The newspaper reported that U.K. Liberal Democrat leader Nick Clegg said Goldman Sachs should be suspended as an adviser to the government until these allegations are looked into. A German lawmaker also said Berlin should put its business relationship with Goldman Sachs on hold for the time being, the newspaper said.
Monday, April 19, 2010
Gallows?
4/19/10 Gallows?
George Ure: "So here's the ponder point: How bad does a crime/fraud/scam have to be - how many people does it have to destroy - before it scales beyond going to jail and means instead going to the gallows? What's that threshold?"
Jim Rogers: "If I were buying energy, I would probably buy natural gas rather than oil just because it’s so depressed. I don’t like to buy when things are up. I like to buy things when down, when people are unhappy that’s when I like to buy things."
Between July 2005 and July 2008, the renminbi appreciated 21 percent against the dollar, yet America's imports from China grew 39 percent and the trade deficit with China increased $66 billion.
Chinese banks have 1.88 billion debit cards and 190 million credit cards outstanding, on which cardholders made 19.7 billion purchases last year. But they can't buy domestic card payment network services from American Express, Discover, JCB, MasterCard or Visa. China UnionPay (CUP) enjoys a protected card-payment-network monopoly. And merchant processors such as First Data and Global Payments, which have joint ventures in China with British banks Standard Chartered and HSBC respectively, can't compete with CUP and Chinese banks providing domestic card acceptance to merchants.
The continued witch hunt and scapegoating at just the symptoms of the
credit bubble and not the disease comes in the context of a market that
was very overbought and was due for any excuse to take a rest. To
quantify, the RSI in the S&P 500 went 6 weeks straight above 65 for
the first time since 1986. With that said, the open ended nature of
future lawsuits and the greater possibility of tighter scrutiny of our
banking system will have an impact on the financials and their future
earnings power. As important for the global economy and its markets is
the correction going on in China in response to further steps to crack
down on their property bubble. The Shanghai index fell 4.8% after banks
were told to halt loans for 3rd home buyers (investors) in cities with
large price gains and to tighten the criteria for sales to non
residents. Commodities are also down in response. Greek bond yields are
breaking out to the highest since 1998.
Rob Hanna: "Big drops on Fridays have often been overreactions and have therefore resulted in a consistent propensity to bounce on Monday."
The Organization of Petroleum Exporting Countries may be
creating a glut after output jumped 5.6 percent to 29.2 million
barrels a day in March from a year earlier, according to
Bloomberg estimates. Shipments will rise 0.9 percent in the four
weeks ending May 1, according to tanker-tracker Oil Movements.
“Oil at $87 a barrel seems pretty unreasonable given the
fundamentals of the market,” said Addison Armstrong, director
of market research at Tradition Energy, a Stamford, Connecticut-
based procurement adviser. “Forget China and India for a minute.
The U.S. remains the biggest consumer, and U.S. demand hasn’t
recovered.”
Greece’s bonds fell, pushing yields
to the highest relative to German bunds since 1998, as debt-
crisis talks with the European Central Bank, European Commission
and International Monetary Fund were delayed.
Greek two-year notes led the declines as officials
postponed the Athens meeting after air space across northern
Europe was closed because of volcanic ash from Iceland, putting
back the start of negotiations to lay down conditions for a 45
billion-euro ($60 billion) bailout package until April 21. The
bonds of Portugal and Ireland also dropped.
Until there is an aid agreement, “the market is not going
to believe it,” said Marc Ostwald, a strategist at Monument
Securities Ltd. in London.
Guy Lerner: "The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2)Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio. The "Dumb Money" indicator is bullish to an extreme degree, and this implies that a price move is either nearing its end or the ascent of prices is surely to show. This is our expectation 85% of the time. As discussed last week, not only is the current value extreme it is also less than prior extremes suggesting decreasing bullishness despite higher equity prices. This remains a noteworthy, yet unconfirmed, negative divergence."
John Hussman: "It seems unwise to celebrate "favorable" bank
earnings reports that are exclusively driven by reduced loan loss
provisions, particularly when the volume of impaired loans has not
declined proportionately....As of last week, the stock market remained characterized by strenuous
overvaluation, strenuous overbought conditions, overbullish sentiment,
and hostile yield pressures. The fraud charges brought against Goldman
Sachs by the SEC may or may not provide a catalyst for market weakness,
but significant risk is already baked into observable market
conditions. The present syndrome tends to be followed by large and
abrupt losses (though with somewhat unpredictable timing). To the
extent that investors tend to attribute market fluctuations to the
immediate news surrounding them, the Goldman Sachs issue may become
more of a subject of investor attention in the weeks ahead than it
deserves. But really, is anybody actually surprised?"
Courtesy of John Hussman:
April 12, 2010: The latest Mortgage Monitor report
released by Lender Processing Services, a leading provider of mortgage
performance data and analytics, shows that the total number of
delinquent loans was 21.3 percent higher than the same period last
year. The nation's foreclosure inventories reached record highs.
February's foreclosure rate of 3.31 percent represented a 51.1 percent
year-over-year increase. The percentage of new problem loans also
remains at a five-year high. The total number of non-current first-lien
mortgages and REO properties is now more than 7.9 million loans.
Furthermore, the percentage of new problem loans is also at its highest
level in five years. More than 1.1 million loans that were current at
the beginning of January 2010 were already at least 30 days delinquent
or in foreclosure by February 2010 month-end.
April
8, 2010: First American CoreLogic reports that distressed home sales –
such as short sales and real estate owned (REO) sales – accounted for
29 percent of all sales in the U.S. in January: the highest level since
April 2009. After the peak in early 2009, the distressed sale share
fell to 23 percent in July, before rising again in late 2009 and
continuing into 2010. Distressed sales are non-arms-length transactions
such as REO or short sales. Market sales are arms-length transactions
between a willing buyer and willing seller and they exclude distressed
sales. Distressed sales have a very strong influence on home price
trends and are an indicator of a housing market's health."
China told banks to stop loans for third-home purchases in cities.
General Electric filed more than 7,000 income tax returns in hundreds
of global jurisdictions last year, but when push came to shove, the
company owed the U.S. government a whopping bill of $0. How'd it pull
off that trick? By losing lots of money. GE
had plenty of earnings last year -- just not in the United States. For
tax purposes, the company's U.S. operations lost $408 million, while
its international businesses netted a $10.8 billion profit.
For every $1 of disposable income, Canadians owe a record $1.47.
The index
of leading economic indicators rose 1.4% in March, marking 12
consecutive gains, following an upwardly revised increase of 0.4% in
February. Analysts polled by MarketWatch had expected a gain of 1.3% in
March. Going forward, the strength of demand "remains the big
question," said Ken Goldstein, economist at the Conference Board.
"Improvement in employment and income will be the key factors in
whether consumers push the recovery on a stronger path," Goldstein
said.
Analysts surveyed by Platts expected an increase in petroleum products inventories in the week ended April 16. The analysts expected crude-oil inventories to rise by 300,000 barrels, while they see gasoline stocks going up by 100,000 barrels. Inventories of distillates, which include diesel and heating oil, are expected to increase by 840,000 barrels.
After wavering between gains and losses for much of the day, the Dow average added 73.39 points, or 0.7%, higher at 11,092.05. The S&P 500 gained 5.39 points, or 0.45%, to 1,197.52, with all sectors posting gains. Financials, which had been down earlier in the session, rallied on Citigroup, Inc results and after Goldman Sachs Group Inc.shares turned higher in the wake of a Securities and Exchange Commission vote. The Nasdaq Composite fell 1.15 points, or 0.1%, to 2,480.11.
IBM raised its full-year outlook and reported stronger-than-expected quarterly results as companies increased spending on software and IT consulting, but the news failed to excite investors who had already begun to price in a strong recovery.
Shares of IBM fell 2 percent despite the positive numbers, mirroring the performance of other tech companies like Oracle Corp and Google Inc , whose investors had also locked in profits following a rally ahead of results.
George Ure: "So here's the ponder point: How bad does a crime/fraud/scam have to be - how many people does it have to destroy - before it scales beyond going to jail and means instead going to the gallows? What's that threshold?"
Jim Rogers: "If I were buying energy, I would probably buy natural gas rather than oil just because it’s so depressed. I don’t like to buy when things are up. I like to buy things when down, when people are unhappy that’s when I like to buy things."
Between July 2005 and July 2008, the renminbi appreciated 21 percent against the dollar, yet America's imports from China grew 39 percent and the trade deficit with China increased $66 billion.
Chinese banks have 1.88 billion debit cards and 190 million credit cards outstanding, on which cardholders made 19.7 billion purchases last year. But they can't buy domestic card payment network services from American Express, Discover, JCB, MasterCard or Visa. China UnionPay (CUP) enjoys a protected card-payment-network monopoly. And merchant processors such as First Data and Global Payments, which have joint ventures in China with British banks Standard Chartered and HSBC respectively, can't compete with CUP and Chinese banks providing domestic card acceptance to merchants.
The continued witch hunt and scapegoating at just the symptoms of the
credit bubble and not the disease comes in the context of a market that
was very overbought and was due for any excuse to take a rest. To
quantify, the RSI in the S&P 500 went 6 weeks straight above 65 for
the first time since 1986. With that said, the open ended nature of
future lawsuits and the greater possibility of tighter scrutiny of our
banking system will have an impact on the financials and their future
earnings power. As important for the global economy and its markets is
the correction going on in China in response to further steps to crack
down on their property bubble. The Shanghai index fell 4.8% after banks
were told to halt loans for 3rd home buyers (investors) in cities with
large price gains and to tighten the criteria for sales to non
residents. Commodities are also down in response. Greek bond yields are
breaking out to the highest since 1998.
Rob Hanna: "Big drops on Fridays have often been overreactions and have therefore resulted in a consistent propensity to bounce on Monday."
The Organization of Petroleum Exporting Countries may be
creating a glut after output jumped 5.6 percent to 29.2 million
barrels a day in March from a year earlier, according to
Bloomberg estimates. Shipments will rise 0.9 percent in the four
weeks ending May 1, according to tanker-tracker Oil Movements.
“Oil at $87 a barrel seems pretty unreasonable given the
fundamentals of the market,” said Addison Armstrong, director
of market research at Tradition Energy, a Stamford, Connecticut-
based procurement adviser. “Forget China and India for a minute.
The U.S. remains the biggest consumer, and U.S. demand hasn’t
recovered.”
Greece’s bonds fell, pushing yields
to the highest relative to German bunds since 1998, as debt-
crisis talks with the European Central Bank, European Commission
and International Monetary Fund were delayed.
Greek two-year notes led the declines as officials
postponed the Athens meeting after air space across northern
Europe was closed because of volcanic ash from Iceland, putting
back the start of negotiations to lay down conditions for a 45
billion-euro ($60 billion) bailout package until April 21. The
bonds of Portugal and Ireland also dropped.
Until there is an aid agreement, “the market is not going
to believe it,” said Marc Ostwald, a strategist at Monument
Securities Ltd. in London.
Guy Lerner: "The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2)Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio. The "Dumb Money" indicator is bullish to an extreme degree, and this implies that a price move is either nearing its end or the ascent of prices is surely to show. This is our expectation 85% of the time. As discussed last week, not only is the current value extreme it is also less than prior extremes suggesting decreasing bullishness despite higher equity prices. This remains a noteworthy, yet unconfirmed, negative divergence."
John Hussman: "It seems unwise to celebrate "favorable" bank
earnings reports that are exclusively driven by reduced loan loss
provisions, particularly when the volume of impaired loans has not
declined proportionately....As of last week, the stock market remained characterized by strenuous
overvaluation, strenuous overbought conditions, overbullish sentiment,
and hostile yield pressures. The fraud charges brought against Goldman
Sachs by the SEC may or may not provide a catalyst for market weakness,
but significant risk is already baked into observable market
conditions. The present syndrome tends to be followed by large and
abrupt losses (though with somewhat unpredictable timing). To the
extent that investors tend to attribute market fluctuations to the
immediate news surrounding them, the Goldman Sachs issue may become
more of a subject of investor attention in the weeks ahead than it
deserves. But really, is anybody actually surprised?"
Courtesy of John Hussman:
April 12, 2010: The latest Mortgage Monitor report
released by Lender Processing Services, a leading provider of mortgage
performance data and analytics, shows that the total number of
delinquent loans was 21.3 percent higher than the same period last
year. The nation's foreclosure inventories reached record highs.
February's foreclosure rate of 3.31 percent represented a 51.1 percent
year-over-year increase. The percentage of new problem loans also
remains at a five-year high. The total number of non-current first-lien
mortgages and REO properties is now more than 7.9 million loans.
Furthermore, the percentage of new problem loans is also at its highest
level in five years. More than 1.1 million loans that were current at
the beginning of January 2010 were already at least 30 days delinquent
or in foreclosure by February 2010 month-end.
April
8, 2010: First American CoreLogic reports that distressed home sales –
such as short sales and real estate owned (REO) sales – accounted for
29 percent of all sales in the U.S. in January: the highest level since
April 2009. After the peak in early 2009, the distressed sale share
fell to 23 percent in July, before rising again in late 2009 and
continuing into 2010. Distressed sales are non-arms-length transactions
such as REO or short sales. Market sales are arms-length transactions
between a willing buyer and willing seller and they exclude distressed
sales. Distressed sales have a very strong influence on home price
trends and are an indicator of a housing market's health."
China told banks to stop loans for third-home purchases in cities.
General Electric filed more than 7,000 income tax returns in hundreds
of global jurisdictions last year, but when push came to shove, the
company owed the U.S. government a whopping bill of $0. How'd it pull
off that trick? By losing lots of money. GE
had plenty of earnings last year -- just not in the United States. For
tax purposes, the company's U.S. operations lost $408 million, while
its international businesses netted a $10.8 billion profit.
For every $1 of disposable income, Canadians owe a record $1.47.
The index
of leading economic indicators rose 1.4% in March, marking 12
consecutive gains, following an upwardly revised increase of 0.4% in
February. Analysts polled by MarketWatch had expected a gain of 1.3% in
March. Going forward, the strength of demand "remains the big
question," said Ken Goldstein, economist at the Conference Board.
"Improvement in employment and income will be the key factors in
whether consumers push the recovery on a stronger path," Goldstein
said.
Analysts surveyed by Platts expected an increase in petroleum products inventories in the week ended April 16. The analysts expected crude-oil inventories to rise by 300,000 barrels, while they see gasoline stocks going up by 100,000 barrels. Inventories of distillates, which include diesel and heating oil, are expected to increase by 840,000 barrels.
After wavering between gains and losses for much of the day, the Dow average added 73.39 points, or 0.7%, higher at 11,092.05. The S&P 500 gained 5.39 points, or 0.45%, to 1,197.52, with all sectors posting gains. Financials, which had been down earlier in the session, rallied on Citigroup, Inc results and after Goldman Sachs Group Inc.shares turned higher in the wake of a Securities and Exchange Commission vote. The Nasdaq Composite fell 1.15 points, or 0.1%, to 2,480.11.
IBM raised its full-year outlook and reported stronger-than-expected quarterly results as companies increased spending on software and IT consulting, but the news failed to excite investors who had already begun to price in a strong recovery.
Shares of IBM fell 2 percent despite the positive numbers, mirroring the performance of other tech companies like Oracle Corp and Google Inc , whose investors had also locked in profits following a rally ahead of results.
Sunday, April 18, 2010
Fraud?
4/18/10 Fraud?
Venezuela secured a $20 billion loan from China and agreed to form a joint
venture to pump crude oil from a block in the Orinoco Belt, President Hugo Chavez said as he promised to meet the Asian country’s
energy needs.
Chavez said the $20 billion financing from China is separate from a $12
billion bilateral investment fund, without providing details. Venezuela
currently sends China 460,000 barrels a day of crude oil to repay an $8 billion
loan that finances infrastructure projects in the South American country.
“We agreed on a huge long-term financing plan,” Chavez said on state
television. “This is a larger scope, a super heavy fund. China needs energy
security and we’re here to provide them with all the oil they need.”
Prime Minister Gordon Brown said on Sunday he wanted Britain's financial
regulator to conduct a special investigation into U.S. bank Goldman Sachs.
Courtesy of ZeroHedge:
"The cycles and very simple fundamentals are enough to
predict that 2011 will be worse than 2008. The medium-term cycles tell us that
there is a very high probability of a serious bout of risk aversion beginning in
the next five trading days and continuing into the week of May 3. This is likely
to be most apparent in Europe, but it should also impact the equity and
commodity markets around the world. The stream of strong economic and corporate
news, plus continued benign inflation outside of Asia should assure us of a
further risk rally, starting in May and running through July and possibly into
early August. This decline after the August peak should be far more serious and
we believe it will be the start of a major market rout continuing into the
middle of 2011, at a minimum. The deflationary recession that will accompany
this market collapse, at least in the developed world, will put extreme pressure
on the Eurozone and the EMU structure. The second half of this decade will
witness a very different world." John Taylor of FX Concepts, biggest currency
hedge fund in the world.
Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."
Mike Shedlock: "Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill’s relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.“This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors,” said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank."
Venezuela secured a $20 billion loan from China and agreed to form a joint
venture to pump crude oil from a block in the Orinoco Belt, President Hugo Chavez said as he promised to meet the Asian country’s
energy needs.
Chavez said the $20 billion financing from China is separate from a $12
billion bilateral investment fund, without providing details. Venezuela
currently sends China 460,000 barrels a day of crude oil to repay an $8 billion
loan that finances infrastructure projects in the South American country.
“We agreed on a huge long-term financing plan,” Chavez said on state
television. “This is a larger scope, a super heavy fund. China needs energy
security and we’re here to provide them with all the oil they need.”
Prime Minister Gordon Brown said on Sunday he wanted Britain's financial
regulator to conduct a special investigation into U.S. bank Goldman Sachs.
Courtesy of ZeroHedge:
"The cycles and very simple fundamentals are enough to
predict that 2011 will be worse than 2008. The medium-term cycles tell us that
there is a very high probability of a serious bout of risk aversion beginning in
the next five trading days and continuing into the week of May 3. This is likely
to be most apparent in Europe, but it should also impact the equity and
commodity markets around the world. The stream of strong economic and corporate
news, plus continued benign inflation outside of Asia should assure us of a
further risk rally, starting in May and running through July and possibly into
early August. This decline after the August peak should be far more serious and
we believe it will be the start of a major market rout continuing into the
middle of 2011, at a minimum. The deflationary recession that will accompany
this market collapse, at least in the developed world, will put extreme pressure
on the Eurozone and the EMU structure. The second half of this decade will
witness a very different world." John Taylor of FX Concepts, biggest currency
hedge fund in the world.
Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."
Mike Shedlock: "Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill’s relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.“This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors,” said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank."
Saturday, April 17, 2010
Monetary Disorder
4/17/10 Monetary Disorder
Regulators on Friday shut down eight banks -- three in Florida, two in
California, and one each in Massachusetts, Michigan and Washington -- putting
the number of U.S. bank failures this year at 50.
Doug Noland: "Almost $50 billion exited money market funds the past week alone, boosting the 15-week outflow to $380 billion. Money Fund assets are down an incredible $900
billion in just 12 months, a historic wall of finance unleashed upon global risk
markets....The Morgan Stanley Retail index closed yesterday above its previous all-time
high set all the way back in April, 2007. From its low of 68.41 in November of
2008, the Morgan Stanley Retail index has tripled in price. While down almost
3% today, the S&P500 Regional Bank index sports a 2010 gain of 34.8%.
During the height of the Credit crisis, I wrote that I believed the U.S. economy
was heading into a depression. I was wrong.... Massive government Credit inflation has, at least for now, sustained the
existing economic structure – buy retailers, regional banks, homebuilders,
restaurants, etc. It’s back to Bubble Economy business as usual.... It is quite amazing how quickly Trust has been restored. A new bull market is
celebrated, while another bout of Monetary Disorder has unfathomable amounts of
“money” sloshing around for the taking.
At the center of it all,
policymaking at home and abroad has distorted market perceptions and market
pricing mechanisms. The unsuspecting again have little notion of the underlying
risks they are accepting. Fleeing zero rates and chasing inflating securities
prices, investors have been left again dangerously exposed to another financial
Bubble and a postponed economic restructuring. It may never be called “fraud”
or “misrepresentation. The outcome will be about the same. At the end of the
day, markets are made or broken on Trust."
"
Bloomberg: “China’s State Council ordered minimum 30% down payments for
purchases of first homes larger than 90 square meters…”
The Monetary Authority of Singapore said it will seek a ‘modest and gradual
appreciation’ in the local dollar and shift to a stronger range for currency
fluctuations… The trade ministry said the $182 billion economy will expand as
much as 9% in 2010, compared with a previous outlook of 6.5%.
Chinese investment in Australian farms increased 10-fold in the past six months,
real estate agents said.
Mike Burk: "The market is overbought.
By my way of counting where all of the major indices must be down to count the week as down, there has not had a down week in the past 10 weeks.
Most of the indicators confirmed Thursday's highs, NYSE volume is the exception. I do not know of any volume indicators that generate buy and sell signals. There is usually a nebulous pattern of volume increasing when the market is rising and volume decreasing when the market is falling. I think of it as a matter of interest. That is, a rising market generates more interest which is reflected in rising volume. Over the past 13 months we have witnesses one of the greatest bull markets in history and it has not generated any interest.
The chart below covers the past 8 years showing the S&P 500 (SPX) in orange and a 5% trend (39 day EMA) of NYSE total volume in grey. Dashed vertical lines have been drawn on the 1st trading day of each year.
NYSE Volume has fallen to an 8 year low."
Regulators on Friday shut down eight banks -- three in Florida, two in
California, and one each in Massachusetts, Michigan and Washington -- putting
the number of U.S. bank failures this year at 50.
Doug Noland: "Almost $50 billion exited money market funds the past week alone, boosting the 15-week outflow to $380 billion. Money Fund assets are down an incredible $900
billion in just 12 months, a historic wall of finance unleashed upon global risk
markets....The Morgan Stanley Retail index closed yesterday above its previous all-time
high set all the way back in April, 2007. From its low of 68.41 in November of
2008, the Morgan Stanley Retail index has tripled in price. While down almost
3% today, the S&P500 Regional Bank index sports a 2010 gain of 34.8%.
During the height of the Credit crisis, I wrote that I believed the U.S. economy
was heading into a depression. I was wrong.... Massive government Credit inflation has, at least for now, sustained the
existing economic structure – buy retailers, regional banks, homebuilders,
restaurants, etc. It’s back to Bubble Economy business as usual.... It is quite amazing how quickly Trust has been restored. A new bull market is
celebrated, while another bout of Monetary Disorder has unfathomable amounts of
“money” sloshing around for the taking.
At the center of it all,
policymaking at home and abroad has distorted market perceptions and market
pricing mechanisms. The unsuspecting again have little notion of the underlying
risks they are accepting. Fleeing zero rates and chasing inflating securities
prices, investors have been left again dangerously exposed to another financial
Bubble and a postponed economic restructuring. It may never be called “fraud”
or “misrepresentation. The outcome will be about the same. At the end of the
day, markets are made or broken on Trust."
"
Bloomberg: “China’s State Council ordered minimum 30% down payments for
purchases of first homes larger than 90 square meters…”
The Monetary Authority of Singapore said it will seek a ‘modest and gradual
appreciation’ in the local dollar and shift to a stronger range for currency
fluctuations… The trade ministry said the $182 billion economy will expand as
much as 9% in 2010, compared with a previous outlook of 6.5%.
Chinese investment in Australian farms increased 10-fold in the past six months,
real estate agents said.
Mike Burk: "The market is overbought.
By my way of counting where all of the major indices must be down to count the week as down, there has not had a down week in the past 10 weeks.
Most of the indicators confirmed Thursday's highs, NYSE volume is the exception. I do not know of any volume indicators that generate buy and sell signals. There is usually a nebulous pattern of volume increasing when the market is rising and volume decreasing when the market is falling. I think of it as a matter of interest. That is, a rising market generates more interest which is reflected in rising volume. Over the past 13 months we have witnesses one of the greatest bull markets in history and it has not generated any interest.
The chart below covers the past 8 years showing the S&P 500 (SPX) in orange and a 5% trend (39 day EMA) of NYSE total volume in grey. Dashed vertical lines have been drawn on the 1st trading day of each year.
NYSE Volume has fallen to an 8 year low."
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