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Saturday, February 27, 2010
Fossella: Gold Can Surge to $1,500 This Year
Gold could hit reach $1,500 an ounce by year-end, says Former Republican Rep. Vito Fossella, chief operating officer of Superfund Investment Group, a global money management firm.
A weaker dollar and the huge U.S. debt burden will fuel the rise, the former congressman told Newsmax.TV.
“As a U.S. citizen, I’d love to see the dollar be as strong as it can be. But excessive debt incurred by the government has caused long-term punishment for the dollar,” said Fossella, who represented New York's 13th Congressional district in the U.S. House of Representatives for 12 years, serving as the lone Republican from New York City. (more)
A weaker dollar and the huge U.S. debt burden will fuel the rise, the former congressman told Newsmax.TV.
“As a U.S. citizen, I’d love to see the dollar be as strong as it can be. But excessive debt incurred by the government has caused long-term punishment for the dollar,” said Fossella, who represented New York's 13th Congressional district in the U.S. House of Representatives for 12 years, serving as the lone Republican from New York City. (more)
Spectre of double-dip recession looms over UK
Fears of a double-dip recession and a sterling crisis in the run-up to the election were raised last night amid news of collapsing investment in British industry and a warning from one of the world's leading financiers that the pound could plummet within weeks.
The pound fell sharply on the foreign exchange markets after a day of grim economic news which saw an admission from RBS that it had missed government targets for business lending, a downgrading of the UK growth prospects by the European commission and a warning from the CBI that consumer spending was likely to remain weak ahead of polling day.
Sterling, already down by a cent against the dollar following the release of official figures showing capital expenditure plunging by almost a quarter between late 2008 and late 2009, saw its losses doubled after Jim Rogers, the former business partner of speculator George Soros, said sterling was a potential "basket case". (more)
Meaning of MERS
Washington, D.C., February 24, 2010: Although only bankers are aware of it, there is a second wave of economic disaster starting to build up that will make the earlier one pale into insignificance. Let us start out with MERS, shall we?
MERS = Mortgage Electronic Registration Inc.holds approximately 60 million American mortgages and is a Delaware corporation whose sole shareholder is Mers Corp. MersCorp and its specified members have agreed to include the MERS corporate name on any mortgage that was executed in conjunction with any mortgage loan made by any member of MersCorp. Thus in place of the original lender being named as the mortgagee on the mortgage that is supposed to secure their loan, MERS is named as the “nominee” for the lender who actually loaned the money to the borrower. In other words MERS is really nothing more than a name that is used on the mortgage instrument in place of the actual lender. MERS’ primary function, therefore, is to act as a document custodian. MERS was created solely to simplify the process of transferring mortgages by avoiding the need to re-record liens – and pay county recorder filing fees – each time a loan is assigned. Instead, servicers record loans only once and MERS’ electronic system monitors transfers and facilitates the trading of notes. It has very conservatively estimated that as of February, 2010, over half of all new residential mortgage loans in the United States are registered with MERS and recorded in county recording offices in MERS’ name. (more)
Head of IMF Proposes New Reserve Currency
Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.
"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.
Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF's special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.
He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country." (more)
The Great Recession of 2011-2012
Are you ready for the Great Recession of 2011–2012? You should be, for it is getting under way even as you read this. Just as the 2009 “greatest economic crisis since the Great Depression” actually began back in 2007, so we are in the early days of the next cycle. Only this recession is going to be a doozy. And the aftershocks will be felt long after President Hillary Clinton leaves the White House in 2024.
The coming crisis should be no surprise, for we all have had plenty of advance warning. If it is a surprise, blame those chat-show economists who have become so politicized that they ignore the truths of their own science in order to acquire celebrity. Nor should we forget those politicians who deliberately suborn national interest for the security of zero-sum pork-barrel politicking. Combine it all with a news media largely made up of self-referential ignoramuses and it is small wonder that most of the world has been diverted as Dorothy was in Oz by the lightning bolts, explosions, and billowing smoke screen being generated by the men behind the curtain. The truth is our wizards dare not admit that the levers they pull are not really connected to the true crisis that confronts America or its place in the global market. (more)
COMEX INVENTORY DATA REVEAL AN ALARMING TREND
For more than 6 months I have been gathering data released daily by the COMEX concerning delivery notices and inventory levels of gold and silver. This data must be captured and recorded each day as there is no database of historical data available to the general public.
Studying data on a daily basis is not conducive to seeing the big picture so I have just completed a study of what can be discerned by looking at the entire 6 months of data. The results are very revealing.
First of all for those who are not familiar with the delivery process of the COMEX I will summarize some key information.
Only a small fraction of the contracts, less than 1%, that are bought or sold on COMEX ever go into the delivery process. The contracts are typically terminated by rolling them to a future month or by closing out the position (either selling a long contract or covering a short contract). (more)
Friday, February 26, 2010
Davidson: Dollar, Market Headed for Collapse
Financial author Jim Davidson says the dollar, the economy, and the stock market are headed for collapse.
In an interview with Newsmax.TV, Davidson, who is a member of the Newsmax board of directors, elucidated the ideas of a recent book, titled “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.”
The book — written by David Wiedemer, Robert Wiedemer, and Cindy Spitzer — states that two big bubbles have yet to burst: the dollar and $12.3 trillion in government debt. (more)
In an interview with Newsmax.TV, Davidson, who is a member of the Newsmax board of directors, elucidated the ideas of a recent book, titled “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.”
The book — written by David Wiedemer, Robert Wiedemer, and Cindy Spitzer — states that two big bubbles have yet to burst: the dollar and $12.3 trillion in government debt. (more)
Alex Jones Talks to Lindsey Williams
Alex also talks with Lindsey Williams, the ordained Baptist minister and Alaskan missionary who has brought to light revelations of the plan by the global elite to sabotage the economy and destroy America. Williams is the author of The Energy Non-Crisis. Alex also covers the latest news and takes your calls.FREE download part 3
FREE download part 4
( Lindsey 's interview starts at about 31:00 in part 3)
Prominent Investor: Pound Could Collapse Within Weeks
Billionaire financier Jim Rogers has predicted that the British Pound could completely collapse within weeks, sending shockwaves throughout the global economy and heralding the beginning of a downturn that would make the recent economic crisis look tame in comparison. “Other currencies aren’t strong and the Euro has real problems, with cracks much wider than Greece beginning to show,” Rogers said.
“But it’s the Pound that’s most vulnerable. In real terms, it’s already devalued against virtually every currency barring the Zimbabwean dollar and it’s especially exposed over the weeks running up to the UK election. In a basket of currencies, the Pound is potentially a basket case. And that will put Britain in an extremely bad position for the shakedown.” (more)
Rates on 30-year home loans rise to 5.05 pct
Rates for 30-year home loans rose above the 5 percent threshold for the first time in three weeks, but remained near historically low levels.
The average rate on a 30-year fixed rate mortgage was 5.05 percent this week, up from 4.93 percent a week earlier, mortgage finance company Freddie Mac said Thursday.
Rates had dropped to a record low of 4.71 percent in December, pushed down by an aggressive government campaign to reduce consumers' borrowing costs.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds. (more)
Oil prices tumble on economy worries
Oil prices tumbled Thursday on new signs that the economy remains weak and that demand for crude is still tepid at best.
Benchmark crude for April delivery fell $1.83 to settle at $78.17 a barrel on the New York Mercantile Exchange.
Oil has been bouncing back and forth for months between $70 and $80 as investors watch economic data for clues about where the economy is heading following the Great Recession.
The signs Thursday were mostly negative as the government said new claims for unemployment benefits last week jumped unexpectedly while a separate report on big-ticket manufactured goods was mixed. (more)
Thursday, February 25, 2010
The doomsday cycle
Over the last three decades, the US financial system has tripled in size, as measured by total credit relative to GDP (see Figure 1). Each time the system runs into problems, the Federal Reserve quickly lowers interest rates to revive it. These crises appear to be getting worse and worse – and their impact is increasingly global. Not only are interest rates near zero around the world, but many countries are on fiscal trajectories that require major changes to avoid eventual financial collapse. (more)
What It's Like To Look For A Job These Days
A note from a reader in New Haven, CT, responding to our post on long-term unemployment: Dear Mr. Blodget,
Interesting story you've written... Did you happen to read the article by Peter Goodman of the NYTimes entitled "The New Poor?"
I can offer further insight...
Do you have any idea how difficult and depressing it is to apply for the jobs that are posted out there?
The other day I read an ad for help at a local coffee shop. Here's what it said.... (more)Canada Gold Stocks Fail to Tap Metal’s Surge: Chart of the Day
The adage that all that glitters isn’t gold is all too familiar to investors in Canadian producers of the precious metal, whose holdings have lagged behind as the commodity soared.
The CHART OF THE DAY shows the gap between gains in the metal and an index of Toronto-traded gold stocks widened to a record last month as investors took advantage of new opportunities to invest in the commodity directly. Since the end of 2000, the last year gold declined, futures on the metal surged almost 300 percent in New York, about double the advance by the Standard & Poor’s/TSX Gold Index.
“Investors are saying, ‘We would want to buy a gold company because of the exposure to the price of gold. Let’s just skip that and buy gold directly,’” said Paul Vaillancourt, director of portfolio strategy for Franklin Templeton Managed Investment Solutions in Calgary. (more)
Commodity Investing 2010, Palladium Still Shines
Palladium had the most tumultuous decade of all the precious metals. Although it's hard to imagine today, it started the century more expensive than platinum. While gold and silver were languishing in 2000, palladium was soaring. During the technology bubble, a perceived shortage of tantalum caused producers of cell phones and other electronic gadgets to switch to palladium which was then much cheaper. As the price zoomed, Ford feared that it would not get enough of the element from Russia. The corporation bought large quantities in panic, pushing the price over US$1000.
However, Russia continued to unload its stockpile of palladium that it accumulated in the 1970s and 1980s under the Soviets. The cell phone dilemma was resolved by a switch to silver alloys. Palladium’s price crashed back to earth due to a sudden surplus, which led to a loss of $1 billion for Ford. The bottom finally formed in the spring of 2003 at approximately $150, but palladium took more than two years to begin a lasting uptrend due to heavy Russian destocking. (more)
Faber: 30 Percent Chance China Will Crash And Burn
Investment guru Marc Faber says there's a 30 percent chance that China's "soft landing" will turn into a crash-and-burn, taking most commodities with it.
“I think to some extent (China) is a bubble,” said Faber, the editor of "The Gloom Boom & Doom Report."
"Last year, total loans by banks have increased by a quarter of GDP. In addition to this they have large excess capacities across industrie,” he told the Smart Investor.
Faber says he expects the Chinese economy will slow down considerably.
“The bigger question is that, 'Will It Crash?'” he asks. “To that, my answer is: 'Yes, That Is Also Possible.'"
He thinks “there is 99 per cent possibility that China will slow down considerably and I would say there is 30 percent chance that it will crash.” (more)
“I think to some extent (China) is a bubble,” said Faber, the editor of "The Gloom Boom & Doom Report."
"Last year, total loans by banks have increased by a quarter of GDP. In addition to this they have large excess capacities across industrie,” he told the Smart Investor.
Faber says he expects the Chinese economy will slow down considerably.
“The bigger question is that, 'Will It Crash?'” he asks. “To that, my answer is: 'Yes, That Is Also Possible.'"
He thinks “there is 99 per cent possibility that China will slow down considerably and I would say there is 30 percent chance that it will crash.” (more)
Underwater Mortgages Hit 11.3 Million
There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure. New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America.The mortgage numbers are much worse when homes with equity of less than 5% are included. First American reports that ”an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity.” That means that three out of ten homes have virtually no financial value to their owners. (more)
FDIC Hits Record "Default" Level As Deposit Insurance Fund Plunges By $12.7 Billion To NEGATIVE 20.9 Billion
The U.S. banking industry continued to struggle in the fourth quarter, as the number of banks on the brink of failure continued
to rise and the government's fund to protect deposits fell sharply into the red.
The Federal Deposit Insurance Corp. said Tuesday that its deposit-insurance fund fell to $20.9 billion at the end of 2009, a $12.6 billion drop in the final three months of the year, as bank failures continued at a pace not seen since the savings and loan crisis. The fund's reserve ratio was -0.39% at the end of the quarter, the lowest on record for the combined bank and thrift fund. (more)
New U.S. Homes Sales Plunged to Record Low in January
Sales of new U.S. homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rebound to an annual rate of 360,000 units.
The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.
Double Dip Recession Risk Is Near: CIO
The global economy looks set to plunge back into recession as the sovereign debt pressure currently rocking Europe intensifies, Ashok Shah, CIO of London & Capital, told CNBC Wednesday.
"There's a risk of a double dip recession round the corner," Shah said. "Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe."
"There's a risk of a double dip recession round the corner," Shah said. "Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe."
The economic outlook for Europe is deteriorating very rapidly and that is adding to the factors dragging on the economic recovery, Shah told CNBC. (more)
NAR Forecasts No Recovery for Commercial Real Estate This Year
The National Association of Realtors® (NAR) released its latest projections for commercial real estate (CRE). The outlook remains grim as the NAR forecasts no recovery in CRE this year. Rents are expected to decline across all segments (although slightly lower than last year’s rent declines) as vacancy rates remain extremely high. CRE is not expected to recover until after employment materially improves. Since the NAR does not anticipate this improvement until later this year, it is projecting a CRE recovery no earlier than 2011.
The NAR also notes a related index finally stopped declining in the last quarter: (more)
The NAR also notes a related index finally stopped declining in the last quarter: (more)
Mass Layoffs by U.S. Manufacturers Surge in January
By definition, a mass layoff in the United States is those job cuts that involve 50 or more workers from the same company. Those types of events increased by 35 in January 2010 to 1,761, according to data released.
This is odd in that it has been asserted by government officials that we're on the edge of new jobs being created in the U.S. economy. That doesn't seem likely in the light of the real numbers and not just wishful thinking by politicians.
I believe the reason for the discrepancy is that companies were replenishing supplies, as I've mentioned before here, and those needs have probably been met in general, so as expected, the manufacturing jobs to produce them are no longer needed. At least that would be part of the reason for increase in mass layoffs. (more)
Wednesday, February 24, 2010
U.S. Stock Slump Fits With Bull-Market Pattern: Chart of Day
U.S. stocks are falling into “a recurring pattern” of volatility this year as the economy’s rebound gains momentum, according to Jeffrey Kleintop, chief market strategist at LPL Financial.
“The environment may be more like that of 1994 and 2004, the last two times the economy transitioned from recovery to sustainable growth,” Kleintop wrote yesterday in a report.
The CHART OF THE DAY shows how the Standard & Poor’s 500 Index’s performance since the beginning of last year compares with its movement during 2003 and 2004. The report featured a similar chart.
Between Jan. 19 and Feb. 8, the S&P 500 lost 8.1 percent. The magnitude of the decline was in line with its setbacks six years earlier, depicted in the chart. The index slid 5 percent to 10 percent three times during 2004, as it did in 1994, even though a bull market was in progress. (more)
Commercial Real Estate Apocalypse 2011-2012
Over the next few years, a wave of commercial real estate loan failures could threaten America’s already-weakened financial system. The Congressional Oversight Panel is deeply concerned that commercial loan losses could jeopardize the stability of many banks, particularly the nation’s mid-size and smaller banks, and that as the damage spreads beyond individual banks that it will contribute to prolonged weakness throughout the economy.Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present “underwater” – that is, the borrower owes more than the underlying property is currently worth. Commercial property values have fallen more than 40 percent since the beginning of 2007. Increased vacancy rates, which now range from eight percent for multifamily housing to 18 percent for office buildings, and falling rents, which have declined 40 percent for office space and 33 percent for retail space, have exerted a powerful downward pressure on the value of commercial properties. (more)
Shilling: Euro Poised to Plunge 27 Percent
Economist and money manager Gary Shilling says the euro is likely to drop about 27 percent from current levels.
“I think the currency could go back to 1-to-1 versus the dollar,” he says.
“The problem is that Europe has a one-size-fits-all monetary policy but very different fiscal statuses in individual countries. Greece is the poster boy, but you have the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) right behind it,” he told Bloomberg.
Greece, for example, has a budget deficit totaling 12.7 percent of GDP.
“It’s really an insoluble problem because these economies are very different,” Shilling said. “They’re much weaker; they need to issue all these sovereign debts. And ratings agencies are downgrading them.” (more)
“I think the currency could go back to 1-to-1 versus the dollar,” he says.
“The problem is that Europe has a one-size-fits-all monetary policy but very different fiscal statuses in individual countries. Greece is the poster boy, but you have the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) right behind it,” he told Bloomberg.
Greece, for example, has a budget deficit totaling 12.7 percent of GDP.
“It’s really an insoluble problem because these economies are very different,” Shilling said. “They’re much weaker; they need to issue all these sovereign debts. And ratings agencies are downgrading them.” (more)
Whitney: Shares of Big Banks Will Drop 15 Percent
Banking analyst Meredith Whitney says her profit expectations for big banks are 30 percent below Wall Street expectations for a very basic reason: asset declines are everywhere.
“On average, lending portfolios are down four-to-20 percent, and we think they’re going to be down another 10-to-15 percent for all the big banks this year,” Whitney told CNBC.
“Your good borrowers don’t want to borrow, and your bad borrowers, you’re trying to kick out of the system.”
Higher capital levels mandated by impending banking law reforms are a given, Whitney says, which means lower returns for the banks. (more)
“On average, lending portfolios are down four-to-20 percent, and we think they’re going to be down another 10-to-15 percent for all the big banks this year,” Whitney told CNBC.
“Your good borrowers don’t want to borrow, and your bad borrowers, you’re trying to kick out of the system.”
Higher capital levels mandated by impending banking law reforms are a given, Whitney says, which means lower returns for the banks. (more)
Banks at risk of going bust tops 700
More than 700 banks, or nearly one out of every 11, are at risk of going under, according to a government report published Tuesday.The Federal Deposit Insurance Corp. said that the number of banks on its so-called "problem list" climbed to 702, its highest level since June 1993.
The number of banks under scrutiny by regulators has moved steadily higher since the recession began. Just 76 financial institutions were on the list in the fourth quarter of 2007.
Banks that end up on the problem list are considered the most likely to fail because of difficulties with their finances, operations or management. (more)
America Just Declared The Recovery Over So You'd Better Get Ready For The Double Dip
Today's bleak consumer confidence number is undoubtedly bad news for the economy. The bigger than expected drop suggests that consumers have lost confidence in the recovery, which will drive down home prices and consumer spending.
Consumer confidence is typically our "first look" at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels--today's were the worst in 27 years--then it is a flashing red-light about the economy. (more)
Consumer confidence is typically our "first look" at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels--today's were the worst in 27 years--then it is a flashing red-light about the economy. (more)
The Triple Dip?
Home prices are falling again, says the latest rendition of the Case-Shiller home price index. National home prices fell 2.5% year over year in the fourth quarter of 2009, the group claims. Both the 10-city and 20-city indexes dropped 0.2% from the previous month. That puts the average home price down 29% from its 2006 peak, back to prices typical of summer 2003. Ouch.
“This isn’t a forecast, but it’s a worry,” Robert Shiller, founder of the index, told unwilling ears on CNBC, “that home prices might drop substantially from here foreword, once this [government] support is taken away… Mortgage rates will go up, the economy might double dip, the expectations for housing -- which helped drive the markets -- might change suddenly when people see the support being withdrawn. Some people were buying because of the homebuyer tax credit. When that’s withdrawn, a lot of people will be absent the market. There is substantial downward risk right now.
“But on the other side,” he added, unable to control laughter sprung from true insanity of it all, “we’ve seen a bubbly nature in the market recently. So I think just uncertainty is at a maximum right now.” Agora Financial
Tuesday, February 23, 2010
Gold May Advance to $1,400 in 12 Months: Technical Analysis
Gold may climb to about $1,400 an ounce in the next 12 months, according to technical analysis by Chartered Market Technician Daniel Bruno, who advises banks and hedge funds. The attached chart shows gold is trading above a trend line that starts from the metal’s low in January last year. A climb to $1,419 an ounce would equate to a 150 percent projection of bullion’s rally from January 2009 to its record in December, according to a series of numbers known as the Fibonacci sequence.
Gold “remains robust above its rising trend line,” and the recent rebound from a three-month low on Feb. 5 is a “bullish” signal, Bruno said in an interview. “We project about $1,400 within 12 months as long as the $1,000 level holds,” he said. (more)
Ireland, Greece and leaving the euro
The economic travails of Ireland and Greece have provoked a debate on the wisdom of the two most vulnerable members of the infamous PIGS (Portugal, Ireland, Greece and Spain) grouping of Eurozone members, on leaving the euro.
On Sunday, in an article in The Sunday Independent, economist and Group Business Editor of Independent Newspapers, Brendan Keenan, pointed out that both Ireland and Greece are largely dependent on foreign lenders to fund their public debt and suggested that if an exports boost did not follow from devaluation, leaving the euro could result in a more dire situation for a country than it had faced within the EMU (European Monetary Union). He says it depends on how sensitive a country's exports are to internal costs, and whether those costs rise quickly because of the increase in imported costs from the cheaper currency. Keenan concludes that those countries which think the balance of advantage for them lies with euro membership will have to tailor their policies to achieve growth within the single currency. Ireland has not yet done so. "We should worry less about debt and defaults and more about enhancing the economy itself," he says. (more)
On Sunday, in an article in The Sunday Independent, economist and Group Business Editor of Independent Newspapers, Brendan Keenan, pointed out that both Ireland and Greece are largely dependent on foreign lenders to fund their public debt and suggested that if an exports boost did not follow from devaluation, leaving the euro could result in a more dire situation for a country than it had faced within the EMU (European Monetary Union). He says it depends on how sensitive a country's exports are to internal costs, and whether those costs rise quickly because of the increase in imported costs from the cheaper currency. Keenan concludes that those countries which think the balance of advantage for them lies with euro membership will have to tailor their policies to achieve growth within the single currency. Ireland has not yet done so. "We should worry less about debt and defaults and more about enhancing the economy itself," he says. (more)
China in record US debt sell-off
China sold a record amount of its US Treasury holdings in December, ceding its place as the world's biggest foreign holder of US debt to Japan.
According to Treasury figures released on Tuesday, Beijing sold off more than $34bn of its holdings in the final month of 2009, cutting its holding of US debt by just over 4 per cent to $755.4bn.
Japan now holds almost $11bn more US debt than China, with a total of nearly $769bn.
Japan had been the largest holder of US Treasury bonds until September 2008, when it was overtaken by China. (more)
Debt Dynamite Dominoes: The Coming Financial Catastrophe
The people have been lulled into a false sense of safety under the rouse of a perceived “economic recovery.” Unfortunately, what the majority of people think does not make it so, especially when the people making the key decisions think and act to the contrary. The sovereign debt crises that have been unfolding in the past couple years and more recently in Greece, are canaries in the coal mine for the rest of Western “civilization.” The crisis threatens to spread to Spain, Portugal and Ireland; like dominoes, one country after another will collapse into a debt and currency crisis, all the way to America. (more)
Buffett's Partner: 'It's Over' for U.S. Economy
Charlie Munger, Warren Buffett’s longtime business partner in Berkshire Hathaway, warns in a new column that the U.S. economic empire is crumbling before our eyes, thanks to federal debt and poor planning.
In an article penned for Slate.com, Munger uses the form of a parable to explain how Wall Street’s love affair with gambling has destroyed America’s Main Street.
The article leads with this headline: “Basically, It’s Over.”
The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match U.S. history.
Early in its history, debt is unknown except for home mortgages and some consumer loans, and people live within their means. Speculation is discouraged, and commodities markets are small and tightly regulated. (more)
In an article penned for Slate.com, Munger uses the form of a parable to explain how Wall Street’s love affair with gambling has destroyed America’s Main Street.
The article leads with this headline: “Basically, It’s Over.”
The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match U.S. history.
Early in its history, debt is unknown except for home mortgages and some consumer loans, and people live within their means. Speculation is discouraged, and commodities markets are small and tightly regulated. (more)
Top Fed Official Warns Jobs Will Be Scarce As 'Paradigm Shift' Slows Hiring
A top Federal Reserve official warned Monday that even as the economy starts to grow again, employers are likely to continue squeezing more productivity out of workers rather than start hiring new ones, thereby prolonging the economic crisis for the millions of unemployed.
In remarks at the University of San Diego, Federal Reserve Bank of San Francisco President Janet Yellen said that rather than experiencing a "V-shaped recovery," the economy will continue to be sluggish and won't be operating at its full potential until 2013.
As reasons, she cited consumer anxiety due to the high unemployment rate; a housing sector that "could weaken again"; "very nervous and exceedingly cost-conscious" businesses; and a commercial real estate market that won't contribute to growth "for some time." (more)
European banks 'need €240bn a year in fund-raising'
The analysts, who include Stefan Nedialkov, said 24 European banks – accounting for almost 70pc of the sector's assets – will face an increased need for funds due to the volatility of the bond markets and new Basel III capital regulations.
The banks issued €56bn of long and medium-term funding in January, but investors' appetite for new issuance has fallen in February as concerns over the state of the European economy has grown.
This means that banks may have to offer a higher yield to attract investors in future. Citigroup estimate that the impact of increased funding costs on banks earnings may reach 10pc in a worst-case scenario.
Nonetheless, the analysts said, funding availability is unlikely to be a major issue for most banks before 2012, and the new stable-funding ratio regulations from Basel only appear onerous for a relatively small number of banks. (more)
Europe's monetary union has become an instrument of deflation torture
The Left called for war damages for Axis occupation and accused German banks of playing a "wretched game of profiteering at the expense of the Greek people".
Mainstream New Democracy was no nicer. "How does Germany have the cheek to attack us over our finances when it has still not paid compensation for Greece's war victims? There are still Greeks weeping for lost brothers," said ex-minister Margaritis Tzimas.
This is deeply hurtful to Germany, a vibrant democracy that has played its difficult part in Europe for 60 years with dignity. No country could have done more to overcome its demons. It has paid the EU bill, and paid again, rarely grumbling.
Yet a decade of monetary union has created such a wide and self-perpetuating gap between North and South that everything in EU affairs is poisoned. German-Greek relations are the worst in my lifetime. (more)
'Buy farmland and gold,' advises Dr Doom
The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a “dirty war” by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash.
The bleak warning of social and financial meltdown, delivered today in Tokyo at a gathering of 700 pension and sovereign wealth fund managers.
Dr Faber, who advised his audience to pull out of American stocks one week before the 1987 crash and was among a handful who predicted the more recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant for the nickname Dr Doom.
Speaking today, Dr Faber said that investors, who control billions of dollars of assets, should start considering the effects of more disruptive events than mere market volatility. (more)
Warning Signals on Debt
“Right now, the market thinks that Germany is a better credit risk than the U.S.” Chris Mayer reports. Indeed, if you own U.S. debt today and want to buy insurance against default, you will find that such insurance costs more than it does to insure German debt.
“I think that’s probably an anomaly,” Chris continues, “as I would bet that Germany is a poorer credit risk than the U.S. In any event, there is not much difference between the two. It’s a bit like choosing whether you’d rather flush your money down the toilet or burn it.
“Both countries are in danger territory, at least according to the work of economist Kenneth Rogoff. He looked at debt levels going back hundreds of years. Rogoff found that as a general rule, a country gets into trouble when external debt to GDP exceeds 60%. That means that the debt held by folks outside the country is about 60% or more of the size of the economy. The economy often contracts, and things can get ugly.
“If you look at the countries flashing warning signs right now, you find a meaty list of potential crises.
“So let’s see… any resemblances strike you? These are almost all Western countries. All the biggies are here: the U.S., Canada, Germany, France, the U.K. and Australia. Plus, four of the five so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) and the usual suspects like Zimbabwe.
“I’ll tell you this: I can’t think of any lists you want to find yourself on with Zimbabwe.”
Agora Financial
Monday, February 22, 2010
Technically Precious with Merv Feb 19, 2010
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Cars: The latest form of affordable housing
At the precise moment that President Obama was proclaiming how well his stimulus package worked, a news story crossed my computer screen saying that 10% of Los Angeles County's 50,000 homeless are now sleeping in their cars each night. Multiply that number of car-dwellers to include the whole nation, and that's a lot of people who will no doubt sleep -- albeit behind the wheel -- more soundly tonight knowing just how much better off they are than our President thinks they would have been.Let's get serious, folks.
The car-dwelling population has now reached sufficient numbers to qualify for its own bureaucratic designation. Meet the "Vehicular Homeless." Many are families whose lives were tossed in a recessionary salad spinner of job loss, followed by apartment and/or home loss. In some cases, there was health insurance loss and a family member's illness that wiped out their savings and sped the process along of moving from roof to backseat. (more)
S & P - Retest Of Highs? Or New Highs?
"May you live in interesting times," Chinese proverb. Anyone who trades futures lives in interesting times every day. There is nothing that has not already
been seen in the markets, yet we have not been able to master them. Why not? We are dealing with
human emotion. There is no chart for that. Well, that is not quite true. The futures charts capture the
human element behind all trading, for what else are charts but the collective results of decision-making
from all participants.
"And your point would be?"
Just when it appears that the market has made an important turn, to the downside, making new highs
is a consideration that cannot be ruled out, as the weekly chart suggests. It will be interesting to see
where price is on the one year anniversary date of last March's low. It will also be interesting to see
how price reaches whatever level it attains on that date. Maybe it will be a non-event? One can never
know for certain what the future holds in futures. One does not need to guess, either. Let the charts
unfold and reveal their intent. (more)
Citigroup Warns Customers It May Refuse To Allow Withdrawals
The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.
"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change," Citigroup said on statements received by customers all over the country. (more)
Saturday, February 20, 2010
"Crisis of Confidence": Yes, Risks of U.S. Default Are Very Real, Charles Ortel Says
With America facing $1 trillion annual deficits and debt-to-GDP ratios on par with those of Europe's so-called PIGS, some are asking what was once unthinkable:Is the U.S. at risk of defaulting on its debt?
Earlier this week, Nobel-prize winning economist Joseph Stiglitz told Tech Ticker the U.S. "has absolutely no real problem servicing the debt at the current level"; meanwhile, Treasury Secretary Tim Geithner recently said America will "never" lose its vaunted triple-A credit rating after Moody's suggested it was a possibility if we don't get our fiscal house in order.
Take a hard look at America's balance sheet and "you have to be concerned," says Charles Ortel, managing director of Newport Value Partners.
Total gross U.S. debt is now $50 trillion or 12 times the nation's total gross income, according to Ortel, whose debt calculation excludes unfunded mandates such as Social Security and Medicaid but does include corporate debt which he says are "potentially eligible for bailouts." (more)
U.S. Mortgage Foreclosures Rose in Fourth Quarter
A record number of Americans were in danger of losing their homes in the fourth quarter, even as new delinquencies declined, the Mortgage Bankers Association said.
Loans in foreclosure rose to 4.58 percent of all mortgages, while those more than 90 days overdue -- the point at which lenders usually begin the process of seizing a property -- climbed to 5.09 percent, the Washington-based trade group said in a report today.
“We have a hard-core block of unemployed who have been out of jobs for a long time, and that’s keeping the long-term delinquencies high,” Jay Brinkmann, the association’s chief economist, said in an interview. “New entrants to the ranks of the unemployed have been falling, and that’s why we see the early delinquencies dropping.” (more)
British military insider: World War III is being staged; starting with Israel and Iran
US “leadership” and their corporate media minions are pushing juvenile-level propaganda for war with Iran; lies that anyone can verify with a few moments’ attention. If you haven’t already confirmed the Orwellian-level disinformation, stop and read the above two links now.
Many people hypothesize the confirmed lies for wars with Iraq and Afghanistan, and a final war with Iran, is to control oil. Connected is the theory that US political and economic “masters” are so confident in their propaganda, and so correct in their conclusion that the critical mass of humanity is too feeble to stop them, that they brazenly move forward for global hegemony.
This article provides a different explanation of the facts; with heightened urgency to prevent war with Iran, as it is a planned step to begin a Third World War. (more)
Many people hypothesize the confirmed lies for wars with Iraq and Afghanistan, and a final war with Iran, is to control oil. Connected is the theory that US political and economic “masters” are so confident in their propaganda, and so correct in their conclusion that the critical mass of humanity is too feeble to stop them, that they brazenly move forward for global hegemony.
This article provides a different explanation of the facts; with heightened urgency to prevent war with Iran, as it is a planned step to begin a Third World War. (more)
Credit markets flash hottest warning signal since crisis
Jitters over Chinese credit tightening and default risks in Greece and Dubai are causing bond vigilantes to batten down the hatches across the world, bringing the most dramatic credit rally for a century to a shuddering halt.
The Markit iTraxx Crossover index measuring yields on lower-grade debt has jumped by almost 130 basis points since mid-January to 514, while the main index of investment grade bonds has jumped by a third to 93. "This is the biggest move since the financial crisis in early 2009, said Gavan Nolan, Markit's credit analyst. (more)
The Markit iTraxx Crossover index measuring yields on lower-grade debt has jumped by almost 130 basis points since mid-January to 514, while the main index of investment grade bonds has jumped by a third to 93. "This is the biggest move since the financial crisis in early 2009, said Gavan Nolan, Markit's credit analyst. (more)
Wall Street's Bailout Hustle
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy. (more)
Friday, February 19, 2010
Credit markets flash hottest warning signal since crisis
Jitters over Chinese credit tightening and default risks in Greece and Dubai are causing bond vigilantes to batten down the hatches across the world, bringing the most dramatic credit rally for a century to a shuddering halt.
The Markit iTraxx Crossover index measuring yields on lower-grade debt has jumped by almost 130 basis points since mid-January to 514, while the main index of investment grade bonds has jumped by a third to 93. "This is the biggest move since the financial crisis in early 2009, said Gavan Nolan, Markit's credit analyst.
"The index is a leading indicator so it is a warning signal. This is being driven by volatility in sovereign debt, with Greece being the biggest issue at the moment but tightening in China could be a bigger negative catalyst in the long-term," he said. (more)
The Markit iTraxx Crossover index measuring yields on lower-grade debt has jumped by almost 130 basis points since mid-January to 514, while the main index of investment grade bonds has jumped by a third to 93. "This is the biggest move since the financial crisis in early 2009, said Gavan Nolan, Markit's credit analyst.
"The index is a leading indicator so it is a warning signal. This is being driven by volatility in sovereign debt, with Greece being the biggest issue at the moment but tightening in China could be a bigger negative catalyst in the long-term," he said. (more)
Get Over It because there will be no Housing Boom This Decade – 5 Factors That Will Drag Housing Down in the Next Ten Years.
In the midst of all the bailouts you might have missed that last month, in perma-bubble Southern California the median price of the entire regional market fell by $17,500. This was the first regional price drop since April of 2009. Now one month doesn’t make a trend of course but if you only listen to the real estate industry and banking cabal you would think that all of a sudden we are circa 2003 real estate. There is this pervasive speculative attitude once again in the air even in the face of a 12.4 percent unemployment rate. The unemployment situation was revised last month nationwide and the BLS upped the number of jobs lost in this recession from the “low” 7 million to 8.4 million. So basically we were underestimating how “good” things were for an entire year (the BLS has suspect numbers because of their methodology). Yet this is part of the new economic psychology where real data is ignored in exchange for bread and circus statistics and political theatre. The reality is we are not going to see any sort of housing boom for the next decade. In fact, housing will be weak for the next ten years (at least) regardless of what the government and Wall Street attempts to do. (more)
Roubini: World Risks Double-Dip Recession
The global economy faces the risk of a double-dip recession, according to economic soothsayer Nouriel Roubini.
That’s because the deleveraging process necessitated by the financial crisis will curb economic activity by governments, banks, and individuals, the New York University professor told CNBC.
But central banks and governments have to be careful not to add more stimuli to counter this situation, lest they join Greece in amassing unmanageable budget deficits.
In any case, investors will see that budget deficits have to be monetized, crowding out investment in the private sector, Roubini says. (more)
That’s because the deleveraging process necessitated by the financial crisis will curb economic activity by governments, banks, and individuals, the New York University professor told CNBC.
But central banks and governments have to be careful not to add more stimuli to counter this situation, lest they join Greece in amassing unmanageable budget deficits.
In any case, investors will see that budget deficits have to be monetized, crowding out investment in the private sector, Roubini says. (more)
Fed bumps up rate banks pay for emergency loans
The Federal Reserve decided Thursday to boost the rate banks pay for emergency loans. The action is part of a broader move to pull back the extraordinary aid it provided to fight the financial crisis.
The action won't directly affect borrowing costs for millions of Americans. But with the worst of the crisis over, it brings the Fed's main crisis lending program closer to normal.
The Fed chose to bump up the so-called "discount" lending rate by one-quarter point to 0.75 percent. It takes effect Friday.
The central bank said the step should not be seen as a signal that it will soon boost interest rates for consumers and businesses. It repeated its pledge to keep such rates at record-low levels for an "extended period" to foster the economic recovery. (more)
The Future of the Dollar
The World is concerned that the dollar cannot play the role of the main reserve currency any longer after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since the 1930s. The Government’s stimulus packages, financial bailouts, the need to support liquidity in Treasuries, keeping interest rates at the lowest level under the circumstances of low economic growth, high unemployment and low tax collection make it print more dollars. This leads to a high risk of substantial inflation, or hyperinflation in a long-run.With a $12.3 trillion national debt and $55 trillion in unfunded obligations for programs such as Social Security, Medicare and Medicaid, with total Federal Reserve and Treasury bailout commitments now at $11.8 trillion, of which $3.6 trillion has already been spent the U.S. need to take steps immediately to protect themselves from the potential loss of the purchasing power of their U.S. Dollars, inflation.us warns. (more)
Jobless Claims Rise Unexpectedly to 473,000
The number of newly laid-off workers filing applications for unemployment benefits unexpectedly surged last week after having fallen sharply in the previous week. The gain dampened hopes about how quickly the labor market may improve this year.
The Labor Department said Thursday that first-time claims for unemployment benefits rose by 31,000 to a seasonally adjusted 473,000. Analysts expected a small decline.
The increase followed a drop of 41,000 in the previous week which had raised hopes that the labor market, which has lost 8.4 million jobs since the recession began in December 2007, could be improving. (more)
Real, Uglier American Unemployment
Can you trust national averages? As bad as the jobless data you hear are, you have not been told the whole truth. If you think the terrible impact of America ’s Great Recession is shown by an official unemployment rate of about 10 percent, think again.
The Middle Class Two Income Trap – Two Breadwinners plus Extra Money to support the Banking Industry. How Middle Class Americans are losing Ground by
If it isn’t enough that average Americans are contending with the rising cost of healthcare, education, and daily necessities like food now additional funds are going directly to the banking sector to keep them propped up like a money loving puppet. Since the Great Depression the rise of the middle class has been the envy of many people around the globe. The ability for hard working Americans to have access to an economy that supported them so long as they worked hard and followed an implicit guarantee with their nation. With this implicit guarantee it was assumed that the government would also protect people to a certain degree especially when it came to their financial well being. This did not assure a winning portfolio but it did mean we wouldn’t turn our stock market into a giant game of casino where the connected had a loaded deck. Much of the strong regulatory arm that came from the Great Depression was because of the speculative gambling during the Roaring 1920s. Yet as time went on slowly Wall Street took these structures away and now we are finding ourselves once again with the middle class largely at risk in the United States. It isn’t by accident we are in the situation we are in today. (more)
Thursday, February 18, 2010
McAlvany Weekly Commentary, Feb 17, 2010
Is the Euro Terminal? An Interview with Ambrose Evans-Pritchard
February 17th, 2010About the Guest:
Ambrose Evans-Pritchard has covered world politics and economics for a quarter century, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London. Click here to read more
Buffett's Berkshire Cuts Oil Stake, Adds Wells Fargo
Billionaire Warren Buffett's company reduced its holdings in Johnson & Johnson, Proctor & Gamble, ConocoPhillips and Exxon Mobil Corp. during the last three months of 2009, according to documents filed Tuesday.
Berkshire Hathaway Inc. disclosed those moves and several other changes to its roughly $58 billion U.S. stock portfolio in documents filed with the Securities and Exchange Commission. The filing offers a snapshot of the Omaha-based company's holdings as of Dec. 31.
Berkshire added to its stakes in Iron Mountain Inc., Becton Dickinson & Co., Republic Services Inc. and Wells Fargo.
But the filing also said Berkshire has received permission from the SEC to omit some information to protect its trading strategy, so the document offers an incomplete picture. (more)
"Economic Terrorism": The Consequences are Poverty and Mass Unemployment
“The American oligarchy spares no pains in promoting the belief that it does not exist, but the success of its disappearing act depends on equally strenuous efforts on the part of an American public anxious to believe in egalitarian fictions and unwilling to see what is hidden in plain sight.” — Michael Lind, To Have and to Have Not
Yes, of course, we all have very strong differences of opinion on many issues.
However, like our Founding Fathers before us, we must put aside our differences and unite to fight a common enemy. It has now become evident to a critical mass that the Republican and Democratic parties, along with all three branches of our government, have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99% of the US population no longer has political representation. The US economy, government and tax system is now blatantly rigged against us. (more)
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