12/4/09 Jobs
The U.S. labor market improved markedly in November, with the unemployment rate falling back to 10% and job losses shrinking to the lowest level in nearly two years, the Labor Department reported Friday. Nonfarm payrolls dropped by a seasonally adjusted 11,000 in November, the fewest since December 2007. Payroll losses in September and October were revised lower by a total of 159,000. The report was much better than expected by economists surveyed by MarketWatch, who were looking for 100,000 fewer jobs and a steady 10.2% unemployment rate. Avg. hourly earnings $18.74 vs. $18.72 prior. Overall workweek 33.2 hours vs. 33 prior. In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs. Revisions added 159,000 from payroll figures previously reported for October and September. The October reading was revised to show a 111,000 drop in jobs compared with an initially reported 190,000 decline.
The number of temporary workers increased 52,000 in November, the biggest since October 2004 and the fourth straight rise. Much of that increase could be attributed to holiday hiring for retail. Service industries, which include banks, insurance companies, restaurants and retailers, added 58,000 workers.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- fell to 17.2 percent from 17.5 percent.
30,000 jobs were created by the CES Birth Death model which has 'estimated' 1.179-million jobs into existence since February. If your unemployment benefits ran out, remember you were not counted on
the unemployment roles.
Among the unemployed, the number of job losers and persons who completed temporary jobs fell by 463,000 in November. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The percentage of unemployed persons jobless for 27 weeks or more increased by 2.7 percentage points to 38.3 percent.
ZeroHedge: "The one number consistently forgotten is the exhaustion transfer as more and more jobless no longer qualify for traditional 6 month unemployment insurance (being unemployed for more than half a year will do that to you). Nonetheless, combining the two data series presents a much uglier picture: adding the 3.859 on Emergency Unemployment Compensation to those on current benefits yields a total of 9.3 million who are suckling at Uncle Obama's teat! Furthermore, the series has ticked higher recently even as initial claims have continued declining. The combined number is a mere 175k off the all time high in this cumulative data series of 9.5 million recorded in late July. Additionally, at the market bottom in March the combined number was just under 7 million, meaning that as the market has rallied over 60%, the economy has lost 2.5 million workers! And don't forget that over the past 6 months an additional set of workers has rolled off the even extended EUC insurance benefits, which according to some estimates could be higher than 1 million (cumulatively) over the past 6 months. As this data is lost somewhere in the limbo of U-6, we can only extrapolate what the attached chart would look like if it captured not just those who collect the weekly $400 or so from Zimbabwe Ben, but also those who no longer are eligible. "
Congressman Kucinich: "America is in the fight of its life and that fight is not in Afghanistan -- it's here ... We are deeply in debt. Our GDP is down. Our manufacturing is down. Our savings are down. The value of the dollar is down. Our trade deficit is up. Business failures are up. Bankruptcies are up."
According to AMG Data, for the week ended Dec. 2, Equity Fund Inflows $3 Bil; Taxable Bond Fund Inflows $4.5 Bil
xETFs - Equity Fund Outflows -$659 Mil; Taxable Bond Fund Inflows $3.4 Bil
Kraft Foods posted its offer document to Cadbury shareholders on Friday, triggering a 9.8 billion pound ($16.3 billion) takeover fight for the British chocolate maker. The bid is unchanged from its indicated offer worth 300 pence in cash and 0.2589 new Kraft share for each Cadbury share, according to an advertisement in the Wall Street Journal. U.K.'s business secretary, Peter Mandelson, warns Kraft: "If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population ... and from the British government."
Walter Bagehot: "At particular times a great deal of stupid people have a great deal of stupid money... At intervals, from causes which are not to be the present purpose, the money of these people – the blind capital, as we call it, of the country – is particularly large and craving; it seeks for someone to devour it, and there is a 'plethora'; it finds someone and there is 'speculation'; it is devoured and there is 'panic'."
Don’t look now but the fuel switching from coal to natural gas for electricity generation is starting. According to a recent report by Reuters, electrical plants in the U.K. are increasingly relying on natural gas to generate the base load power instead of coal.
This is obviously being driven by the current surplus of natural gas, which has taken away the arbitrage opportunities and kept prices within a range that makes it economic to use the more environmentally friendly fuel.
China Petroleum & Chemical Corporation (Sinopec) has entered into an agreement to purchase 2 million tons of liquefied natural gas per annum from the Papua New Guinea Liquefied Natural Gas (PNG LNG) Project, operated by Exxon Mobil Corporation subsidiary Esso Highlands Limited, for a period of 20 years, Esso Highlands and Sinopec subsidiary Unipec Asia announced December 3.
The agreement will supply an LNG terminal that will be built by Sinopec in Qingdao, Shandong province, the announcement said. The terminal's capacity is expected to be 3 million tons per annum in its first phase and 5-6 million tons per year in its second phase, said Sinopec Senior Vice President Wang Zhigang.
AT&T and UPS have expressed interest in converting their fleets to CNG, and the Fed-Ex package delivery service reportedly already has natural-gas vehicles in its fleet. “We need to find a way to get from Kansas to Utah driving a natural-gas vehicle,” to attract truckers and other commercial travelers, she declared.
The only consumer-oriented car that rolls off U.S. assembly lines ready to burn natural gas is the Honda CGX. And while production is rising, Swalnick said, it is still relatively limited.
Orders for U.S. factory goods expanded in October for the six month out of the last seven, the Commerce Department reported Friday. Factory orders increased 0.6% in October, above the flat reading expected by economists surveyed by MarketWatch. Analysts had expected a weak report after an advanced report last week that orders for durable-goods decreased 0.6% in October. But the more complete data showed that overall factory orders rose led by 1.6% jump in nondurable-goods orders. Core capital equipment orders fell 3.4% in October, revised down from a 2.9% fall estimated a week ago, the government said. Inventories rose 0.4% in October, the first gain following 13 straight declines.
David Goldman: "A senior executive of one of the world’s largest shipping companies told me recently that there has been no pickup whatever in business, and that shippers continue to lose money hand over fist. The Baltic Dry Index of freighter costs confirms this dour view. If there's a recovery underway, how come no one is shipping anything?"
Abercrombie, Macy’s report drop in business in Nov as discounts failed to persuade shoppers.
Dennis Wholey: "Expecting the world to treat you fairly because you are a good person is a little like expecting the bull not to attack you because you are a vegetarian."
Houston residents are bracing for the earliest snowfall ever today as a storm bears down on Texas and Louisiana, threatening to disrupt travel and holiday shopping.
Canadian employers added more than five times as many jobs as expected in November, led by education, manufacturing and finance, a sign of an accelerating economic recovery.
Employment rose by 79,100 last month, the most in more than a year, Statistics Canada said today in Ottawa. The jobless rate fell to 8.5 percent from October’s 8.6 percent. The median forecast of economists surveyed by Bloomberg was for a 15,000 increase in jobs and an unemployment rate of 8.6 percent.
John Mauldin: "I'm in the double-dip recession camp," says John Mauldin of Millennium Wave Investments, who fears the Obama administration is "going to massively increase taxes…in 2011, in a weak economy. I think that's the absolutely dumbest thing we're going to do as a country."
The Gas Exporting Countries Forum meeting next week will discuss ways of stabilizing natural-gas prices, said Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah.
Natural gas futures for delivery at the Henry Hub in Louisiana have fallen 19 percent this year to $4.566 a million British thermal units on the New York Mercantile Exchange. Prices sank as low as $2.409 in September.
“Limiting the supplies in most of the contracts is impossible because they are long-term contracts,” al-Attiyah told reporters in Cairo today. “But we are going to see and discuss how to stabilize the gas price. Gas should have a premium, it is a clean fuel, it’s a choice fuel.”
European utilities such as E.ON AG and GDF Suez SA buy most of their gas under supply contracts linked to the cost of crude- oil products that are valid for as long as 30 years. The accords have take-or-pay clauses requiring them to take minimal volumes, even when demand drops, or pay a penalty.
On the Comex division of the New York Mercantile Exchange, gold for December delivery fell $48.60 to end at $1,168.80 an ounce. Friday's losses erased gold's weekly gain. The benchmark contract ended the week down 0.5%, falling for the first week in five. The U.S. dollar rose sharply after an upbeat U.S. jobs report.
At one point during the session, stocks rallied briskly, with the Dow, the S&P 500 and the Nasdaq climbing to their highest levels in 15 months. The Dow rose as high as 10,516.70, while the S&P 500 climbed as high as 1,119.13, and the Nasdaq jumped as high as 2,214.39.
Falling commodity prices weighed on natural resource companies, sending the S&P materials index down 1.2 percent and the S&P energy index down 0.8 percent.
The U.S. dollar index , which measures the greenback against a basket of six other major currencies, jumped 1.5 percent on the upbeat jobs data.
In contrast, U.S. crude oil futures fell 99 cents to settle at $75.47 a barrel.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of 7 to 3, while on the Nasdaq, about 10 stocks rose for every three that fell.
Two Georgia bank failures brought the U.S. bank failure tally to 126, according to the Federal Deposit Insurance Corporation. Regulators closed the First Security National Bank of Norcross, Ga., and Atlanta's Buckhead Community Bank. State Bank and Trust Co. of Macon, Ga. will assume the deposits of both banks.
Friday, December 04, 2009
Thursday, December 03, 2009
Unemployment
12/3/09 Unemployment
In a sign of improving labor markets, new claims for state unemployment benefits dropped for a fifth straight week, the Labor Department reported Thursday. But a large increase in the number of people collecting checks indicates hiring remained sluggish. The number of Americans filing for state unemployment benefits fell by a seasonally adjusted 5,000 to 457,000 in the week ending Nov. 28. It's the fewest initial claims since September 2008. Claims in the previous week were revised lower by 4,000 to 462,000. Economists surveyed by MarketWatch had expected initial claims to rise to about 480,000. The total number of people claiming benefits rose by 527,000 to 9.61 million, as a new program for extended benefits kicked in.
Comcast and General Electric said that they will form a joint venture that will be 51% owned by Comcast and 49% owned by GE. The joint venture will consist of the NBC Universal businesses and Comcast's cable networks, regional sports networks and certain digital properties and unconsolidated investments. GE will contribute to the joint venture NBCU's businesses valued at $30 billion. Comcast will contribute its cable networks and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments. As part of the deal, GE will acquire Vivendi's (FR:VIV) 20% interest in NBC Universal for $5.8 billion. "This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain," said GE CEO Jeff Immelt.
Costco Wholesale Corp.reported on Thursday that for November, comparable-store sales rose 6% as total sales advanced 9% to $6.04 billion from $5.55 billion in the year-earlier month. A survey of analysts by Thomson Reuters produced a consensus estimate of comparable sales up 8.1%. The comparable-store sales reflected increases of 2% in the U.S. and 21% overseas, Costco said. Gasoline-price inflation helped the current year's sales and hurt the year-earlier numbers. Excluding the effect of gasoline prices and the effect of stronger foreign currency relative to the U.S. dollar, comparable-store sales rose 2%. On this basis, U.S. sales were flat and international sales were up 7%.
Productivity increased 8.1 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 2.5 percent (seasonally adjusted annual rates, revised). In manufacturing, productivity increased 13.4 percent while unit labor costs fell 6.1 percent.
George Ure: "Before you get carried away with productivity, try to remember that if everyone is fired then productivity shoots skyward until there's no one working and productivity reaches 100%."
E-commerce sales grew 5% YoY on Cyber Monday—first Monday after Thanksgiving.
Japan shares jump nearly 4 percent to five-week high on weakening yen.
Elizabeth Warren: "Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking."
Henry Hub's NG spot prices up 8% 12/02. Up on 12/03 as well
Harley-Davidson Inc. said Thursday it plans to take about $200 million in charges by 2012 to eliminate 950 jobs at its York, Pa. motorcycle operations, but it will keep its presence there. The Milwaukee-based motorcycle brand will cut the work force at the site to 1,000 hourly workers. The move on York comes on top of an earlier restructuring for Harley announced on Oct. 15, including the sale of its Buell brand.
The service sectors of the U.S. economy contracted in November after two months of expansion, the Institute for Supply Management said Thursday. The ISM's non-manufacturing index fell to 48.7% from 50.6% in October. Six of 18 industries were expanding in November, the ISM said. The employment index rose to 41.6% from 41.1%. The new orders index fell to 55.1% from 55.6%. The production index dropped sharply to 49.6% from 55.2%.
Working gas in storage was 3,837 Bcf as of Friday, November 27, 2009, according to EIA estimates. This represents a net increase of 2 Bcf from the previous week. Stocks were 470 Bcf higher than last year at this time and 487 Bcf above the 5-year average of 3,350 Bcf. In the East Region, stocks were 168 Bcf above the 5-year average following net withdrawals of 7 Bcf. Stocks in the Producing Region were 243 Bcf above the 5-year average of 976 Bcf after a net injection of 8 Bcf. Stocks in the West Region were 76 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,837 Bcf, total working gas is above the 5-year historical range.
Freddie Mac said Thursday that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% with an average 0.7 point for the week ending Dec. 3 from 4.78% last week. The new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%.
Paul Ausick: "Due to both the abundance of shale gas and the relative ease with which it can now be extracted, energy companies are looking at replacing coal-fired power plants with natural gas-burning plants. Natural gas emits less than half the carbon dioxide of coal and has the additional benefit of being very easy to start up and shut down."
The Dow Jones Industrial Average ended at 10,366.15, off 86.53 points. The S&P 500 Index fell 9.32 points to 1,099.92, while the Nasdaq Composite declined 11.89 points to 2,173.14.
In a sign of improving labor markets, new claims for state unemployment benefits dropped for a fifth straight week, the Labor Department reported Thursday. But a large increase in the number of people collecting checks indicates hiring remained sluggish. The number of Americans filing for state unemployment benefits fell by a seasonally adjusted 5,000 to 457,000 in the week ending Nov. 28. It's the fewest initial claims since September 2008. Claims in the previous week were revised lower by 4,000 to 462,000. Economists surveyed by MarketWatch had expected initial claims to rise to about 480,000. The total number of people claiming benefits rose by 527,000 to 9.61 million, as a new program for extended benefits kicked in.
Comcast and General Electric said that they will form a joint venture that will be 51% owned by Comcast and 49% owned by GE. The joint venture will consist of the NBC Universal businesses and Comcast's cable networks, regional sports networks and certain digital properties and unconsolidated investments. GE will contribute to the joint venture NBCU's businesses valued at $30 billion. Comcast will contribute its cable networks and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments. As part of the deal, GE will acquire Vivendi's (FR:VIV) 20% interest in NBC Universal for $5.8 billion. "This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain," said GE CEO Jeff Immelt.
Costco Wholesale Corp.reported on Thursday that for November, comparable-store sales rose 6% as total sales advanced 9% to $6.04 billion from $5.55 billion in the year-earlier month. A survey of analysts by Thomson Reuters produced a consensus estimate of comparable sales up 8.1%. The comparable-store sales reflected increases of 2% in the U.S. and 21% overseas, Costco said. Gasoline-price inflation helped the current year's sales and hurt the year-earlier numbers. Excluding the effect of gasoline prices and the effect of stronger foreign currency relative to the U.S. dollar, comparable-store sales rose 2%. On this basis, U.S. sales were flat and international sales were up 7%.
Productivity increased 8.1 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 2.5 percent (seasonally adjusted annual rates, revised). In manufacturing, productivity increased 13.4 percent while unit labor costs fell 6.1 percent.
George Ure: "Before you get carried away with productivity, try to remember that if everyone is fired then productivity shoots skyward until there's no one working and productivity reaches 100%."
E-commerce sales grew 5% YoY on Cyber Monday—first Monday after Thanksgiving.
Japan shares jump nearly 4 percent to five-week high on weakening yen.
Elizabeth Warren: "Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking."
Henry Hub's NG spot prices up 8% 12/02. Up on 12/03 as well
Harley-Davidson Inc. said Thursday it plans to take about $200 million in charges by 2012 to eliminate 950 jobs at its York, Pa. motorcycle operations, but it will keep its presence there. The Milwaukee-based motorcycle brand will cut the work force at the site to 1,000 hourly workers. The move on York comes on top of an earlier restructuring for Harley announced on Oct. 15, including the sale of its Buell brand.
The service sectors of the U.S. economy contracted in November after two months of expansion, the Institute for Supply Management said Thursday. The ISM's non-manufacturing index fell to 48.7% from 50.6% in October. Six of 18 industries were expanding in November, the ISM said. The employment index rose to 41.6% from 41.1%. The new orders index fell to 55.1% from 55.6%. The production index dropped sharply to 49.6% from 55.2%.
Working gas in storage was 3,837 Bcf as of Friday, November 27, 2009, according to EIA estimates. This represents a net increase of 2 Bcf from the previous week. Stocks were 470 Bcf higher than last year at this time and 487 Bcf above the 5-year average of 3,350 Bcf. In the East Region, stocks were 168 Bcf above the 5-year average following net withdrawals of 7 Bcf. Stocks in the Producing Region were 243 Bcf above the 5-year average of 976 Bcf after a net injection of 8 Bcf. Stocks in the West Region were 76 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,837 Bcf, total working gas is above the 5-year historical range.
Freddie Mac said Thursday that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% with an average 0.7 point for the week ending Dec. 3 from 4.78% last week. The new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%.
Paul Ausick: "Due to both the abundance of shale gas and the relative ease with which it can now be extracted, energy companies are looking at replacing coal-fired power plants with natural gas-burning plants. Natural gas emits less than half the carbon dioxide of coal and has the additional benefit of being very easy to start up and shut down."
The Dow Jones Industrial Average ended at 10,366.15, off 86.53 points. The S&P 500 Index fell 9.32 points to 1,099.92, while the Nasdaq Composite declined 11.89 points to 2,173.14.
Wednesday, December 02, 2009
The Consumer
12/2/09 The Consumer
Fitch Ratings on Wednesday said late payments on credit cards rose again in November and are close to setting record highs as consumers continue to struggle to pay off debt in a weak job market. Payments that are late by at least 60 days rose to 4.41% in November. Late-stage delinquencies are 31% higher than a year ago and just below the record high of 4.45% set in June, the ratings agency said. "Credit-card delinquencies are on the rise again and cardholder defaults will retest recent highs as we head into the new year," said Michael Dean, managing director at Fitch. "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets."
The latest ADP Employment Change Report indicated that 169,000 private payrolls were shed in November. Though that figure is down from the 203,000 job losses reported in October, it is worse than the 150,000 job losses that had been widely expected.
Goods-producing jobs fell by 88,000 in November, including 44,000 in manufacturing and 44,000 in construction. Services-producing jobs fell by 81,000.
Randall W. Forsyth: "
Employers announced 50,349 job cuts in November, 9.6% fewer than October’s 55,679, and down 72% from November 2008’s paroxysm of firings that followed the Lehman collapse, Challenger’s data are not seasonally adjusted.
Which mainly proves that after employers slashed workforces to the bone, there’s hardly anybody left to sack.
Consensus forecasts for the official employment report from the Labor Department call for a cut of 100,000 in non-farm payrolls while the jobless rate is expected to remain unchanged at 10.2%....But Trim Tabs’ estimate of based on tax receipts is for a much larger drop of 255,000 in payrolls. These tax data don’t count the phantom jobs assumed by government statisticians resulting from the start-ups of small businesses. Nobody pays phantom taxes on these phantom jobs."
Wells Fargo & Co. will close 122 bank branches in California following its takeover of Wachovia Corp., the Los Angeles Times reported Wednesday, citing comments from the bank. Most of the branches to be closed will be smaller Wachovia offices that are near existing Wells Fargo branches, the newspaper reported.
The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 74.384 in early action. On Tuesday, it fell to 74.328, its lowest level since August 2008.
The Oil Drum: " Peak oil consumption for the US was and remains 21.7 mbpd in August 2005, nearly 3 mbpd above current levels."
Gold hit record highs at $1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices, with funds lengthening positions due to expectations for a fresh leg of dollar weakness and more central bank buying.
Wal-Mart Stores is cutting prices on popular video games by $10 each and offering a $50 gift card with the purchase of a Nintendo Wii video game console as the retailer tries to lure shoppers to its U.S. stores ahead of the Christmas holiday.
Wednesday morning (12.2.09), marked a Full Moon.
ZeroHedge: "The S&P, in "real" terms (represented in ounces of gold) is now back to April levels, and receding fast."
The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -12.
Black Friday weekend sales rose 1.6% while total U.S. foot traffic declined 1.1%, according to mall-traffic tracker ShopperTrak. Sales on Black Friday itself rose 0.5% to $10.66 billion. They rose 0.9% to $6.12 billion on Saturday followed by a 5.2% increase to $3.73 billion on Sunday. Traffic for the weekend declined after Black Friday traffic slipped 2.5%, followed by a 3.2% decrease on Saturday and flat traffic on Sunday. Still the declining traffic improved from the year-earlier rate, which saw traffic tumble 19%, the largest three-day drop on record, according to ShopperTrak.
LA Times: "Twitter was just the beginning. After dreaming up the innovative communication medium, Jack Dorsey is looking to revolutionize another core aspect of society -- money.
On Tuesday, Dorsey announced his new start-up, Square, which will let anyone with a cellphone or iPod become a merchant and accept credit card payments.
Square is a small plastic device that plugs into a gadget's headphone jack. Buyers swipe their credit cards through the machine, which then transmits the payment data to an application running on a connected iPhone or iPod Touch. (Android and Blackberry apps are in development, and computer software will be available later.)
You don't have to have the Square gadget or app to pay. You just need a credit card and an e-mail address to receive a receipt."
Brian Durrant: “Consider a country. For the top 20% of the population real incomes have increased by 60% since 1970. But for the other four-fifths real income has fallen by more than 10%. Am I talking about Guatemala or Bolivia? These sorts of inequalities have in the past provoked resentment sometimes articulated through revolutionary movements and social unrest. But I am not talking about a tiny Latin American state; these figures apply to the US. How can this be? Middle class America is surely better off compared to 1970; if you look at higher car ownership, better housing, more white goods and gadgets. The answer is debt. No wonder the politicians are frightened of it contracting!”
Crude stockpiles rose 2.1 million barrels in the week ended Nov. 27, the Energy Information Administration reported. Gasoline inventories increased 4 million barrels and distillate inventories, which include heating oil and diesel, fell 1.2 million barrels. Total petroleum demand fell 2.6%, with gasoline demand down 1.6% to 8.94 million barrels a day.
The Australian Competition and Consumer Commission (ACCC) said on Wednesday, Caltex's planned purchase by Mobil's 302 service stations was likely to substantially lessen competition across a range of retail fuel markets in Australia.
The commission said it had identified 53 Mobil stations which, if acquired by Caltex, would have reduce competition for petrol, diesel and automative liquid petroleum gas markets, leading to higher prices.
Retailers' November sales have been mixed, with online, electronics and jewelry sector showing gains while apparel, luxury, and department stores got off to a slow start of the holiday season, according to MasterCard Advisors' SpendingPulse, which estimated U.S. retail sales across all payment forms including cash and check. Electronics sales for November were up 6.6%. Online sales were strong, posting a 12% increase as traffic jumped 18%. The luxury sector excluding jewelry declined 7.3%, its first drop since August after gains in both September and October. Jewelry was a bright spot, showing a 4.6% gain, the third straight monthly gain and the first time the three-month average moved to positive territory since July 2008. Apparel sales in November slowed overall. They declined 5.7% within the specialty apparel segment, MasterCard data showed.
The U.S. economy "improved modestly" in late October and November, with moderate gains in consumer spending, manufacturing and housing offsetting "dismal" conditions in commercial real estate, the Federal Reserve said Wednesday in its Beige Book report on the economy. Eight of 12 Fed regions reported the economy had picked up since mid-October, while conditions were little changed or mixed in the four bank regions stretching from Ohio and Pennsylvania to the south. Labor markets remained weak, "with further layoffs, sluggish hiring and high levels of unemployment." Business contacts told the Fed that there was little or no upward pressure on wages or consumer prices.
The Dow Jones industrial average declined 18.90 points, or 0.18 percent, to end at 10,452.68. The Standard & Poor's 500 Index inched up just 0.38 of a point, or 0.03 percent, to finish at 1,109.24. The Nasdaq Composite Index gained 9.22 points, or 0.42 percent, to close at 2,185.03.
Fitch Ratings on Wednesday said late payments on credit cards rose again in November and are close to setting record highs as consumers continue to struggle to pay off debt in a weak job market. Payments that are late by at least 60 days rose to 4.41% in November. Late-stage delinquencies are 31% higher than a year ago and just below the record high of 4.45% set in June, the ratings agency said. "Credit-card delinquencies are on the rise again and cardholder defaults will retest recent highs as we head into the new year," said Michael Dean, managing director at Fitch. "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets."
The latest ADP Employment Change Report indicated that 169,000 private payrolls were shed in November. Though that figure is down from the 203,000 job losses reported in October, it is worse than the 150,000 job losses that had been widely expected.
Goods-producing jobs fell by 88,000 in November, including 44,000 in manufacturing and 44,000 in construction. Services-producing jobs fell by 81,000.
Randall W. Forsyth: "
Employers announced 50,349 job cuts in November, 9.6% fewer than October’s 55,679, and down 72% from November 2008’s paroxysm of firings that followed the Lehman collapse, Challenger’s data are not seasonally adjusted.
Which mainly proves that after employers slashed workforces to the bone, there’s hardly anybody left to sack.
Consensus forecasts for the official employment report from the Labor Department call for a cut of 100,000 in non-farm payrolls while the jobless rate is expected to remain unchanged at 10.2%....But Trim Tabs’ estimate of based on tax receipts is for a much larger drop of 255,000 in payrolls. These tax data don’t count the phantom jobs assumed by government statisticians resulting from the start-ups of small businesses. Nobody pays phantom taxes on these phantom jobs."
Wells Fargo & Co. will close 122 bank branches in California following its takeover of Wachovia Corp., the Los Angeles Times reported Wednesday, citing comments from the bank. Most of the branches to be closed will be smaller Wachovia offices that are near existing Wells Fargo branches, the newspaper reported.
The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 74.384 in early action. On Tuesday, it fell to 74.328, its lowest level since August 2008.
The Oil Drum: " Peak oil consumption for the US was and remains 21.7 mbpd in August 2005, nearly 3 mbpd above current levels."
Gold hit record highs at $1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices, with funds lengthening positions due to expectations for a fresh leg of dollar weakness and more central bank buying.
Wal-Mart Stores is cutting prices on popular video games by $10 each and offering a $50 gift card with the purchase of a Nintendo Wii video game console as the retailer tries to lure shoppers to its U.S. stores ahead of the Christmas holiday.
Wednesday morning (12.2.09), marked a Full Moon.
ZeroHedge: "The S&P, in "real" terms (represented in ounces of gold) is now back to April levels, and receding fast."
The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -12.
Black Friday weekend sales rose 1.6% while total U.S. foot traffic declined 1.1%, according to mall-traffic tracker ShopperTrak. Sales on Black Friday itself rose 0.5% to $10.66 billion. They rose 0.9% to $6.12 billion on Saturday followed by a 5.2% increase to $3.73 billion on Sunday. Traffic for the weekend declined after Black Friday traffic slipped 2.5%, followed by a 3.2% decrease on Saturday and flat traffic on Sunday. Still the declining traffic improved from the year-earlier rate, which saw traffic tumble 19%, the largest three-day drop on record, according to ShopperTrak.
LA Times: "Twitter was just the beginning. After dreaming up the innovative communication medium, Jack Dorsey is looking to revolutionize another core aspect of society -- money.
On Tuesday, Dorsey announced his new start-up, Square, which will let anyone with a cellphone or iPod become a merchant and accept credit card payments.
Square is a small plastic device that plugs into a gadget's headphone jack. Buyers swipe their credit cards through the machine, which then transmits the payment data to an application running on a connected iPhone or iPod Touch. (Android and Blackberry apps are in development, and computer software will be available later.)
You don't have to have the Square gadget or app to pay. You just need a credit card and an e-mail address to receive a receipt."
Brian Durrant: “Consider a country. For the top 20% of the population real incomes have increased by 60% since 1970. But for the other four-fifths real income has fallen by more than 10%. Am I talking about Guatemala or Bolivia? These sorts of inequalities have in the past provoked resentment sometimes articulated through revolutionary movements and social unrest. But I am not talking about a tiny Latin American state; these figures apply to the US. How can this be? Middle class America is surely better off compared to 1970; if you look at higher car ownership, better housing, more white goods and gadgets. The answer is debt. No wonder the politicians are frightened of it contracting!”
Crude stockpiles rose 2.1 million barrels in the week ended Nov. 27, the Energy Information Administration reported. Gasoline inventories increased 4 million barrels and distillate inventories, which include heating oil and diesel, fell 1.2 million barrels. Total petroleum demand fell 2.6%, with gasoline demand down 1.6% to 8.94 million barrels a day.
The Australian Competition and Consumer Commission (ACCC) said on Wednesday, Caltex's planned purchase by Mobil's 302 service stations was likely to substantially lessen competition across a range of retail fuel markets in Australia.
The commission said it had identified 53 Mobil stations which, if acquired by Caltex, would have reduce competition for petrol, diesel and automative liquid petroleum gas markets, leading to higher prices.
Retailers' November sales have been mixed, with online, electronics and jewelry sector showing gains while apparel, luxury, and department stores got off to a slow start of the holiday season, according to MasterCard Advisors' SpendingPulse, which estimated U.S. retail sales across all payment forms including cash and check. Electronics sales for November were up 6.6%. Online sales were strong, posting a 12% increase as traffic jumped 18%. The luxury sector excluding jewelry declined 7.3%, its first drop since August after gains in both September and October. Jewelry was a bright spot, showing a 4.6% gain, the third straight monthly gain and the first time the three-month average moved to positive territory since July 2008. Apparel sales in November slowed overall. They declined 5.7% within the specialty apparel segment, MasterCard data showed.
The U.S. economy "improved modestly" in late October and November, with moderate gains in consumer spending, manufacturing and housing offsetting "dismal" conditions in commercial real estate, the Federal Reserve said Wednesday in its Beige Book report on the economy. Eight of 12 Fed regions reported the economy had picked up since mid-October, while conditions were little changed or mixed in the four bank regions stretching from Ohio and Pennsylvania to the south. Labor markets remained weak, "with further layoffs, sluggish hiring and high levels of unemployment." Business contacts told the Fed that there was little or no upward pressure on wages or consumer prices.
The Dow Jones industrial average declined 18.90 points, or 0.18 percent, to end at 10,452.68. The Standard & Poor's 500 Index inched up just 0.38 of a point, or 0.03 percent, to finish at 1,109.24. The Nasdaq Composite Index gained 9.22 points, or 0.42 percent, to close at 2,185.03.
Tuesday, December 01, 2009
Extended Market Valuation
12/1/09 Extended Market Valuation
John Hussman: "In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the “typical post-war recovery” scenario, we are observing an increasing number of internal divergences and non-confirmations in market action."
Chain-store sales for the week ended Nov. 28 rose 3.1% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales fell 0.1%. "Electronics and online shopping were the big winners during the launch of the post-Thanksgiving holiday season," said Michael Niemira, ICSC's chief economist. "But even as retailers opened their doors on Thanksgiving Day, consumers fell behind last year in their holiday shopping completion rate as consumers reported an average 42.2% of their shopping completed through the end of November compared with 48.3% during the comparable week of 2008. This has negative implications for reported sales in November, but positive implications for December sales." ICSC forecast November sales will be up by 3% to 4%, the second time it's lowered the November outlook.
North Korea has apparently raised the value of its currency by 100-fold, in what would be the first such move in 17 years, according to South Korea's Yonhap news agency.
The Reserve Bank of Australia raised its policy cash rate by 25 basis points to 3.75% Tuesday, as widely expected, saying that the economy is in "a gradual recovery." The RBA, currently the only major industrialized economy on a tightening cycle, had raised it policy rate by the same quarter percentage point at its October and November meetings.
The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.
“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.
Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.
"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.
A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.
More people were late with their auto loan payments in the third quarter as job losses continued, but amid rising delinquencies there are positive signs for the economy in certain states. The auto delinquency rate — the rate at which payments fell behind 60 days or more — edged up in the July-to-September quarter to 0.81 percent, from 0.80 in the same period last year, according to credit reporting agency TransUnion.
US commercial mortgage default rate hits 3.4%. Rate climbs to 16-year high in third quarter.
Marla Singer: "Buried in the depths of page 26 of the Office of the Special Inspector General for the Troubled Asset Relief Program's (SIGTARP's) November 17, 2009 report "Factors Affecting Efforts to Limit Payments to AIG Counterparties" hidden in footnotes 33 and 34 is something of a mystery. It might be the beginning of an interconnected financial chain involving Dubai, the Federal Reserve, AIG, Basel I, Eastern Europe and even Switzerland and which, even if it doesn't worry you, probably should. Or it might be nothing at all."
China’s manufacturing grew last month at the fastest pace since April 2004- HSBC survey.
Davidowitz predicts "the noise will be taken out" about "strong" Black Friday sales in the coming weeks and a sobering reality will settle in: "People will look at stores closing and a rash of bankruptcies after Christmas. People will start to look at this and say ‘wow, this is terrible,'" he says.
According to the WSJ, the U.S. government is out with its latest natural-gas production report and gas production in the Lower 48 states fell by 1.4 billion cubic feet a day in September compared to August.
The data, which comes from the Energy Information Administration, suggest that the sharp drop in U.S. drilling activity is finally starting to result in lower production. That, in turn, could ease the glut of gas that has kept prices under $5 per million British thermal units.
This is a dollop of good news for companies like Chesapeake Energy and Devon Energy. Ironically, they have been betting on a turnaround in gas prices to justify (and pay for) increased drilling.
Video game console leader Nintendo says that U.S. sales of its Wii gaming system dropped 30% year-over-year to 550,000 for the week ending Nov. 28, according to numbers reported by Bloomberg. Nintendo cut the price of the Wii by $50 to $200 recently, while Microsoft (MSFT) dropped the price of its Xbox 360, and Sony (SNE) chopped the price of its PlayStation 3 console.
GM’s sales in China may have topped those in the US for the first time last month. Edmunds has estimated the domestic sales of the No.1 American car company fell just over 1% in November to 155,000 units.
Signed sales contracts on existing homes in the United States rose for the ninth straight month in October, a real estate industry group reported Tuesday. The pending home sales index rose a seasonally adjusted 3.7% in October from September, the National Association of Realtors reported. The index is up 31.8% compared with last October. The index rose 6% in September. The index tracks sales contracts on pre-owned homes. Typically, it takes a month or two after the contract is signed for the sale to close. At that point, the sale is booked in the NAR's existing-home sales report.
Outlays for U.S. construction projects were flat in October, the Commerce Department reported Tuesday, as a gain in spending on housing was offset by a drop in spending on public works. Outlays in September were revised to a 1.6% drop, the largest since January, from the earlier estimate of a 0.8% gain. Construction spending has not risen since April. Outlays are down 14.4% compared with a year earlier.
The ISM manufacturing index fell to 53.6% from 55.7% in October. Readings over 50% indicate more firms said they were growing than said they were contracting.The new orders index rose to 60.3% from 58.5% in October. The production index fell to 59.9% from 63.3% in October. The employment index fell to 50.8% from 53.1% in October. The inventories index fell to 41.3% from 46.9% n October.
You can look at the Arca Natural Gas Index which is within 8% of its yearly high and then see the
disconnect with the price of natural gas itself.
Euro rises to buy $1.51 highest since August 2008.
Charles Plosser, the president of the Philadelphia Federal Reserve Bank, became the first top central bank official to call for higher interest rates in this cycle. In a speech on Tuesday, Plosser said the Fed had to start raising interest rates sooner rather than later and had to begin withdrawing excess cash from the financial system. If the Fed does not act soon "the inflation rate is likely to rise to levels that most would consider unacceptable," he warned. Plosser will not be a voting member of the Fed interest-rate committee until 2011.
Individual investors moved assets back into cash in November, after three months of increasing holdings of stocks and bonds, according to a new survey by the American Association of Individual Investors. The proportion of holdings in cash rose about 8 percentage points to 27% of assets last month. Investors decreased both equity and fixed-income holdings, with stock holdings falling about 2 percentage point to 57% of assets. Bond holdings dropped 6 points to 18%. Cash holdings in October fell to the lowest since July 2007, as Americans became more willing to invest in higher-returning assets as the economy improved.
Gold futures ended at a new high of $1,199.10 an ounce Tuesday, briefly topping $1,200 in intraday trading, as the dollar weakened and as Barrick Gold Corp. eliminated all of its gold hedges, showing confidence in a rising gold price.
U.S. retail gasoline demand last week rose 3.1 percent from the previous week as Thanksgiving holiday traffic boosted demand, according to a MasterCard SpendingPulse report released on Tuesday. "Gasoline consumption increased sharply due to holiday traffic," said Michael McNamara, vice president of research and analysis at MasterCard Advisors. Gasoline demand averaged 9.357 million barrels per day during the week ending Nov. 27, unchanged from the same period a year ago, according to the weekly report. The four-week moving average of U.S. gasoline consumption climbed 0.7 percent year-over-year. Year-to-date, gasoline consumption is up 0.6 percent for 2009 compared with the same period in 2008. The national average retail prices for gasoline were unchanged at $2.62.
U.S. copper futures closed at a 15-month high on Tuesday, as the dollar extended its slump and economic sentiment improved from positive manufacturing data in the U.S. and in China, the world's top copper consumer.
The American Petroleum Institute said late Tuesday U.S. crude oil inventories rose by 2.9 million barrels last week.
The Dow Jones Industrial Average ended at 10,471.58, up 126.74 points, or 1.2%. The S&P 500 Index rose 13.23 points, or 1.2%, to 1,108.86. The Nasdaq Composite gained 31.31 points, or 1.5%, to 2,175.81.
John Hussman: "In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the “typical post-war recovery” scenario, we are observing an increasing number of internal divergences and non-confirmations in market action."
Chain-store sales for the week ended Nov. 28 rose 3.1% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales fell 0.1%. "Electronics and online shopping were the big winners during the launch of the post-Thanksgiving holiday season," said Michael Niemira, ICSC's chief economist. "But even as retailers opened their doors on Thanksgiving Day, consumers fell behind last year in their holiday shopping completion rate as consumers reported an average 42.2% of their shopping completed through the end of November compared with 48.3% during the comparable week of 2008. This has negative implications for reported sales in November, but positive implications for December sales." ICSC forecast November sales will be up by 3% to 4%, the second time it's lowered the November outlook.
North Korea has apparently raised the value of its currency by 100-fold, in what would be the first such move in 17 years, according to South Korea's Yonhap news agency.
The Reserve Bank of Australia raised its policy cash rate by 25 basis points to 3.75% Tuesday, as widely expected, saying that the economy is in "a gradual recovery." The RBA, currently the only major industrialized economy on a tightening cycle, had raised it policy rate by the same quarter percentage point at its October and November meetings.
The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.
“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.
Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.
"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.
A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.
More people were late with their auto loan payments in the third quarter as job losses continued, but amid rising delinquencies there are positive signs for the economy in certain states. The auto delinquency rate — the rate at which payments fell behind 60 days or more — edged up in the July-to-September quarter to 0.81 percent, from 0.80 in the same period last year, according to credit reporting agency TransUnion.
US commercial mortgage default rate hits 3.4%. Rate climbs to 16-year high in third quarter.
Marla Singer: "Buried in the depths of page 26 of the Office of the Special Inspector General for the Troubled Asset Relief Program's (SIGTARP's) November 17, 2009 report "Factors Affecting Efforts to Limit Payments to AIG Counterparties" hidden in footnotes 33 and 34 is something of a mystery. It might be the beginning of an interconnected financial chain involving Dubai, the Federal Reserve, AIG, Basel I, Eastern Europe and even Switzerland and which, even if it doesn't worry you, probably should. Or it might be nothing at all."
China’s manufacturing grew last month at the fastest pace since April 2004- HSBC survey.
Davidowitz predicts "the noise will be taken out" about "strong" Black Friday sales in the coming weeks and a sobering reality will settle in: "People will look at stores closing and a rash of bankruptcies after Christmas. People will start to look at this and say ‘wow, this is terrible,'" he says.
According to the WSJ, the U.S. government is out with its latest natural-gas production report and gas production in the Lower 48 states fell by 1.4 billion cubic feet a day in September compared to August.
The data, which comes from the Energy Information Administration, suggest that the sharp drop in U.S. drilling activity is finally starting to result in lower production. That, in turn, could ease the glut of gas that has kept prices under $5 per million British thermal units.
This is a dollop of good news for companies like Chesapeake Energy and Devon Energy. Ironically, they have been betting on a turnaround in gas prices to justify (and pay for) increased drilling.
Video game console leader Nintendo says that U.S. sales of its Wii gaming system dropped 30% year-over-year to 550,000 for the week ending Nov. 28, according to numbers reported by Bloomberg. Nintendo cut the price of the Wii by $50 to $200 recently, while Microsoft (MSFT) dropped the price of its Xbox 360, and Sony (SNE) chopped the price of its PlayStation 3 console.
GM’s sales in China may have topped those in the US for the first time last month. Edmunds has estimated the domestic sales of the No.1 American car company fell just over 1% in November to 155,000 units.
Signed sales contracts on existing homes in the United States rose for the ninth straight month in October, a real estate industry group reported Tuesday. The pending home sales index rose a seasonally adjusted 3.7% in October from September, the National Association of Realtors reported. The index is up 31.8% compared with last October. The index rose 6% in September. The index tracks sales contracts on pre-owned homes. Typically, it takes a month or two after the contract is signed for the sale to close. At that point, the sale is booked in the NAR's existing-home sales report.
Outlays for U.S. construction projects were flat in October, the Commerce Department reported Tuesday, as a gain in spending on housing was offset by a drop in spending on public works. Outlays in September were revised to a 1.6% drop, the largest since January, from the earlier estimate of a 0.8% gain. Construction spending has not risen since April. Outlays are down 14.4% compared with a year earlier.
The ISM manufacturing index fell to 53.6% from 55.7% in October. Readings over 50% indicate more firms said they were growing than said they were contracting.The new orders index rose to 60.3% from 58.5% in October. The production index fell to 59.9% from 63.3% in October. The employment index fell to 50.8% from 53.1% in October. The inventories index fell to 41.3% from 46.9% n October.
You can look at the Arca Natural Gas Index which is within 8% of its yearly high and then see the
disconnect with the price of natural gas itself.
Euro rises to buy $1.51 highest since August 2008.
Charles Plosser, the president of the Philadelphia Federal Reserve Bank, became the first top central bank official to call for higher interest rates in this cycle. In a speech on Tuesday, Plosser said the Fed had to start raising interest rates sooner rather than later and had to begin withdrawing excess cash from the financial system. If the Fed does not act soon "the inflation rate is likely to rise to levels that most would consider unacceptable," he warned. Plosser will not be a voting member of the Fed interest-rate committee until 2011.
Individual investors moved assets back into cash in November, after three months of increasing holdings of stocks and bonds, according to a new survey by the American Association of Individual Investors. The proportion of holdings in cash rose about 8 percentage points to 27% of assets last month. Investors decreased both equity and fixed-income holdings, with stock holdings falling about 2 percentage point to 57% of assets. Bond holdings dropped 6 points to 18%. Cash holdings in October fell to the lowest since July 2007, as Americans became more willing to invest in higher-returning assets as the economy improved.
Gold futures ended at a new high of $1,199.10 an ounce Tuesday, briefly topping $1,200 in intraday trading, as the dollar weakened and as Barrick Gold Corp. eliminated all of its gold hedges, showing confidence in a rising gold price.
U.S. retail gasoline demand last week rose 3.1 percent from the previous week as Thanksgiving holiday traffic boosted demand, according to a MasterCard SpendingPulse report released on Tuesday. "Gasoline consumption increased sharply due to holiday traffic," said Michael McNamara, vice president of research and analysis at MasterCard Advisors. Gasoline demand averaged 9.357 million barrels per day during the week ending Nov. 27, unchanged from the same period a year ago, according to the weekly report. The four-week moving average of U.S. gasoline consumption climbed 0.7 percent year-over-year. Year-to-date, gasoline consumption is up 0.6 percent for 2009 compared with the same period in 2008. The national average retail prices for gasoline were unchanged at $2.62.
U.S. copper futures closed at a 15-month high on Tuesday, as the dollar extended its slump and economic sentiment improved from positive manufacturing data in the U.S. and in China, the world's top copper consumer.
The American Petroleum Institute said late Tuesday U.S. crude oil inventories rose by 2.9 million barrels last week.
The Dow Jones Industrial Average ended at 10,471.58, up 126.74 points, or 1.2%. The S&P 500 Index rose 13.23 points, or 1.2%, to 1,108.86. The Nasdaq Composite gained 31.31 points, or 1.5%, to 2,175.81.
Monday, November 30, 2009
No Guarantee
11/30/09 No Guarantee
John Hussman: "In part, the market's increasing propensity toward speculation reflects the increasing lack of fiscal and monetary discipline from our leaders. Policy makers who seek quick fixes and could care less about long-term consequences undoubtedly encourage investors to embrace the same value system."
Dubai's government said Monday it doesn't guarantee the debt of Dubai World, its sprawling conglomerate, according to remarks by an official cited in the media. Abdulrahman al-Saleh, director general of Dubai's department of finance, said creditors need to take part of the responsibility and that Dubai World is not part of the government, according to media reports. "The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government," Saleh said in an interview on Dubai Television, according to reports.
Rob Hanna: "Friday’s selloff was marked by extremely negative breadth. Around 97% of the volume was to the downside on the NYSE. In the past, days that have been SO negative have often led to bounces over the short-term."
More businesses in the Chicago region were expanding in November, according to the Chicago purchasing managers index released Monday by the NAPM-Chicago. The business activity index rose to 56.1% in November from 54.2% in October. It's the highest since August 2008.
Thailand's natural gas demand is expected to rise 10.6 percent in 2010 to 3.95 billion cubic feet per day due mainly to growing demand from petrochemical plants, PTT PTT.BK, the country's sole gas supplier, said on Monday. Domestic gas consumption in 2009 should grow by around 3.3 percent to 3.57 billion cubic feet per day, Permsak Shevawattananon, senior executive vice president for PTT's gas business, told reporters.
"The main growth driver next year will come from petrochemical plants," Permsak said, adding PTT's sixth gas separation plant and an ethane plant should come onstream in early 2010 if a dispute at the country's biggest industrial estate was resolved.
Rejecting safety warnings from crash investigators and pilots, federal aviation regulators have decided to allow more than 130 Boeing Co. 777 jetliners to continue flying long-distance international trips through early 2011 with suspect parts that have caused engines in extremely rare instances to ice up and basically shut down in midair.
Unite, Britain's biggest union, said on Monday it had written to Kraft chief executive Irene Rosenfeld about the 10 billion pound ($16.5 billion) cash-and-shares bid.
Unite asked for commitments there would be no compulsory redundancies and protection for employment terms and pensions.
The Dow Jones Industrial Average rose 34.92 points, or 0.3%, at 10,344.84, leaving it up 6.5% for November. The S&P 500 Index climbed 4.14 points, or 0.4%, at 1,095.63, up 5.7% from the month-ago close. The Nasdaq Composite gained 6.16 points, or 0.3%, to 2,144.60, leaving it with an advance of 4.9% for the month.
December gold futures rose $6.90, or 0.6%, to end at $1,181.10 an ounce on the Comex division of the New York Mercantile Exchange. It had climbed to a record high near $1,188 an ounce last week. Gold has only seen three losing sessions in November and has risen 13%, the biggest monthly gain since November 2008. Futures soared 14% in that month, the biggest gain since 1999.
John Hussman: "In part, the market's increasing propensity toward speculation reflects the increasing lack of fiscal and monetary discipline from our leaders. Policy makers who seek quick fixes and could care less about long-term consequences undoubtedly encourage investors to embrace the same value system."
Dubai's government said Monday it doesn't guarantee the debt of Dubai World, its sprawling conglomerate, according to remarks by an official cited in the media. Abdulrahman al-Saleh, director general of Dubai's department of finance, said creditors need to take part of the responsibility and that Dubai World is not part of the government, according to media reports. "The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government," Saleh said in an interview on Dubai Television, according to reports.
Rob Hanna: "Friday’s selloff was marked by extremely negative breadth. Around 97% of the volume was to the downside on the NYSE. In the past, days that have been SO negative have often led to bounces over the short-term."
More businesses in the Chicago region were expanding in November, according to the Chicago purchasing managers index released Monday by the NAPM-Chicago. The business activity index rose to 56.1% in November from 54.2% in October. It's the highest since August 2008.
Thailand's natural gas demand is expected to rise 10.6 percent in 2010 to 3.95 billion cubic feet per day due mainly to growing demand from petrochemical plants, PTT PTT.BK, the country's sole gas supplier, said on Monday. Domestic gas consumption in 2009 should grow by around 3.3 percent to 3.57 billion cubic feet per day, Permsak Shevawattananon, senior executive vice president for PTT's gas business, told reporters.
"The main growth driver next year will come from petrochemical plants," Permsak said, adding PTT's sixth gas separation plant and an ethane plant should come onstream in early 2010 if a dispute at the country's biggest industrial estate was resolved.
Rejecting safety warnings from crash investigators and pilots, federal aviation regulators have decided to allow more than 130 Boeing Co. 777 jetliners to continue flying long-distance international trips through early 2011 with suspect parts that have caused engines in extremely rare instances to ice up and basically shut down in midair.
Unite, Britain's biggest union, said on Monday it had written to Kraft chief executive Irene Rosenfeld about the 10 billion pound ($16.5 billion) cash-and-shares bid.
Unite asked for commitments there would be no compulsory redundancies and protection for employment terms and pensions.
The Dow Jones Industrial Average rose 34.92 points, or 0.3%, at 10,344.84, leaving it up 6.5% for November. The S&P 500 Index climbed 4.14 points, or 0.4%, at 1,095.63, up 5.7% from the month-ago close. The Nasdaq Composite gained 6.16 points, or 0.3%, to 2,144.60, leaving it with an advance of 4.9% for the month.
December gold futures rose $6.90, or 0.6%, to end at $1,181.10 an ounce on the Comex division of the New York Mercantile Exchange. It had climbed to a record high near $1,188 an ounce last week. Gold has only seen three losing sessions in November and has risen 13%, the biggest monthly gain since November 2008. Futures soared 14% in that month, the biggest gain since 1999.
Sunday, November 29, 2009
Shoppers
11/29/09 Shoppers
"I personally feel that there's a palpable difference, that it's changed," said Don Calvert, an international trade specialist at the Commerce Department, who was out by a Washington D.C. Filene's store a couple of blocks from the White House. "There are fewer people in clothing stores. There are even fewer people at electronics stores."
More shoppers spent time online at the start of the 2009 holiday season. They spent 35 percent more on Black Friday web purchases than a year earlier, with the average order value reaching $170.19, according to online retail analytics company Coremetrics. Those shoppers bought an average of 5.4 items per order, up from 4.6 items last year, Coremetrics said.
According to Bloomberg, India, the world’s top recipient of migrant remittances, is examining the effect Dubai’s attempt to delay debt repayments may have on Asia’s third-largest economy, central bank Governor Duvvuri Subbarao
said. About 4.5 million Indians live and work in the Gulf region and remit more than $10 billion annually, according to government data. The turmoil may affect remittances, said Thomas Issac, finance minister of the southern state of Kerala, which accounted for about a quarter India’s migrant labor in 2005. Remittances from the Middle East account for about 25 percent of Kerala’s economy, Issac said. India received $52 billion of remittances last year, according to the World Bank, making it the world’s largest recipient of money from migrant workers. China got $49 billion.
Black Friday retail sales rose a scant 0.5% to $10.66B according to early readings from ShopperTrak, but online sales outperformed, up 35% from a year ago.
There are 239 counties in the United States where at least a quarter of the population receives food stamps, according to an analysis of local data collected by The New York Times.
The counties are as big as the Bronx and Philadelphia and as small as Owsley County in Kentucky, a patch of Appalachian distress where half of the 4,600 residents receive food stamps.
In more than 750 counties, the program helps feed one in three blacks. In more than 800 counties, it helps feed one in three children. In the Mississippi River cities of St. Louis, Memphis and New Orleans, half of the children or more receive food stamps. Even in Peoria, Ill. — Everytown, U.S.A. — nearly 40 percent of children receive aid.
The United Arab Emirates' central bank set up a facility on Sunday to support liquidity in the banking system.
Under the $75 billion Treasury program, companies that agree to lower payments for troubled borrowers collect $1,000 initially from the government for each loan, followed by $1,000 annually for up to three years.
The government support, which is provided from the $700 billion financial bailout program, is aimed at providing cash incentives for mortgage providers to accept smaller mortgage payments rather than foreclosing on homes.
The program has come under heavy criticism for failing to do enough to attack a tidal wave of foreclosures. Analysts said the foreclosure crisis is likely to persist well into next year as high unemployment pushes more people out of their homes.
Rising foreclosures depress home prices and threaten the sustainability of the fledgling economic recovery.
A report last week from the Mortgage Bankers Association found that 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter.
Mike Burk: "The market is nearing a short term cyclical low. Recently the market has been rallying early in the month and historically early December has been strong.
I expect the major indices to be higher on Friday December 4 than they were on Friday November 27."
Alan Abelson: "In the latest survey of advisory services by Investors Intelligence, no fewer than 50.6% of those cockeyed seers were bulls, versus a scant 17.6% bears. Last time we saw numbers like that was before the market crashed back in '07."
On so-called Cyber Monday, 96.5 million people plan to shop, up from 85 million a year ago. Nine in 10 retailers also will have special deals and promotions for Cyber Monday, the survey said. In addition, a majority of the planned shopping is to be done from home, with 14% done from work. At some point during the holiday season, an estimated 69 million Americans will shop from work, a Shop.org survey said last week.
More Americans hit the stores during Black Friday and the rest of the holiday-shopping weekend, but they spent less, the National Retail Federation said Sunday. Its survey found that 195 million shoppers visited stores and Web sites, up from 172 million last year, but the average ticket was about $343, down from about $373 a year ago. For the weekend, the total spending figure is estimated at $41.2 billion.
"I personally feel that there's a palpable difference, that it's changed," said Don Calvert, an international trade specialist at the Commerce Department, who was out by a Washington D.C. Filene's store a couple of blocks from the White House. "There are fewer people in clothing stores. There are even fewer people at electronics stores."
More shoppers spent time online at the start of the 2009 holiday season. They spent 35 percent more on Black Friday web purchases than a year earlier, with the average order value reaching $170.19, according to online retail analytics company Coremetrics. Those shoppers bought an average of 5.4 items per order, up from 4.6 items last year, Coremetrics said.
According to Bloomberg, India, the world’s top recipient of migrant remittances, is examining the effect Dubai’s attempt to delay debt repayments may have on Asia’s third-largest economy, central bank Governor Duvvuri Subbarao
said. About 4.5 million Indians live and work in the Gulf region and remit more than $10 billion annually, according to government data. The turmoil may affect remittances, said Thomas Issac, finance minister of the southern state of Kerala, which accounted for about a quarter India’s migrant labor in 2005. Remittances from the Middle East account for about 25 percent of Kerala’s economy, Issac said. India received $52 billion of remittances last year, according to the World Bank, making it the world’s largest recipient of money from migrant workers. China got $49 billion.
Black Friday retail sales rose a scant 0.5% to $10.66B according to early readings from ShopperTrak, but online sales outperformed, up 35% from a year ago.
There are 239 counties in the United States where at least a quarter of the population receives food stamps, according to an analysis of local data collected by The New York Times.
The counties are as big as the Bronx and Philadelphia and as small as Owsley County in Kentucky, a patch of Appalachian distress where half of the 4,600 residents receive food stamps.
In more than 750 counties, the program helps feed one in three blacks. In more than 800 counties, it helps feed one in three children. In the Mississippi River cities of St. Louis, Memphis and New Orleans, half of the children or more receive food stamps. Even in Peoria, Ill. — Everytown, U.S.A. — nearly 40 percent of children receive aid.
The United Arab Emirates' central bank set up a facility on Sunday to support liquidity in the banking system.
Under the $75 billion Treasury program, companies that agree to lower payments for troubled borrowers collect $1,000 initially from the government for each loan, followed by $1,000 annually for up to three years.
The government support, which is provided from the $700 billion financial bailout program, is aimed at providing cash incentives for mortgage providers to accept smaller mortgage payments rather than foreclosing on homes.
The program has come under heavy criticism for failing to do enough to attack a tidal wave of foreclosures. Analysts said the foreclosure crisis is likely to persist well into next year as high unemployment pushes more people out of their homes.
Rising foreclosures depress home prices and threaten the sustainability of the fledgling economic recovery.
A report last week from the Mortgage Bankers Association found that 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter.
Mike Burk: "The market is nearing a short term cyclical low. Recently the market has been rallying early in the month and historically early December has been strong.
I expect the major indices to be higher on Friday December 4 than they were on Friday November 27."
Alan Abelson: "In the latest survey of advisory services by Investors Intelligence, no fewer than 50.6% of those cockeyed seers were bulls, versus a scant 17.6% bears. Last time we saw numbers like that was before the market crashed back in '07."
On so-called Cyber Monday, 96.5 million people plan to shop, up from 85 million a year ago. Nine in 10 retailers also will have special deals and promotions for Cyber Monday, the survey said. In addition, a majority of the planned shopping is to be done from home, with 14% done from work. At some point during the holiday season, an estimated 69 million Americans will shop from work, a Shop.org survey said last week.
More Americans hit the stores during Black Friday and the rest of the holiday-shopping weekend, but they spent less, the National Retail Federation said Sunday. Its survey found that 195 million shoppers visited stores and Web sites, up from 172 million last year, but the average ticket was about $343, down from about $373 a year ago. For the weekend, the total spending figure is estimated at $41.2 billion.
Saturday, November 28, 2009
A Pimple On An Elephant's Ass
11/28/09 A Pimple On An Elephant's Ass
Abu Dhabi, wealthy capital of the United Arab Emirates, will "pick and choose" how to assist debt-laden neighbor Dubai, a senior official said on Saturday, after fears of a Dubai default sent global markets reeling.
"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official in the government of the emirate of Abu Dhabi told Reuters by phone. "Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," said the official, who declined to be identified because he is not authorized to speak to the press.
According to the Dallas Fed, current unfunded liabilities are about $100 trillion dollars. That makes Dubai's problems look like a pimple on an elephant's ass.
Marla Singer: "It occurs to us that, in this respect, and in an admittedly perverse (but deliciously ironic) interpretation, Abu Dhabi is the Anti-Fed/Anti-Treasury that some Americans have been lusting for in the wake of AIG funnel payments to the likes of SocGen: Crushing moral hazard (and bond prices), a dozen foreign investors at a time (and perhaps making money for taxpayers on the bailout in the very short term via careful use of quiet acquisitions of distressed debt and the aggressive use of default protection).
Or maybe the message is simply that sovereigns of all stripes should just stay the fuck out of finance."
Most big U.S. banks may be forced to make public offerings soon if the Treasury demands payback of the funds it issued under the Troubled Assets Relief Program, veteran banking analyst Richard Bove said.
The U.S. Federal Reserve this month asked banks that were part of its "stress tests" to submit plans to repay government money, if they have not already repaid it.
"Virtually all of the banks can easily redeem their TARP preferreds from current cash holdings. However, it may be that only 3 of the top 30 would have an adequate Tier 1 Capital ratio if they redeemed these preferreds," Bove said in a note to clients.
ZeroHedge: "The Federal Reserve's balance sheet hit a new all time record of $2.2 Trillion in assets, after an $11 billion spike in MBS and Agency purchases week over week."
David Rosenberg: "The Conference Board’s consumer confidence index may have improved (48.7 in October to 49.5 in November) and beaten consensus expectations, but it remains firmly in recession terrain. It is so obvious that consumers are tired of the over-borrowing and over-spending days of yesteryear. Despite all the temptations provided by the government, auto buying plans dropped to an eight-month low (from 4.7 in October to 4.4 in November); home buying plans slipped to a new 27-year low of 2.3 (from 2.5 in October and 3.0 in September); and intentions to buy a major appliance stayed at a 14-year low (23.2)."
The Oil Drum: "It is a little early to see how the Dubai situation will play out, but it seems to me that there is a significant chance that the Dubai situation will mark the beginning of the next leg down in the downward recessionary spiral and world debt unwind. Oil prices are likely to drop, so few are likely to notice that oil ultimately plays a major role in the continuing debacle."
According to the WSJ, “the new investments funded by China’s stimulus plan may swamp world markets and lead to a surge in trade conflicts, an international business group said… The European Union Chamber of Commerce in China… said a combination of easy credit and other incentives for Chinese companies to expand has led to the construction of many new factories in areas like steel, aluminum, cement and chemicals. The increase in industrial capacity – at a time of global economic weakness – could drive down profit margins worldwide and lead to a backlash from other countries, the chamber said. ‘The Chinese stimulus package has poured credit into increasingly questionable projects and will almost certainly increase direct and indirect subsidies to investment and manufacturing,’ the report says. ‘China’s growth model requires that external demand - the European Union and the United States - be able to absorb the overcapacity it produces,’ a prospect that is increasingly unlikely given the weak economic recovery in the developed countries.”
Dubai is part of the United Arab Emirates, seven city-states which have separate ruling families, separate budgets, but security, immigration and foreign policies in common. Abu Dhabi has nearly all the UAE’s oil.
An estimated 50% has been wiped off the average price of real estate in the emirate since its peak… Earlier this month, UBS said Dubai property prices could drop a further 30% over the next 18 months.
Bloomberg (Francois De Beaupuy): “French Prime Minister Francois Fillon said Dubai’s request to reschedule debt repayments shows the global financial crisis “is not over” and that stimulus efforts must be maintained to avoid “breaking the weak recovery.’” Unfortunately, government stimulus created through more indebtedness cannot foster positive cash flow that sticks to the bones of its citizens.
According to the NY Times, New York State is running out of cash. Without a budget deal, New York will be left with just $36 million in the bank by the end of December, according to current projections. And the money will last that long, officials say, only if the state chooses to fully exhaust its emergency reserves by tapping several billion dollars’ worth of temporary loans from its rainy-day fund and short-term investments.
New Jersey, which faces an estimated $8 billion deficit, saw tax revenue collections fall last month by $222 million or 11.6% short of projections, the treasurer’s office said.
Vietnam shaved 5% off the value of its currency, the dong… its third devaluation since June 2008.
Reggie Middleton: "In terms of absolute dollar exposure, JP Morgan has the largest exposure towards both Interest rate and Forex contracts with notional value of interest rate contracts at $64.6 trillion and Forex contracts at $6.2 trillion exposing itself to volatile changes in both interest rates and currency movements."
Bob Hoye: "The concept of throwing credit at a credit contraction and hoping it will go away has been floated on every severe crisis since the 1618 crash. The esteemed Walter Bagehot argued it elegantly when he was editor of The Economist in 1873. That year's collapse of a great bubble marked the beginning of long contraction that in 1884 prompted the first usage of the term "Great Depression". The long-running contrast between academics and the markets has been one of the best generators of irony in history. The contraction lasted from 1873 to 1895, but as late as 1939, top economists such as Rostow, were still analyzing it as the "Great Depression".
Recently, leading experts have declared that certain manipulations have prevented "Great Depression 2.0" from happening. From their own literature such economists should know that it would be the third one. History counts that the one that started in 1929 was number five in the series."
Marc Faber: "The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government's balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued".
"I think eventually there will be a big bust and then the whole credit expansion will come to an end," Faber added.
"Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to stimulus".
In one of his Gloomiest predictions, Faber, referred to as Dr Doom, said "the average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war".
"People ask me against whom? Well, they will invent an enemy," Faber said.
"At some stage, somewhere in future, we will have a war - that you have to be prepared for. And during war times, commodities go up strongly."
Business Week: "With industry sales expected to tumble 8% to $164.9 billion this year, Pioneer dropped out of the plasma HD television market and mobile Internet device innovator OQO shut its doors. Even the supposedly recession-proof video-game industry suffered steep sales declines."
Like many home owners, hotels are starting to drown in debt. They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights. But all that discounting hasn't stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt. The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It's a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.
The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.
The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008, according to mortgage data firm Trepp LLC, which tracks those traded by investors. In October, 8.7 percent were distressed, compared with 1.5 percent last year.
The French electricity giant EDF will take a 10 percent stake in the Gazprom natural gas pipeline South Stream, to run under the Black Sea, said the chief executive of Gazprom, Aleksei Miller. Another French utility, GDF Suez, announced progress in taking part in a separate proposed pipeline, Nord Stream, under the Baltic Sea.
Both pipelines would compete with Nabucco, a proposed pipeline backed by the United States and the European Union.
EBay Inc.'s PayPal unit, which processes online sales for a wide swath of shopping sites, said that it recorded a 25% increase in the volume of U.S. payments on Thursday, compared with Thanksgiving last year. A year ago, Thanksgiving Day sales were up just 15% above figures for 2007, the company said.
Hyundai Motor Co. said Saturday it will pull out of the Japanese passenger vehicle market amid sluggish sales, and instead focus on commercial vehicle sales there.
Michael Santoli: "So when Dubai World, the corporate affiliate of the emirate of Dubai, sought to suspend debt payments last week, triggering a spasm of selling in world markets, the natural question is, what will happen to investor confidence in assets that have been lifted by a rising liquidity tide...BCA Research seemed to have it about right in a Friday dispatch, noting that the Dubai tripwire, Greek bond selloff and Vietnam's devaluation all come as equity markets "are technically vulnerable [and] the risk/reward tradeoff has deteriorated. The turbulence gives an excuse to hedge funds to reduce risk and lock in gains as year-end approaches."
[sated]
Abu Dhabi, wealthy capital of the United Arab Emirates, will "pick and choose" how to assist debt-laden neighbor Dubai, a senior official said on Saturday, after fears of a Dubai default sent global markets reeling.
"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official in the government of the emirate of Abu Dhabi told Reuters by phone. "Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," said the official, who declined to be identified because he is not authorized to speak to the press.
According to the Dallas Fed, current unfunded liabilities are about $100 trillion dollars. That makes Dubai's problems look like a pimple on an elephant's ass.
Marla Singer: "It occurs to us that, in this respect, and in an admittedly perverse (but deliciously ironic) interpretation, Abu Dhabi is the Anti-Fed/Anti-Treasury that some Americans have been lusting for in the wake of AIG funnel payments to the likes of SocGen: Crushing moral hazard (and bond prices), a dozen foreign investors at a time (and perhaps making money for taxpayers on the bailout in the very short term via careful use of quiet acquisitions of distressed debt and the aggressive use of default protection).
Or maybe the message is simply that sovereigns of all stripes should just stay the fuck out of finance."
Most big U.S. banks may be forced to make public offerings soon if the Treasury demands payback of the funds it issued under the Troubled Assets Relief Program, veteran banking analyst Richard Bove said.
The U.S. Federal Reserve this month asked banks that were part of its "stress tests" to submit plans to repay government money, if they have not already repaid it.
"Virtually all of the banks can easily redeem their TARP preferreds from current cash holdings. However, it may be that only 3 of the top 30 would have an adequate Tier 1 Capital ratio if they redeemed these preferreds," Bove said in a note to clients.
ZeroHedge: "The Federal Reserve's balance sheet hit a new all time record of $2.2 Trillion in assets, after an $11 billion spike in MBS and Agency purchases week over week."
David Rosenberg: "The Conference Board’s consumer confidence index may have improved (48.7 in October to 49.5 in November) and beaten consensus expectations, but it remains firmly in recession terrain. It is so obvious that consumers are tired of the over-borrowing and over-spending days of yesteryear. Despite all the temptations provided by the government, auto buying plans dropped to an eight-month low (from 4.7 in October to 4.4 in November); home buying plans slipped to a new 27-year low of 2.3 (from 2.5 in October and 3.0 in September); and intentions to buy a major appliance stayed at a 14-year low (23.2)."
The Oil Drum: "It is a little early to see how the Dubai situation will play out, but it seems to me that there is a significant chance that the Dubai situation will mark the beginning of the next leg down in the downward recessionary spiral and world debt unwind. Oil prices are likely to drop, so few are likely to notice that oil ultimately plays a major role in the continuing debacle."
According to the WSJ, “the new investments funded by China’s stimulus plan may swamp world markets and lead to a surge in trade conflicts, an international business group said… The European Union Chamber of Commerce in China… said a combination of easy credit and other incentives for Chinese companies to expand has led to the construction of many new factories in areas like steel, aluminum, cement and chemicals. The increase in industrial capacity – at a time of global economic weakness – could drive down profit margins worldwide and lead to a backlash from other countries, the chamber said. ‘The Chinese stimulus package has poured credit into increasingly questionable projects and will almost certainly increase direct and indirect subsidies to investment and manufacturing,’ the report says. ‘China’s growth model requires that external demand - the European Union and the United States - be able to absorb the overcapacity it produces,’ a prospect that is increasingly unlikely given the weak economic recovery in the developed countries.”
Dubai is part of the United Arab Emirates, seven city-states which have separate ruling families, separate budgets, but security, immigration and foreign policies in common. Abu Dhabi has nearly all the UAE’s oil.
An estimated 50% has been wiped off the average price of real estate in the emirate since its peak… Earlier this month, UBS said Dubai property prices could drop a further 30% over the next 18 months.
Bloomberg (Francois De Beaupuy): “French Prime Minister Francois Fillon said Dubai’s request to reschedule debt repayments shows the global financial crisis “is not over” and that stimulus efforts must be maintained to avoid “breaking the weak recovery.’” Unfortunately, government stimulus created through more indebtedness cannot foster positive cash flow that sticks to the bones of its citizens.
According to the NY Times, New York State is running out of cash. Without a budget deal, New York will be left with just $36 million in the bank by the end of December, according to current projections. And the money will last that long, officials say, only if the state chooses to fully exhaust its emergency reserves by tapping several billion dollars’ worth of temporary loans from its rainy-day fund and short-term investments.
New Jersey, which faces an estimated $8 billion deficit, saw tax revenue collections fall last month by $222 million or 11.6% short of projections, the treasurer’s office said.
Vietnam shaved 5% off the value of its currency, the dong… its third devaluation since June 2008.
Reggie Middleton: "In terms of absolute dollar exposure, JP Morgan has the largest exposure towards both Interest rate and Forex contracts with notional value of interest rate contracts at $64.6 trillion and Forex contracts at $6.2 trillion exposing itself to volatile changes in both interest rates and currency movements."
Bob Hoye: "The concept of throwing credit at a credit contraction and hoping it will go away has been floated on every severe crisis since the 1618 crash. The esteemed Walter Bagehot argued it elegantly when he was editor of The Economist in 1873. That year's collapse of a great bubble marked the beginning of long contraction that in 1884 prompted the first usage of the term "Great Depression". The long-running contrast between academics and the markets has been one of the best generators of irony in history. The contraction lasted from 1873 to 1895, but as late as 1939, top economists such as Rostow, were still analyzing it as the "Great Depression".
Recently, leading experts have declared that certain manipulations have prevented "Great Depression 2.0" from happening. From their own literature such economists should know that it would be the third one. History counts that the one that started in 1929 was number five in the series."
Marc Faber: "The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government's balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued".
"I think eventually there will be a big bust and then the whole credit expansion will come to an end," Faber added.
"Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to stimulus".
In one of his Gloomiest predictions, Faber, referred to as Dr Doom, said "the average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war".
"People ask me against whom? Well, they will invent an enemy," Faber said.
"At some stage, somewhere in future, we will have a war - that you have to be prepared for. And during war times, commodities go up strongly."
Business Week: "With industry sales expected to tumble 8% to $164.9 billion this year, Pioneer dropped out of the plasma HD television market and mobile Internet device innovator OQO shut its doors. Even the supposedly recession-proof video-game industry suffered steep sales declines."
Like many home owners, hotels are starting to drown in debt. They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights. But all that discounting hasn't stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt. The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It's a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.
The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.
The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008, according to mortgage data firm Trepp LLC, which tracks those traded by investors. In October, 8.7 percent were distressed, compared with 1.5 percent last year.
The French electricity giant EDF will take a 10 percent stake in the Gazprom natural gas pipeline South Stream, to run under the Black Sea, said the chief executive of Gazprom, Aleksei Miller. Another French utility, GDF Suez, announced progress in taking part in a separate proposed pipeline, Nord Stream, under the Baltic Sea.
Both pipelines would compete with Nabucco, a proposed pipeline backed by the United States and the European Union.
EBay Inc.'s PayPal unit, which processes online sales for a wide swath of shopping sites, said that it recorded a 25% increase in the volume of U.S. payments on Thursday, compared with Thanksgiving last year. A year ago, Thanksgiving Day sales were up just 15% above figures for 2007, the company said.
Hyundai Motor Co. said Saturday it will pull out of the Japanese passenger vehicle market amid sluggish sales, and instead focus on commercial vehicle sales there.
Michael Santoli: "So when Dubai World, the corporate affiliate of the emirate of Dubai, sought to suspend debt payments last week, triggering a spasm of selling in world markets, the natural question is, what will happen to investor confidence in assets that have been lifted by a rising liquidity tide...BCA Research seemed to have it about right in a Friday dispatch, noting that the Dubai tripwire, Greek bond selloff and Vietnam's devaluation all come as equity markets "are technically vulnerable [and] the risk/reward tradeoff has deteriorated. The turbulence gives an excuse to hedge funds to reduce risk and lock in gains as year-end approaches."
[sated]
Friday, November 27, 2009
Capital Flows
11/27/09 Capital Flows
With the backdrop of the Dubai debt default, in early pre-market trading the Dow was down close to
250 points. On the holiday shortened trading day, we'll see how the damage can be minimized.
Dubai's debt woes may serve as a catalyst for a correction in stock markets but it does not signal a new crisis, investment manager Mohammed El-Erian told CNBC.
China says the U.S. Commerce Department's decision to levy an average of about 13.7 percent anti-subsidy tariffs on its oil well pipes is "discriminatory."
The tariffs, designed to counter China's unfair government subsidies, were announced Tuesday, the state-run Xinhua news agency reported. They will range from 10.36 percent to 15.78 percent, affecting more than $2.5 billion worth of Chinese exports.
The United Arab Emirate (UAE) has total debt amounting to $184 billion at the end of 2009, according to estimates by Bank of America-Merrill Lynch, which said the region faces a heavy redemption schedule until 2013.
Japan and Switzerland intervene in forex markets in an effort to prop up the dollar.
The S&P 500 Index sank 19 points, or 1.7%, to 1,091. The Dow Jones Industrial Average declined 154 points, or 1.5%, to 10,310, and the Nasdaq dropped 38 points, or 1.7%, to 2,138.
With the backdrop of the Dubai debt default, in early pre-market trading the Dow was down close to
250 points. On the holiday shortened trading day, we'll see how the damage can be minimized.
Dubai's debt woes may serve as a catalyst for a correction in stock markets but it does not signal a new crisis, investment manager Mohammed El-Erian told CNBC.
China says the U.S. Commerce Department's decision to levy an average of about 13.7 percent anti-subsidy tariffs on its oil well pipes is "discriminatory."
The tariffs, designed to counter China's unfair government subsidies, were announced Tuesday, the state-run Xinhua news agency reported. They will range from 10.36 percent to 15.78 percent, affecting more than $2.5 billion worth of Chinese exports.
The United Arab Emirate (UAE) has total debt amounting to $184 billion at the end of 2009, according to estimates by Bank of America-Merrill Lynch, which said the region faces a heavy redemption schedule until 2013.
Japan and Switzerland intervene in forex markets in an effort to prop up the dollar.
The S&P 500 Index sank 19 points, or 1.7%, to 1,091. The Dow Jones Industrial Average declined 154 points, or 1.5%, to 10,310, and the Nasdaq dropped 38 points, or 1.7%, to 2,138.
Thursday, November 26, 2009
Dubai
11/26/09 Dubai
European shares slipped 3.2 percent on Thursday to record their biggest one-day percentage drop in seven months as concerns about debt problems in Dubai weighed on the market, with banks the major fallers.
Gold imports by India, the biggest buyer, slumped for the seventh month as jewelers and housewives
shunned bullion because of record prices, a traders’ group said.
Purchases so far this month totaled about 18 tons compared
with 34 tons a year ago, said Suresh Hundia, president of the Bombay Bullion Association Ltd., citing preliminary data.
U.S. bankruptcy filings rose 33 percent in the
third quarter to the highest number since 2005, government data show,
as rising unemployment and tight credit made it more difficult for
consumers and businesses to stay current on their debts.
"With
unemployment surpassing 10 percent and credit to businesses remaining
tight, consumers and businesses are increasingly turning to the
financial relief of bankruptcy," said Samuel Gerdano, executive
director of the nonpartisan American Bankruptcy Institute, in a
statement.
Online advertising revenue in the U.S. fell
5.4 percent in the third quarter from a year ago, as the sputtering
economy kept its tight grip on even the fastest growing segment of
industry, according to a report released Wednesday.
But there's a
glimmer of hope: Revenue was up 1.7 percent from the second quarter,
the first sequential increase since late 2008, the industry trade group
Interactive Advertising Bureau said in a report prepared by
PriceWaterHouseCoopers LLP.
The extremely high search volume on Wednesday means many people were making menu and shopping decisions at the last minute.
“As a snapshot of America,” said Tanya Wenman Steel, the editor in chief of Epicurious, “it shows that people aren’t planning.”
According to the Christian Science Monitor, “the shadow economy makes
up a larger portion of the economies of countries like Greece (25
percent) or Mozambique (more than 40 percent) than it does in the US.
But because America’s economy is so much bigger, its shadow economy
amounts to nearly 8 percent of its gross domestic product (GDP) — in
the ballpark of $1 trillion, estimates Friedrich Schneider, an
economics professor at Johannes Kepler University in Linz, Austria.
That’s bigger than the GDP of Turkey or Australia.”
Starting Dec. 12, the automated system that Fannie Mae uses to approve
loans will reject borrowers who have at least a 20% down payment but
whose credit scores fall below 620 out of 850. Previously, the cutoff
was 580.
Also, for borrowers with a 20% down payment, no more than 45% of their gross monthly income can go toward paying debts.
Fannie
declined to disclose the previous threshold, except to say that it was
higher. The company will raise the level to 50% in cases with "strong
compensating factors."
Chris Puplava: "Since the start of the decade gold has been in a strong secular bull
market in which it has had only one negative year (2001) while the
S&P 500 has had four. Gold’s strong performance has produced a
cumulative return of 311.54% for an annualized return of 15.18% per
annum this decade. In stark contrast, the S&P 500 has been in a
secular bear market in which its cumulative return has been a negative
24.52% for a negative 2.77% annualized return."
Rocky Vega: " According to a recent Thomson
Reuters/Ipsos poll, many Americans consider the US relationship with
China the most important one it has. That’s despite uncertainty about
whether or not that’s a good thing… most thought it was bad.
According to the write-up,
“Thirty-four percent of Americans chose China as the ‘most important
bilateral relationship’ — ahead of Britain and Canada. Yet when asked
to characterize China, 56 percent saw it as an adversary while only 33
viewed it as an ally.”
According to Reuters, offshore crude storage, which has declined sharply from record
levels in April, may rise again in the U.S. Gulf as front-month U.S.
oil futures trade at a steep discount to barrels for later delivery.
The volume of crude oil stored in tankers globally has dipped to
between 32 million and 42 million barrels, according to estimates from
several shipbrokers. Floating crude storage likely fell more than 60
percent from peaks above 100 million barrels in April.
Offshore storage plays may now regain popularity near the U.S. Gulf
Coast, a key refining region and hub for seaborne oil imports, several
shipbrokers and industry sources said. A U.S. oil market contango -
when prompt crude trades at a discount - is encouraging new storage
plays.
European shares slipped 3.2 percent on Thursday to record their biggest one-day percentage drop in seven months as concerns about debt problems in Dubai weighed on the market, with banks the major fallers.
Gold imports by India, the biggest buyer, slumped for the seventh month as jewelers and housewives
shunned bullion because of record prices, a traders’ group said.
Purchases so far this month totaled about 18 tons compared
with 34 tons a year ago, said Suresh Hundia, president of the Bombay Bullion Association Ltd., citing preliminary data.
U.S. bankruptcy filings rose 33 percent in the
third quarter to the highest number since 2005, government data show,
as rising unemployment and tight credit made it more difficult for
consumers and businesses to stay current on their debts.
"With
unemployment surpassing 10 percent and credit to businesses remaining
tight, consumers and businesses are increasingly turning to the
financial relief of bankruptcy," said Samuel Gerdano, executive
director of the nonpartisan American Bankruptcy Institute, in a
statement.
Online advertising revenue in the U.S. fell
5.4 percent in the third quarter from a year ago, as the sputtering
economy kept its tight grip on even the fastest growing segment of
industry, according to a report released Wednesday.
But there's a
glimmer of hope: Revenue was up 1.7 percent from the second quarter,
the first sequential increase since late 2008, the industry trade group
Interactive Advertising Bureau said in a report prepared by
PriceWaterHouseCoopers LLP.
The extremely high search volume on Wednesday means many people were making menu and shopping decisions at the last minute.
“As a snapshot of America,” said Tanya Wenman Steel, the editor in chief of Epicurious, “it shows that people aren’t planning.”
According to the Christian Science Monitor, “the shadow economy makes
up a larger portion of the economies of countries like Greece (25
percent) or Mozambique (more than 40 percent) than it does in the US.
But because America’s economy is so much bigger, its shadow economy
amounts to nearly 8 percent of its gross domestic product (GDP) — in
the ballpark of $1 trillion, estimates Friedrich Schneider, an
economics professor at Johannes Kepler University in Linz, Austria.
That’s bigger than the GDP of Turkey or Australia.”
Starting Dec. 12, the automated system that Fannie Mae uses to approve
loans will reject borrowers who have at least a 20% down payment but
whose credit scores fall below 620 out of 850. Previously, the cutoff
was 580.
Also, for borrowers with a 20% down payment, no more than 45% of their gross monthly income can go toward paying debts.
Fannie
declined to disclose the previous threshold, except to say that it was
higher. The company will raise the level to 50% in cases with "strong
compensating factors."
Chris Puplava: "Since the start of the decade gold has been in a strong secular bull
market in which it has had only one negative year (2001) while the
S&P 500 has had four. Gold’s strong performance has produced a
cumulative return of 311.54% for an annualized return of 15.18% per
annum this decade. In stark contrast, the S&P 500 has been in a
secular bear market in which its cumulative return has been a negative
24.52% for a negative 2.77% annualized return."
Rocky Vega: " According to a recent Thomson
Reuters/Ipsos poll, many Americans consider the US relationship with
China the most important one it has. That’s despite uncertainty about
whether or not that’s a good thing… most thought it was bad.
According to the write-up,
“Thirty-four percent of Americans chose China as the ‘most important
bilateral relationship’ — ahead of Britain and Canada. Yet when asked
to characterize China, 56 percent saw it as an adversary while only 33
viewed it as an ally.”
According to Reuters, offshore crude storage, which has declined sharply from record
levels in April, may rise again in the U.S. Gulf as front-month U.S.
oil futures trade at a steep discount to barrels for later delivery.
The volume of crude oil stored in tankers globally has dipped to
between 32 million and 42 million barrels, according to estimates from
several shipbrokers. Floating crude storage likely fell more than 60
percent from peaks above 100 million barrels in April.
Offshore storage plays may now regain popularity near the U.S. Gulf
Coast, a key refining region and hub for seaborne oil imports, several
shipbrokers and industry sources said. A U.S. oil market contango -
when prompt crude trades at a discount - is encouraging new storage
plays.
Wednesday, November 25, 2009
Happy Thanksgiving
11/25/09 Happy Thanksgiving
Crude oil futures slipped below
$76 a barrel in electronic trades after the American Petroleum
Institute late Tuesday reported a surprise jump in oil inventories last
week. The industry group said crude stocks rose by 3.347 million
barrels in the week ended Nov. 20. Analysts polled by Platt's had
expected a rise of 1.4 million barrels. Gasoline stocks rose 1.7
million barrels, and distillate stocks fell 2.4 million barrels.
Analysts expected a rise of 500,000 barrels in gasoline inventories and
unchanged distillate stocks. Crude oil for January fell to $75.73 a
barrel, down 0.4% from the floor close of $76.02 a barrel. Oil ended
the floor session 2% lower.
Orders for U.S.-made durable
goods fell in October, declining 0.6% on weaker demand for machinery,
the Commerce Department reported Wednesday. Excluding transportation
goods, orders fell 1.3%. Unfilled orders for manufactured durable goods in October, down thirteen consecutive months, decreased $3.0 billion or 0.4 percent to $730.4 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent September decrease. Transportation equipment, down twelve of the last thirteen months, had the largest decrease, $2.2 billion or 0.5 percent to $424.3 billion.
Real (inflation-adjusted)
consumer spending rose a seasonally adjusted 0.4% in October after a
0.7% drop in September. Real disposable incomes rose a seasonally
adjusted 0.2%, following a gain of 0.1% in September. In current-dollar
terms (not inflation-adjusted), spending rose 0.7% in October,
following a drop of 0.6% in the prior month. Current-dollar personal
income rose 0.2% in October.
In the week ending Nov. 21, the advance figure for seasonally adjusted initial claims was 466,000, a decrease of 35,000 from the previous week's revised figure of 501,000. The 4-week moving average was 496,500, a decrease of 16,500 from the previous week's revised average of 513,000.
The advance seasonally adjusted insured unemployment rate was 4.1 percent for the week ending Nov. 14, a decrease of 0.2 percentage point from the prior week's unrevised rate of 4.3 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 14 was 5,423,000, a decrease of 190,000 from the preceding week's revised level of 5,613,000. The 4-week moving average was 5,613,750, a decrease of 98,500 from the preceding week's revised average of 5,712,250.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.866 million.
For the fiscal year Tiffany
lifted its earnings guidance to a range of $1.88 to $1.98 a share, from
a range of $1.65 to $1.75 a share and said total worldwide sales would
drop around 8%.
Deere & Co
said Wednesday its fiscal fourth-quarter net loss was $222.8 million,
or 53 cents a share, versus net income of $345 million, or 81 cents a
share, in the year-ago period. On an adjusted basis, the agricultural
equipment company said it earned 23 cents a share. Total net sales fell
30% to $4.7 billion. Analysts polled by FactSet Research were looking
for sales of $4.6 billion, on average. For 2010, Deere predicted net
income of about $900 million, versus the Wall Street consensus of $1.1
billion.
Greek banks fell sharply on
Friday amid worries about how the lenders will fund themselves once
European Central Bank support is wound down.
Half of the losses suffered by banks could still be hidden in their
balance sheets, more so in Europe than in the United States, the
International Monetary Fund's chief, Dominique Strauss-Kahn, was quoted
as saying on Tuesday.
The U.S. dollar traded at a new 16-month low.
An index of consumer sentiment
in November rose to 67.4 from an earlier reading of 66, said the
University of Michigan and Reuters Wednesday, according to media
reports. Economists polled by MarketWatch were expecting a reading of
67. The November report is a drop from 70.6 in October, marking the
survey's second straight monthly drop.
U.S. new home sales rose 6.2% in
October on strong results in the South, the Commerce Department
estimated Wednesday. The rise in new-home sales to a seasonally
adjusted annual rate of 430,000 was well above the 390,000 pace
expected by economists surveyed by MarketWatch. Sales rose 23.2% in the
South. Sales fell 20% in the Midwest, and 5.1% in both the Northeast
and the West. The pace of new-home sales in September was revised
slightly higher to a level of 405,000. New-home sales are up 5.1%
compared with a year ago. The supply of homes on the market fell to
239,000 in October, representing a 6.7-month supply. The median sales
price in October hit $212,200, compared with $213,200 in the prior
year.
China's energy firms are reducing gas supplies to industry to avoid
having to cut off households during winter, but risking more factory
shutdowns, dampening production and raising costs as shortages may
worsen.
The shortfalls began this month when early, heavy snow hit northern
China, spiking up heating demand and forcing PetroChina to divert south
China's supplies northwards. The cold spell then hit the south, adding
to demand and slowing supplies.
PetroChina (601857.SS),
the country's leading gas supplier, said on Tuesday it would make a
second cut of 3 million cubic meters (mcm) in the daily amount it
delivers to industrial users in northern China, reducing their volumes
by another 10 percent.
PetroChina has also cut 3 mcm per day, or 8 percent, from supplies
to firms in the Yangtze River delta and the provinces of Hunan and
Hubei, as well as trimming flows to industries in the southwest and
northwest, the main gas producing regions.
Financial Chronicle of India:"India
is open to buying more gold from the International Monetary Fund (IMF).
It bought 200 tonnes for $6.7 billion on November 3. The Reserve Bank of India (RBI) may well buy
IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are
now under negotiation."
ZeroHedge: "According to the FDIC's just released report, there was $784 billion
borrowed between credit card loans and securitization receivables. The
U.S. consumer is not only retrenching, but banks continue to limit
credit card purchases, which further constrains spending, creating a
vicious deleveraging, and thus deflationary, loop....According to Meredith Whitney: Considering that $1.2 trillion has been cut since 2Q08, we believe that by the end of 2010, $2.7 trillion of lines will be expunged from the system. We believe unused lines will be reduced by $2 trillion, to an estimated $2,700B by 4Q09, and nearly $2.7 trillion toan estimated $2,011B by 4Q10. Concurrently, we believe the utilization rate will increase from 17% at 4Q08 to 23% by 4Q09 and 30% by 4Q10."
Crude inventories rose 1 million
barrels in the week ended Nov. 20, the Energy Information
Administration reported Wednesday. Gasoline inventories rose 1 million
barrels and distillate stockpiles, which include heating oil and
diesel, fell 500,000 barrels. After the data, crude futures remained
little changed at $75.99 a barrel. Industry group American Petroleum
Institute reported late Tuesday an increase of 3.4 million in crude
inventories, and analysts polled by Platts had expected a buildup of
1.4 million barrels.
Working gas in storage was 3,835 Bcf as of Friday, November 20, 2009,
according to EIA estimates. This represents a net increase of 2 Bcf
from the previous week. Stocks were 404 Bcf higher than last year at
this time and 442 Bcf above the 5-year average of 3,393 Bcf. In the
East Region, stocks were 145 Bcf above the 5-year average following net
withdrawals of 2 Bcf. Stocks in the Producing Region were 229 Bcf above
the 5-year average of 982 Bcf after a net injection of 3 Bcf. Stocks in
the West Region were 69 Bcf above the 5-year average after a net
addition of 1 Bcf. At 3,835 Bcf, total working gas is above the 5-year
historical range.
Gold for December delivery rose as high as $1,185.90 an ounce in electronic
trade on Globex. That's a $20.1 an ounce, or 1.7%, gain from the prior day's
settlement.
Hershey Trust Co., the philanthropic entity overseeing Hershey Co., is seeking the blessing of
the Pennsylvania attorney general for a potential bid for Cadbury PLC to avoid political issues
that sidelined previous deals, The Wall Street Journal reported in its online
edition, citing people familiar with the matter. Among the people that the trust
has reached out to are Attorney General Tom Corbett, a Republican who is running
for governor, the newspaper said. Corbett reportedly has not commented on the
deal as of yet. Under state law, Pennsylvania's attorney general has broad
powers to regulate charitable trusts, according to the Journal.
GM presents a reorganization plan to Opel workers, which may include closing its Belgium plant and cutting 5,400 German jobs. While Opel's four German sites will keep operating, they'll suffer most of the planned job cuts.
Dubai asks for a six-month freeze on debt payments as it restructures investment company Dubai World, which owes $59B.
Contracts to protect the emirate from default surged to 434 basis
points - the most since beginning trading in January, and higher now
than Iceland's.
The Dow Jones Industrial Average rose 30.69 points, or 0.3%, to 10,464.4. The S&P 500 Index climbed 4.98 points, or 0.5%, to 1,110.63. The Nasdaq Composite added 6.87 points, or 0.3%, to 2,176.05.
The dollar traded at almost a 14- year low against the yen and declined beyond $1.51 per euro as the Federal Reserve’s signal that it will tolerate a weaker greenback encouraged investors to buy higher-yielding assets outside America.
Crude oil futures slipped below
$76 a barrel in electronic trades after the American Petroleum
Institute late Tuesday reported a surprise jump in oil inventories last
week. The industry group said crude stocks rose by 3.347 million
barrels in the week ended Nov. 20. Analysts polled by Platt's had
expected a rise of 1.4 million barrels. Gasoline stocks rose 1.7
million barrels, and distillate stocks fell 2.4 million barrels.
Analysts expected a rise of 500,000 barrels in gasoline inventories and
unchanged distillate stocks. Crude oil for January fell to $75.73 a
barrel, down 0.4% from the floor close of $76.02 a barrel. Oil ended
the floor session 2% lower.
Orders for U.S.-made durable
goods fell in October, declining 0.6% on weaker demand for machinery,
the Commerce Department reported Wednesday. Excluding transportation
goods, orders fell 1.3%. Unfilled orders for manufactured durable goods in October, down thirteen consecutive months, decreased $3.0 billion or 0.4 percent to $730.4 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent September decrease. Transportation equipment, down twelve of the last thirteen months, had the largest decrease, $2.2 billion or 0.5 percent to $424.3 billion.
Real (inflation-adjusted)
consumer spending rose a seasonally adjusted 0.4% in October after a
0.7% drop in September. Real disposable incomes rose a seasonally
adjusted 0.2%, following a gain of 0.1% in September. In current-dollar
terms (not inflation-adjusted), spending rose 0.7% in October,
following a drop of 0.6% in the prior month. Current-dollar personal
income rose 0.2% in October.
In the week ending Nov. 21, the advance figure for seasonally adjusted initial claims was 466,000, a decrease of 35,000 from the previous week's revised figure of 501,000. The 4-week moving average was 496,500, a decrease of 16,500 from the previous week's revised average of 513,000.
The advance seasonally adjusted insured unemployment rate was 4.1 percent for the week ending Nov. 14, a decrease of 0.2 percentage point from the prior week's unrevised rate of 4.3 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 14 was 5,423,000, a decrease of 190,000 from the preceding week's revised level of 5,613,000. The 4-week moving average was 5,613,750, a decrease of 98,500 from the preceding week's revised average of 5,712,250.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.866 million.
For the fiscal year Tiffany
lifted its earnings guidance to a range of $1.88 to $1.98 a share, from
a range of $1.65 to $1.75 a share and said total worldwide sales would
drop around 8%.
Deere & Co
said Wednesday its fiscal fourth-quarter net loss was $222.8 million,
or 53 cents a share, versus net income of $345 million, or 81 cents a
share, in the year-ago period. On an adjusted basis, the agricultural
equipment company said it earned 23 cents a share. Total net sales fell
30% to $4.7 billion. Analysts polled by FactSet Research were looking
for sales of $4.6 billion, on average. For 2010, Deere predicted net
income of about $900 million, versus the Wall Street consensus of $1.1
billion.
Greek banks fell sharply on
Friday amid worries about how the lenders will fund themselves once
European Central Bank support is wound down.
Half of the losses suffered by banks could still be hidden in their
balance sheets, more so in Europe than in the United States, the
International Monetary Fund's chief, Dominique Strauss-Kahn, was quoted
as saying on Tuesday.
The U.S. dollar traded at a new 16-month low.
An index of consumer sentiment
in November rose to 67.4 from an earlier reading of 66, said the
University of Michigan and Reuters Wednesday, according to media
reports. Economists polled by MarketWatch were expecting a reading of
67. The November report is a drop from 70.6 in October, marking the
survey's second straight monthly drop.
U.S. new home sales rose 6.2% in
October on strong results in the South, the Commerce Department
estimated Wednesday. The rise in new-home sales to a seasonally
adjusted annual rate of 430,000 was well above the 390,000 pace
expected by economists surveyed by MarketWatch. Sales rose 23.2% in the
South. Sales fell 20% in the Midwest, and 5.1% in both the Northeast
and the West. The pace of new-home sales in September was revised
slightly higher to a level of 405,000. New-home sales are up 5.1%
compared with a year ago. The supply of homes on the market fell to
239,000 in October, representing a 6.7-month supply. The median sales
price in October hit $212,200, compared with $213,200 in the prior
year.
China's energy firms are reducing gas supplies to industry to avoid
having to cut off households during winter, but risking more factory
shutdowns, dampening production and raising costs as shortages may
worsen.
The shortfalls began this month when early, heavy snow hit northern
China, spiking up heating demand and forcing PetroChina to divert south
China's supplies northwards. The cold spell then hit the south, adding
to demand and slowing supplies.
PetroChina (601857.SS),
the country's leading gas supplier, said on Tuesday it would make a
second cut of 3 million cubic meters (mcm) in the daily amount it
delivers to industrial users in northern China, reducing their volumes
by another 10 percent.
PetroChina has also cut 3 mcm per day, or 8 percent, from supplies
to firms in the Yangtze River delta and the provinces of Hunan and
Hubei, as well as trimming flows to industries in the southwest and
northwest, the main gas producing regions.
Financial Chronicle of India:"India
is open to buying more gold from the International Monetary Fund (IMF).
It bought 200 tonnes for $6.7 billion on November 3. The Reserve Bank of India (RBI) may well buy
IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are
now under negotiation."
ZeroHedge: "According to the FDIC's just released report, there was $784 billion
borrowed between credit card loans and securitization receivables. The
U.S. consumer is not only retrenching, but banks continue to limit
credit card purchases, which further constrains spending, creating a
vicious deleveraging, and thus deflationary, loop....According to Meredith Whitney: Considering that $1.2 trillion has been cut since 2Q08, we believe that by the end of 2010, $2.7 trillion of lines will be expunged from the system. We believe unused lines will be reduced by $2 trillion, to an estimated $2,700B by 4Q09, and nearly $2.7 trillion toan estimated $2,011B by 4Q10. Concurrently, we believe the utilization rate will increase from 17% at 4Q08 to 23% by 4Q09 and 30% by 4Q10."
Crude inventories rose 1 million
barrels in the week ended Nov. 20, the Energy Information
Administration reported Wednesday. Gasoline inventories rose 1 million
barrels and distillate stockpiles, which include heating oil and
diesel, fell 500,000 barrels. After the data, crude futures remained
little changed at $75.99 a barrel. Industry group American Petroleum
Institute reported late Tuesday an increase of 3.4 million in crude
inventories, and analysts polled by Platts had expected a buildup of
1.4 million barrels.
Working gas in storage was 3,835 Bcf as of Friday, November 20, 2009,
according to EIA estimates. This represents a net increase of 2 Bcf
from the previous week. Stocks were 404 Bcf higher than last year at
this time and 442 Bcf above the 5-year average of 3,393 Bcf. In the
East Region, stocks were 145 Bcf above the 5-year average following net
withdrawals of 2 Bcf. Stocks in the Producing Region were 229 Bcf above
the 5-year average of 982 Bcf after a net injection of 3 Bcf. Stocks in
the West Region were 69 Bcf above the 5-year average after a net
addition of 1 Bcf. At 3,835 Bcf, total working gas is above the 5-year
historical range.
Gold for December delivery rose as high as $1,185.90 an ounce in electronic
trade on Globex. That's a $20.1 an ounce, or 1.7%, gain from the prior day's
settlement.
Hershey Trust Co., the philanthropic entity overseeing Hershey Co., is seeking the blessing of
the Pennsylvania attorney general for a potential bid for Cadbury PLC to avoid political issues
that sidelined previous deals, The Wall Street Journal reported in its online
edition, citing people familiar with the matter. Among the people that the trust
has reached out to are Attorney General Tom Corbett, a Republican who is running
for governor, the newspaper said. Corbett reportedly has not commented on the
deal as of yet. Under state law, Pennsylvania's attorney general has broad
powers to regulate charitable trusts, according to the Journal.
GM presents a reorganization plan to Opel workers, which may include closing its Belgium plant and cutting 5,400 German jobs. While Opel's four German sites will keep operating, they'll suffer most of the planned job cuts.
Dubai asks for a six-month freeze on debt payments as it restructures investment company Dubai World, which owes $59B.
Contracts to protect the emirate from default surged to 434 basis
points - the most since beginning trading in January, and higher now
than Iceland's.
The Dow Jones Industrial Average rose 30.69 points, or 0.3%, to 10,464.4. The S&P 500 Index climbed 4.98 points, or 0.5%, to 1,110.63. The Nasdaq Composite added 6.87 points, or 0.3%, to 2,176.05.
The dollar traded at almost a 14- year low against the yen and declined beyond $1.51 per euro as the Federal Reserve’s signal that it will tolerate a weaker greenback encouraged investors to buy higher-yielding assets outside America.
Tuesday, November 24, 2009
Under Water
11/24/09 Under Water
The proportion of U.S. homeowners who owe more on their mortgages
than the properties are worth has swelled to about 23%, threatening
prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in
the third quarter, according to First American CoreLogic, a real-estate
information company based in Santa Ana, Calif.
The dollar extended losses
versus the Japanese yen and remained slightly lower versus the euro on
Tuesday after a government report showed the U.S. economy grew at a
2.8% pace in the third quarter, slower than previously reported but in
line with economists' expectations. Compared with a year ago, real GDP is down 2.5%.
Surging imports, which outpaced the growth in exports, restrained
the economic growth rate in the third quarter. Imports jumped 20.8
percent, the biggest gain since the second quarter of 1985, instead of
16.4 percent. They knocked 2.53 percentage points off real GDP, the
department said.
Another drag on GDP came from the construction of nonresidential
structures, which dropped 15.1 percent in the last quarter rather than
9.0 percent, highlighting the problems in the commercial property
market. That shaved just over half a percentage point off GDP.
Thomas Jefferson: "It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world."
Fitch Ratings downgraded Mexico's credit rating Monday, saying
dependence on a flagging oil sector has weakened the country's ability
to weather financial problems.
Mexico's rating remained at investment grade, but the downgrade will bring a rise in the government's borrowing costs.
U.S. states tax collections fell for
the fourth consecutive quarter as job losses and the economic
recession cut revenue from income and sales levies, according to
the Nelson A. Rockefeller Institute of Government.
The decline of 10.7 percent in the period that ended in
September, compared with a year earlier, was less than the
previous quarter’s 16.6 percent drop, which was the biggest
since 1963, the Albany, New York-based institute said today. The
report covered 44 states for which comparable data was
available.
“Despite indications that the national recession may be
over, the revenue situation remained gloomy in virtually every
state in the third quarter,” according to the report. A number
of states are collecting less than they projected, and “further
revenue shortfalls and more spending cuts are most likely on the
way for many,” the institute said.
The S&P/Case-Shiller home-price index increased 0.27
percent from the prior month on a seasonally adjusted basis,
after a 1.13 percent rise in August, the group said today in New
York. The gauge fell 9.36 percent from September 2008, more than
forecast, yet the smallest year-over-year decline since the end
of 2007.
In an interview last week, Raul Vazquez, the president and CEO of Walmart.com,
asserted the site was growing faster than Amazon's; suggested that
Amazon Prime, a two-day-shipping service that costs $80 a year, was too
expensive; and said it was "only a matter of time" before Wal-Mart
dominated Web shopping.
Nov. clothing sales weaken vs. 2008's clearance sales, but electronics, online rise.
The number of distressed banks
in the U.S. rose to the highest level in sixteen years, according to a
report released by the Federal Deposit Insurance Corp. Tuesday. The
FDIC said that the number of troubled banks rose to 552 at the end of
September from 416 at the end of June and 305 at the end of March. This
is the largest number of banks on its "problem list" since the end of
1993.
The Conference Board reported
modestly higher consumer confidence in November. The New York-based
research organization's confidence index came to 49.5, up from a
revised 48.7 for October. "The moderate improvement in the short-term
outlook was the result of a decrease in the percent of consumers
expecting business and labor market conditions to worsen," noted Lynn
Franco, the Conference Board's director of consumer research. "Income
expectations remain very pessimistic and consumers are entering the
holiday season in a very frugal mood." Confidence had been expected to
lessen to 45.5 as opposed to October's original reading of 47.7,
according to a MarketWatch survey of economists.
Local-phone company Windstream
Corp. on Tuesday said it will buy Iowa Telecommunications Services Inc.
in a deal worth $1.1 billion, including the assumption of debt. Under
the agreement, Windstream (WIN) will issue 0.804 shares and $7.09 in cash for each share of Iowa Telecom (IWA),
which reflects a total price of about $16.14 a share or a 26% premium.
Iowa Telecom, which closed Monday at $12.69, leaped as much as 24% to
$15.71 in early Tuesday trades. As part of the deal, Windstream will
also assume $598 million in Iowa Telecom debt.
The typical black family owns 10 cents to the white family's dollar,
and the typical Latino family owns 12 cents, according to a 2007 survey
in Insight Center for Economic Development's report.
David Rosenberg, who used to be Merrill Lynch's chief economist and now
works for Gluskin Sheff of Canada, told CNBC Tuesday that the US
economy is mired in an economic crisis that shows only scant signs of
abating. "We're in a form of Depression," Rosenberg said in a live interview.
"Depressions...typically happen after a prolonged period of credit
excess morphs into a collapse and you get asset deflation. We had asset
deflation and we had a contraction in private-sector credit."
Calculated Risk: "The price-to-rent ratio is currently almost as high as during the late '80s housing bubble....Using national median income and house prices provides a gross overview
of price-to-income (it would be better to do this analysis on a local
area). However this does shows that the price-to-income is still too
high, and that this ratio needs to fall another 10% or so. A further
decline in this ratio could be a combination of falling house prices
and/or rising nominal incomes....It appears that house prices - in general - are still too high. However
prices depend on the local supply and demand factors. In many lower
priced bubble areas supply has declined sharply (because of the loan
modification efforts and local moratoria), and demand was very strong
in Q3 from the first-time home buyer frenzy and cash flow investors.
This has pushed up prices at the low end, and suggests price might fall
some again at the low end - although probably not to new lows.
However
in the mid-to-high end of the bubble areas - with significant supply
and little demand - prices are still too high. And I expect further
declines in those areas and probably nationwide (although this isn't as
obvious as it was in 2005 since most of the price declines are over). "
The fund used to safeguard U.S. bank deposits dropped to a negative
balance of $8.2 billion in the third quarter, the first shortfall since
1992, the Federal Deposit Insurance Corp said Tuesday.
Crude oil for January delivery lost $1.54, or 1.9%, to end at $76.02 a barrel on the New York Mercantile Exchange. Gold for December delivery finished up $1.10 at $1,165.80 an ounce on the New York Mercantile Exchange.
Federal Reserve officials
believe the recovery is going to expand at a slow rate while
unemployment will continue to remain high, according to the minutes of
their closed-door Nov. 3 and Nov 4 meetings released Tuesday.The Fed
forcast that the unemployment rate could stay elevated in 2010 at 9.7%
and would only drop modestly to 8.6% in 2011, according to the summary
of the latest meetings.
The Dow Jones Industrial Average fell 17.24 points to 10,433.71. The S&P 500 Index declined less than 1 point to 1,105.65, while the Nasdaq Composite shed 6.83 points to 2,169.18.
The proportion of U.S. homeowners who owe more on their mortgages
than the properties are worth has swelled to about 23%, threatening
prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in
the third quarter, according to First American CoreLogic, a real-estate
information company based in Santa Ana, Calif.
The dollar extended losses
versus the Japanese yen and remained slightly lower versus the euro on
Tuesday after a government report showed the U.S. economy grew at a
2.8% pace in the third quarter, slower than previously reported but in
line with economists' expectations. Compared with a year ago, real GDP is down 2.5%.
Surging imports, which outpaced the growth in exports, restrained
the economic growth rate in the third quarter. Imports jumped 20.8
percent, the biggest gain since the second quarter of 1985, instead of
16.4 percent. They knocked 2.53 percentage points off real GDP, the
department said.
Another drag on GDP came from the construction of nonresidential
structures, which dropped 15.1 percent in the last quarter rather than
9.0 percent, highlighting the problems in the commercial property
market. That shaved just over half a percentage point off GDP.
Thomas Jefferson: "It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world."
Fitch Ratings downgraded Mexico's credit rating Monday, saying
dependence on a flagging oil sector has weakened the country's ability
to weather financial problems.
Mexico's rating remained at investment grade, but the downgrade will bring a rise in the government's borrowing costs.
U.S. states tax collections fell for
the fourth consecutive quarter as job losses and the economic
recession cut revenue from income and sales levies, according to
the Nelson A. Rockefeller Institute of Government.
The decline of 10.7 percent in the period that ended in
September, compared with a year earlier, was less than the
previous quarter’s 16.6 percent drop, which was the biggest
since 1963, the Albany, New York-based institute said today. The
report covered 44 states for which comparable data was
available.
“Despite indications that the national recession may be
over, the revenue situation remained gloomy in virtually every
state in the third quarter,” according to the report. A number
of states are collecting less than they projected, and “further
revenue shortfalls and more spending cuts are most likely on the
way for many,” the institute said.
The S&P/Case-Shiller home-price index increased 0.27
percent from the prior month on a seasonally adjusted basis,
after a 1.13 percent rise in August, the group said today in New
York. The gauge fell 9.36 percent from September 2008, more than
forecast, yet the smallest year-over-year decline since the end
of 2007.
In an interview last week, Raul Vazquez, the president and CEO of Walmart.com,
asserted the site was growing faster than Amazon's; suggested that
Amazon Prime, a two-day-shipping service that costs $80 a year, was too
expensive; and said it was "only a matter of time" before Wal-Mart
dominated Web shopping.
Nov. clothing sales weaken vs. 2008's clearance sales, but electronics, online rise.
The number of distressed banks
in the U.S. rose to the highest level in sixteen years, according to a
report released by the Federal Deposit Insurance Corp. Tuesday. The
FDIC said that the number of troubled banks rose to 552 at the end of
September from 416 at the end of June and 305 at the end of March. This
is the largest number of banks on its "problem list" since the end of
1993.
The Conference Board reported
modestly higher consumer confidence in November. The New York-based
research organization's confidence index came to 49.5, up from a
revised 48.7 for October. "The moderate improvement in the short-term
outlook was the result of a decrease in the percent of consumers
expecting business and labor market conditions to worsen," noted Lynn
Franco, the Conference Board's director of consumer research. "Income
expectations remain very pessimistic and consumers are entering the
holiday season in a very frugal mood." Confidence had been expected to
lessen to 45.5 as opposed to October's original reading of 47.7,
according to a MarketWatch survey of economists.
Local-phone company Windstream
Corp. on Tuesday said it will buy Iowa Telecommunications Services Inc.
in a deal worth $1.1 billion, including the assumption of debt. Under
the agreement, Windstream (WIN) will issue 0.804 shares and $7.09 in cash for each share of Iowa Telecom (IWA),
which reflects a total price of about $16.14 a share or a 26% premium.
Iowa Telecom, which closed Monday at $12.69, leaped as much as 24% to
$15.71 in early Tuesday trades. As part of the deal, Windstream will
also assume $598 million in Iowa Telecom debt.
The typical black family owns 10 cents to the white family's dollar,
and the typical Latino family owns 12 cents, according to a 2007 survey
in Insight Center for Economic Development's report.
David Rosenberg, who used to be Merrill Lynch's chief economist and now
works for Gluskin Sheff of Canada, told CNBC Tuesday that the US
economy is mired in an economic crisis that shows only scant signs of
abating. "We're in a form of Depression," Rosenberg said in a live interview.
"Depressions...typically happen after a prolonged period of credit
excess morphs into a collapse and you get asset deflation. We had asset
deflation and we had a contraction in private-sector credit."
Calculated Risk: "The price-to-rent ratio is currently almost as high as during the late '80s housing bubble....Using national median income and house prices provides a gross overview
of price-to-income (it would be better to do this analysis on a local
area). However this does shows that the price-to-income is still too
high, and that this ratio needs to fall another 10% or so. A further
decline in this ratio could be a combination of falling house prices
and/or rising nominal incomes....It appears that house prices - in general - are still too high. However
prices depend on the local supply and demand factors. In many lower
priced bubble areas supply has declined sharply (because of the loan
modification efforts and local moratoria), and demand was very strong
in Q3 from the first-time home buyer frenzy and cash flow investors.
This has pushed up prices at the low end, and suggests price might fall
some again at the low end - although probably not to new lows.
However
in the mid-to-high end of the bubble areas - with significant supply
and little demand - prices are still too high. And I expect further
declines in those areas and probably nationwide (although this isn't as
obvious as it was in 2005 since most of the price declines are over). "
The fund used to safeguard U.S. bank deposits dropped to a negative
balance of $8.2 billion in the third quarter, the first shortfall since
1992, the Federal Deposit Insurance Corp said Tuesday.
Crude oil for January delivery lost $1.54, or 1.9%, to end at $76.02 a barrel on the New York Mercantile Exchange. Gold for December delivery finished up $1.10 at $1,165.80 an ounce on the New York Mercantile Exchange.
Federal Reserve officials
believe the recovery is going to expand at a slow rate while
unemployment will continue to remain high, according to the minutes of
their closed-door Nov. 3 and Nov 4 meetings released Tuesday.The Fed
forcast that the unemployment rate could stay elevated in 2010 at 9.7%
and would only drop modestly to 8.6% in 2011, according to the summary
of the latest meetings.
The Dow Jones Industrial Average fell 17.24 points to 10,433.71. The S&P 500 Index declined less than 1 point to 1,105.65, while the Nasdaq Composite shed 6.83 points to 2,169.18.
Monday, November 23, 2009
Gold
11/23/09 Gold
The European Central Bank's extraordinary monetary stimulus measures are set to phase out by design, but governments also need to begin putting together detailed plans to exit fiscal stimulus measures once economic conditions improve, ECB President Jean-Claude Trichet said in a speech delivered Monday in Madrid. "The additional fiscal costs that governments have shouldered will be carried forward in terms of higher debt for years to come," Trichet said. "This is why there is an increasingly pressing need for ambitious and realistic fiscal exit strategies and for fiscal consolidation." Without naming any individual nations, Trichet said some countries are in a "relatively favorable position" due to "wise and prudent" past management, while "others are already very close to losing credibility."
John Hussman: "We are now largely beyond the peak of the sub-prime mortgage crisis, and have just begun the second wave of Alt-A and Option-ARM resets. That's important, because what we saw in the third quarter, then, was still part of the relatively tame and predictable March-November 2009 lull in the reset schedule. In that context, the surge in delinquencies and foreclosures on prime fixed-rate loans is disturbing, because that wasn't even part of the reset equation, and represents a relatively pure effect of the weakness in employment conditions.
Now, we face a coupling of those weak employment conditions with a mountain of adjustable resets, on mortgages that have to-date been subject to low teaser rates, interest-only payments, and other optional payment features (hence the “Option” in Option-ARM). These are precisely the mortgages that were written at the height of the housing bubble, and therefore undoubtedly carry the highest loan-to-value ratios.
The inevitability of profound credit losses here is unnervingly similar to the inevitability of profound losses following the dot-com bubble. In that event, it wasn't just that people were excited about dot-com stocks in a way that might or might not have worked out depending on how fast the economy grew. Rather, it was a structural issue that related to the dot-com industry itself – those bubble investments couldn't have worked out in a competitive economy, because market capitalizations were completely out of line with what could possibly be sustained in an industry that had virtually no cost to competitive entry. If you understood how profits evolve in a perfectly competitive market with low product differentiation, you understood that profits would not accrue to the majority of those companies even if the economy and the internet itself grew exponentially."
Edmund Andrews: "With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.
In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan."
Despite the long-held assumption that MS is an autoimmune disorder, new research suggests it is actually a vascular disease triggered by a buildup of iron in the brain due to problems in blood flow.
“Savers are getting killed by these low rates,” banking analyst Bert Ely said. “They're getting next to nothing.”
Clusterstock: "As the NYT reports, hedge funds are buying up big pools of distressed mortgages, modifying the loans with the homeowners, and then wrapping them in FHA insurance, so they can flip them for a higher price.
For instance, a fund might offer to pay $40 million for a $100 million block of mortgages from a bank in distress. Then the fund could arrange to have some of those loans refinanced into mortgages backed by an agency like the F.H.A and then sold to an agency like Ginnie Mae. The trick is to persuade the homeowners to refinance those mortgages, by offering to reduce the amounts the homeowners owe.
The profit comes when the refinancings reach more than the $40 million that the fund paid for the block of loans.
So it's good for the homeowner, and great for the hedge fund, but the taxpayer bears the burden. Why?
We suppose you could think of the hedge fund as merely a service provider in this case -- and certainly finding proper loans to modify and doing so costs money. There's the risk that they won't be able to modify and get FHA insurance on enough of the loans to make a profit.
But however you boil it down, it's still a case of the public taking a risk, and the private sector collecting a profit.
But then, how's that new at all?"
For the first time in 7 decades, Treasury bills are paying no interest.
"All of our indications suggest that consumers will shop but will be more cautious in their approach," saiys Marshal Cohen, chief industry analyst at market researcher the NPD Group. "The study's results show consumers will be doing their homework a bit more carefully this year."
According to a recent NPD survey, about 45 percent of consumers plan to comparison shop before they make a purchase.
That's a five-year high, according to Cohen.
Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Purchases of existing homes rose 23.5 percent in October compared with a year earlier. The median price fell 7.1 percent from a year ago to $173,100.
The number of previously-owned unsold homes on the market fell 3.7 percent to 3.57 million. At the current sales pace, it would take 7 months to sell those houses compared with 8 months at the end of the prior month. The months’ supply is the lowest since February 2007. The biggest gains were found in the cheapest homes – especially condominiums and co-ops. Their sales surged 13.2% (seasonally adjusted) and were up an astonishing 40.8% above a year ago. Median prices for condos fell 10.4% below October 2008.
Pragmatic Capitalist: "Insider selling surged in the latest week from $960MM in sales to over $1.39B. Buying made a drastic improvement from $29MM to over $166MM. The improvement in buying is a positive sign, but the vast discrepancy in selling continues to overshadow the buying.
Insiders are clearly viewing the run-up as a selling opportunity. This is consistent with the very tepid recovery we’ve seen in organic revenue growth thus far during the economic rebound. Executives are still unlikely to invest their personal fortunes in the companies they run due to the fact that they aren’t seeing the organic growth that so many equity buyers are hoping will develop once the government steps aside and stops propping up the economy.
Thus far, there are little to no signs of this occurring and this is perhaps most evident in the personal use of insider buying and selling."
Gold futures will fall below $1,000 an ounce by year-end and fall as low as $800 an ounce next year, said U.K. forecasting firm Capital Economics Monday. New York gold futures Monday hit a new high of $1,174 an ounce. Economist Julian Jessop attributed bullion's recent surge to a desire for insurance against the risks of inflationary bubbles in other assets and a U.S. dollar collapse. "These risks are probably much lower than generally supposed," he wrote, adding his forecast depends "crucially" on at least a partial recovery for the U.S. dollar. "While we do not think that gold is yet in a bubble, the weakness of underlying demand at these record price levels is at least a warning sign," he wrote.
After three days of losses, the Dow added 132.79 points, or 1.3%, to 10,450.95. The S&P 500 Index rose 14.86 points, or 1.4%, to 1,106.24. The Nasdaq Composite climbed 29.97 points, or 1.4%, to 2,176.01.
The European Central Bank's extraordinary monetary stimulus measures are set to phase out by design, but governments also need to begin putting together detailed plans to exit fiscal stimulus measures once economic conditions improve, ECB President Jean-Claude Trichet said in a speech delivered Monday in Madrid. "The additional fiscal costs that governments have shouldered will be carried forward in terms of higher debt for years to come," Trichet said. "This is why there is an increasingly pressing need for ambitious and realistic fiscal exit strategies and for fiscal consolidation." Without naming any individual nations, Trichet said some countries are in a "relatively favorable position" due to "wise and prudent" past management, while "others are already very close to losing credibility."
John Hussman: "We are now largely beyond the peak of the sub-prime mortgage crisis, and have just begun the second wave of Alt-A and Option-ARM resets. That's important, because what we saw in the third quarter, then, was still part of the relatively tame and predictable March-November 2009 lull in the reset schedule. In that context, the surge in delinquencies and foreclosures on prime fixed-rate loans is disturbing, because that wasn't even part of the reset equation, and represents a relatively pure effect of the weakness in employment conditions.
Now, we face a coupling of those weak employment conditions with a mountain of adjustable resets, on mortgages that have to-date been subject to low teaser rates, interest-only payments, and other optional payment features (hence the “Option” in Option-ARM). These are precisely the mortgages that were written at the height of the housing bubble, and therefore undoubtedly carry the highest loan-to-value ratios.
The inevitability of profound credit losses here is unnervingly similar to the inevitability of profound losses following the dot-com bubble. In that event, it wasn't just that people were excited about dot-com stocks in a way that might or might not have worked out depending on how fast the economy grew. Rather, it was a structural issue that related to the dot-com industry itself – those bubble investments couldn't have worked out in a competitive economy, because market capitalizations were completely out of line with what could possibly be sustained in an industry that had virtually no cost to competitive entry. If you understood how profits evolve in a perfectly competitive market with low product differentiation, you understood that profits would not accrue to the majority of those companies even if the economy and the internet itself grew exponentially."
Edmund Andrews: "With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.
In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan."
Despite the long-held assumption that MS is an autoimmune disorder, new research suggests it is actually a vascular disease triggered by a buildup of iron in the brain due to problems in blood flow.
“Savers are getting killed by these low rates,” banking analyst Bert Ely said. “They're getting next to nothing.”
Clusterstock: "As the NYT reports, hedge funds are buying up big pools of distressed mortgages, modifying the loans with the homeowners, and then wrapping them in FHA insurance, so they can flip them for a higher price.
For instance, a fund might offer to pay $40 million for a $100 million block of mortgages from a bank in distress. Then the fund could arrange to have some of those loans refinanced into mortgages backed by an agency like the F.H.A and then sold to an agency like Ginnie Mae. The trick is to persuade the homeowners to refinance those mortgages, by offering to reduce the amounts the homeowners owe.
The profit comes when the refinancings reach more than the $40 million that the fund paid for the block of loans.
So it's good for the homeowner, and great for the hedge fund, but the taxpayer bears the burden. Why?
We suppose you could think of the hedge fund as merely a service provider in this case -- and certainly finding proper loans to modify and doing so costs money. There's the risk that they won't be able to modify and get FHA insurance on enough of the loans to make a profit.
But however you boil it down, it's still a case of the public taking a risk, and the private sector collecting a profit.
But then, how's that new at all?"
For the first time in 7 decades, Treasury bills are paying no interest.
"All of our indications suggest that consumers will shop but will be more cautious in their approach," saiys Marshal Cohen, chief industry analyst at market researcher the NPD Group. "The study's results show consumers will be doing their homework a bit more carefully this year."
According to a recent NPD survey, about 45 percent of consumers plan to comparison shop before they make a purchase.
That's a five-year high, according to Cohen.
Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Purchases of existing homes rose 23.5 percent in October compared with a year earlier. The median price fell 7.1 percent from a year ago to $173,100.
The number of previously-owned unsold homes on the market fell 3.7 percent to 3.57 million. At the current sales pace, it would take 7 months to sell those houses compared with 8 months at the end of the prior month. The months’ supply is the lowest since February 2007. The biggest gains were found in the cheapest homes – especially condominiums and co-ops. Their sales surged 13.2% (seasonally adjusted) and were up an astonishing 40.8% above a year ago. Median prices for condos fell 10.4% below October 2008.
Pragmatic Capitalist: "Insider selling surged in the latest week from $960MM in sales to over $1.39B. Buying made a drastic improvement from $29MM to over $166MM. The improvement in buying is a positive sign, but the vast discrepancy in selling continues to overshadow the buying.
Insiders are clearly viewing the run-up as a selling opportunity. This is consistent with the very tepid recovery we’ve seen in organic revenue growth thus far during the economic rebound. Executives are still unlikely to invest their personal fortunes in the companies they run due to the fact that they aren’t seeing the organic growth that so many equity buyers are hoping will develop once the government steps aside and stops propping up the economy.
Thus far, there are little to no signs of this occurring and this is perhaps most evident in the personal use of insider buying and selling."
Gold futures will fall below $1,000 an ounce by year-end and fall as low as $800 an ounce next year, said U.K. forecasting firm Capital Economics Monday. New York gold futures Monday hit a new high of $1,174 an ounce. Economist Julian Jessop attributed bullion's recent surge to a desire for insurance against the risks of inflationary bubbles in other assets and a U.S. dollar collapse. "These risks are probably much lower than generally supposed," he wrote, adding his forecast depends "crucially" on at least a partial recovery for the U.S. dollar. "While we do not think that gold is yet in a bubble, the weakness of underlying demand at these record price levels is at least a warning sign," he wrote.
After three days of losses, the Dow added 132.79 points, or 1.3%, to 10,450.95. The S&P 500 Index rose 14.86 points, or 1.4%, to 1,106.24. The Nasdaq Composite climbed 29.97 points, or 1.4%, to 2,176.01.
Sunday, November 22, 2009
Bear Market Rally
11/22/09 Bear Market Rally
Tim Wood: "Again, the best example of this bull market top and the rally we are seeing is the 1966 to 1974 period. I believe that the ongoing rally is synonymous with the 1966 to 1968 bear market rally, which should ultimately prove to separate Phase I from Phase II of the ongoing secular bear market. I have analyzed the Dow Jones Industrial Average since its inception in 1896 and I have discovered a common thread that has occurred at major market tops, in both bull and bear markets. Based on that discovery, I know what this top will ultimately look like because I have the statistical parameters to identify it. That data is not something that I can make public, as this is data that is only available in my monthly research letters. However, I can tell you that nothing has developed to change my perspective about the bigger picture. To clarify a point , please understand that I'm not saying this rally will last as long as the bear market rallies during the 1966 to 1974 period did. It could last longer, or it could end much sooner. But, I am confident that in having identified the common thread of all major market tops, that I will be able to identify the top as it develops. My market research also continues to tell me that this is a bear market rally. I also know that the longer this rally last, the more convincing it will become to more and more people. As a result, the longer this rally last, the more dangerous and further reaching the Phase II decline is likely to be."
Mike Burk: "The market is oversold going into the weakest part of Thanksgiving week so there should not be much, if any, decline early in the week while the end of the week should be up modestly on minimal volume.
I expect the major indices to be higher on Friday November 27 than they were on Friday November 20."
Reliance Industries Ltd., owner of the world’s largest oil-refining complex, made a cash offer to buy a controlling stake in closely held LyondellBasell Industries AF, the bankrupt chemicals and fuels maker.
Terms weren’t disclosed. The buyout would be coordinated with emergence from bankruptcy and represents a “potential alternative” to its reorganization plan, Rotterdam-based LyondellBasell said in a statement. The offer is subject to due diligence and sufficient creditor support, Mumbai-based Reliance said in a news release yesterday.
Bloomberg: " Wal-Mart Stores(WMT) sank to the cheapest valuation relative to the S&P 500 in at least 19 years. The ratio between Walmart’s price relative to reported earnings and the S&P 500’s valuation fell to .68 last month, the lowest since at least 1990. It never fell below .85 before July and touched that level just twice previously. The first time, in January 1997, Walmart surged 74% in the next year, more than the S&P 500’s 30% rise. The second time, in November 2007, it rose 26% as the index lost 36%. “The stock is exceptionally cheap,” said Gary Bradshaw, who helps manage $800 million including 400,000 Walmart shares at Hodges Capital Mgmt. “The fact Buffett doubled his position may get the stock going.”
Seeking Alpha: " Is Gold in a Bubble? Courtesy of Elliott Wave, we get another measure of gold sentiment: The Daily Sentiment Index (trade-futures.com) has been at, or above 90 percent gold bulls since November 3, a string of 10 straight days. The only other comparable streak of optimism over the past 22 years of data is leading up to the December 2, 2004 gold high when the DSI was at, or above 90 percent for 20 consecutive days. At that time, prices made a high at $458.70, declined over 10 percent, and did not exceed the December 2004 high again for the next 10 months. But during this entire 20 day stretch, optimism never reached the single day extreme that today did, with fully 97 percent of traders optimistic on gold’s future prospects. This time, we expect a larger decline, one that lasts longer too."
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 29% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -10.
Mike Whitney: " Geithner and Co. see the US economy languishing in a low-grade Depression for the foreseeable future, therefore, Wall Street must progressively move its base-of-operations eastward.
This is the real reason behind Obama’s trip to China. There’s no truth to the rumor that US policymakers care about “currency manipulation” or the ongoing looting of the American middle class. That’s rubbish. China’s “dollar-peg” essentially serves the interests of the giant multinational corporations and Wall Street speculators who own the media, the courts, the congress, the White House and most of the country."
Swiss food giant Nestle may consider a bid for Britain's Cadbury to challenge a hostile 9.9 billion pound ($16.3 dollars) bid by Kraft Foods Inc and a potential move by Hershey, Bloomberg reported on Sunday.
Nestle is still weighing its options and may decide against a bid, Bloomberg said, citing two unnamed people with knowledge of the matter.
“If Fannie and Freddie can’t sell to an end buyer, i.e. the U.S. government steps back, the mortgage market at minimum contracts, rates go higher, and banks are poised with more writedowns,” said Whitney, founder of Meredith Whitney Advisory Group. “This is probably the issue that scares me most across the board.”
An investment company owned by Qatar's sovereign wealth fund on Sunday signed a $26 billion deal with Germany's national railway operator to build a railroad network, a key part of the natural gas-rich Gulf sheikdom's expansion plans.
Under the deal, the Qatari Diar Real Estate Investment Company and Deutsche Bahn AG will set up a joint venture to develop a metro system in Qatar's capital, as well as a national rail network and a long-distance connection to neighboring Bahrain.
Qatar will hold a 51 percent stake in Qatar Railways Development Company and the German state-held railway will have a 49 percent stake.
Tim Wood: "Again, the best example of this bull market top and the rally we are seeing is the 1966 to 1974 period. I believe that the ongoing rally is synonymous with the 1966 to 1968 bear market rally, which should ultimately prove to separate Phase I from Phase II of the ongoing secular bear market. I have analyzed the Dow Jones Industrial Average since its inception in 1896 and I have discovered a common thread that has occurred at major market tops, in both bull and bear markets. Based on that discovery, I know what this top will ultimately look like because I have the statistical parameters to identify it. That data is not something that I can make public, as this is data that is only available in my monthly research letters. However, I can tell you that nothing has developed to change my perspective about the bigger picture. To clarify a point , please understand that I'm not saying this rally will last as long as the bear market rallies during the 1966 to 1974 period did. It could last longer, or it could end much sooner. But, I am confident that in having identified the common thread of all major market tops, that I will be able to identify the top as it develops. My market research also continues to tell me that this is a bear market rally. I also know that the longer this rally last, the more convincing it will become to more and more people. As a result, the longer this rally last, the more dangerous and further reaching the Phase II decline is likely to be."
Mike Burk: "The market is oversold going into the weakest part of Thanksgiving week so there should not be much, if any, decline early in the week while the end of the week should be up modestly on minimal volume.
I expect the major indices to be higher on Friday November 27 than they were on Friday November 20."
Reliance Industries Ltd., owner of the world’s largest oil-refining complex, made a cash offer to buy a controlling stake in closely held LyondellBasell Industries AF, the bankrupt chemicals and fuels maker.
Terms weren’t disclosed. The buyout would be coordinated with emergence from bankruptcy and represents a “potential alternative” to its reorganization plan, Rotterdam-based LyondellBasell said in a statement. The offer is subject to due diligence and sufficient creditor support, Mumbai-based Reliance said in a news release yesterday.
Bloomberg: " Wal-Mart Stores(WMT) sank to the cheapest valuation relative to the S&P 500 in at least 19 years. The ratio between Walmart’s price relative to reported earnings and the S&P 500’s valuation fell to .68 last month, the lowest since at least 1990. It never fell below .85 before July and touched that level just twice previously. The first time, in January 1997, Walmart surged 74% in the next year, more than the S&P 500’s 30% rise. The second time, in November 2007, it rose 26% as the index lost 36%. “The stock is exceptionally cheap,” said Gary Bradshaw, who helps manage $800 million including 400,000 Walmart shares at Hodges Capital Mgmt. “The fact Buffett doubled his position may get the stock going.”
Seeking Alpha: " Is Gold in a Bubble? Courtesy of Elliott Wave, we get another measure of gold sentiment: The Daily Sentiment Index (trade-futures.com) has been at, or above 90 percent gold bulls since November 3, a string of 10 straight days. The only other comparable streak of optimism over the past 22 years of data is leading up to the December 2, 2004 gold high when the DSI was at, or above 90 percent for 20 consecutive days. At that time, prices made a high at $458.70, declined over 10 percent, and did not exceed the December 2004 high again for the next 10 months. But during this entire 20 day stretch, optimism never reached the single day extreme that today did, with fully 97 percent of traders optimistic on gold’s future prospects. This time, we expect a larger decline, one that lasts longer too."
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 29% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-nine percent (39%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -10.
Mike Whitney: " Geithner and Co. see the US economy languishing in a low-grade Depression for the foreseeable future, therefore, Wall Street must progressively move its base-of-operations eastward.
This is the real reason behind Obama’s trip to China. There’s no truth to the rumor that US policymakers care about “currency manipulation” or the ongoing looting of the American middle class. That’s rubbish. China’s “dollar-peg” essentially serves the interests of the giant multinational corporations and Wall Street speculators who own the media, the courts, the congress, the White House and most of the country."
Swiss food giant Nestle may consider a bid for Britain's Cadbury to challenge a hostile 9.9 billion pound ($16.3 dollars) bid by Kraft Foods Inc and a potential move by Hershey, Bloomberg reported on Sunday.
Nestle is still weighing its options and may decide against a bid, Bloomberg said, citing two unnamed people with knowledge of the matter.
“If Fannie and Freddie can’t sell to an end buyer, i.e. the U.S. government steps back, the mortgage market at minimum contracts, rates go higher, and banks are poised with more writedowns,” said Whitney, founder of Meredith Whitney Advisory Group. “This is probably the issue that scares me most across the board.”
An investment company owned by Qatar's sovereign wealth fund on Sunday signed a $26 billion deal with Germany's national railway operator to build a railroad network, a key part of the natural gas-rich Gulf sheikdom's expansion plans.
Under the deal, the Qatari Diar Real Estate Investment Company and Deutsche Bahn AG will set up a joint venture to develop a metro system in Qatar's capital, as well as a national rail network and a long-distance connection to neighboring Bahrain.
Qatar will hold a 51 percent stake in Qatar Railways Development Company and the German state-held railway will have a 49 percent stake.
Saturday, November 21, 2009
Bubbles
11/21/09 Bubbles
Germany joins China in warning the U.S. on market bubbles.
“China is sending ‘strong signals’ that it’s concerned the rally in asset prices may be forming a bubble, according to Morgan Stanley Asia Chairman Stephen Roach. Liu Mingkang, China’s top banking regulator, said Nov. 15 the dollar’s decline and the U.S.’s decision to keep interest rates low have caused ‘huge’ speculation in foreign exchange trading and hurt global asset prices.”
Chief Executive of the Hong Kong Monetary Authority: “These economies could of course raise interest rates to contain inflation and increases in asset prices. But the fear is that once interest rates are raised the carry trade will become even more active, attracting even more fund inflows. Asian economies are therefore facing a dilemma.”
Doug Noland: "To be sure, the Fed has been accommodating Bubbles for many years now. And with each bursting Bubble came policy reflation and only larger Bubbles. The bursting of bigger Bubbles provoked only more aggressive reflations and Bubbles of historic dimensions. The inflationists fatefully disregarded Bubble dynamics earlier this decade when their aggressive post-tech Bubble policy course fomented a much more dangerous Wall Street/mortgage finance Bubble. They are content these days to make a similar mistake.... It is fundamental to Credit Bubble analysis to appreciate that the unfolding reflation is going to be altogether different than previous reflations. As I’ve repeatedly tried to explain, the epicenter of reflationary forces have shifted from the Core (U.S.) to the Periphery (China, Asia, and the “emerging” markets). The dollar and sophisticated Wall Street Credit instruments have been supplanted by non-dollar assets and markets as the inflationary asset class of choice. The underlying U.S. economic structure evolved during - and for – a Credit cycle era comprised of massive ongoing U.S. mortgage Credit expansion, resulting asset inflation, over-consumption and mal-investment. Accordingly, the U.S. economy is today especially poorly positioned for the new global reflationary backdrop....It is my thesis that there is no alternative than a major transformation of the underlying structure of the U.S. economy. In simplest terms, we must produce much more, consume much less and do it with a lot less Credit creation. The objective of current policymaking, however, is to quickly rejuvenate housing and asset prices with the intention of sustaining the legacy economic structure. Zero interest-rate policy is key to this strategy. The objective is to push savers out to the risk asset markets, as well as to transfer returns on savings from the savers to be used instead to recapitalize the banking/financial system. If this reflation is unsuccessful, the household sector will find itself with only greater exposure to risky assets.
No only is the current course of policymaking unjust, I believe it is flawed. The nation’s housing markets will remain rather impervious to low rates, while the household sector is punished with near zero returns on its savings. At the same time, monetary policy will continue to play a major role in dollar devaluation and higher consumer prices for energy and imports. Financial sector profits have already bounced back strongly, but there is little market incentive to direct new finance in a manner that would fund any semblance of economic transformation. The focus remains on financing the old structure. Indeed, I would argue that the current course of policymaking and market interventions only work to delay the unavoidable economic adjustment process."
Magnus Ekervik: "The 10-year bond has formed an almost perfect fractal of the price pattern that appeared before the 2008 crash in bond yields. The market is in the same position now as before the 2008 crash and if the pattern continues to play out bond yields will be cut in half in less than two months. Considering the bearish sentiment on bonds not many investors are prepared for sky rocketing bond prices and crashing yields at the moment, that's why I believe the pattern could be important. If the crash in bond yields materializes the US dollar will go up in a big way. Not many investors are expecting this either....The second chart that deserves attention is the Dow Jones Transportation Average. This index is also forming a replica of the 2008 price structure. The expanding wedge is a very rare pattern. It was seen in many individual stocks just before the 1929 market crash and it was seen in 2008 in Dow Jones Transportation Average moments before prices went into a waterfall decline. It is interesting to see the same pattern forming again at the end of 2009 together with high bullish sentiment on stocks. The pattern is clearer in 2009 probably because this turn is of higher degree than the turn of If the pattern of 2009 plays out in similar fashion as in 2008 the Dow Jones Transportation Average (and probably most other stock indexes) will fall more than 50% in less than one month, starting now.
Sounds impossible? Maybe it is, time will tell."
Commerce Bank of Southwest Florida in Fort Myers, Florida was closed by financial regulators on Friday, becoming the 124th bank to fail in 2009 and the 12th in the state of Florida. However, the holding company, Florida Commerce Bancorp, was not included in the closing of the bank or the resulting receivership. All deposit accounts, excluding certain brokered deposits, have been transferred to Central Bank of Stillwater, Minnesota.
Germany joins China in warning the U.S. on market bubbles.
“China is sending ‘strong signals’ that it’s concerned the rally in asset prices may be forming a bubble, according to Morgan Stanley Asia Chairman Stephen Roach. Liu Mingkang, China’s top banking regulator, said Nov. 15 the dollar’s decline and the U.S.’s decision to keep interest rates low have caused ‘huge’ speculation in foreign exchange trading and hurt global asset prices.”
Chief Executive of the Hong Kong Monetary Authority: “These economies could of course raise interest rates to contain inflation and increases in asset prices. But the fear is that once interest rates are raised the carry trade will become even more active, attracting even more fund inflows. Asian economies are therefore facing a dilemma.”
Doug Noland: "To be sure, the Fed has been accommodating Bubbles for many years now. And with each bursting Bubble came policy reflation and only larger Bubbles. The bursting of bigger Bubbles provoked only more aggressive reflations and Bubbles of historic dimensions. The inflationists fatefully disregarded Bubble dynamics earlier this decade when their aggressive post-tech Bubble policy course fomented a much more dangerous Wall Street/mortgage finance Bubble. They are content these days to make a similar mistake.... It is fundamental to Credit Bubble analysis to appreciate that the unfolding reflation is going to be altogether different than previous reflations. As I’ve repeatedly tried to explain, the epicenter of reflationary forces have shifted from the Core (U.S.) to the Periphery (China, Asia, and the “emerging” markets). The dollar and sophisticated Wall Street Credit instruments have been supplanted by non-dollar assets and markets as the inflationary asset class of choice. The underlying U.S. economic structure evolved during - and for – a Credit cycle era comprised of massive ongoing U.S. mortgage Credit expansion, resulting asset inflation, over-consumption and mal-investment. Accordingly, the U.S. economy is today especially poorly positioned for the new global reflationary backdrop....It is my thesis that there is no alternative than a major transformation of the underlying structure of the U.S. economy. In simplest terms, we must produce much more, consume much less and do it with a lot less Credit creation. The objective of current policymaking, however, is to quickly rejuvenate housing and asset prices with the intention of sustaining the legacy economic structure. Zero interest-rate policy is key to this strategy. The objective is to push savers out to the risk asset markets, as well as to transfer returns on savings from the savers to be used instead to recapitalize the banking/financial system. If this reflation is unsuccessful, the household sector will find itself with only greater exposure to risky assets.
No only is the current course of policymaking unjust, I believe it is flawed. The nation’s housing markets will remain rather impervious to low rates, while the household sector is punished with near zero returns on its savings. At the same time, monetary policy will continue to play a major role in dollar devaluation and higher consumer prices for energy and imports. Financial sector profits have already bounced back strongly, but there is little market incentive to direct new finance in a manner that would fund any semblance of economic transformation. The focus remains on financing the old structure. Indeed, I would argue that the current course of policymaking and market interventions only work to delay the unavoidable economic adjustment process."
Magnus Ekervik: "The 10-year bond has formed an almost perfect fractal of the price pattern that appeared before the 2008 crash in bond yields. The market is in the same position now as before the 2008 crash and if the pattern continues to play out bond yields will be cut in half in less than two months. Considering the bearish sentiment on bonds not many investors are prepared for sky rocketing bond prices and crashing yields at the moment, that's why I believe the pattern could be important. If the crash in bond yields materializes the US dollar will go up in a big way. Not many investors are expecting this either....The second chart that deserves attention is the Dow Jones Transportation Average. This index is also forming a replica of the 2008 price structure. The expanding wedge is a very rare pattern. It was seen in many individual stocks just before the 1929 market crash and it was seen in 2008 in Dow Jones Transportation Average moments before prices went into a waterfall decline. It is interesting to see the same pattern forming again at the end of 2009 together with high bullish sentiment on stocks. The pattern is clearer in 2009 probably because this turn is of higher degree than the turn of If the pattern of 2009 plays out in similar fashion as in 2008 the Dow Jones Transportation Average (and probably most other stock indexes) will fall more than 50% in less than one month, starting now.
Sounds impossible? Maybe it is, time will tell."
Commerce Bank of Southwest Florida in Fort Myers, Florida was closed by financial regulators on Friday, becoming the 124th bank to fail in 2009 and the 12th in the state of Florida. However, the holding company, Florida Commerce Bancorp, was not included in the closing of the bank or the resulting receivership. All deposit accounts, excluding certain brokered deposits, have been transferred to Central Bank of Stillwater, Minnesota.
Subscribe to:
Posts (Atom)