Credit Rally Sputters as Investors Doubt Rebound

July 15 (Bloomberg) -- The record credit-market rally of 2009 engineered by President Barack Obama and Federal Reserve Chairman Ben S. Bernanke is starting to reverse as optimism erodes that the economy is poised to recover.

Corporate bonds, loans and mortgage securities and asset- backed debt have all weakened or been stuck in ranges in the past three to five weeks on concern that markets strengthened too far, too fast. Yields on high-yield, high-risk U.S. company bonds rose to 9.69 percentage points more than Treasuries yesterday, after falling to 9.17 points on June 12 from 16.62 points on Dec. 31, according to Barclays Capital Inc. index data. Loans to the companies fell to 79.41 cents on the dollar, from 80.24 cents on June 12, Standard & Poor’s data show. (more)

The Gold Report 07/14/2009

Grandich: King of Metals Will Keep Its Crown

Agoracom market analyst Peter Grandich, who isn’t among those who expect the world at large to emerge from “this absolutely horrific downturn” by year-end, instead sees good opportunities on the horizon for investors who want to “buy things on the cheap” because prices will fall in the equity markets. He also sees bright prospects for gold—particularly gold ETFs and mining companies that are in or near production and have potential for developing additional deposits. At the same time, Peter tells The Gold Report that the “severely wounded” U.S. economy should anticipate rougher and tougher times. Given his penchant for accurate predictions, that’s not a very comforting forecast. (more)

Airlines, Already Suffering, Brace for More Woes

The airline industry is in the midst of one of its most wrenching summers ever. And the fall and winter may be even worse — unless people start to fly again.

While the airlines have been struggling for more than a year as leisure travelers pulled back on spending, the industry has been battered from all directions since the financial system nearly collapsed last September.

Business and international travel, which had been a relative bright spot until then, dropped precipitously. Fuel costs have also been difficult to manage, as carriers first struggled to pay record high prices last summer and now have to contend with extraordinarily volatile prices. And the credit markets, which the airlines have turned to in previous tough times, are particularly reluctant to lend now, giving some carriers little choice but to pay high interest rates. (more)

The Economy Is Even Worse Than You Think

By MORTIMER ZUCKERMAN

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion. (more)

What's the Real CPI?

Inquiring minds are asking "What is the Real CPI?" It's a good question, too. However, you can find many widely differing opinions. For example, you will get one answer from the government, a different answer from sites like Shadowstats, and a third opinion from me.

First let's look at John Williams' Shadowstats .

That's an interesting chart, especially given the hyperinflationary bent of John Williams. He pegs the CPI at 2% as of May 2009 and had it at 9% mid-2008 and right around 5% in 2007. In contrast, the official CPI was 5.5% in mid-2008 and 2+% in 2007. (more)