Saturday, November 29, 2008
CLoseup of what I recently posted.
Here is more charts and discussion ontopic at Ludwig Von Mises
With all this why isnt VELOCITY of money growing?
By Kim-Mai Cutler and Candice Zachariahs
Nov. 28 (Bloomberg) -- The cost of borrowing in dollars for one month stayed at the highest level in three weeks as banks sought funding to bolster balance sheets through year-end amid a global squeeze on credit.
The London interbank offered rate, or Libor, that banks say they charge one another for such loans was unchanged at 1.90 percent today, British Bankers’ Association data showed. The rate rose the most in nine years yesterday. The overnight Libor climbed above the Federal Reserve’s target rate for the first time in almost a month, to 1.16 percent. The Libor-OIS spread, a measure of the willingness of banks to lend, also widened.
“One-month rates are the most sensitive at the moment,” said Sean Maloney, a fixed-income strategist in London at Nomura International Plc. “We are getting to month-end so the rate will cover the turn into 2009 and there’s very limited liquidity in the market.”
With a month to go until the end of 2008, banks are vying for loans that mature after Dec. 31 to strengthen their balance sheets as they prepare to report to investors. Financial institutions mark the value of loans and cash positions at the end of each quarter. The one-month Libor climbed 47 basis points yesterday, the most since 1999.
Banks are hoarding cash on concern interest-rate cuts and government spending plans will fail to avert the worst global slump since World War II. China’s economic deterioration is quickening as the financial crisis spreads, the nation’s top planner said yesterday.
Squeeze in Lending
Credit markets, which began seizing up after BNP Paribas SA halted withdrawals on three funds in August 2007, froze after Lehman Brothers Holdings Inc. collapsed on Sept. 15. Financial institutions posted almost $1 trillion of writedowns and credit losses since the start of 2007.
The Libor-OIS spread, a gauge of cash scarcity among banks favored by former Fed Chairman Alan Greenspan, widened four basis points to 182 basis points. The difference between what banks and the Treasury pay to borrow money for three months, known as the TED spread, rose two basis points to 218 basis points. The spread, which reached a low this year of 76 basis points in May, was at 464 basis points on Oct. 10, the most since Bloomberg began compiling the data in 1984.
“OIS-Libor spreads remain wide,” said Guillaume Baron, a fixed-income strategist at Societe Generale SA in Paris. “We have seen some improvement in conditions for euros, but not in dollars. We can’t explain why. The market’s crazy.”
The one-month euro interbank offered rate, or Euribor, that banks say they charge each other declined 4 basis points to 3.57 percent today, according to the European Banking Federation. It jumped 22 basis points yesterday, the most in a year. The three- month rate fell to the lowest level in 21 months, to 3.85 percent, the EBF said.
In a further indication of the squeeze in lending, the European Central Bank registered almost 205 billion euros ($263 billion) of cash deposited by banks yesterday in its overnight facility. It was the seventh straight day the figure surpassed 200 billion euros. The daily average in the first eight months of the year was 427 million euros.
Interest rates on U.S. commercial paper, or CP, rose to the highest level in more than three weeks, according to data compiled by Bloomberg. Rates on the highest-ranked 30-day CP climbed 25 basis points to 1.52 percent, or 52 basis points more than the Fed’s target rate, according to yields offered by companies and compiled by Bloomberg. CP, which matures in 270 days or less, is used by companies to finance daily expenses such as payroll and rent.
‘Trust Not Addressed’
Rates in Asia increased today. Singapore‘s interbank three- month offered rate for U.S. dollar loans, or Sibor, rose two basis points to 2.22 percent, capping the first weekly advance since Oct. 10. Australia’s three-month rate rose 16 basis points to 4.72 percent. South Korea’s one-year cross-currency swap was below zero for a sixth day, showing the nation’s banks are starved of U.S. currency.
“The provision of liquidity is only part of the problem, with solvency and trust still to be fully addressed,” Brian Verlaan, global head of fixed-income research in Singapore at Standard Chartered Plc, said in a note to clients today. “It is the latter that will take longest to mend, with liquidity continuing to be hoarded and interbank-lending activity confined to just the shortest tenors.”
Japan’s three-month rate jumped 3.7 basis points this week to 0.876 percent, the biggest gain since February 2007. A basis point is 0.01 percentage point.
Hong Kong‘s three-month interbank rate, Hibor, fell 4.5 basis points to 1.951 percent, paring its first weekly increase this month.
Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a daily survey by the BBA before noon in London. Members give estimates for how much they would charge for loans ranging from one day to a year in currencies including the dollar, euro, yen and pound. Euribor is set about two hours earlier in a survey by the European Banking Federation. EBF members only give estimates for the cost of borrowing euros.
Friday, November 28, 2008
Baltic Dry Index - BDI
A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.
Country's industrial production plummets as slowing world economy weighs on exports.
November 28, 2008: 6:31 AM ET
TOKYO (AP) -- Production at Japan's vital manufacturers is sinking fast - and is projected to turn in its worst quarter ever - amid a plunge in global demand that is battering the core of the world's second-largest economy.
The government said Friday that industrial production in October fell a sharp 3.1% from the previous month and is expected to decline precipitously in the months ahead. The result follows a 1.1% gain in September and undershot market expectations for a 2.5% contraction.
"The world economy is a disaster," said Richard Jerram, chief economist at Macquarie Securities in Tokyo. "Exports are in the process of collapsing, and as a result industrial production is falling at unprecedented speed."
The results, along with labor and spending data released separately, underscore the increasingly grim outlook for Japan as it grapples with recession and the perils of depending so heavily on overseas sales of its cars and gadgets.
Exports in October marked their biggest decline in seven years, and companies expect conditions to only get worse.
Factory output will likely plummet 6.4% in November and fall 2.9% in December, according to the Ministry of Economy, Trade and Industry.
At that rate, industrial production is on track for its biggest quarterly fall since the government began compiling the data in 1955, said Masamichi Adachi, senior economist at JP Morgan Securities in Tokyo.
Adding to the pain is a stronger yen, forcing a growing number of exporters big and small to slash their future expectations for profit, sales and spending.
Electronics giant Panasonic Corp (PC). on Thursday became the latest victim of the global whiplash. It revised down its annual profit forecast by 90%, blaming a strong yen, sluggish sales and heavy discounting.
Earlier, Toyota Motor Corp. (TM) reduced its net profit full-year profit forecast to $5.5 billion - about a third of last year's earnings.
October's dismal production figures stem largely from heavy production cutbacks in among auto companies, electronics firms and machinery makers.
Production of transport equipment fell 5.8% during the month, while that of general machinery declined 3.5%. Electrical machinery output was down 1.7%, and electronic parts and device production slid 8.9%.
The government released other troubling data Friday.
Japan's unemployment rate stood at 3.7% in October, down from 4% the previous month.
The figure, however, is misleading, because it does not reflect the growing numbers of those choosing to leave the labor market entirely instead of looking for work, said Goldman Sachs economist Chiwoong Lee in a report.
"In the current situation we focus on the number of employed, which has declined for nine months in a row," Lee said. "This says the labor market is deteriorating."
After the data's release, Finance Minister Shoichi Nakagawa urged the Bank of Japan to take more steps to bolster Japan's labor market, without specifying any proposals.
"Looking ahead, Japan's economy is expected to face further deterioration, especially in income and employment," Nakagawa said, according to Kyodo news agency. "If the BOJ shares such a recognition, I would like the bank to carry out necessary steps."
Also, average monthly household spending in October fell a worse-than-expected 3.8% from a year earlier. The figure is an important gauge for individual spending, which accounts for more than half of Japan's gross domestic product.
Retail sales fell 0.6% from a year earlier in the second straight month of decline.
Prices continued to climb in October, though at a slower pace than earlier this year as oil prices eased. Japan's core consumer price index, excluding often volatile fresh food prices, rose 1.9%, climbing for the 13th straight month.
Lower prices should help stabilize domestic demand and offer some support to domestic companies' profits, Macquarie's Jerram said.
"The real disaster is on the export side of the economy," he said. "The domestic economy is not in great shape, but it's nothing like the catastrophe that you can see in export-facing industries."
Thursday, November 27, 2008
great read every month! http://www.contraryinvestor.com/mo.htm
and where we ended the 2003 Bear Mkt ($40 SPX earnings and a PE of 35 !!! DIV yield of 2%) and add in chart of where TOTAL credit mkt debt as % of GDP (now 350% !!!) a BELL rang in my head and gives me the clearest picture I can hope to have as to what 2009 could be and what the stock market might reflect.
If we are indeed in a PROLONGED period of CREDIT CONTRACTION as one might expect we are indeed in, to my understanding you just don't STOP this and TURN ON A DIME. If case even remotely similar to 1930's correction back to the mean.......I don't need to spell that out....a generational shift?
Is there an ESCAPE from Kondratief WInter? Is near DOUBLING of existing fiat currency (if even just held by the treasury as deposits and not loaned out) in a matter of just a few months going to turn this deflation train around and again FORSTALL DAY OF RECKONING? and the eventual TRIP BACK TO THE MEAN?
With hit to Consumer Discretionary Spending, collpase of Energy Company and FInancial company profits coming to the 2009 SPX 500 profits, what are the chances this "pull out all the stops" efforts will avert what history says must repeat?
Is current situation more damaging than previous Bear correction? 2000 Profits were around $35 for SPX per CI chart, a collapse in stock prices and the effect of monetary policy saw the trough at $35 SPX earnings, PE ratio 35 and in 2006 saw SPX reach near $90 earnings and PE contracted to near 15.......we got their by GOOSING on STEROIDS bank and Real Estate related profits as we built historic bubble. EN MASSE Americans pulled maybe $Trillions out of their home equity and SPENT, UPGRADED, IMPROVED, CONSUMED our way to the height of 2007 prosperity.
WILL proposed historic GOV spending stimulus plan revive the economy? If so by next year it would again PUT OFF NEEDED recovery from historic malinvestments.
If doubling the monetary base and all the stim is ineffective, what then?
WED the BDI ended at lowest level for this move extending its IMPLOSION, off over 95% from highs at start of 2008, the BDI does not show a coming recovery of any kind and it should start here, the shipping of the raw materials to make things.
BEAR MKTS have ended with single digit PE ratios and DIV yields OVER 6%........where are we now? OVER 17 !!
Regardless, it is the abandonment of dividends for capital gains to finance our retirements that has resulted in a bubble. And even in using the dividend yield (dividends divided by price), the picture painted is much worse. Stocks, even with the crash in the past two weeks are still overvalued based on the only thing that matters; dividends. We're still not even close to the historical average dividend yield of 5%. Ergo, why buy stocks now? http://captaincapitalism.blogspot.com/2008/10/s-500-dividend-yield.html
Wednesday, November 26, 2008
Tuesday, November 25, 2008
The word “stimulus” has never been more in vogue than it is now. All the highly educated economists selected by the incoming president to take charge of the government’s battle against economic meltdown are said to be in agreement that no matter what, countless billions of additional dollars must be deployed as a “stimulus” to the imploding economy. The mind reels as it contemplates how in the world more of what caused the problem in the first place can possibly cure it. Ron Paul described the strategy as trying to cure an ill patient by giving him poison.
For all their bally-hooed brilliance, the Obama economic team – Tim Geithner, Larry Summers, Christina Romer and Melody Barnes – are products of universities where they were taught Keynesian economics. As a result, they believe that the market correction of the problems caused by Federal Reserve-created credit is the problem itself. This misdiagnosis leads to precisely the wrong treatment for the malady, the printing of more dollars. Richard Maybury says, ‘They are rather like the drug addict who thinks withdrawals are his problem, so he keeps shooting up in order to avoid them.”
Every day we hear about the need to get the consumers spending again, which means borrowing like they used to. But people don’t want to borrow now and lenders don’t want lend now, because the confidence, the “irrational exuberance” that made the markets soar has turned into fear about the future. The mania (greed) has morphed as it always does when markets crash, into fear. The Fed has been inflating the money supply since its creation in 1913. The brute fact is that the private banking cartel, whose ostensible purpose was to protect the value of the dollar, has instead presided over its destruction. The 1913-dollar has been reduced to four cents today.
Federal debt is now rising in a hockey stick curve, accelerating past $10 trillion dollars and racing toward infinity. Your individual share is in the neighborhood of $35,000. That’s what you owe our creditors now. Check it out. Then tell me how creating even more debt, flooding the economy with more dollars is going to turn things around. The Keynesians are without a clue. The Austrians are without influence. The likely result of what our leaders are doing in response to the crisis is the eventual destruction of the dollar after a period, however long no one knows, in which cash will be king.
In the end, inflation will almost assuredly overtake the massive ongoing asset deflation, which has seen the loss of at least $30 trillion in stocks and real estate valuations in just the last few months. When will the remaining four cents of that 1913-dollar disappear, and what happens then? It’s beyond imagining for most of us and that’s probably just as well.
WBAL Radio Baltimore
Monster Lurking in the Bond Market
"The monster is still coming closer and I've just about run out of ways of protecting myself," Nicole Elliott from Mizuho Corporate Bank told CNBC while taking a technical look at US and Japanese bonds.
** Friends, readers from around the globe, I couldn't make this stuff up.....are we faced in this country with one of only 2 choices? WEIMAR REPUBLIC or DEPRESSION?
I am not alarmist, nor rosey optimist, but a practical guy, I rather be happy...singing a tune....eating a kit kat bar...strumming my bass without a care. But I run a business, my sales have shrunk to 1990 levels but i have 2008 expenses, health care, rent, insurance. I have manufacturers still raising prices.....even as their sales flag...trying to make up lost ground.
Well it can't be done. You can't force people to borrow, you can't force banks to lend.....you cannot reinflate the credit monster bubble of all times no matter how much you throw at it.
Imbalances have to correct at some point and the time is now.
10 yr yields at 3% and 3 month yields at 0% this is the stuff of DEFLATION MY FRIENDS....the way the printing presses are going night and day.....NEVER BEFORE and it has not turned this thing around!
YR/YR existing home prices collapsed last month......I have to ask you....how did Obama arrive at creating 2.5 Million jobs?
If furniture is not bought, cars sold, financial houses in RUIN, multitudes of corporations DESPERATE to fund debt....GE took 10% money! how so we print up 2.5 M jobs?
"No place to run and hide"
London Banker has been a central banker and securities markets regulator during a varied and interesting career in global financial markets.
Great read thanks P
The Bailout Surge
by Ron Paul
This week the bailout of the Big Three automakers was under heavy consideration in Congress's lame duck session. I have always opposed government bailouts of private organizations. Back in 1979 Congress had hearings about bailing out Chrysler and I was on record pointing out that these types of policies are foolish and very damaging to the long term economic health of our country. They still are.
There was also renewed pressure this week to bailout homeowners and send another round of stimulus checks to "Main Street" to balance out all the handouts to big business. It seems that eventually the entire economy is going to be blanketed over with Federal Reserve notes. Most in Washington are completely oblivious as to why this model of money creation and spending is so dangerous.
We must remember that governments do not produce anything. Their only resources come from producers in the economy through such means as inflation and taxation. The government has an obligation to be good stewards of these resources.
In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed - the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me.
With each bailout we hear rhetoric that this is the mother of all bailouts. This will fix the problem once and for all, and that this is absolutely necessary to avert disaster. This sense of panic squeezes astonishing amounts of dollars out of reluctant but hopeful legislators, who hate the position they are being put in, but are relieved that it will be the last time. It is never the last time, and again and again we are faced with the same scenarios and the same fears.
We are already in the bailout business for such a staggering amount that admitting it was wrong in the first place would be too embarrassing. So the commitment to this course of action is only irrationally escalated, in the hopes that somehow, someway eventually it will work and those in power won't have to admit they were wrong.
It won't work. It can't work. We need to cut our losses and get back on course. There is too much at stake for too many people to continue down this road. The bailouts thus far to AIG, Bear Stearns, Fannie and Freddie, and TARP funds amount to around $1.5 trillion. Considering our GDP is $14 trillion, and our Federal budget is already $3 trillion, this additional amount will significantly eat into our future lifestyles. That amounts to an extra $5,000 that every person in the country needs to somehow produce just to keep up.
It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.
OCT YR/YR home prices fell by 11% and this is a worsening from previous as sales or existing homes fell below expectation.
I have feeling this 2 day BURST is NOT the real deal....until VIX is BROKEN Down any longs should be ninbble quickies....if you make a pt or 2 I would exit....like move in lots of shares yesterday.
We need to have a $1T stimulus bill yet we can CUT same out of budget? Something has spurred furn ind to cut 2009 sales by 10% (office)
I dont BUY the V bottom theory, lucky to get U,
GDP this AM futures ramping up ahead
2 500 pt days should act like 2 90% downers, should bring down to sideways next 5-7 days
If THIS MOVE for real, certainly now would be good time to test any S levels before moving on.
People showing up for foreclosure auctions but few bids and LOWER prices.
HOW much $$ destroyed? STIM package not going to SLOW DOWN layoffs and downward price spiral IMHO
Monday, November 24, 2008
9200-9500 is not out of the question. VIX dropped sharply, a fall below 40 ish would be one nail in bear coffin.
Stocks have looked cheap all the way down, how do you know when to jump in? 2 trips to VIX 80 should have been enough fear to give bear a pause....
I think we are seeing abear mkt rally, not end of bear or beginning of new bull, money can be made.
HNI jumped $1.50 today from $9 lows....I thought $9 was stupid price. SOLID company with caveat industry sales projected to fall 10% in 2009 ! IS IT already in stock?
ODP looks like a casualty under $2
WFMI whole foods up sharply finally rallying. SNDK popped off $5 price !!!
Not for the weak of knees, lots of risk, lots of potential, ST plays on long side.
NEED GOOD TEST of lows to get more jiggy as most will be deep in denial
Sunday, November 23, 2008
Thought I would dismiss this story as dribble, but reasons to SELL next 2 months may be accurate and keep sustainable rally at bey
In his first one hundred days in office, Roosevelt was responding to crises more than he was laying plans for economic construction. First he ended the run on the banks, bringing a return of confidence in banking. In a "fireside chat" he told citizens that it was safer to put money in the bank than to keep it under one's mattress. He invoked the Trading with the Enemy Act of 1917 in order to suspend the export of gold and silver. By law, banks and individuals were now required to deliver their gold to Federal Reserve banks in return for currency. Then his advisors talked him into attempting to stimulate the economy by increasing the money supply. This included putting three billion more dollars into circulation and taking the dollar off the gold standard.
During these first one hundred days, Roosevelt decided to help the distressed farmers. Hoover had tried to help farmers by buying their surpluses, which had encouraged over-production and resulted in ruinous low prices for farmers. Instead of this and letting bankruptcies run their course, Roosevelt chose to limit the production of certain crops and to give relief to farmers who were in immediate danger of losing their homes.
One problem with above article is, the damage done from current situation is not over. I agree our morass may take 2nd place in stats of human tradegy, but in historical market stats we are setting some records.
Our small businesses and incubator venture capital layer of new biz has all but been snuffed out, access to credit is needed to fuel the businesses of the future and create new jobs. Where have all the IPO's gone?
Saturday, November 22, 2008
Thursday, November 20, 2008
The chart (proprietary) is astonishing, the plummet to this level crashlike, but until it turns up and I get additional data I do not want to imply this low reading will be the low reading or guess when it turns up. The weekly MA did, but then turned down again, so I am sticking with the monthly less subject to any whipsawing.
You could argue that at these levels DOWN THE ROAD you will make money as the market trend OVER TIME is up, but as I have tried to show over long secular bear markets (which contain wild cyclical bulls) it is a destroyer of values, and returns can be meager at best.
Bottom like readings in different areas, like almost 0% on 3 mnth tbills, record VIX, put call ratios near extremes add to the consideration. But we have just broken on the close the OCT 2008 lows with a higher VIX, so we want to see fear dissapate, mistakes are make thinking a HIGH fear level is enough to call a bottom, we need to see the trend of rising fear ended.
Here is some data to chew
7506 low of day OCT 2008 lows broken
7532 Reaction low of 2002
7500 closing low sept/oct 2002 (+ or -)
7416 2003 reaction low
7197 2002 reaction low
http://stockcharts.com/h-sc/ui?s=$CYC:$CMR&p=W&yr=8&mn=6&dy=0&id=p74150163626&a=147023766 new low here for this bear
How do you tell that all the hedges and forced selling is over? lower prices bring additional MARGIN CALLS and more forced selling.
On long term dow chart I see some support near 7,000, then it's down to 6,000 IMHO
Current environment is NOT condusive to support for SPX 500 earnings and hence expanding PE ratios.
ADAM HAMILTON OF ZEAL on DIVIE YIELDS AND BOTTOMS
As discussed in “Long Valuation Waves”, dividend yields in the last century averaged about 4.6% for the general US equity markets. In all the graphs in this essay 4.6% is marked as fair value. Unlike valuations based solely on earnings, like the venerable P/E ratio, there is an inverse relationship between general dividend yields and general stock-market over or undervaluation.
When stocks are cheap they have high dividend yields, they pay out a relatively high percentage of their share price each year to their owners in cash dividends. The cheap level is arbitrarily marked in these graphs at 6%. As you examine the graphs, carefully observe the white 48-month moving average (48mma) of the dividend yield as well as the blue raw dividend yield itself and you will note that stocks generally rally in future years after cheap dividend yields around 6% are witnessed.
Conversely, when stocks are expensive they have low dividend yields. Their share prices are bid up so high that their annual cash dividend payments to their owners become relatively small in comparison. In these graphs, we marked 3% as the arbitrary expensive level. Once again, as you digest the graphs below you will note that stocks usually enter secular bear markets or trade sideways for years after expensive dividend yields around 3% are witnessed.
**Current SPX 500 yields near 3.57%
I cannot predict exactly WHERE the bottom will be, and those following me hopefully have sidestepped this destruction but we do have history as a guide and when paid 6% plus to hold a stock, IF dividend is not cut can make huge difference when considering risk.
With play money there surely do appear to be some stocks worth considering, but in a fast moving market, with fear staying at historic elevated levels, trying to pick a btotom comes with some risk.....
IMHO I think the 2002 reaction lows are possible, and have figured a break there to maybe 6,000. We could be VERY close, and it always matters how long your willing to hold, but at very least a LIST of gems uncovered by the bear is a start in your quest to pick up some pieces.....when ready if you have raised cash to be able to do so.
This environment as people lose jobs could get worse, but at some point the market will begin to discount the end game.
Wednesday, November 19, 2008
Some good info here, especially inflation adjusted Dow going back 100 years.
More info on SECULAR TRENDS
Tuesday, November 18, 2008
Monday, November 17, 2008
>>The principal focus of attention for markets as the new week kicks off was the meeting of the G-20 world leaders in Washington. Though they provided a symbolic show of unity between rich and emerging nations, few concrete reform measures — aside from a commitment to further monetary and fiscal stimulus and free trade — were announced.
"No one was expecting any miracles out of the G-20 but having said that it was positive to get nations together in the first place," said Richard Hunter, a strategist at Hargreaves Lansdown stockbrokers in London.<<
CITI announces intentions of "laying off 50,000 workers..."
Stock markets have lost multiple $Trillions......homes have lost $trillions in value.....1 in 4 home loans in danger of default....world steel production cut by 40%, BDI has CRASHED...this is where the real DEFLATION IS.
30 day Treasuries yield .005% LIBOR rates have stoped coming down.
If 2000-2003 market action is now seen as a correction to then ongoing Bull Market which began approx in 1980.....the breaking of the 200 month moving avg and other technical data could be seen as we have enterred a true Secular Bear Market.
The bull market grew, and sustained itself with ever growing credit expansion. It took ever increasig amounts of new debt to fuel a $1 of economic growth, now considering the contraction of wealth, destruction we have seen, the $750B bailout plan seems a paltry sum.
Bailout car makers? then auto parts companies too right? Bailout mortgage holders? smaller banks? what other busineses?
Cut Gov spending? 10 yr notes at 3.7%.......
I hope we see a turnaround soon, but the forces behind the current environment may be too hardy for any gov intervention to displace.
Gold in many opinions still in Bull MKT, but correction has been painful, is why STOPS need to be used to protect against losses and in many cases protect profits.
Friday, November 14, 2008
Sun Microsystems says it will slash up to 6,000 jobs - 18% of global workforce. More soon.
Freddie: $25B loss, taps tax dollars
7:57am: Mortgage finance firm reports huge quarterly loss - Treasury pumps in $14 billion backstop. more
CITI to lay off 10,000 workers....HARD to turn this around when THIS is reaction.....this doesn't appear to have bottomed....
Got to "calendars" then "economic" for AM REPORTS usually due at 8:30
If futures HOLD we get GAP DOWN at open, let's look for "FIRST HOUR EXTREME" price and what it does next...ANOTHER reversal to close.......points for ST bottom.IMHO
Thursday, November 13, 2008
http://greenwombat.blogs.fortune.cnn.com/2008/11/13/the-renewable-energy-industrys-obama-wish-list/ OBAMA behind it
In a move that will bring thin-film solar panels to the U.S. residential market, First Solar has signed a deal to provide installer SolarCity with 100 megawatts’ worth of solar arrays over the next five years. First Solar is also investing $25 million into SolarCity, the Silicon Valley startup backed by Tesla Motors founder Elon Musk.
This is First Solar’s initial foray into the home market — and apparently the first of any thin-film solar module maker. Thin-film solar panels are made by depositing solar cells on sheets of glass or flexible material and use little of the expensive silicon that forms the heart of more bulky conventional solar modules. That makes thin-film panels cheaper, although they are less efficient at converting sunlight into electricity. And thin is in for homeowners who prefer less-obtrusive panels on their roofs.
SolarCity CEO Lyndon Rive told Green Wombat that First Solar’s more economical panels will allow the company to expand to the East Coast and other areas that do not heavily subsidize solar. SolarCity installs solar panels at no cost to the homeowner and then leases them back for a monthly charge. “What matters is not efficiency but cost per kilowatt-hour,” Rive says, noting that solar programs like California’s reduce rebates to panel makers as the number of installations increase. “We need solutions that address declining subsidies.”
Added SolarCity communications director Jonathan Bass: “When we talk to customers their four biggest priorities are cost, cost, cost and aesthetics.”
Beginning in early 2009, SolarCity will start receiving 20 megawatts’ worth of First Solar panels a year. Rive won’t disclose how many megawatts SolarCity currently installs annually, but 20 megawatts would seem to represent a significant expansion of the startup’s operations. Over the past two years, SolarCity has installed solar arrays for 2,500 homes and small businesses and a spokeswoman says the First Solar deal would supply enough panels for about 5,000 homes a year.
The deal also marks a move to diversify on the part of Tempe-Ariz.-based First Solar (FSLR) — known as the Google (GOOG) of solar for its once-stratospheric stock price. The company, backed by Wal-Mart’s (WMT) Walton family, had primarily focused on the overseas commercial rooftop market. This year though First Solar has signed deals to build thin-film solar power plants for utilities like Southern California Edison (EIX) and Sempra (SRE).
First Solar on Wednesday reported that third quarter revenues rose 30% to $348.7 million from the second quarter and was up 119% from the year-ago quarter. Profit spiked 42% to $99.3 million from the second quarter and increased nearly 116% from a year ago.
The Fed also reported Thursday that troubled insurer American International Group (AIG, Fortune 500) borrowed even more from the government than it had before. The Fed's numbers, however, do not reflect the terms of AIG's new bailout, which will not go into effect for more than a week.
AIG now owes the government $83.6 billion, up from $81.2 billion as of last week. That includes roughly $63 billion from the $85 billion bridge loan and $20.2 billion from the Fed's $37.8 billion lending facility, according to AIG.
In the coming weeks, the government will restructure the insurer's bailout deal to include a $40 billion loan from the Treasury, a $60 billion loan from the Fed, and two new funding facilities of $23.5 billion and $30 billion. That increases the total amount available to AIG to $152.5 billion from $122.8 billion.
The Treasury Department said Thursday that the deficit for the first month in the new budget year was the highest monthly imbalance on record. It was far bigger than analysts expected, over four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year.
You dont make money fighting the trend...
TARP - ‘Troubled ASSET RELIEF Program’? Are Banks the ‘Troubled Asset’?
Posted on October 31st, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research
More TARP anger and confusion is surfacing every day. The blow back with respect to it looking nothing like what originally was sold to American tax payers is getting heavy. Even the name TARP (Troubled Asset Relief Program) makes no sense any longer, unless the banks themselves are the troubled assets to which the acronym refers.
The TARP bailout went from a 2 1/2 page $700 billion blank check for Paulson to a 400+ page porked-up money grab like none other in history - it’s still a blank check but now for the banks as well. I was told one bank is putting the funds to use buying energy-related Bonds. Many, including myself, knew that while spending vast amounts of money strategically was needed, this was a rushed deal with so few specifics it can’t be trusted.
Within two weeks, the program has become vastly different from what the politicians begged American’s every day on TV to support and what Paulson and Bernanke stood up under oath and testified to. That is, ‘our financial system is melting down and there is a very strong chance we will go into a depression unless we can buy troubled assets from financial institutions balance sheets, hold them for longer than the institutions can and magically make money in the future.
If we give this money to the Treasury, the banks will begin to lend to businesses and consumers once again and the system will be saved’.
During vote week, the media did all they could to get this bill passed.
2008-11-12 — bloomberg.com
Residential and commercial-mortgage backed bonds tumbled after Treasury Secretary Henry Paulson said the government no longer plans to buy devalued mortgage assets, credit-default swap indexes suggest.
``No one in the market knows what to believe any more,'' David Castillo, a senior trader of structured-finance bonds at Further Lane Securities in San Francisco, said in an e-mail today. ``Things change on a daily basis.''
You can say that again, David. The government hasn't "bailed out" the private markets with its litany of ad hoc interventions this past year. It has destroyed them.
Wednesday, November 12, 2008
There is No question we are IN Recession, where it goes from here is anyone's guess and I pray it isn't this but IMHO the econcomy is weakening more... I was more sure when I suggested back in SPET and OCT 2007 that BEAR was upon us and the BUll which began in 2003 was kaput.....the current situation is VERY COMPLICATED and here you are seeing more and more with hand out to get to what? new money from Fed...printed just for you.....
The area of sideways trading now appears to have been basing for next move down NOT accumulation as had hoped (bulls)
Controversial piece "Who are the architechts of the collapse"
DEFLATION? (thanks to JD)
Deflation great enough to bring the nominal interest rate close to zero poses special problems for the economy and for policy. First, when the nominal interest rate has been reduced to zero, the real interest rate paid by borrowers equals the expected rate of deflation, however large that may be.3 To take what might seem like an extreme example (though in fact it occurred in the United States in the early 1930s), suppose that deflation is proceeding at a clip of 10 percent per year. Then someone who borrows for a year at a nominal interest rate of zero actually faces a 10 percent real cost of funds, as the loan must be repaid in dollars whose purchasing power is 10 percent greater than that of the dollars borrowed originally. In a period of sufficiently severe deflation, the real cost of borrowing becomes prohibitive. Capital investment, purchases of new homes, and other types of spending decline accordingly, worsening the economic downturn.
Although deflation and the zero bound on nominal interest rates create a significant problem for those seeking to borrow, they impose an even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation. This burden arises because, even if debtors are able to refinance their existing obligations at low nominal interest rates, with prices falling they must still repay the principal in dollars of increasing (perhaps rapidly increasing) real value. When William Jennings Bryan made his famous "cross of gold" speech in his 1896 presidential campaign, he was speaking on behalf of heavily mortgaged farmers whose debt burdens were growing ever larger in real terms, the result of a sustained deflation that followed America's post-Civil-War return to the gold standard.4 The financial distress of debtors can, in turn, increase the fragility of the nation's financial system--for example, by leading to a rapid increase in the share of bank loans that are delinquent or in default. Japan in recent years has certainly faced the problem of "debt-deflation"--the deflation-induced, ever-increasing real value of debts. Closer to home, massive financial problems, including defaults, bankruptcies, and bank failures, were endemic in America's worst encounter with deflation, in the years 1930-33--a period in which (as I mentioned) the U.S. price level fell about 10 percent per year.
Tuesday, November 11, 2008
Folks, do you realize this price DECLINE has occurred in just a few months? I dont think this has ever happened like this before, gas prices have dropped by historic measures...lower gas is reason to cheer? Well it's great to pay less at pump but the reason for it is not.
Some keep repeating INFLATION INFLATION....friends..maybe LATER, not now......isnt it obvious? We have the LOWEST ever recorded consumer Confidence number......
Monday, November 10, 2008
China rescue plan BS.
World is in a deflationary spiral.....DOW to NEW LOWS during this Bear market.......some businesses will go on like nothing is happening....and my business hs picked up this week, nothing huge, but real live customers coming in. I do offer lower cost alternatives, but it hadn't mattered.
Thanks jbr and SSK for your thoughts, I will do my best to survive, I redid my showroom, reorganized it, put out new stuff, it looks best it ever did!
No, we didn't do anything and are caught up in this, but the collosal screw ups wont leave many without scars....looks like Obamma's team is full of the regular insiders.....
His advisers range from mega-investor Warren Buffett to Google CEO Eric Schmidt.
The full membership of Obama's Transition Economic Advisory Board is:
David Bonior (member of House of Representatives, 1977-2003)
Warren Buffett (chairman and CEO of Berkshire Hathaway)
Roel Campos (former commissioner of the Securities and Exchange Commission)
William Daley (Midwest chairman of JPMorgan Chase; secretary of commerce, 1997-2000)
William Donaldson (chairman of the SEC, 2003-2005)
Roger Ferguson (president and CEO of TIAA-CREF; former vice chairman of the Board of Governors of the Federal Reserve)
Jennifer Granholm (governor of Michigan)
Anne Mulcahy (chairman and CEO of Xerox)
Richard Parsons (chairman of the board of Time Warner)
Penny Pritzker (CEO of Classic Residence by Hyatt)
Robert Reich (professor at the University of California-Berkeley; secretary of labor, 1993-1997)
Robert Rubin (chairman and director of the Executive Committee at Citigroup; secretary of the Treasury, 1995-1999)
Eric Schmidt (chairman and CEO of Google)
Lawrence Summers (professor at Harvard University; managing director at D. E. Shaw; secretary of the Treasury, 1999-2001)
Laura Tyson (professor at the Haas School of Business, University of California-Berkeley; chairman of the National Economic Council, 1995-1996; chairman of the President's Council of Economic Advisers, 1993-1995)
Antonio Villaraigosa (mayor of Los Angeles)
Paul Volcker (chairman of the Federal Reserve Board, 1979-1987)
Sunday, November 09, 2008
The Asset-Backed Securities (ABS) market remains pretty much closed down. Year-to-date total US ABS issuance of $129bn (tallied by JPMorgan's Christopher Flanagan) is running at 25% of comparable 2007. Home Equity ABS issuance of $351 million compares with 2007’s $232bn. Year-to-date CDO issuance of $30bn compares to the year ago $300bn.
Federal Reserve Credit surpassed $1.0 Trillion for the first time in September and rose above $2.0 Trillion last week. For the week, Fed Credit surged $183bn to a record $2.056 TN, with a historic 8-wk increase of $1.168 Trillion. Fed Credit has expanded $1.82 TN y-t-d (156% annualized) and $1.191 Trillion y-o-y (138%). Fed Foreign Holdings of Treasury, Agency Debt last week (ended 11/5) increased $8.1bn to $2.494 TN. “Custody holdings” were up $438bn y-t-d, or 24.6% annualized, and $462bn y-o-y (22.7%).
International reserve assets (excluding gold) - as accumulated by Bloomberg’s Alex Tanzi – have dropped a notable $145bn over the past three weeks. During the past year reserves were up $864bn, or 14.5%, to $6.801 TN.
November 5 – MarketNews International (Steven K. Beckner): “Dallas Federal Reserve Bank President Richard Fisher said Tuesday he ‘would not be surprised’ if the Fed’s assets balloon to $3 trillion by the end of year. Fisher… suggested inflation has ceased to be an issue for now because the economy is ‘geared to the downside with a kind of turbulent ferocity.’ He said it ‘will take time’ before confidence is reestablished.”
*In recorded history $1B, then in 3 wks to $2T and goal by yr end is $3T ??????
November 5 – Wall Street Journal (Kelly Evans): “Banks continue to tighten lending terms for the nation’s consumers and businesses…
Also, separate reports Monday showed manufacturing activity slowed, and construction spending fell… Some 95% of banks in the U.S. said they tightened price terms on commercial and industrial loans to large and midsize firms… A total of 85% tightened lending standards, compared with 60% in the previous three-month period
November 7 – Washington Post (David Cho, Peter Whoriskey and Neil Irwin): “The federal government is preparing to take tens of billions of dollars in ownership stakes in an array of companies outside the banking sector, dramatically widening the scope of the Treasury Department’s rescue effort beyond the $250 billion set aside for traditional financial firms, government and industry officials said. Treasury officials are finalizing the new program, which could ultimately involve hundreds of billions of the $700 billion rescue package, though the initiative is unlikely to be announced until the end of next week at the earliest.”
GOV BAILOUTS INCREASE
November 7 – Bloomberg (Jeff Green and Mike Ramsey): “General Motors Corp., seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall ‘significantly short’ of the amount needed by the end of June unless the auto market improves or it raises more capital. The largest U.S. automaker reported a $4.2 billion third-quarter operating loss…”
November 7 – Bloomberg (Bill Koenig): “Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.”
November 7 – Bloomberg (John Hughes): “General Motors Corp., Ford Motor Co. and Chrysler LLC, strapped for cash as sales plunge, are seeking $50 billion in federal loans to help them weather the worst auto market in 25 years, a person familiar with the matter said. The package would be $25 billion for health-care spending and $25 billion for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve…”
AGAIN IS THE GOV PLAN WORKING?????????????????
November 6 – Wall Street Journal (Prabha Natarajan and Robin Sidel): “A key part of the bond market that is essential for making credit-card, auto, education and mortgage loans still shows little sign of improvement -- a development that could have repercussions for both banks and consumers. New data on this ‘asset securitization’ market from… Dealogic reveal that issuers sold just one $500 million securitization deal for the entire month of October. That compares with $50.7 billion worth of deals made one year earlier, and a fraction of the overall $2.5 trillion market for buying and repackaging consumer-based loans.”
COME ON THE PLAN IS EASING CREDIT RIGHT?????????????????????????
November 4 – Wall Street Journal (Kelly K. Spors, Raymund Flandez and Phred Dvorak): “When entrepreneurs can’t get conventional loans, they traditionally turn to loans backed by the Small Business Administration. But in recent months -- as many banks turned away businesses and slashed credit lines -- SBA lending also has dried up substantially. The retrenchment has become especially pronounced in the past couple of weeks… The SBA reported last week that loan volumes made under its flagship 7(a) loan program fell 30% in the fiscal year ended Sept. 30. And in October, overall SBA loan volumes were 50% lower than in October 2007…”
GET READY FOR ALT ENERGY REVOLUTION RIGHT?????
November 3 – Bloomberg (Joe Carroll and Mario Parker): “VeraSun Energy Corp. and U.S. ethanol makers backed by Bill Gates and Vinod Khosla are failing after wrong-way bets on corn prices overwhelmed $20 billion in federal aid and government-guaranteed demand for the fuel additive. VeraSun, the second-largest U.S. ethanol producer, was the latest in a string of distillers stung by imploding hedges when the… company filed for Chapter 11 bankruptcy protection on Oct. 31. Biofuel Energy… and at least six other distillers have shut down or curtailed operations because of volatile corn prices and narrowing ethanol margins… Investors from Wall Street to Silicon Valley took a piece of the action after Congress and the White House ordered oil companies three years ago to almost double ethanol use by 2012.”
DIVIDENDS ARE SAFE????????????????????
November 7 – Wall Street Journal (Annelena Lobb): “Dividends are another investor mainstay weakening in this market, along with 401(k)s, variable annuities, money-market funds and other once-reliable vehicles. This year, dividend payouts have taken a hit… Thirty-six companies listed on S&P’s 500-stock index have cut or suspended dividends 46 times in 2008, sucking some $33.3 billion from investors’ pockets… From that sum, $30.8 billion came from financial companies, representing 37 individual actions.”
LIBOR EASING RIGHT???????????
November 5 – Bloomberg (Christian Vits): “Banks deposited a record amount of cash with the European Central Bank overnight, suggesting they remain reluctant to lend to each other even as money-market rates fall.
LOOK TO THE EAST
November 3 – Bloomberg (Michael Dwyer): “India and China are accelerating efforts to prop up growth as a global slump threatens the world’s fastest-expanding major economies. The Reserve Bank of India on Nov. 1 lowered its benchmark interest rate for the second time in two weeks… China’s central bank removed temporary controls over loans to maintain ‘relatively fast’ growth, Xinhua News Agency reported…”
November 5 – Wall Street Journal (Patricia Jiayi Ho): “Growth in China’s once-roaring auto market has slowed to a near-crawl… Car-producing giants such as General Motors Corp. and Ford Motor Co. have been looking to emerging markets -- mainly China and India -- to provide a much-needed counterbalance to declining sales in the U.S. and Europe… Until midyear, Chinese auto sales had grown at 14% to 24% every month year-to-year…”
November 6 – Bloomberg (Naoko Fujimura and Tetsuya Komatsu): “Toyota Motor Corp… forecast the biggest drop in profit in at least 18 years… Net income will likely be 550 billion yen ($5.6 billion) for the year ending March 31, compared with an earlier forecast of 1.25 trillion yen… The new forecast will be a 68% drop from the 1.72 trillion yen Toyota earned last year.”
November 5 – Wall Street Journal (John Murphy): “During Toyota Motor Corp.’s rapid global expansion this decade, residents of the auto giant’s hometown saw their fortunes soar. Those days are quickly ending. Sales of Japan’s biggest company -- widely seen as Japan’s final bulwark against an economic slowdown -- are sputtering… The auto maker has slashed production and cut its temporary work force… by more than 20%... That has sent a chill across the Toyota City region, from its 400 car-related businesses to its real-estate market, department stores and noodle shops.”
Real Estate Bust Watch:
November 7 – Bloomberg (Sarah Mulholland): “Commercial real estate borrowers are running out of options as asset-backed markets dry up and alternative financing comes to an ‘abrupt halt,’ RBS Greenwich Capital Markets Inc. analysts said. Regional banks and insurance companies, which had become the primary source of financing since credit markets seized up, have stopped lending… Sales of bonds backed by commercial mortgages slumped to $12.2 billion in 2008, compared with a record $237 billion last year, according to JPMorgan…”
Saturday, November 08, 2008
Some politicians think there is nothing wrong with the consumer except he is nervous, when confidence returns the consumer will be back as good as before.
This current environment is feeding upon itslef, and I dont know except time what will change any of that. WE got our first dose of cumeupins, and I dont think this is done just yet.
Hope is here with new PResident, he will be able to solve our problems, just by repositioning tax revenue?
Obama might end up as one term President, for what he has inherited, no one would want.
Friday, November 07, 2008
10 straight months of job losses, HUGE downard revision to Sept unempoyment #'s, 240K losses AM report, jump in unemployment rate from 6.1% to 6.5% all painting a BLEAK employment picture....and pointing to the all important XMAS shopping season where MOST retailers go from RED INK to BLACK.
If you didnt think my call to hunker down was right weeks, months ago, how about now?
IMHO this continuing weak data points to the "probability" of probing the lows..... market could rally here too, but I just don't think it can sustain a move, have enough buying coming in to sustain it.
Thursday, November 06, 2008
MY 1st target was 8500....I have to run out, may post chart later, IMHO a break there and we TEST THE LOWS......and I am afraid they may not hold......90% down volume day yesterday.
Wednesday, November 05, 2008
NOW WE KNOW who will be PResident for the next 4 years, so maybe it's back to reality a bit as our economic problems have not gone away.
There is hope, there has been a strong rally, and later as I get a chance we can explore the potential for a bottom or the lack thereof.
Tuesday, November 04, 2008
It makes sense to me....in 2007 the selling lasted into JAn....OCT good month for lows even if ST.....so that is a potential,.....FUTURES BIG GREEN like a FED meeting day.......change is being sold (bought) LIBOR coming down....though corp spreads not so.....been QUIET on the banking crisis front
OBAMA WINS IN ONE OF THE MOST LOPSIDED ELECTIONS IN HISTORY (tomorrow's headline)
SO do the DEM's up for election......voters outing any BUSHITE with stench of IRAQ, CHENEY and STUMBLING ECONOMY.
I think we have ST setup for a ST top here TODAY! and like FED meeting day after brings REVERSAL when REALITY (1% rates or whatever) (OH G=D OBAMA WON) strikes home.....and he has talked of "SACRIFICE" " THIS WON'T BE EASY" SOCIAL REPOSITIONING......FEAR SPREADS OF REPEAL (tax rate back to reagan era?) of BUSH TAX CUTS (how else is he to PAY for new socialistic programs?)
He has said he will broaden war in AFGHAN....where no one has ever defeated their forces....in the mountains
Pulling out of IRAQ creates CHAOS there...NO NET savings....as AFGHAN WAR SPREADS AND FORCES COMMITED
IS THE RECESSION GROWING? WHEN WILL THE MKT (has it?) DISCOUNTED ITS END?
L stats for THIS rally not yet too impressive......unless SELLING POWER SHEDS like a 500 pound man in a sauna.......
SO.....today's OOOMPH will be important if OOOMPH......OOOMPHS in this BEAR have been sold.....but CHANGE IS COMING...
No need to guess it will show it's hand soon!
Saturday, November 01, 2008
NEW 11/1/2008 9:42:47 AM
Smokey posted the exact opposite assertion two days ago sighting a quote from Ben Bernanke in his 2002 speech wherein he stated that in order to inflate the economy out of deflation the Fed could control the price of longer dated treasuries by purchasing them from the Treasury.
However upon further investigation he has learned that the Fed no longer has the authority to purchase treasuries directly from the Treasury outside of replacement of maturing securities.During World War II the Fed did purchase treasury bills directly from the government in order to mainain low rates during the war.
But as this Wikipedia insertion indicates, they were relieved of this responsibility in the 1951 Accord."The 1951 Accord, also known simply as the Accord, was an agreement between the U.S. Department of the Treasury and the Federal Reserve that restored independence to the Fed.During World War II, the Fed pledged to keep the interest rate on Treasury bills fixed at 0.375 percent.
It continued to support government borrowing after the war ended, despite the fact that the Consumer Price Index rose 14% in 1947 and 8% in 1948, and the economy was in recession. President Harry S. Truman in 1948 replaced then Chairman of the Federal Reserve Marriner Eccles with Thomas B. McCabe for opposing this policy, although Eccles's term on the board would continue for three more years.
The reluctance of the Fed to continue monetizing the deficit became so great that in 1951, President Truman invited the entire Federal Open Market Committee to the White House to resolve their differences. William McChesney Martin, then Assistant Secretary of the Treasury, was the principal mediator. Three weeks later, he was named Chairman of the Fed, replacing Eccles." LINK
Additionally, as this Fed bulletin of 1997 specifies, the Fed currently has no authority to lend directly to the Treasury."Outright OperationsThe Desk may not add to the Federal Reserve's holdings ofsecurities by purchasing new securities when they are firstauctioned because it has no authority to lend directly to the Treasury.(1) Therefore, it must make any additions to holdings through purchases from primary dealers in the secondary market or directly from foreign official and internationalinstitutions.(1) It may exchange its maturing holdings for new securities at auction,however, and it does so routinely."
http://www.federalreserve.gov/pubs/bulletin/1997/199711lead.pdf This does not preclude a new agreement between the Fed and the Treasury to purchase government debt but it does verify what MrMoto and others have been indicating for some time. Outside of replacement of maturing securities, the Fed has no authority to directly monetize government debt.0.