U.S. stocks chalked up their best day in nearly two months on Thursday as investors welcomed a string of robust earnings reports, while Greece appeared close to a bailout deal, easing fears about a wider sovereign debt crisis.
News that Greece was readying severe austerity measures to secure a multibillion-euro aid package spurred widespread relief, and the more beaten-down sectors, like banks, recouped recent losses for a second day running.
Continuing the generally favorable earnings season, cellphone maker Motorola Inc (MOT.N) beat forecasts and its stock gained 3.5 percent to $7.16. Visa Inc, (V.N) reported higher-than-expected profits and raised its revenue outlook, spurring hopes of a revival in consumer spending. (more)
Friday, April 30, 2010
Modern Civilization: This Sucker Is Going Down
George W. Bush was onto something in the fall of 2008 when he remarked apropos of the Lehman collapse: “…this sucker could go down.” It’s my serene conviction, by the way, that this sucker actually is going down, right now, even as I clatter away at the keys — perhaps in slow motion, so that not many other bystanders have noticed yet, and the few who have noticed are mostly too crosseyed with nausea to speak.
It’s perhaps useful to define even what we mean when we say “this sucker.” Everybody knows what a sucker is, of course — say, a Midwestern public employees’ union pension fund snookered into buying a fat slice of equity tranche in a Goldman Sachs-engineered CDO. But “this sucker” is something else: a rather large cargo of commercial relations, entailed obligations, hopes, expectations, habits of daily life — indeed millions of whole lives — loaded onto the rather creaky vessel we call modern civilization. “This sucker” was such an apt term coming from someone whose understanding of civilization was like unto that of a boy who found a PlayStation under the Christmas tree. (more)
SWC…A Compelling Palladium Investment
In an article titled the Palladium; the stealth bull market, we explored the Palladium bull market and laid down the criteria necessary for Palladium to trade to the 800 ranges. We are going to post some of the excerpts of this article below before we examine SWC. "It broke through the 1st resistance point at 375 with relative ease and is now attempting to break past an even stronger zone of resistance. The $465-$475 ranges make up a zone of very strong resistance, and most likely it will take several attempts before palladium manages to break past this zone; once it does though it should be clear sailing to the 550-600 ranges.
The $465-$475 ranges which should have provided a zone of strong resistance, was once again taken out with ease, indicating that Palladium is in an extremely strong upward bullish phase. What is even more astounding is the fact that it has managed this in the face of a strengthening dollar; it is the only precious metal that continues to put in a series of new highs in tandem with a rising dollar. (more)
Bond Rally Teeters as Yield Spreads Blow Out: Credit Markets
The record rally in corporate bonds is showing signs of cracking, with yields rising the most in 13 months relative to government debt and new sales falling to the least this year.
The extra interest investors demand to own company debentures rather than government debt widened 6 basis points this week to 149 basis points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The last time spreads rose in a week was in the period ended Feb. 12. Global corporate bond issuance tumbled 56 percent to $19.6 billion, data compiled by Bloomberg show. (more)
Wheat Looks to be Consolidating, Support from Corn Helps
Given the current fundamental resistance to higher prices in wheat, the wheat trade remains constructive. Barring any major change in the outside markets, wheat should continue to work higher over the near term. Traders looking at fundamentals are poised to sell these markets on any sign of weakness; however the market has proven to be very resilient.The bulls in the wheat market continue to focus on the size of the net position held by trend following funds in the Chicago contract and to some extent the KC contract. At times, this position has pushed would be sellers to the sidelines. The most recent Commitments of Traders Report, as of April 20th, indicated that trend following funds were net short 61,500 contracts. We should see another slight reduction, as of April 23rd, once the report is released on Friday afternoon. Basically, we are looking at a reduction of 17,000 to 18,000 net short positions over the course of the corrective rally that began on April 5th. More momentum is needed to consider this a fundamental shift in how this short position is going to be handled going forward. (more)
Bill Clinton Is Now a Gold Bug
File this under unexpected. Former President Bill Clinton blames the current financial crisis on the U.S. leaving the gold standard.
During an interview conducted at the Peterson Institute by Bob Schaeffer, Clinton sounded like a hardcore gold bug as he said that the problems in the economy started when the U.S. went off the gold standard.
He then hedged a bit and justified the U.S. leaving the gold standard for "economic management" reasons.
Those economic management reasons were, of course, that the U.S. had printed so many dollars at the then price of gold ($35 per ounce) that the U.S. did not have enough gold to back up all the money it printed. But Clinton's statement clearly implies that he understands that gold is a check on out of control government printing of money. (more)
During an interview conducted at the Peterson Institute by Bob Schaeffer, Clinton sounded like a hardcore gold bug as he said that the problems in the economy started when the U.S. went off the gold standard.
He then hedged a bit and justified the U.S. leaving the gold standard for "economic management" reasons.
Those economic management reasons were, of course, that the U.S. had printed so many dollars at the then price of gold ($35 per ounce) that the U.S. did not have enough gold to back up all the money it printed. But Clinton's statement clearly implies that he understands that gold is a check on out of control government printing of money. (more)
7 questions Eliot Spitzer would have asked Goldman
In ordinary times, the SEC's fraud case against Goldman Sachs would have been settled before it was even filed. There would have been a consent decree in which Goldman neither admitted nor denied any wrongdoing, paid a fine, and agreed to make more fulsome disclosures in the future. But these are not ordinary times, and the SEC's very public announcement that it's charging Goldman with misrepresentation and fraud in its marketing of a subprime debt product has become one of the biggest stories in the entire Wall Street scandal. (more)Frauds And Scandals Follow The Collapse Of The Financial System , Bob Chapman
As the world faces an ongoing sovereign debt debacle we see an attempt to defuse an oncoming scandal involving Goldman Sachs, Paulson and perhaps others.
The collapse of the fiat money system is underway and each day picks up momentum. The only question is how long it can survive? In the interim we are faced with inflation and perhaps hyperinflation as the privately owned Federal Reserve and other central banks add stimulus and money and credit into their financial systems.
America’s system of finance and economy has been deliberately destroyed via regulation, illegal immigration and free trade, globalization, offshoring and outsourcing. We wrote about these issues and tactics as long ago as 1967. Taxes on both individuals and corporations are still onerous, the exception being the rich who pay far less than their fair share. By the way taxes will increase in the future and government may in the future attempt to take away your retirement plans and replace them with guaranteed annuities. We ask how can a bankrupt government guarantee anything? America and the rest of the world are realizing that you cannot live beyond your means indefinitely. The resultant poverty that eventually results is accompanied by the theft of wealth by inflation, subtly and secretly. (more)
Thursday, April 29, 2010
McAlvany Weekly Commentary, April 28, 2010
The End of Globalization. A Continuing Conversation With Harold James
Posted on 28 April 2010.
-by Harold James
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Biggest VIX Jump Since 2008 May Be One-Day Wonder: Chart of Day
The U.S. stock market’s fear gauge probably will settle down in the next few days after its biggest one-day surge since October 2008, according to Bill Luby, editor of the VIX and More newsletter and blog.
The CHART OF THE DAY displays daily percentage changes in the indicator -- the Chicago Board Options Exchange Volatility Index, also known as the VIX -- during the past 18 months.
The VIX climbed 31 percent yesterday as Standard & Poor’s lowered Greece’s debt ratings to junk-bond status and downgraded Portugal, heightening concern that European government deficits will spark a global financial crisis. This was only the eighth increase of 30 percent or more since the CBOE introduced the gauge in 1993, according to data compiled by Bloomberg. (more)
Trump: Commercial Real Estate Won’t Crash
While commercial real estate has its problems, the sector isn’t headed for a crash, says property icon Donald Trump.
“Commercial real estate will be severe, but nothing like the housing (crisis) that almost imploded our whole economy,” he says.
The industry was actually in worse shape during the last downturn of the early 1990s, Trump says.
“We don’t have that much supply compared to 1990. The commercial real estate problem is largely a question of financing it.” (more)
“Commercial real estate will be severe, but nothing like the housing (crisis) that almost imploded our whole economy,” he says.
The industry was actually in worse shape during the last downturn of the early 1990s, Trump says.
“We don’t have that much supply compared to 1990. The commercial real estate problem is largely a question of financing it.” (more)
Roubini: Euro Zone May Collapse Within Days
New York University economist Nouriel Roubini says the euro zone’s days may be numbered, and he’s not talking about some day far off in the future.
“In a few days, there might not be a euro zone for us to discuss,” he said at a Los Angeles conference sponsored by the Milken Institute, Reuters reports.
European policy makers may have to fork over 600 billion euros ($794 billion) in aid or buy government bonds to erase the debt crisis, economists tell Bloomberg.
Roubini says Greece can’t come up with the 10 percent spending reduction necessary to prevent its debt from exploding out of control. (more)
“In a few days, there might not be a euro zone for us to discuss,” he said at a Los Angeles conference sponsored by the Milken Institute, Reuters reports.
European policy makers may have to fork over 600 billion euros ($794 billion) in aid or buy government bonds to erase the debt crisis, economists tell Bloomberg.
Roubini says Greece can’t come up with the 10 percent spending reduction necessary to prevent its debt from exploding out of control. (more)
A Clear Warning Sign: Global Liquidity Is Drying Up!
In last week’s Money and Markets column I told you the majority of my indicators are signaling that the stock market has probably entered the last phase of its medium-term uptrend, which began in March 2009.I went over price-to-earnings ratios (based on twelve-months trailing GAAP earnings) and dividend yields. Both metrics are showing a heavily overvalued market.
Today I want to add that “normalized earnings,” which try to even out the impact of the ups and downs in the business cycle, are strongly supporting this message.
Plus, I’d like to give you updates on what I discussed last week and tell you about one more important signal … (more)
Spain downgrade sparks European sell-off
Spain's debt has been downgraded in a further widening of Europe’s government debt crisis.
The move follows its reductions yesterday of Portugal and Greece, which sent shock waves through world markets.
Standard & Poor’s said its decision to downgrade Spain’s credit rating by one notch to AA from AA+ is due to its expectation that the country will suffer an “extended" period of subdued economic growth.
“We now believe that the Spanish economy’s shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed,” the S&P credit analyst Marko Mrsnik said. (more)
The move follows its reductions yesterday of Portugal and Greece, which sent shock waves through world markets.
Standard & Poor’s said its decision to downgrade Spain’s credit rating by one notch to AA from AA+ is due to its expectation that the country will suffer an “extended" period of subdued economic growth.
“We now believe that the Spanish economy’s shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed,” the S&P credit analyst Marko Mrsnik said. (more)
Contagion Getting Worse
So it’s looking pretty ugly across the pond this morning.
Spreads between the debt of fiscally troubled countries — Portugal, Ireland, Italy, Greece, Spain — are continuing to widen versus German debt, a sign of growing stress. The blowout in Greek vs. German spreads is getting downright comical. On 10-year bonds, it was at more than 1.90 percentage points earlier this morning, with the Greek 10-year yielding just under 12%. All told the spread between Greek and German 10-years is around 850 basis points. Yields on Greek two-year bonds are also soaring. At around 8:30 a.m. Tradeweb was quoting the yield on the Greek two year at more than 22%. (more)
New Bloomberg Analysis Gives Income Investors Reason to Cheer
After some very tough years, income investors may finally rejoice. An analysis conducted by Bloomberg predicts that the current quarter will be the first time in years that no S&P 500 companies will cut or suspend their dividends. If true, it would mark the first such quarter since the second quarter of 2004, and it is certainly a bullish statement by US corporations. Earnings have steadily improved over the last year, and according to our data trailing twelve month reported earnings on the S&P 500 have increased 89% over the past year. Having heavily cut costs companies are flush with cash, and very few S&P 500 stocks are distressed or in need of a dividend cut to conserve capital. As a comparison, S&P 500 companies decreased dividend payouts by a record $52 billion in 2009. (more)
Gold Bubble?
“Gold remains as a safe haven during times of economic uncertainty,” maintains Frank Holmes, a perennial presence at our Investment Symposium. “In the 1970s, double-digit inflation rapidly eroded wealth, and these days there is a lingering fear of higher inflation as the federal government piles more debt onto its already groaning balance sheets.
“But a key difference is that gold has gained stature as a legitimate asset class for investors. During the 1970s run-up, investment demand peaked around 27 million ounces, about half of what it is today. Contributing to this demand are new investment vehicles, including gold-oriented mutual funds and bullion-backed ETFs, both of which have made it easier for investors to allocate a portion of their portfolios to the yellow metal.
“We also have greater affluence in the developing world, where people have traditionally turned to gold to store their wealth. Central banks in these countries, most notably China and India, have built up their gold holdings as a way to diversify their foreign reserves away from the dollar and other paper currencies.
“The chart below compares the price performance of gold bullion during the 1970s bull market (green line) to the current price trend (red). As you can see, the price line since the start of 1999, when gold was trading just under $300, has been far less volatile than during the earlier period.
“The 1990s dot-com era was a bubble, and likewise the 2000s housing market. But gold? We don’t think so.” Agora Financial
Wednesday, April 28, 2010
Cuts to Debt Rating Stir Anxiety in Europe
Greece’s credit rating was lowered to junk status Tuesday by a leading credit agency, a decision that rocked financial markets and deepened fears that a debt crisis in Europe could spiral out of control.
The ratings agency, Standard & Poor’s, downgraded Greece’s long-term and short-term debt to non-investment status and cautioned that investors who bought Greek bonds faced dwindling odds of getting their money back if Greece defaulted or went through a debt restructuring. The move came shortly after S.&P. reduced Portugal’s credit rating and warned that more downgrades were possible. (more)
The ratings agency, Standard & Poor’s, downgraded Greece’s long-term and short-term debt to non-investment status and cautioned that investors who bought Greek bonds faced dwindling odds of getting their money back if Greece defaulted or went through a debt restructuring. The move came shortly after S.&P. reduced Portugal’s credit rating and warned that more downgrades were possible. (more)
Canada's National Debt
In 1993, the Canadian Taxpayers Federation commissioned the construction of a giant debt clock – 12 feet long by 8-and-a-half feet high – with changeable faceplates for the federal and each provincial government. The clock displayed the per-second increase in debt along with the share for each Canadian family.
Debt ClockThe clock was toured around the country and made headlines everywhere it went. The clock went into temporary retirement once the federal government balanced the budget in 1997 and began paying down the federal debt.
Now we can reach more Canadians through debtclock.ca than we could by touring around a physical debt clock. But the message hasn’t changed.
In fiscal 2008-09 the debt clock climbed by $183.92 per second, taking our federal debt up to $463,700,000,000. After April 1, 2009, the clock, and our federal debt began growing by $1,772.58 per second. That’s $106,355 per minute, $6.4-million per hour, or $153-million every day! By March 31, 2010, Canada’s federal debt will hit $519,600,000,000. (more)
Debt ClockThe clock was toured around the country and made headlines everywhere it went. The clock went into temporary retirement once the federal government balanced the budget in 1997 and began paying down the federal debt.
Now we can reach more Canadians through debtclock.ca than we could by touring around a physical debt clock. But the message hasn’t changed.
In fiscal 2008-09 the debt clock climbed by $183.92 per second, taking our federal debt up to $463,700,000,000. After April 1, 2009, the clock, and our federal debt began growing by $1,772.58 per second. That’s $106,355 per minute, $6.4-million per hour, or $153-million every day! By March 31, 2010, Canada’s federal debt will hit $519,600,000,000. (more)
Barbara Hollingsworth: Fannie Mae owns patent on residential 'cap and trade' exchange
When he wasn't busy helping create a $127 billion mess for taxpayers to clean up, former Fannie Mae Chief Executive Officer Franklin Raines, two of his top underlings and select individuals in the "green" movement were inventing a patented system to trade residential carbon credits.
Patent No. 6904336 was approved by the U.S. Patent and Trade Office on Nov. 7, 2006 -- the day after Democrats took control of Congress. Former Sen. John Sununu, R-N.H., criticized the award at the time, pointing out that it had "nothing to do with Fannie Mae's charter, nothing to do with making mortgages more affordable." (more)
Barbara Hollingsworth: Fannie Mae owns patent on residential 'cap and trade' exchange
When he wasn't busy helping create a $127 billion mess for taxpayers to clean up, former Fannie Mae Chief Executive Officer Franklin Raines, two of his top underlings and select individuals in the "green" movement were inventing a patented system to trade residential carbon credits.
Patent No. 6904336 was approved by the U.S. Patent and Trade Office on Nov. 7, 2006 -- the day after Democrats took control of Congress. Former Sen. John Sununu, R-N.H., criticized the award at the time, pointing out that it had "nothing to do with Fannie Mae's charter, nothing to do with making mortgages more affordable." (more)
Silver-Mining ETF Emerges as Latest Niche
Mining stocks got support as GlobalX Funds started selling the GlobalX Silver Miners ETF(SIL).
It's the latest in a flurry of mining-stock exchange traded funds, which include the Market Vectors Junior Gold Miners ETF(GDXJ) and the First Trust ISE Global Copper Index Fund(CU). GlobalX also has a new copper fund with its Copper Miners ETF(COPX). The company has the silver category all to itself for now.
Canada accounts for 58% of the ETF, Mexico, 24%, the U.S., 10%, and Russia and Peru, 4% each. Many of the Canada-based companies have much of their operations in South or Central America. (more)
It's the latest in a flurry of mining-stock exchange traded funds, which include the Market Vectors Junior Gold Miners ETF(GDXJ) and the First Trust ISE Global Copper Index Fund(CU). GlobalX also has a new copper fund with its Copper Miners ETF(COPX). The company has the silver category all to itself for now.
Canada accounts for 58% of the ETF, Mexico, 24%, the U.S., 10%, and Russia and Peru, 4% each. Many of the Canada-based companies have much of their operations in South or Central America. (more)
Oil Volatility Sinks as Shortage Concern Eases: Energy Markets
Crude oil volatility is falling to the lowest level in almost three years as brimming stockpiles and rising OPEC investment in production capacity eases concern of shortages.
Oil’s 50-day historical volatility, a measure of how much crude fluctuates around its average price during that period, declined to 23 percent yesterday, the lowest since July 2007. The measure rose to a record 108 percent at the beginning of 2009 as prices collapsed following the demise of Lehman Brothers Holdings Inc. and the onset of global recession.
The Organization of Petroleum Exporting Countries said it is planning 140 oil projects over the next five years and that its 6 million barrels a day of unused production is enough to meet demand and avoid a repeat of the price swings of 2008. U.S. crude stockpiles rose to 356 million barrels on April 2, the highest since June, and inventories held on ships are climbing, according to Morgan Stanley. (more)
An illegal bank is the second-largest holder of U.S. treasury securities
From the U.S. Treasury Department’s latest numbers of major foreign holders of treasury securities, we see that China owned $877.5 billion and Japan owned $768.50 billion in February 2010.
From their historical data, we see that China overtook Japan as the largest foreign holder of treasury securities as recently as September 2008, the month that the world’s economic system was thrown into turmoil by the collapse of Lehman Brothers and the stock and real estate market.
However, Japan isn’t the second-largest holder of U.S. treasury securities — the privately owned Federal Reserve Bank of New York is. That is, one of the 12 member banks of the illegal privately owned Federal Reserve System of the United States.
From their official numbers on April 21, 2010, they owned $771.57 billion in U.S. treasury securities — $3 billion more than Japan did in February. (more)
From their historical data, we see that China overtook Japan as the largest foreign holder of treasury securities as recently as September 2008, the month that the world’s economic system was thrown into turmoil by the collapse of Lehman Brothers and the stock and real estate market.
However, Japan isn’t the second-largest holder of U.S. treasury securities — the privately owned Federal Reserve Bank of New York is. That is, one of the 12 member banks of the illegal privately owned Federal Reserve System of the United States.
From their official numbers on April 21, 2010, they owned $771.57 billion in U.S. treasury securities — $3 billion more than Japan did in February. (more)
11 cities of the 20-city index saw year-over-year declines
“Further,” notes S&P’s David Blitzer, “in six cities, prices were at their lowest levels since the prices peaked three-four years ago. These data point to a risk that home prices could decline further before experiencing any sustained gains. While the year-over-year data continued to improve for 18 of the 20 MSAs and the two Composites, this simply confirms that the pace of decline is less severe than a year ago. It is too early to say that the housing market is recovering.” This chart might be a better representation of what’s really happening… that year-over-year gain looks pretty silly plotted this way:
In all, 1.8 million buyers have taken advantage of these $8,000 free tax credits, at an expense of $12.6 billion to the US Treasury. Those numbers are just through February.
That program is supposed to expire this Friday. The National Association of Realtors (NAR) estimated last week that 44% of March homebuyers would NOT have purchased a home without the credit. That doesn’t bode well for the rest of 2010. Agora Financial
Hunting for the Next Gulf Gusher
Between its acquisition of Devon Energy's (NYSE: DVN) shelf properties and its takeover offer for midsized Mariner Energy (NYSE: ME), Apache (NYSE: APA) sure made some big waves in the Gulf of Mexico this month.
The moves prompted me to assess how ATP Oil & Gas (Nasdaq: ATPG) stacks up from a comparable valuation perspective. ATP Oil & Gas shareholders are far from the only ones wondering whether they're sitting on the next Gulf gusher, however. A reader asked me to opine on W&T Offshore (NYSE: WTI), and I'm happy to oblige.
If you're not familiar with W&T Offshore, this is a company that's focused on the Gulf of Mexico shelf. Of the company's top 10 fields at year's end, only one was out in the deepwater. W&T Offshore recently reported holding an interest in 77 producing fields spread across the Gulf, so its asset base is far less concentrated than that of ATP Oil & Gas or Contango Oil & Gas (AMEX: MCF). Production is 53% natural gas-weighted, and clocks in at around 220 million cubic feet equivalent (Mmcfe) per day. Reserves dropped to 371 billion cubic feet equivalent (Bcfe) last year, largely on account of low average gas prices. (more)
The moves prompted me to assess how ATP Oil & Gas (Nasdaq: ATPG) stacks up from a comparable valuation perspective. ATP Oil & Gas shareholders are far from the only ones wondering whether they're sitting on the next Gulf gusher, however. A reader asked me to opine on W&T Offshore (NYSE: WTI), and I'm happy to oblige.
If you're not familiar with W&T Offshore, this is a company that's focused on the Gulf of Mexico shelf. Of the company's top 10 fields at year's end, only one was out in the deepwater. W&T Offshore recently reported holding an interest in 77 producing fields spread across the Gulf, so its asset base is far less concentrated than that of ATP Oil & Gas or Contango Oil & Gas (AMEX: MCF). Production is 53% natural gas-weighted, and clocks in at around 220 million cubic feet equivalent (Mmcfe) per day. Reserves dropped to 371 billion cubic feet equivalent (Bcfe) last year, largely on account of low average gas prices. (more)
Chart of the Day: US Housing Prices
The Case-Shiller 10-city index is up 1.6% since February of last year. The 20-city has risen 0.6%.
An ETF to Play the Gold Miners
For investors expecting the gold miners to report strong first quarter earnings this week, now is the appropriate time to gain exposure to gold through the miners.
Newmont Mining(NEM) will report earnings Tuesday, while Goldcorp(GG) and Barrick(ABX) report on Wednesday. Combined, these companies account for 38% of the net assets of Market Vectors Gold Miners ETF(GDX).
Last earnings season, the reports from these top components of GDX were spread out over the course of almost a month, with a week or more separating each company's announcement. All three companies beat estimates, but the impact on GDX was minimized due to the timing of the reports. This time around, the effect of the reports on GDX will be more direct. (more)
Newmont Mining(NEM) will report earnings Tuesday, while Goldcorp(GG) and Barrick(ABX) report on Wednesday. Combined, these companies account for 38% of the net assets of Market Vectors Gold Miners ETF(GDX).
Last earnings season, the reports from these top components of GDX were spread out over the course of almost a month, with a week or more separating each company's announcement. All three companies beat estimates, but the impact on GDX was minimized due to the timing of the reports. This time around, the effect of the reports on GDX will be more direct. (more)
Tuesday, April 27, 2010
Why Are U.S. Stocks and The U.S. Dollar Rising?
So why are these markets rising day after day, month after month? Before we answer that question we want to address the following error that we think the typical investor makes. Turn on the news and an investor will hear the exact reason the market rose or dropped on any given day. How can this be possible? When we hear these explanations we ask ourselves: - Is it that simple? With trillions of dollars floating around the global markets how can the local news or an analyst so simply “enlighten” us by explaining exactly why the Dow Jones rose or fell.
- If analysts can conclude simple ‘cause and effect’ relationships between daily events and market movements, why can’t this same logic provide better forecasting results? (more)
Rogoff Says Greece May Not Be Europe’s Last Bailout
Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.
“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.” (more)
Strategist Daley: Stocks May Plunge 40 Percent
Stocks may soon suffer a plunge, because the economic rebound stems from massive government stimulus that is unsustainable, says Kirby Daley, strategist at Newedge Group.
"Right now we're enjoying the confluence of the implementation of massive stimulus, massive monetary stimulus as well as fiscal, around the world," he says.
"I don't believe we have 30 percent upside from here, I certainly believe we are at risk of 30 to 40 percent downside."
Many investors are enthusiastic over the global rebound from recession, including a 5.6 percent expansion in the United States during the fourth quarter. (more)
"Right now we're enjoying the confluence of the implementation of massive stimulus, massive monetary stimulus as well as fiscal, around the world," he says.
"I don't believe we have 30 percent upside from here, I certainly believe we are at risk of 30 to 40 percent downside."
Many investors are enthusiastic over the global rebound from recession, including a 5.6 percent expansion in the United States during the fourth quarter. (more)
9 Years' Worth of Homes
Economic theory has it that prices tend to rise when demand exceeds supply. But when the potential inventory of homes for sale by banks -- which is aside from the properties that homeowners and builders might also be looking to unload -- is equivalent to nine years' worth of demand, as detailed by Real Time Economics in "Number of the Week: 103 Months to Clear Housing Inventory," that suggests those who see signs of a recovery in the residential real estate market should probably be thinking about checking into rehab: (more)
Economists: The stimulus didn't help
The recovery is picking up steam as employers boost payrolls, but economists think the government's stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.
In latest quarterly survey by the National Association for Business Economics, the index that measures employment showed job growth for the first time in two years -- but a majority of respondents felt the fiscal stimulus had no impact.
NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act, which the White House's Council of Economic Advisers says is on track to create or save 3.5 million jobs by the end of the year. (more)US newspaper circulation falls 8.7 percent
Circulation continues to drop severely at U.S. newspapers, though the rate of decline slowed from the previous six-month reporting period.
Figures released Monday by the Audit Bureau of Circulations show average weekday circulation fell 8.7 percent in the six months that ended March 31, compared with the same period a year earlier. Sunday circulation fell 6.5 percent.
That's a slight improvement from April through
Even so, the top 25 newspapers in the country showed some huge circulation losses. (more)
Housing Sales and Inflation Surge
The big news in the economy last week was new home sales jumped 27% in March. It was the best monthly increase percentage wise since John F. Kennedy was in office. What the mainstream media did not tell you was new housing starts jumped up from a very low level– like the lowest level in history! This chart from shadowstats.com illustrates the point: This is one of the many reasons why shadowstats.com founder, John Williams, says the economy is “bottom bouncing.” That is exactly what the chart shows. In early 2006, housing starts were more than 2 million–now they are just over a half million. Housing starts are down around 75% from the peak. Does this look like a big turnaround to you? Please do not get fooled into thinking we are on the brink of a real recovery. Williams says, “The U.S. economy remains in an economic depression, which is about to intensify anew. . .” (more)
Bankers Said ‘Anything’ to Get High Rating, S&P Ex-Analyst Says
Just past midnight on May 3, 2005, Standard & Poor’s analyst Chui Ng e-mailed co-workers to broker a solution to demands by Goldman Sachs Group Inc. bankers that he said violated two or more of the ratings company’s internal guidelines.
Goldman Sachs was adding $200 million in debt at the “last minute” to a $1.5 billion bond pool called Adirondack Ltd., Ng wrote. That meant the New York investment bank would originate 13 percent of the pool itself, two-and-a-half times the 5 percent limit set by S&P.
Goldman Sachs also balked at Ng’s request to pay in advance for an insurance policy known as a credit default swap, which was being used to create the additional debt obligation. (more)
Euro Crash?
“This will be the biggest story of 2010,” says our macro adviser Rob Parenteau, “but Wall Street economists and investment analysts will be the last to really get it. The European Monetary Union had several design flaws from the get-go.
“We presume the path of least resistance will be a maxi-depreciation of the euro, on the order of another 20–30% decline in the exchange rate of the euro.”
Say again: A 20-30% euro crash.
“It begins, but does not end, with Greece (actually, it began with Latvia and Ireland, but that is another story). Band-Aids to save Greece, no matter how graciously offered by the legitimately concerned German politicians, cannot and will not paper over the cracks in the rest of the peripheral eurozone nations -- which we will refer to as the GIIPS, since that seems to be the more politically correct version of the more porcine moniker.
“The math of the fiscal balances in the GIIPS is such that partial default or partial public debt renegotiation is all but inevitable. We would not touch GIIPS’ public debt until this becomes evident to more professional investors and until the potential haircuts (principal reductions) can be plausibly quantified.
“All else on the way to public debt default is shadowboxing, mostly for public political consumption only. IMF or eurozone loans or fiscal assistance only accomplish the extend-and-pretend wash/rinse/repeat cycle we have seen policymakers turn to one too many times during the recent financial and economic crisis.” Agora Financial
Monday, April 26, 2010
Gold Most Likely to Double: Puru Saxena
Gold will most likely double from its current $1150 an ounce during the course of the bull market, according to Puru Saxena, founder of Puru Saxena Wealth Management.
In an exclusive interview with Kitco News, Saxena said one major factor in gold’s favor "is that central banks have now become net buyers of gold. So that reduces supply from the market,” said Saxena.
Investment demand will appreciate over time as people become more dubious over currencies and they transfer assets into gold as a hedge, said the investment adviser from his Hong Kong office.
He thinks inflation will occur at an accelerated pace over the next few years. "Real interest rates are negative in most countries, so gold should continue to benefit purely as an anti-currency because people lost faith in the euro and the dollar," he said. "At some point people are going to say well, ‘we don’t want to lose purchasing power in currencies that are dubious, we want gold as an insurance.’” (more)
The Six Key Drivers of Emerging Markets
Emerging markets are changing the way the world works by developing into global powerhouses. The latest edition of our “What’s Driving?” series identifies the six key drivers and the effect they have on the economic vitality of emerging markets.1. Rapid Economic Growth: In the coming years, growth in emerging economies is expected to outpace that of the developed world. This growth is fueling an increase in household income in places like China and India where nearly 60 million people—roughly the combined populations of Texas and California—are joining the ranks of the middle class each year. (more)
Soros: Tame Derivatives or Risk Yet Another Crash
Billionaire George Soros says the derivatives behind the Securities and Exchange Commissions’ case against Goldman Sachs “merely cloned existing mortgage-backed securities into imaginary units that mimicked the originals.”
"Whether or not Goldman is guilty, the transaction in question clearly had no social benefit,” Soros writes in the Financial Times. "The primary purpose of the transaction was to generate fees and commissions."
"This synthetic collateralized debt obligation did not finance the ownership of any additional homes or allocate capital more efficiently; it merely swelled the volume of mortgage-backed securities that lost value when the housing bubble burst.” (more)
"Whether or not Goldman is guilty, the transaction in question clearly had no social benefit,” Soros writes in the Financial Times. "The primary purpose of the transaction was to generate fees and commissions."
"This synthetic collateralized debt obligation did not finance the ownership of any additional homes or allocate capital more efficiently; it merely swelled the volume of mortgage-backed securities that lost value when the housing bubble burst.” (more)
Is South Africa turning into Zimbabwe?
Aleading black South African commentator has uttered the dreaded “Z” word, a sentiment that has been considered too terrible to think for ordinary people and considered near-treasonous in the upper reaches of the ruling African National Congress. “Hardly a decade from now, Zimbabwe will be our destination, our reality,” wrote Barney Mthombothi in his column in this weekend’s Financial Mail, South Africa’s equivalent of The Economist.
Mr Mthombothi, one of his country’s finest journalists, was commenting in the course of an analysis on the dire situation in neighbouring Zimbabwe where, he said, life had become “hell on earth”. (more)
Greek meltdown in danger of spreading
GERMANY, France and the International Monetary Fund (IMF) must act quickly to bail out Greece to prevent a slide in confidence in financial markets, Alistair Darling said yesterday.
“It’s absolutely imperative that the IMF, the euro group and Greece sort this out,” said the chancellor, attending the spring meetings of the IMF and World Bank in Washington.
Eurozone governments and the IMF are preparing a €45 billion (£39 billion) loan package for Greece after market concerns about its ability to meet its financial commitments. (more)
Dodd Bill Would Allow Fed To Hide Its Spending
The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate.
"The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn't do anything of the sort. I'm going to run down the details for you, and reprint the legislative language so you can read it yourself," writes Rep. Alan Grayson (D-Fla.).
It would not allow the GAO to look into the Fed's massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions. (more)
Gerald Celente: Financial Reform is Just a Show
Trends forecaster Gerald Celente gives his analysis on Wall Street regulation, including problems with the finance reform bill.
Celente argues that the people who deregulated the financial industry are the same people advising President Obama in the White House. The trends forecaster points out the large amounts of money President Obama and Senator Chris Dodd have received from financial institutions.
“This is just another episode in the presidential reality show to make people feel like they’re doing something,” says Celente. “The major source of the problem is Federal Reserve policy.”
Celente states: “The Obama policies are the ones that are creating the too-big-to fails to make them even bigger.” He comments on a page of the bill that allows the FDIC to bailout the banks with taxpayer money.
Bank of Canada sounds alarm on growing deficits
Bank of Canada Governor Mark Carney warned on Saturday of the need to tackle growing fiscal deficits around the world, saying some people underestimate the scale of action needed to bring public finances under control. Carney, speaking to reporters following G20 and IMF meetings in Washington, said the Greek debt crisis had served as a stark reminder to policy makers of the dangers inherent in their massive, globally coordinated stimulus plans, widely credited with preventing a depression.
The Canadian economy could take a hit if other countries were forced to make bigger-than-expected fiscal adjustments or implement exit strategies sooner than anticipated, he said. (more)
Saturday, April 24, 2010
Trading Crude Oil Spreads: WTI and Brent
Many investors are interested in profiting from their views on the price of crude oil, but may not have considered that trading price differentials between different products. West Texas Intermediate (WTI) and Brent crude oil, offer compelling opportunities for traders.Two main types of crude oil products traded in the marketplace are based on location and grade. The one we normally trade in North America is West Texas Intermediate, the type of oil entering the United States through the Gulf of Mexico. Brent crude oil is the product located in the North Sea between Scotland and Norway, is essentially the benchmark for the European market.
WTI has slightly lower sulfur content and is therefore easier to refine to meet emissions requirements in place in most Western countries. Therefore, it demands a higher price. The West Texas Intermediate crude has an average historical premium of $1.40 over Brent. However we often see the prices go out of alignment and this often has to do with location and transportation bottlenecks. If crude oil is subject to a shortage in one region and there is an excess supply in another, oil will eventually be redirected, depending on the shipping industry’s capacity to move it around. This redistribution can take a few weeks or months, but over the medium term the market naturally rebalance. Oil tankers are basically conducting arbitrage as they move their oil around the world. In the meantime in the short term market prices can get out of line. (more)
Governments Will 'Bankrupt Us': Marc Faber
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report.
"They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down...they'll just print money and print more money," he said on CNBC Thursday.
"What I object to the current government intervention in so-called 'solving the crisis', (is that) they haven't solved anything. They've just postponed it." (more)
High-Frequency Trading: High-tech highway robbery
The Securities and Exchange Commission (SEC) knows that High-Frequency Trading (HFT) manipulates the market and bilks investors out of tens of billions of dollars every year. But SEC chairman Mary Schapiro refuses to step in and take action. Instead, she's concocted an elaborate "information gathering" scheme, that does nothing to address the main problem. Schapiro's plan--to track large blocks of trades by large institutional investors-- is an attempt to placate congress while the big Wall Street HFT traders to continue to rake in obscene profits. It achieves nothing, except provide the cover Schapiro needs to avoid doing her job.
High-frequency trading (HFT) is algorithmic-computer trading that finds "statistical patterns and pricing anomalies" by scanning the various stock exchanges. It's high-speed robo-trading that oftentimes executes orders without human intervention. But don't be confused by all the glitzy "state-of-the-art" hype. HFT is not a way of "allocating capital more efficiently", but of ripping people off in broad daylight. (more)
Escalating Greek default fears rock Europe's debt markets
With contagion spreading across Southern Europe, spreads on 10-year Greek bonds exploded to almost 600 basis points over German Bunds in panic trading, pushing borrowing costs close to 9pc. Rates on two-year debt rose to 10.6pc in a market gone mad. “It is clear that the Greek situation is a very serious one,” said Dominique Strauss-Kahn, head of the International Monetary Fund. “There is no silver bullet to solve it in an easy manner.”
Now we know the truth. The financial meltdown wasn't a mistake – it was a con
The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves. (more)
Are Interest Rate Derivatives a Ticking Time Bomb?
Derivatives are the world's largest market, dwarfing the size of the bond market and world's real economy.
The derivatives market is currently at around $600 trillion or so (in gross notional value).
In contrast, the size of the worldwide bond market (total debt outstanding) as of 2009 was an estimated $82.2 trillion.
And the CIA Fact Book puts the world economy at $58.07 trillion in 2009 (at official exchange rates).
Interest rate derivatives, in turn, are by far the most popular type of derivative. (more)
Friday, April 23, 2010
Food costs jump most in 26 years...
Wholesale prices rose more than expected last month as food prices surged by the most in 26 years. But excluding food and energy, prices were nearly flat.
The Labor Department said the Producer Price Index rose by 0.7 percent in March, compared to analysts' forecasts of a 0.4 percent rise. A rise in gas prices also helped push up the index.
Still, there was little sign of budding inflation in the report. Excluding volatile food and energy costs, wholesale prices rose by 0.1 percent, matching analysts' expectations. (more)
The Labor Department said the Producer Price Index rose by 0.7 percent in March, compared to analysts' forecasts of a 0.4 percent rise. A rise in gas prices also helped push up the index.
Still, there was little sign of budding inflation in the report. Excluding volatile food and energy costs, wholesale prices rose by 0.1 percent, matching analysts' expectations. (more)
Federal Reserve Made $47.4 Billion in 2009
The Federal Reserve transferred $47.4 billion, a record sum, to the Treasury Department last year, a result of the central bank’s actions to support the fragile housing market.The transfer to the public coffers rose roughly 50 percent, or $15.7 billion, from $31.7 billion transferred in 2008, the Fed announced on Wednesday in releasing its annual financial statements, which were audited by Deloitte.
“Central banking is a great business,” joked Vincent R. Reinhart, a former director of monetary affairs at the Fed.
Unlike private banks, the Fed does not exist for the purpose of making a profit, though it inevitably does so. Historically, it paid no interest on the currency and bank reserves that represent its liabilities, while it made interest on the Treasury securities that make up its assets. (more)
A Look at REITs
“Haven't heard much chatter about the health of REITs lately,” a reader writes. “Do you folks have any prognostications on the pros and cons of investing in some now?” The 5: Look for the REITs to start issuing a boatload of new shares, says Dan Amoss, who follows the sector even more closely than hard-core football fans will follow the NFL draft tonight.
“REITs will have to divide up their shrinking rental cash flow among lots of new shareholders,” says Dan, “most of whom invested capital just to delever balance sheets. This capital staved off bankruptcies. It’s defensive capital; it won’t be deployed as growth capital.
“The flood of new REIT shares will act as strong resistance against further rallies in the REIT sector and has permanently diluted the sector’s per share earnings power.
Too, “there’s still a huge wall of ‘un-refinanceable’ commercial mortgage maturities over the next several years. These maturities will occur at a time when property values and rents will remain weak.
“Yet REIT investors aren’t expecting this type of chronic weakness; most REITs have priced in a typical cyclical rebound in rents. REITs are now almost as expensive as they were near the 2007 peak, and will only become cheaper if rents quickly return to their peak levels.” Agora Financial.
Indicator with good long-term record has flashed a buy signal
If the trend is your friend, as the Wall Street cliché goes, then the stock market has been an incredibly friendly place of late.
I say this not just because the stock market, with seemingly little effort, was able to shrug off last Friday's news about Goldman Sachs' legal troubles, with the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 11,135, +9.68, +0.09%) gaining 73 points on Monday and another 25 on Tuesday.
What I have in mind is a rare buy signal that was generated a couple of weeks ago by a trend-following indicator with a good long-term record. Prior to the recent buy signal, there had been only 12 of them since 1967.
And two of those 12 prior buy signals occurred in the last 12 months alone. In other words, between 1967 and March 2009, this indicator gave just 10 buy signals -- an average of just one every 4.3 years. Since March 2009, in contrast, they have averaged once every four months or so. (more)
I say this not just because the stock market, with seemingly little effort, was able to shrug off last Friday's news about Goldman Sachs' legal troubles, with the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 11,135, +9.68, +0.09%) gaining 73 points on Monday and another 25 on Tuesday.
What I have in mind is a rare buy signal that was generated a couple of weeks ago by a trend-following indicator with a good long-term record. Prior to the recent buy signal, there had been only 12 of them since 1967.
And two of those 12 prior buy signals occurred in the last 12 months alone. In other words, between 1967 and March 2009, this indicator gave just 10 buy signals -- an average of just one every 4.3 years. Since March 2009, in contrast, they have averaged once every four months or so. (more)
Is the Mortgage Burning Party a Thing of the Past?
When I was 25 years old I remember receiving a telephone call from my dad asking me to come home for the weekend. Well, that isn’t entirely right, he more or less demanded I come home. He called it a “command performance”.
When I asked him why, he told me he had finished paying the mortgage, was throwing a mortgage burning party and he wanted me to come. It was a great party with all of his friends in attendance. I still remember the applause from everyone as he put the match to the document which signified so many years of his life’s hard work. It was a great moment, very emotional.
Later, in a quiet moment, he confided to me that there was more to the ceremony of burning the mortgage than just noting the passing of an era. You see, as long as that original document was out there, as long as it wasn’t in his hands or “up in smoke”, there was always the risk it could come back and someone could demand payment all over again. By burning it, he made sure that could never happen. The house was his, no one could take it away. But because of the way the Mortgage Electronic Registration Service (MERS) system works, mortgage burning parties don’t happen anymore. The blue ink copy of the mortgage has vanished. (more)
Metals Manipulation, Machinations And Assassinations
Every now and again, something comes up that is so curious it just needs to be mentioned, regardless of how paranoid it makes us look. The emerging scandal over manipulation of the silver market is one of those things. Some have said it is the largest fraud in history. To make the story even more dubious and enthralling, we shall start ... at the beginning:
How many US presidents have been assassinated while in office? (That's right, the story begins here.)
The answer is four.
Of those four, how many were sound money advocates (favoured gold or silver backing of the currency) and had sound money as one of their key policies?
All four of them. (more)
'The SEC is a farce' - expert
With the Securities and Exchange Commission filing charges against Goldman Sachs, arguably Wall Street's most lauded and respected firm, it's tempting to say the agency is targeting corporate titans to get its mojo back.The civil charges leveled last Friday are in fact only the most recent in a string of investigations into some of the largest corporations in the U.S. and the world. Last week, Bloomberg News reported that the SEC was investigating General Electric (GE, Fortune 500) and CEO Jeffrey Immelt; and five days ago Hewlett-Packard (HPQ, Fortune 500) acknowledged that SEC regulators were examining whether the company bribed Russian officials to win business in the country. (more)
Richard Koo Says If Banks Marked Commercial Real Estate To Market,It Would "Trigger A Chain Of Bankruptcies"
Richard Koo's latest observations on the US economy are as always, a must read. The critical observation from the Nomura economist explains why the realists and the naive idealists are at greater odds than ever before: the government continues to perpetuate, endorse and legalize accounting fraud in the hope that covering everything up under the rug will rekindle animal spirits. The truth, as Koo points out, is that were the FASB to show the real sad state of affairs, the two core industries in the US - finance and real estate, would be bankrupt. "If US authorities were to require banks to mark their commercial real estate loans to market today, lending to this sector would be extinguished, triggering a chain of bankruptcies as borrowers became unable to roll over their debt." In other news Citi, Bank of America, and Wells just reported fantastic earnings beats on the heels of reduced credit loss provisions. Nothing on the conference call mentioned the fact that all would be bankrupt if there was an ounce of integrity left in financial reporting, and that every firm is committing FASB-complicit 10(b)-5 fraud. One day, just like Goldman's mortgage follies, all this will be the subject of epic lawsuits. But not yet. There is some more money to be stolen from the middle class first, by these very firms. (more)
Thursday, April 22, 2010
Jim Rogers: Next Recession Will Be Much Worse
The Great Recession that may have just ended will amount to nothing compared to the next one, says commodities expert Jim Rogers.
The huge fiscal and monetary stimulus is what will cause the crisis, he says. Rogers notes that the United States suffers a recession every four to six years on average.
“When it (the next one) comes, it’s going to be much worse, because Washington can’t quintuple its debt again,” he told Newsmax.TV Money. (more)
The huge fiscal and monetary stimulus is what will cause the crisis, he says. Rogers notes that the United States suffers a recession every four to six years on average.
“When it (the next one) comes, it’s going to be much worse, because Washington can’t quintuple its debt again,” he told Newsmax.TV Money. (more)
FT: U.S. Debt to Hit $20 Trillion in 10 Years
While the global financial system remains transfixed the by the problems of Greece and several other European countries risking default over their massive debts, the real threat is whether the credit standing and currency stability of the world’s biggest borrower, the US, will be jeopardized by its disastrous outlook on deficits and debt.
That’s the fear raised in a devastating op-ed on the Financial Times website written by Robert Altman, a former deputy US Treasury secretary under President Clinton who is now chairman of Evercore Partner, a leading global advisory and investment firm.
“America’s fiscal picture is even worse than it looks,” Altman writes. “The non-partisan Congressional Budget Office just projected that over 10 years, cumulative deficits will reach $9.7 trillion and federal debt 90 percent of gross domestic product – nearly equal to Italy’s. (more)
That’s the fear raised in a devastating op-ed on the Financial Times website written by Robert Altman, a former deputy US Treasury secretary under President Clinton who is now chairman of Evercore Partner, a leading global advisory and investment firm.
“America’s fiscal picture is even worse than it looks,” Altman writes. “The non-partisan Congressional Budget Office just projected that over 10 years, cumulative deficits will reach $9.7 trillion and federal debt 90 percent of gross domestic product – nearly equal to Italy’s. (more)
Obama suggests value-added tax may be an option
President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.
Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, "I want to get a better picture of what our options are."
After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery." (more)
Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, "I want to get a better picture of what our options are."
After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery." (more)
The Stock Market Is Starting to Look Toppy
From a big-picture perspective, the stock market’s advance off the March 2009 low is nothing more than a huge, bear market rally.
To understand how I come to that conclusion, just look at two classical valuation measures, price-to-earnings ratios and dividend yields, in the chart below. You can easily see how this stock market bear, which started in 2000 at record overvaluations, still has a lot of work to do … (more)
Taxes take up greatest part of household income, Fraser Institute says
A prominent think-tank that's often critical of government spending policies says Canadian families spend more than two-fifths of their total income on taxes.
The Fraser Institute says its annual Canadian Consumer Tax Index calculated that taxes ate up 41.7 per cent of the average family's income in 2009.
That's up from 1981 when taxes accounted for 40.8 per cent of a family's income, or 33.5 per cent in 1961 when the Fraser Institute first compiled the index.
12 Reasons Americans Are Incredibly Angry About The State Of The U.S. Economy
We have reached a very interesting turning point in American history. More than at any other point in modern times, Americans are deeply angry about the state of the economy. In fact, it is no stretch to say that millions of U.S. citizens are hopping mad about the economic situation. Most of them don't know exactly what is wrong, and even fewer of them have any idea about how to go about fixing things, but they do know one thing. They know that they are mad. As Americans, we were raised with the belief that our overwhelmingly powerful economic machine would always provide good jobs and prosperity for all of us as long as we worked hard. But we have come to learn that is not true. We have come to learn that our politicians and our leaders have squandered the great inheritance that our forefathers left for us. We have come to learn that the financial future of our nation is beyond bleak. We have come to learn that our government has piled up the biggest mountain of debt in the history of the world. Now the foolish decisions of the past several decades are catching up with us. (more)
China Importing More Coal
“China, for the first time, is an importer of coal,” writes Chris Mayer. “And it looks like it might be an importer for some time yet, providing a boost for coal prices. There has been drought in southern China and the Mekong Delta for months now. Now there is also drought in the northern part of the country. Since there is quite a bit of hydropower in these places, it looks like output could drop 70-90%. That would mean electricity shortages of 10-15% nationally. “Unless China gets some big-time rain soon, that will mean it will have to rely more on coal to make up the difference. In fact, there is a possibility that China’s reservoirs go completely dry, in which case its hydropower plants will have to shut down…
“The longer this drought goes on, the more the Chinese will have to buy coal to offset the decline from hydropower. We could see quite a spike in coal prices over the next few months as Chinese buyers wade into the market.”
Wednesday, April 21, 2010
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