Jay Taylor: Turning Hard Times Into Good Times

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Half of Commercial Mortgages to Be Underwater: Warren

By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.
“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending." (more)

California USA vs. Ontario Canada - Which State (Province) Is In Worse Shape? Canadian Banks vs. US Banks Comparison

Record debt levels in Ontario may translate into higher borrowing costs for Canada’s largest province relative to other regional governments.

The province’s net debt will rise to C$220 billion ($216 billion) in 2010-11, or a record 37 percent of gross domestic product, according to budget documents released yesterday. That’s almost twice as high as the debt-to-GDP ratio in British Columbia.

The province, home to 13.1 million people who account for more than a third of Canada’s economy, outlined plans to balance its budget in eight years. Standard & Poor’s last year cut the province’s credit rating on concern over escalating debt as the global recession buffeted the manufacturing industry, which accounts for almost a fifth of output. (more)

Downtown NYC Towers Empty as Best Market Falters

Downtown Manhattan, where demand for office space began to surge three years after the 9/11 terrorist attacks, is about to lose its spot as the best- performing U.S. market.

Vacancies may exceed 14 percent of the area’s 87 million square feet by late 2011, empty space that’s equivalent to four Empire State Buildings and the highest rate since 1997, according to property broker Cushman & Wakefield Inc. That doesn’t include the 4.4 million square feet of offices in two towers now under construction at the World Trade Center site. Those are scheduled for completion in 2013. (more)

Bears Are Dead Wrong? Hmmm....

Yahoo has jumped the shark with publishing "1,300" on the S&P by the end of the year, a 17% annual increase:

"The bears have been consistently wrong throughout this whole rally," Altucher tells Aaron in the accompanying clip. "If you followed the bears' advice at the bottom you'd be dead broke right now." For full disclosure, Altucher did not call the market crash in 2008. "Better to be consistently bullish than consistently bearish."

Well now that's math: 70% of the time the market is ascending, historically.

The problem is that when it declines it almost always goes down much faster than it goes up, and due to that pesky math again if you lose 50% you must get a clean double to be "back to even." (more)

NY Times: California the New Greece?

Many states have huge financial holes that could lead to a systemic crisis, experts say.

Budget deficits run into the billions of dollars in California and New York. States have taken on huge debt loads, many face shortfalls in their pension funds, and many are using accounting tricks to hide their true position.

The difficulties have faded to the background as the municipal bond market has surged. But if investors start to shy away from municipal debt, a crisis could rage at some point soon.

“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” Harvard economist Ken Rogoff told The New York Times. (more)

Western Civilization and the Economic Crisis: The Impoverishment of the Middle Class

The western nations of the world have built their great wealth and societies on the exploitation and plundering of the people and resources of the rest of the world. The wealth, freedom, and structures of our societies have been built on the starvation, robbery, deprivation and murder of millions upon millions of the world’s people, both historically and presently. (more)

US healthcare reform is boon for India outsourcing companies

With 22 pen strokes, President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it’s heaven-sent. A number of Indian companies are already anticipating an increase in workload thanks to Obama's healthcare law. (more)

State Debt Woes Grow Too Big to Camouflage

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.

New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million. (more)

Europe unlikely to join any new yuan offensive

Preparation of a U.S. Treasury report that could potentially brand China a "currency manipulator" is rekindling tensions with Beijing prior to mid-April publication and raises questions as to how broad international support will be if things turned uglier.

The saber-rattling is growing in volume since U.S. lawmakers said they were crafting proposals to allow import duties to be slapped on Chinese goods on the grounds that American jobs are being lost and Beijing must now budge.

Despite the fact that governments in Europe also believe the yuan is undervalued, giving China an unfair edge in global trade competition, there appears to be little appetite here to up the ante simply because tempers are fraying in Congress, potentially weakening the U.S. diplomatic push. (more)

Home price dip extends to 4th month

The market seems to have pulled the rug out from under housing industry hopes for a sustained early recovery.

After a five-month run-up in home prices starting last spring, prices have now fallen for four consecutive months, according to the S&P/Case-Shiller Home Price Index of 20 cities, a gauge of market values, released Tuesday.

In January, prices were down 0.4%, compared with December and have fallen 0.7% from a year earlier.

"The rebound in housing prices seen last fall is fading," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "Fewer cities experienced month-to-month gains in January." (more)

Chart of the Day

Birinyi Raises Full-Year S&P 500 Forecast to 1,325

Birinyi Associates Inc. raised its year-end forecast for the Standard & Poor’s 500 Index to 1,325 because of rallies by General Electric Co., Citigroup Inc. and Microsoft Corp.’s shares.

The estimate from the research and money-management firm founded by Laszlo Birinyi implies a 13 percent advance from today’s closing price and a full-year increase of 19 percent. Today’s report cited 2010 gains exceeding 20 percent for GE and Citigroup as well as Microsoft rising above $30 last week.

Birinyi said the S&P 500’s reversal of losses on March 22 shows that markets are exhibiting strength. The benchmark index for U.S. stocks lost as much as 0.6 percent after the biggest overhaul of the health-care industry in four decades and concern about Greece’s budget deficit, as well as Tiffany & Co., the world’s second-largest luxury jewelry retailer, reporting less profit than the average analyst estimate. The S&P 500 rose 0.5 percent that day and went on to advance a fourth straight week. (more)

Central Banks Stashing Away Gold at Brisk Pace

Central banks around the world added 425.4 metric tons of gold to their reserves last year, the biggest increase since 1964, according to the World Gold Council.

That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988.

Central banks in India, Russia and China were among those boosting their gold reserves last year, as the precious metal jumped 24 percent, hitting a record of $1,226 an ounce in December.

Central banks now possess 18 percent of all gold ever mined. (more)

Greenspan: Bond Yield Rise Foreshadows High Rates

Former Federal Reserve Chairman Alan Greenspan warns that the spike in Treasury yields is a “canary in the mine” that may foreshadow higher interest rates, as investors have avoided three major Treasury auctions this week.

Prices of U.S. government debt fell on Thursday following a weak auction of $32 billion in seven-year Treasury notes. The high yield on the auction came in at 3.37 percent, above the market's expectations, according to market data.

Thursday's auction capped a week of $118 billion in new supply which attracted dismal investor interest. The government has been auctioning a steady stream of bonds for months to fund its economic stimulus efforts.

The higher yields indicate investors’ fears about a “huge overhang of federal debt which we have never seen before,” Greenspan told Bloomberg. “I’m very much concerned about the fiscal situation,” he said. (more)

It's Official - America Now Enforces Capital Controls

It couldn't have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration's millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation's domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It's the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose - the law now says so. Capital Controls are now here and are now fully enforced by the law. (more)

Jim Rogers Speaks About the Dollar Index and Euro

Sell-off in US Treasuries raises sovereign debt fears

The yield on 10-year Treasuries – the benchmark price of global capital – surged 30 basis points in just two days last week to over 3.9pc, the highest level since the Lehman crisis. Alan Greenspan, ex-head of the US Federal Reserve, said the abrupt move may be "the canary in the coal mine", a warning to Washington that it can no longer borrow with impunity. He said there is a "huge overhang of federal debt, which we have never seen before".

David Rosenberg at Gluskin Sheff said Treasury yields have ratcheted up 90 basis points since December in a "destabilising fashion", for the wrong reasons. Growth has not been strong enough to revive fears of inflation. Commodity prices peaked in January and US home sales have fallen for the last three months, pointing to a double-dip in the housing market. (more)

Stocks Soar, but Many Analysts Ask Why

The unemployment rate remains locked in a range that recalls the economic doldrums of the early 1980s. Housing is stuck in a ditch, with foreclosures rising. And consumers are still reluctant to part with the little cash they do have.

Yet the stock markets are partying like it's 2003, when hiring was brisk, real estate was booming, wallets were fat -- and the major stock indexes started a four-year rally that would double their value and push them to new heights just before the financial crisis hit.

Judging from stock prices alone, one would think the economy was poised for a roaring comeback. But the federal government plans to unplug the economic life-support programs that stimulated production, kept interest rates low and placed a thick cushion under the real estate market. (more)

Fed Spent Over $1 Trillion Buying Debt

However, this week market support from the Federal Reserve is supposed to end. If it keeps to its schedule, the Fed’s program to purchase mortgage-backed securities and Fannie/Freddie debt concludes on Wednesday, the last day of March.

“This is likely to be a big thing,” warns The Richebacher Society’s Rob Parenteau. “The Fed has bought over $1 trillion on government-sponsored entity (GSE) debt from the private sector. Private sector investors have taken the money the Fed has created. “Given the yield on near cash instruments, we believe investors have turned around and invested the proceeds from their GSE sales to the Fed in risky assets. We also believe some of these investors have replaced their GSE positions with Treasury bonds.

“So directly, the Fed has bid GSE prices up and suppressed GSE-related interest rates (think mortgage rates). Indirectly, the Fed’s money creation in the QE ops has suppressed Treasury yields and boosted prices of risky assets. At month end, then, a major prop beneath asset markets will go poof.

“Do you see that line in the powering through $1 trillion on April Fools’ Day? That represents the Fed’s QE purchases of GSE debt… and that is going to do a 180 -- it is bound for zero. What happens, then, when broker dealers, households and money market funds go to sell their GSE debt after March 31 and there is no Fed on the other side of the trade, with a bunch of blank checks, prepared to buy the GSE debt?

“Can you say train wreck?”

Chart of the Day: Social Security

Technically Precious with Merv, March 26, 2010

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Will the USD Continue Rallying?

Now that we see the USD rising again over 81 on the US Dollar Index (USDX) the question becomes will we possibly see 91 USDX sometime in 2010?

Yes very possibly, and we may see more than that. Let me explain. Since roughly fall 2007, the US Fed has been creating liquidity and even buying markets directly (home mortgage bonds for example) then when the US decides to roll that back, there is USD strengthening as institutions who borrowed Fed money with bad collateral have to repo the stuff and get dollars to buy the stuff back (repossess them).

Then, on top of repo activity starting after the end of March 2010, the Fed stated they intend to roll back QE (actual Fed buying markets themselves) and this would be market negative, since half of Fed liquidity infusions in 2009 was invested directly in markets by banks, instead of lent out. The same goes for all of China’s stimulus, much of their own stimulus money and huge bank lending in 2009 went into their property and real estate bubbles. (more)

Metals & Mining Analysts' Ratings & Estimates - Juniors

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Sure Looks Like A Top? VIX, NYSE, DOW & GOLD

I think many of you will find this article interesting as I show several different indicators which point to an imminent correction for stocks and precious metals.

Last Wednesday’s report I showed how the current price of the index was almost identical to the January peak from where prices dropped nearly 10%. The report was called “28 Day Sector Rotation, Commodity & Index”. We did get the first sign of topy market last Friday with the sharp one day sell off as I expected.

Today, one week later we are now that much closer to a 3-8% drop which is shown in the charts below. It’s important to remember that bottoms tend to happen quickly while a market toping is more of a process which is why so many people take big losses trying tip a top. (more)

What happened to $2,000 gold?

Not so long ago, the price of gold was soaring, and analysts predicted $2,000 an ounce was imminent. What stopped gold's rise? Will it take off again?

Throughout all the tumult of the past 10 years -- the bubbles, the recessions, the wars, the bank failures and the bailouts -- one asset class has outshone all others: (more)

Titanium Metals Corporation (NYSE:TIE) – “On Fire” With Boeing Announcement

Titanium Metals Corporation (NYSE:TIE) is a Dallas-based titanium producer with facilities in the US and Europe. Recent reports have shown its shares being widely accumulated on heavy volume.

What’s motivating the activity? For the inside scoop, we check in for analysis from Chris Mayer, editor of Agora Financial’s Capital & Crisis newsletter:

“Titanium Metals (NYSE:TIE) has been on fire. The stock was up about 15% this week, and is now up about 90% since last August, a time when it was down and out. Our thesis was that the long-term demand for titanium for the next generation of aircraft was inevitably going to rise. (more)

Gerald Celente : This time they will close Banks & Wall Street 03/27/10

CFTC whistleblower injured in London hit-and-run

Dear Friend of GATA and Gold:

London metals trader Andrew Maguire, who warned an investigator for the U.S. Commodity Futures Trading Commission in advance about a gold and silver market manipulation to be undertaken by traders for JPMorgan Chase in February and whose whistleblowing was publicized by GATA at Thursday's CFTC hearing on metals futures trading --

http://www.gata.org/node/8466

-- was injured along with his wife the next day when their car was struck by a hit-and-run driver in the London area. (more)

World Financial report, March 26, 2010

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Mortgage delinquencies rise to nearly 14 percent

Delinquencies on mortgages rose to nearly 14 percent in late 2009, led by a sharp increase in seriously overdue home loans held by the most credit-worthy borrowers, U.S. banking regulators said on Thursday.

The percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009, down 0.9 percent from the previous three months, marking a decline for the seventh consecutive quarter, the report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision said.

It was also down 3.9 percent from a year earlier. (more)

The Economist March 27th - April 2nd 2010

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3/25/10 Jim Rogers on CNBC: Commodities More Attractive Than Currencies

A London trader walks the CFTC through a silver manipulation in advance

Additional Statement by Bill Murphy, Chairman
Gold Anti-Trust Action Committee

to the U.S. Commodity Futures Trading Commission
Washington, D.C., March 25, 2010

On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events. (more)

Whistleblower Exposes JP Morgan's Silver Manipulation Scheme

Earlier today the CFTC held a sham hearing in which, among other things, the organization discussed position limits in PM speculation, because, you know, it's the mom and pop speculators that destroy the precious metal market (not JP Morgan or the New York Fed mind you). The hearing could not have come at a more opportune time. GATA has just broken a major story, in which a London metals trader-slash-whistleblower exposes JP Morgan's silver price suppression/manipulation scheme. At this point none of this should be at all shocking, and the only thing that matters is when CFTC's ex-Goldmanite Gary Gensler will be fired for allowing hundreds of billions of dollars to be sucked out of the PM market on behalf of such major market manipulating entities as JP Morgan and the New York Federal Reserve, for whom it transacts. Don't worry - the answer to that rhetorical question is "never", as it is the administration's goal to make all the millionaires among the bulge bracket firms billionaires, via legalized theft from honest investors. Furthermore, if indeed the CFTC is complicit in these manipulative events, as GATA suggest, we hope our objective mainstream media readers enjoin GATA in seeking justice for this criminal breach of proper regulatory enforcement. (more)

Debt Fears Send Rates Up

A sudden drop-off in investor demand for U.S. Treasury notes is raising questions about whether interest rates will finally begin a march higher—a climb that would jack up the government’s borrowing costs and spell trouble for the fragile housing market.

For months, investors have focused their attention on the debt crisis in Europe, but there are signs the spotlight is turning to the ability of the U.S. to finance its own budget deficit.

This week, some investors turned up their noses at three big U.S. Treasury offerings. Demand was weak for a $44 billion 2-year-note auction on Tuesday, a $42 billion sale of 5-year debt on Wednesday and a $32 billion 7-year-note sale Thursday. (more)

Gross: Buy Canadian, German Bonds; Sell Greek, U.K. Debt

Pimco chief investment officer Bill Gross recommends that investors buy government bonds of countries with strong finances and sell government bonds of the weak.

“Investors should obviously focus on those sovereigns where fundamentals promise lower credit or inflationary risk,” he wrote in his latest commentary on Pimco’s Web site.

“Germany and Canada are amongst those at the top of our list while a rogues’ gallery of the obvious, including Greece, euro land lookalikes and the U.K. gather near the bottom.”

Gross has particularly scathing comments for the U.K., whose budget deficit totals about 12 percent of GDP. That almost matches basket case Greece, whose gap amounted to 12.7 percent of GDP last year. (more)

Bill Murphy of GATA Reveals Whistle-Blower in Gold Price Suppression

Keiser Report №28: Markets! Finance! Scandal!

Business Week - 5 April 2010

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Chart of the Day

HUMOR

Americans Say They Missed 73% Rise in S&P 500 as Economy Surged

Americans are down on the economy and the markets even as stocks and growth indicators are up.

By an almost 2-to-1 margin Americans believe the economy has worsened rather than improved during the past year, according to a Bloomberg National Poll conducted March 19-22. Among those who own stocks, bonds or mutual funds, only three of 10 people say the value of their portfolio has risen since a year ago.

During that period, a bull market has driven up the benchmark Standard & Poor’s 500 Index more than 73 percent since its low on March 9, 2009. The economy grew at a 5.9 percent annual pace during last year’s fourth quarter. (more)

Big Build Bananza!

The Energy Report for Thursday, March 25, 2010

Maybe the oil bulls can take some comfort in the fact that oil was unable to close below $80 despite the fact that the euro hit a ten month low and the stock market actually closed lower. (It can do that you know.) Oil prices shook off a mighty crude oil inventory build according to the Department of Energy’s Energy Information Agency. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by gigantic 7.3 million barrels from the previous week. The build was on the back of strong imports which averaged 9.4 million barrels per day which was up a cool 969,000 barrels from last week. Yet draw downs in products kept the oil somewhat supported. The EIA reported a fall of 2.7 million barrels in gasoline supply and a 2.4 million barrel drop in distillates. The drop was inspired in part by strong gasoline demand. The EIA says that gasoline demand rose 2.7%, or 238,000 b/d, to 9.087 million barrels a day which according to David Bird at Dow Jones was the highest weekly level since November 20. Still year over year demand was down 13,000 barrels per day for the corresponding week a year ago. Bird says that the gain in gasoline led a 504,000 barrel per day, or 2.7%, rise in total oil demand for the week, to 19.336 million barrels per duty which was a two week high.Increasing gas demand usually is a sign that things for consumers are getting a little better and we may see that optimism grow in gas demand numbers first. (more)

Sun Belt Loses Its Shine

The recession has halted the dominant migration trend of recent decades, turning once-hot destinations such as Las Vegas and Orlando, Fla., into some of the country's losers.

Census data released Tuesday portray a sharp shift in migration during the depths of the recession, from July 2008 to July 2009. With home prices slammed and few jobs available in any state, people from Massachusetts to California decided to stay put or go back where they came from.

The Las Vegas metropolitan area lost about 1,300 residents to other areas. That compares with an annual inflow of 54,000 people during the height of the real-estate boom, and marks the first year of out-migration the city has seen in at least a century. The Orlando area swung to an outflow of about 4,300 from an inflow of 52,000 in 2004-2005. (more)

WEEKLY METALS REPORT

Precious Metals Remain Under Pressure…

Thus far this week the precious metals have been under heavy pressure globally as the economic data has been very U.S Dollar friendly. All eyes are on the two day European Summit which began today as investors hope to receive a better understanding of the true economic condition and the debt crisis that exists in Europe. So far the information coming out the European Union has been as clear as mud. Greece was the first state that had its credit rating lowered followed by Portugal today and unfortunately will probably reveal several more states in need of a financial bail-out including Spain, Ireland, and Italy. Obviously with this many states needing financial assistance the pressure on the Euro has been devastating. Since a weaker Euro means a stronger Dollar and a halt to the precious metals upward momentum. It had been written in “FOCUS” a German based magazine that the vast Gold reserves in Europe would be used to help stabilize the European Union and give much needed confidence to the Euro. guess time will tell. There is now speculation that the European states in need of financial assistance may have to turn to the (IMF) International Monetary Fund for financial assistance which could promote inflation and possibly further erode the Euro. (more)

Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

Well, its official (sort of). Greece, a member of the European Union, will probably join the ranks of countries like Latvia (where policies are limited by the choice of the currency regime), Iceland (where the crisis has resulted in a very heavy external debt burden), the Ukraine (which is still affected by financial and political fragility) and a bevy of third world and emerging market countries in distress from the (not very) esteemed club of IMF financial aid recipients. What does this portend for the Euro? Well, I have blogged earlier in the year that the Euro's credibility is now highly suspect and those pundits who dared contemplate the Euro potentially replacing the dollar as the global reserve currency now see the folly of their ways. The chances of a break-up are significantly higher and quite realistic. Credit Agricole's currency strategist puts it succinctly: (more)

Fed's Pianalto: Economy Will Stagger for Years

A bumpy U.S. recovery and subdued inflation warrant the central bank's promise to keep benchmark interest rates low for an extended period, a senior Federal Reserve official said on Thursday.

"Despite early signs of recovery, the economy is still facing some significant headwinds that will limit the rate of growth we can expect for the next couple of years," Cleveland Federal Reserve Bank President Sandra Pianalto told the Bonita Springs, Fla., Chamber of Commerce.

She said two major headwinds facing the U.S. economy are prolonged unemployment and a heightened sense of caution among consumers and businesses. (more)

Experts: Investors Avoid U.S. Bonds, Sensing Pricey Obamacare Disaster

Bond investors have avoided two major Treasury Department auctions this week, prompting economists to say there is a looming sense of financial disaster in the wake of President Barack Obama’s landmark — and expensive — healthcare overhaul.

If demand for U.S. debt continues to weaken, experts say the government would be forced to pay higher interest rates to lure investors. Prospects that the $940 billion healthcare plan could add to the massive U.S. deficit would make the nation's debt less attractive to investors because of an increase in supply and less fiscal stability.

Most auctions so far in 2010 have attracted strong demand. Experts say a few lukewarm auctions don’t mean that demand will continue to evaporate. An auction Tuesday of $44 billion in two-year notes also saw demand slip from earlier in the year. (more)

Personal Income Drops Across the Country

Personal income in 42 states fell in 2009, the Commerce Department said Thursday.

How state personal income changed in 2009 from 2008.

Nevada's 4.8% plunge was the steepest, as construction and tourism industries took a beating. Also hit hard: Wyoming, where incomes fell 3.9%.

Incomes stayed flat in two states and rose in six and the District of Columbia. West Virginia had the best showing with a 2.1% increase. In Maine, Kentucky and Hawaii, increased government benefits, such as unemployment insurance and Social Security, offset drops in earnings and property values.

Nationally, personal income from wages, dividends, rent, retirement plans and government benefits declined 1.7% last year, unadjusted for inflation. One bright spot: As the economy recovered, personal income was up in all 50 states in the fourth quarter compared with the third. Connecticut, again, had the highest per capita income of the 50 states at $54,397 in 2009. Mississippi ranked lowest at $30,103.

Welcome back, McCotter: So this is what hope and change looks like

Did Gordon Brown Sell UK's Gold To Keep AIG And Rothschild Solvent; More Disclosures On How The NY Fed Manipulates Gold Prices

In the neverending saga of new disclosure of gold price manipulation, here is the most recent pearl, courtesy of Jesse's Cafe Americain:"In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K." Makes one wonder just how much the gold price was pushed down today alone to make Gordon Brown's most recent budget reception a little more palatable. It also confirms yet again, that there is no such thing as an unmanipulated gold market. Lastly, it demands the question: on how many other occasions has the UK's massively unpopular prime minister sacrificed his people's interest merely to make criminal organizations such as AIG whole? (more)

The stimulus: It didn't work

‘W

e presented a plan, a bold plan, Canada’s Economic Action Plan… That plan is working… The proof is in our performance,” boasted federal Finance Minister Jim Flaherty in his budget speech earlier this month. While Minster Flaherty’s comments are certainly great political rhetoric, the latest data from Statistics Canada tells a remarkably different story. Government stimulus had negligible effect on Canada’s economic turnaround in the second half of 2009. Put simply, the stimulus didn’t work. (more)

Social Security to See Payout Exceed Pay-In This Year

The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.

Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.

The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax. (more)

Home Prices ‘Double Dip’ in 12 Cities, Zillow Says

Twelve U.S. cities, including Boulder, Colorado, and Providence, Rhode Island, are showing extended declines in housing values, reversing signs of a sustained recovery last year, according to Zillow.com.

The number of markets in a “double dip” jumped in January from five in December, data released today by Seattle-based Zillow show. The real estate information provider defines a double dip as five consecutive price drops after at least five straight monthly increases. The gains must have been preceded by a period where values fell in at least 10 of 12 months.

The prospect of rising interest rates may be reducing home prices after the government boosted sales in 2009 with tax credits, increased federal housing agency lending and purchases of mortgage-backed securities by the Federal Reserve, said Stan Humphries, Zillow’s chief economist. (more)

McAlvany Weekly Commentary, March 24, 2010

China: Tariffs, Trade Wars & Tragic Miscalculations

Posted on 24 March 2010.

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CFTC must act fast on metals limits - Chilton

The Commodity Futures Trading Commission needs to move quickly to establish position limits for metals such as gold and silver, Bart Chilton, the strongest proponent for position limits at the commission, said on Tuesday.

The CFTC, the country's top futures regulator, already has proposed a plan to limit the number of speculative contracts a trader can hold in the energy sector. The agency will hold a hearing on Thursday on whether metals position limits are needed to avoid concentration and price manipulation.

"I think we should propose a rule on metals position limits now and move forward as swiftly as possible," Chilton, a Democratic commissioner at the CFTC, told metal investors. (more)

How the Middle Class Slowly Evaporated in the Last 40 Years – Loss of Manufacturing, Bank Deregulation, Hyper Consumption, and Short-term Profit Seeki

Some like to think that the middle class has always been a fixture of American society. In fact, the rise of a steady and strong middle class didn’t happen until after World War II. Clearly people can’t look at the economically painful Great Depression, which rampaged the nation from 1929 to 1939 as a good time for average Americans? In fact, even a few years after World War II the nation hit a few rough patches with price controls and millions of Americans rushing back into the workforce. But with many of the industrial economies in tatters in Europe and Asia, the U.S. had a well positioned spot for decades of strong growth. But make no mistake by looking at history that we were producing and manufacturing goods for the world. And things seemed to work out well for many Americans even with a robust manufacturing base. (more)

Faber: Dismal Stocks, Bonds Create New Gold Standard

Uncertainties surrounding asset classes such as stocks and bonds have created a new gold standard, says Marc Faber, editor of “The Gloom, Boom and Doom Report.”

Between 2001 and 2008, gold outperformed stocks and bonds, but beginning in 2009, stocks soared.

That, Faber says, sent some investors to gold for safety because normally, retail investors cannot move in and out of different assets like institutional investors.

“I think we already have now a gold standard … created by the market place,” Faber tells CNBC. (more)

Florida political leaders consider state bank: 2% mortgages, 6% credit cards, no state debt costs

Even though this idea is obviously cost-effective with just a few moments’ consideration of the facts, even though the idea of creating money and credit for the public good rather than for bank profit has a rich history of support from many of America’s brightest minds, and even though this is the “secret” to the state with the lowest unemployment in the nation along with a record budget surplus (it’s North Dakota, one of only two solvent states today), the idea of a state-owned bank creating its own credit is a new idea for many Americans.

Florida candidate for Governor, economist Farid Khavari, explains that a state-owned bank should replace for-profit banks to provide substantial public benefits while profiting the state. Two percent mortgages would reduce interest payments by 85%, saving $88,000 per every $100,000 borrowed. The bank would pay 5% interest on deposits, charge 6% interest on credit cards, and 3-4% on commercial and vehicle loans. (more)

Treasurys Sink After Poor Sale

Treasury prices fell hard after a poor five-year auction that escalated concerns about the government's ability to sell its massive amounts of debt.

Worries about supply picked up this week after the government's $44 billion two-year auction on Tuesday attracted less demand than anticipated. The five year sale was messier, sending Treasury prices tumbling. Demand at the auctions may have been impacted by less buying from Japan as its fiscal year-end approaches. Nonetheless, the poor results put investors on edge given the huge amounts of debt the government is likely to continue to issue to fund its budget deficit.

Investors were reminded of the huge amounts of debt the government will need to continue to sell after President Barack Obama signed into law a $940 billion health-care overhaul bill on Tuesday, which will necessitate even more borrowing by the government. (more)

U.S. Is Riskier Than Euro Zone; So Says CDS Market

Something troubling has occurred in the market for default protection on the debt of the world's biggest borrower.

As the folks at Standard Poor's Valuation and Risk Strategies division noted in a research note Monday, the difference between the spread on U.S. sovereign credit default swaps and an equivalent benchmark for AAA-rated euro-zone sovereigns flipped into positive territory March 12. As U.S. CDS spreads expanded to their widest levels in two years, that cross-region gap blew out to 5.7 basis points last Friday before narrowing to 4.7 Tuesday.

Wider CDS spreads indicate that sellers of insurance against a particular issuer's default are charging more for it. In effect, the positive U.S.-versus-euro zone spread means investors think the risk of a U.S. default--however remote--is greater than that on euro-denominated sovereign debt. (more)

Portugal’s Debt Rating Lowered by Fitch on Finances

Portugal’s credit grade was cut by Fitch Ratings, underscoring growing concern that Europe’s weakest economies will struggle to meet their debt commitments as finances deteriorate.

The rating was lowered one step to AA- with a “negative” outlook, Fitch said in a statement today. The euro extended its decline, weakening 1.1 percent to $1.3355 as of 10:32 a.m. in London. Portuguese bonds fell, with the yield on the 10-year note rising 5 basis points to 4.33 percent. Portugal’s PSI-20 Index of stocks dropped 2 percent.

Euro-region governments including Greece, Ireland, Italy and Spain are seeking to narrow growing budget deficits. Portugal’s deficit is 9.3 percent of gross domestic product, more than triple the European Union’s 3 percent limit. Its economic growth is “significantly below” what is typical for a AA country, reducing its ability to resist the global financial crisis, Fitch said. (more)

Explain why you sold Britain's gold, Gordon Brown told

The decision to sell the gold – taken by Mr Brown when he was Chancellor – is regarded as one of the Treasury's worst financial mistakes and has cost taxpayers almost £7 billion.
Mr Brown and the Treasury have repeatedly refused to disclose information about the gold sale amid allegations that warnings were ignored.
Following a series of freedom of information requests from The Daily Telegraph over the past four years, the Information Commissioner has ordered the Treasury to release some details. The Treasury must publish the information demanded within 35 calendar days – by the end of April. (more)

Hussman: Inflation Will Be Huge in the Years to Come

Economist and fund manager John Hussman says inflation will be huge.

"It should not escape investors that the rapid expansion of deficits during the 1970s and into the early 1980s was accompanied by a hostile inflation climate, while the fiscal discipline of the 1990s produced a very pleasant period of low inflation pressures," Hussman writes in a note to investors.

Hussman’s near-term concern continues to be the risk of fresh credit strains, the likely outcome of which he feels will be a flight-to-safety toward default-free Treasury securities and a tendency toward dollar strength and commodity weakness.

“The long-term implications of bailouts, tax shortfalls and lack of budget discipline is likely to be significant inflation pressure beginning about four years or so out, and continuing for the remainder of the decade,” Hussman says. (more)

Here's Why The Money Supply Has Exploded, But We Haven't Seen Rampant Inflation Yet

The U.S. money supply has been expanding at an absolutely unprecedented rate. So why are we not experiencing rampant inflation? Why is the U.S. dollar not falling through the floor? Well, the truth is that all of this new money has gotten into the U.S. financial system but it is not getting into the hands of U.S. businesses and consumers. In fact, even though the money supply is exploding, U.S. banks have dramatically decreased lending. This has brought us to a very bizarre financial situation as a nation.

What we have seen is the U.S. government shovel massive amounts of cash into the U.S. financial system and then watch as the big banks sit on that cash and refuse to lend it. The biggest banks in the U.S. reduced their collective small business lending balance by another 1 billion dollars in November 2009. That drop was the seventh monthly decline in a row. In fact, in 2009 as a whole U.S. banks posted their sharpest decline in lending since 1942. (more)

Sales of New U.S. Homes Dropped in February to Lowest on Record

Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market.

Purchases decreased 2.2 percent to an annual pace of 308,000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.

The new-home market is vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6 percent this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the housing market as the administration takes steps to overhaul real-estate financing and regulation. (more)

This year, US public debt could reach end game

For at least four years, AsiaNews has sounded the alarm bells against the risks due to the huge size reached by speculative finance[1]. In 2008, we said that the attempt to save US banks could push the US debt beyond the point of solvency (see Maurizio d’Orlando, “US debt approaches insolvency . . .,” in AsiaNews 19 December 2008)[2]. Back them it could appear a bit overblown, but now even US Federal Reserve Chairman Ben S Bernanke is warning the US Congress about the danger. In a statement before the House Financial Services Committee,[3] he said that the US public debt might no longer be sustainable very soon. Financial jargon aside, the subtitle of an article by The Washington Times—Stage is set in U.S. for a Greek tragedy—says it all. Interviewed for the article, Bernanke says the United States is likely to face a debt crisis like the one in Greece sooner than later, “not something that is 10 years away”.

In 2008, the size of the debt was such that it was quite clear that it was not sustainable. Now we have a timeframe to measure the likelihood of insolvency for the US public debt, and it is this year. The reason for that is described in an article whose title needs no explanation: “The bankruptcy of the United States is now certain”. (more)

Oil reserves 'exaggerated by one third'

The scientist and researchers from Oxford University argue that official figures are inflated because member countries of the oil cartel, OPEC, over-reported reserves in the 1980s when competing for global market share.

Their new research argues that estimates of conventional reserves should be downgraded from 1,150bn to 1,350bn barrels to between 850bn and 900bn barrels and claims that demand may outstrip supply as early as 2014. The researchers claim it is an open secret that OPEC is likely to have inflated its reserves, but that the International Energy Agency (IEA), BP, the Energy Information Administration and World Oil do not take this into account in their statistics. (more)

Jay Taylor: Turning Hard Times Into Good Times

click here for audio

The Stealth Palladium Bull Market

The steeper the mountain the harder the climb the better the view from the finishing line Anonymous

Palladium was the underdog of the precious metals sector for a long time, because for the most part it hardly received any attention. In the last few months this all changed and with the introduction of the Palladium ETF (PALL), Palladium has finally emerged from the shadows to the spotlight. Now the average Joe has a way to jump in and out of Palladium without having to actually purchase the metal. In reality owing the physical is far better than buying the ETF, but that is a topic for another day. (more)

Gold's current consolidation phase to continue as the market looks for new direction.

Many market commentators argue that investing in gold is a waste of time especially since it does not pay interest and remains inert. This statement is very misleading. The issue of interest has no relevance. No one has ever invested in gold in order to receive interest. While gold is a precious metal as well as being a form of global currency, it is also a commodity. And, the reason why investors buy commodities is not for an annual dividend payment, but for a return on their investment that occurs as the price of the commodity appreciates. (I have not heard analysts say don't buy corn because it doesn't pay an interest). And, in many instances this rate of appreciation can be truly spectacular giving investors massive returns. (more)

Demand for Treasuries Soars, Defying the Experts

Many experts predicted this would be the year of the bear for Treasuries, as the exploding U.S. debt burden and fears of inflation drove investors to other assets.

But that hasn’t been the case.

The 10-year Treasury yield has actually dipped 20 basis points so far in 2010, to 3.65 percent. (One basis point is equivalent to 0.01%, or one-hundredth of a percentage point.)

Remember that bond prices move in the opposite direction from yields.

The government has had little difficulty in finding buyers for the record amounts of bonds it is issuing — $2.1 trillion last year. (more)

Top Analyst: "Developed Market Governments Are Insolvent By Any Reasonable Definition"

Dylan Grice, a top analyst for European financial giant Société Générale, writes:

Developed market governments are insolvent by any reasonable definition.

Who could have known?

Everyone, actually.

As I wrote in December 2008, "The "Central Banks' Central Bank" says Bailouts Putting Nations at Risk, as Confirmed By Higher Credit Default Swap Spreads":

The Bank for International Settlements (BIS) is often called the "central banks' central bank", as it coordinates transactions between central banks.

BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps: (more)

Lehman Bros categorized loans as sales to hide debt

Underemployment At Record 20% According To Gallup

Just in case anyone needed confirmation that the DOL data is just a little, how should we say it, cooked, here comes Gallup with their March 15 undermployment number, which just hit a 2010, and series, high of 20%. This is obviously worse compared to both the beginning of the year (19.5%) and February (19.8%). Unlike the Dept of Labor's arcane voodoo which lately is based more on executive confidential memos and snowfall observations, Gallup's underemployment measure is based on more than 20,000 phone interviews collected over a 30-day period and reported daily. Furthermore "Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by approximately two weeks." We wonder if the abnormally hot March weather will used as an excuse for a deterioraiton in the most recent NFP numbers. (more)

Metals Position Limits

RE: metals position limits

Regarding the Dire Necessity of Imposing Metals Position Limits on the Shorts

Others have written to the CFTC as if they assume the CFTC is made up of good people who would enforce position limits if only they knew that the markets were manipulated; and thus, two others have written the CFTC to show the current manipulation in progress.

I'm not so gracious, as I have written to the CFTC before, and I know that the CFTC has always evaded the issues. Therefore, I must assume the CFTC is made up of people who only think they are doing good, who assume that letting big banks get what they want is somehow compatible with free market theory, and thus, not regulating the bankers' position limits is somehow good, and that hiding the truth is somehow good for the nation.

Thank you, Bart Chilton, for writing that "he does not think his fellow commissioners are currently willing to support a move to curb speculation for metals contracts" so that we can help to persuade them.
http://www.reuters.com/article/ousiv/idUSTRE62L3YP20100322 (more)

15 Facts About China that Will Blow Your Mind

1. By 2025, China will build TEN New York-sized cities.
2. By 2030, China will add more new city-dwellers than the entire U.S. population.
3. China already consumes twice as much steel as the U.S., Europe and Japan combined.
4. If the Chinese, one day, use as much oil per person as Americans, then the world will need seven more Saudi Arabias to meet their demand.
5. There are already more Christians in China than Italy, and China is on track to become the largest center of Christianity in the world.
6. Chinese are far more likely to believe in evolution than Americans.
7. Chinese internet users are five times as likely to have blogs as Americans.
8. China has 150 percent more soldiers than America does -- plus a high tech 'Kill Weapon' the U.S. can't deal with.
9. China still hasn't rid itself of Europe's medieval plague.
10. Forty percent of Chinese small businesses went bust or almost went bust during the world financial crisis.
11. China executes three times as many people as the rest of the world COMBINED -- and uses mobile execution vans for efficiency.
12. China averages 274 protests PER DAY.
13. When you buy Chinese stocks, you are basically financing the Chinese government. Eight of Shanghai's top ten stocks are state-controlled arms of the government.
14. Fifty percent of counterfeit goods come from China.
15. The majority of Chinese drink polluted water.

Chart of the Day

$1 Million Doesn't Cut It for Retirement

Conventional wisdom says you need to save $1 million for retirement.

That target may be easy to remember, but it falls short of the true cost of what's required for post-career comfort. Longer life spans, the threat of inflation and the uncertain future of Social Security benefits make this long-touted savings advice inadequate for most, advisers say.

Scottrade recently polled 226 registered investment advisers on the topic and found that 71% don't believe $1 million is enough for the average American family. Most said families need to save double, or more than triple, the amount.

"Younger generations, especially, need to set their retirement goals higher than other generations and start saving as early as possible," says Craig Hogan, Scottrade's director of customer-relationship management and reporting. (more)

A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075

This policy brief presents a long view of the federal government's finances and the potential impact of two critical drivers of federal spending: the government's largest entitlement programs--Social Security, Medicare, and Medicaid--and interest on the federal debt held by the public. Under the projections shown here, outlays for those entitlement programs would rise from 8 percent of gross domestic product (GDP) today to 21 percent in 2075, which would exceed the share of GDP now absorbed by all federal revenues. Even if other major categories of federal spending remained fixed as a share of GDP, the growth of those programs would push total federal spending well above the level that it has been throughout much of the post-World War II period. Left unchecked, such spending could cause major deficits to emerge, propelling the government's debt and interest expenditures to unprecedented levels. The total cost of government, including interest expense, could more than double as a share of the economy, rising from 19 percent of GDP in 2002 to 40 percent in 2075. (more)

The future's hot for lithium - and getting hotter

The Gold Report: Jon, you're a very strong proponent of lithium and from what you've told us previously you believe it's hot. How hot is it?

Jon Hykawy: Hot and getting hotter. What we've seen recently is a number of deals coming to market looking for financing and those deals are getting done. We're currently in the midst of one Toronto IPO. It's an Australian-listed company called Orocobre Ltd. (AU:ORE). The company just put out press releases suggesting that they're going out and raising $22 million, to be exact. There's a rumor that we're going to see their direct neighbor on the salar in Argentina come to market soon with their IPO. We've seen a number of offtake and partnering agreements being signed including the Toyota Tsusho (OTCBB:TYHOF.PK) agreement with Orocobre. The interest in the sector has never been greater.

TGR: How are these deals getting financed so easily compared to other rare earth deals? (more)

Possibly the Best Signal for Economic Recovery

Some economic indicators suggest the worst of the Great Recession is behind us, but Jim Cory at Pax Corrugated Products, isn't seeing any signs of recovery.

"We're still waiting to see it get better," said Cory, president of the privately held custom box and point of purchase display maker that employs 53 in Lebanon. Last year, business was down and Cory said his company isn't seeing many indications of improvement this year.

"Demand is flat, as industry box shipments are down," he said. Year-to-year shipments were down about four percent in January, he said, according to industry data.

Corrugated box shipments have long been viewed as a leading economic indicator, favored by no less than former Fed Chairman Alan Greenspan. Virtually all manufactured products from raw materials to finished goods are put in a box for delivery as some point. So demand for corrugated boxes is an early sign of the economy's direction, according to advocates. (more)