COLD HARD FACTS

LIQUIDITY PUMP RUNS DRY by Mish and Hussman

Are we in for a 30% haircut? I think so, IMHO decline will resume after "holiday" bounce.

Duratek

2008 ELECTION

http://www.mittromney.com/

Time to begin researching candidates, aside from ROn Paul I personally feel Romney is worth considering, none of the Dem's are.

D

MORE BANKING TROUBLE?

Mortgage meltdown seen spreading to credit cards
Analysts point to new round of charge-offs expected by major U.S. issuers
By Murray Coleman, MarketWatch
Last Update: 5:03 PM ET Nov 19, 2007
SAN FRANCISCO (MarketWatch) -- As shares of Citigroup Inc. tumbled on Monday, analysts pointed to signs that the mortgage meltdown could be spreading to the banking giant and other major credit card players.
"We're starting to see signs within the industry that credit quality is dropping," said Justin McHenry, research director at market tracker IndexCreditCards.com. "That's causing major credit card companies to at least consider taking out larger reserves to protect themselves against more people defaulting in the future."
In downgrading Citigroup (C
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C) , Goldman Sachs analyst William Tanona raised issues related to an ongoing search for a new chief executive and expectations of more write-downs related to mortgage lending. See related story.
But he also forecast an erosion in Citigroup's credit card business. Tanona says he foresees "deteriorating consumer credit trends and higher corresponding provisions and charge-offs" for the company in the future.
Such views come on the heels of at least two key credit issuers revising expectations for coming quarters.
'We're starting to see signs...that credit quality is dropping. That's causing major credit card companies to at least consider taking out larger reserves to protect themselves against more people defaulting in the future.'
— Justin McHenry, IndexCreditCards.com
On Nov. 6, Capital One Financial Corp. (COF
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COF) said that it expects charge-off rates to reach around 5.25% in the fourth quarter. That would imply that as much as $1.2 billion of its U.S. credit card portfolio could require some sort of provisions to stem short-term credit-related setbacks.
"Charge-offs are the amount that consumers have charged on their credit cards but haven't paid off," said Julie Rakes, a Capital One spokeswoman.
Typically, lenders will take charges on credit cards that are past 180 days or so overdue. Those charges go against reserves set aside for uncollected balances, among other possible uses.
Rising delinquencies, usually considered 30 days or more overdue, spur credit card issuers to usually at least consider raising reserves.
And that's definitely starting to happen, say McHenry and other analysts say.
But they warn that determining the extent credit card issuers will be hit by macroeconomic trends and falling mortgages remains difficult to state at this point.
"If we see more credit card companies raise reserve levels," said McHenry, "then that will be a fairly definitive sign about eroding credit conditions in this industry. But it's a very fluid situation right now."
More charge-offs seen
Peter Schnall, Capital One's chief risk officer, says that he now expects 2008 charge-offs of around $4.9 billion.
"We based that view on the delinquency trends we saw at the time and limited speculation about the future course of the economy," he said at Capital One's annual investor conference in early November.
In a presentation on Nov. 14 at a banking conference, Capital One's Chief Executive Rich Fairbank reiterated previous guidance.
"Delinquencies have been relatively flat, although over the last four months they have increased," he said.
Much of that rise can be traced to a changing mix in the firm's credit portfolio, Fairbank added. "But there is some component of the delinquency increase that appears to have its roots in the economy," he said.
CIBC World Markets says it now projects credit losses at Capital One to reach $5.2 billion next year, which would be in line with upper ranges given by management this month.
Meredith Whitney, a CIBC analyst, also has raised her estimates on the firm's credit losses in 2009 to $5.4 billion.
"The increase is driven by prolonged, higher credit card delinquencies and further deterioration in the housing market," she wrote on Nov. 7.
Discover Financial Services (DFS
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DFS) also says it now expects charge-offs in 2008 to range between 4.25% to 4.75%. That could result essentially in write-offs to the firm of around $2 billion next year, estimates Mike Taiano, an analyst at Sandler O'Neill & Partners.
Still, such charge-offs wouldn't come close to levels seen in 2001-02. In that period, several large credit card companies reported close to 7% rates. And some engaged in more risky credit markets soared into double-digits as a percentage of outstanding payments.
"If you look at those numbers, charge-off rates are still pretty low from a historical view," said Taiano. "But the signs we're seeing of more charge-offs could be creating an earnings headwind for the industry."
Credit card receivables aren't growing a lot for the industry as a whole, he added. "Coupled with the fact that their losses are expected to go up in coming quarters, credit card companies could be facing a significant impact going forward on their earnings," Taiano said.
Capital One and Discover emphasized that any rise in delinquencies come after historically low levels in recent years.
"Credit card issuers are arguing their charge-offs are simply precautions and represent still manageable levels," said analyst McHenry. "But it's worth noting that they're taking out larger reserves in anticipation that more people could default on their credit card payments."
Murray Coleman is a reporter for MarketWatch in San Francisco

BEAR ALERT!!!

NOW IT GETS INTERESTING! AUG LOWS FOR THE SPX ARE 60 POINTS BELOW TODAYS CLOSE 1370.60 AND FOR DOW 12,517.94 UTILITIES STILL ON SCREAM SINCE 2003 LOWS.....SAFETEY IN YIELDS? 10 YR YIELDS NEAR 4% NOW

NEAR A 90% DOWNSIDE DAY, UNOFFICIAL 89% DOWN VOLUME.

iT WOULD TAKE SUBSTANTIAL more WEAKNESS TO SEE SPX AND DOWN CONFIRM NEW TRANS LOWS.

VIX IN UPWARD TREND 06 HIGH 23.81 07 HIGH 37.50 VOLATILITY CONTINTUES TO CLIMB, A BEARISH PHENOM.

I KEEP LOOKING FOR REBOUND, IS IT THAT PRICES ARE NOT LOW ENOUGH YET FOR SUSTAINED BUYING INTEREST?

DURATEK......BEEN ON THE DEFENSIVE!

IS A BEAR MARKET APPROACHING?

*click to enlarge Transports warned in late 1999 that something was wrong, they are doing it again NOT confirming the NEW DOW HIGHS and leading the way DOWN.

As we approached the all time high in the DOW, the number of stocks also hitting 52 week highs was already declining, and the strength was coming from a selective few stocks, large tech and a few multi nationals, this past week many of THOSE stocks appeared to have blowoff tops, GOOG, HANS, AAPLE, BIDU

Speculation was rampant in stocks like FSLR a chinese solar play up $50 in one day!

WED's decline had 94% downside volume, the 3rd 90% day in last 30 days, none have been followed by 90% up days, a sign of renewed buying interest. BUYING interest seems to be DRYING UP.

http://nymag.com/guides/money/2007/39952/ must read threats to our economy.

WHAT makes up for the $500B per year in consumer spending taken from home equity?

Finacials lead stealth bear market

Pity bounce may be near, it will get sold IMHO, AUG lows to be challenged

D

RON PAUL ON TAX REFORM

November 05, 2007
Tax Reform Promises Treats, Delivers Tricks
by Ron Paul

Representative Charles Rangel's recently announced plan to address the impending Alternative Minimum Tax's application to middle-class Americans demonstrates limited economic understanding.
The Alternative Minimum Tax (AMT) began in the late 1960's because 155 wealthy taxpayers had become savvy enough with loopholes that they managed to avoid income taxes altogether. Very few Americans avoided taxes completely this way, nonetheless, policy was enacted that now threatens 25 million Americans.
Rangel's plan boasts loudly about repealing the AMT, but under the Democrats' pay-as-you-go rules, actual tax cuts are not allowed. Congress must replace any tax revenue reduction with an increase somewhere else, and of course, there are no rules preventing tax hikes. Thus, a new 4% surtax on incomes over $150,000 for singles and $200,000 for couples is proposed to "pay for" the estimated lost revenue. This simultaneously raises $36 billion MORE than simply leaving the AMT alone, and creates a huge new marriage penalty tax. It won't be long before $150,000 is an average income, and middle class taxpayers will again face the situation we see coming today from inflation and the AMT. Overall, the Rangel tax plan is estimated to increase taxes by $3.5 trillion over the next 10 years.
With the leadership in Congress calling for this massive tax hike, spending levels promising to absorb all that and then some (thanks to our ambitiously misguided foreign policy), as well as the Federal Reserve's again cheapening the dollar, American taxpayers are wondering where their purchasing power went. We are working harder than ever before, as our standard of living falls.
The founding fathers never saw taxation as a method to direct social behavior or enforce equality. Equality to them was equality under the law, not equality of outcome, or income. It was not the founding fathers' job to manage the economy, or make American businesses competitive. That was up to the free market and American businesses. The founders sought to provide only protection of property and civil liberties such that job creation could happen naturally and peacefully in a stable, prosperous environment. They never sought to take from the rich to give to the poor, or rob Peter to pay Paul. But today, the top 5% of earners in this country pay over half of all income taxes collected, but only bring in a third of the income. One third of Americans pay nothing or receive subsidies from government.
Tax policy should not be based on the premise that government owns you and allows you to keep some arbitrary amount of your labor. Thus, the AMT should be repealed. The estate tax should be repealed. Capital gains taxes should be repealed. The income tax should be repealed. We don't need to overhaul or adjust tax policy, we need to scrap the whole thing and start over.
But this message is not getting through to the leadership of Congress. Congress has ensnared itself in rules so that the only changes in tax policy allowed are increases, while the administration is obsessed with spending, especially spending us into oblivion by spreading this dead-end war when we should be coming home.
If Washington can only do wrong, then let's hope for gridlock, until a more sensible Congress is in office. Sometimes a do-nothing Congress is a lot better than the alternative.

Dr. Ron PaulProject Freedom

THE US $$$$$ IS IN DEATH SPIRAL

The Greenback Is on the Run
2007-11-06 - Steve Christ

War fighting may be tough on boots, but it's murder on the wallet.
Unfortunately, that's a lesson that Captain Allan McClain needed to learn the hard way. Incredibly, he had to lay out $600 for new a set of footwear. And to add insult to injury he was charged a whopping $10 for a simple spool of thread.
And while that hardly seems like a fair deal for an American fighting man, it really did happen. The year was January 1781.
Captain McClain wasn't fighting terrorists but chasing the Redcoats around a new nation. He was a soldier in the Continental Army and he was paid in Continental Dollars. Needless to say, he probably deserved better.
Created in 1775, the Continental Dollar was a series of notes designed to support the revolution. Its plates were crudely engraved by Paul Revere himself and printed on such thick paper that the Brits referred to it derisively as "the paste board money of the rebels."
Clearly, The Brits were on to something.
At the behest of Congress, two million dollars worth these of "paste board" notes were to be created. And by July of 1775 they became part of the currency of the day.
More Dollars = More Inflation
But to the surprise of no one, those two million notes weren't nearly enough to cover the bills. So almost as soon as those new "dollars" hit the street, the Congress decided to print some more of them, and by the end of 1775 there were over six million of these notes in circulation.
The money supply had more than tripled.
But guess what? It seems that even our sainted founding fathers simply couldn't help themselves when it came to money. So much so that by its final printing the aggregate amount of Continental Dollars in circulation had skyrocketed to a stunning $242 million in as little as five years!
Needless to say, this massive devaluation of the currency through the inflated money supply simply devastated the notes. In fact, it was so bad that by the end of 1781 it took $16,800 to purchase a mere $100 worth of gold.
In the end, the Congress never did redeem the bills and their part of the debt was not assumed by the new U.S. government. So in six short years the Continentals became completely worthless.

Sadly, what was true in 1775 is still true today. Bankers love to print money.
The reasons for this are twofold. One is that central bankers believe they can somehow "manage" the economy through the manipulation of interest rates and the money supply.
The second is that the government printing press is necessary to monetize the escalating federal debt that politicians not only hunger for but thrive on.
You see, we don't sell war bonds or raise taxes anymore. That would be too restrictive.
Besides, why bother when you've got tons of paper and the keys to the printing presses?
In short, it's a combination of hubris, greed, and blind ambition and it cannot end well.
Other countries, of course, can see this too, and because of it they are moving away from the dollar as fast as they can.
Rate Cuts Crush the Almighty Greenback
But few Americans actually get the picture yet. How could they?
After all, we don't remember the Continental, and our modern nation has never suffered from inflation so severe that it destroyed the dollar.
That's something that happens in other countries.
And what we know about the Fed, for some reason, couldn't fill a thimble. Ben Bernanke is by all accounts the second most powerful person in the country, and the vast majority of Americans could not begin to tell you a single thing about what the Federal Reserve actually does. (Why is that?)
So instead we believe the bankers and the politicians. We see soft landings.
We have lived our whole lives at the top of the world heap. How could tomorrow be any different?
The truth is it could be very different. The rapid expansion of the money supply ensures it, because when we devalue the currency by creating huge volumes of dollars out of thin air, the result is inflation.
In 1781 it was $600 boots. Today it's $96 dollar oil and $800 gold.
Inflation is a monetary phenomenon and history proves it.
In fact, a dollar from before the creation of the Federal Reserve is now worth only about four cents.
That's why the soaring prices of gold and oil are not just some anomaly. It's a worldwide vote of no confidence against the Fed and its dollars. That was the case in 70s, and it is the case today.
Heck, even a supermodel can figure it out. Along with Warren Buffett and Jim Rogers, Gisele Bündchen is also bearish on the dollar. She recently demanded that Proctor & Gamble pay her in Euros.
So as long as the world is restless over our increasing money supply, our trade deficits, our unfunded liabilities, and the complete inability of Congress to rein in government spending, the price of gold and oil will continue to rise as the dollar continues its freefall.
In fact, Helicopter Ben is just getting warmed up with his cuts.
Bailing out the banks will take rates much lower than the current ones.
Of course, the dollar likely won't have the same fate as the Continental, but it won't be pretty.
It's called inflation and its coming to a boot store near you.
Wishing you happiness, health and wealth.


Steve Christ, Editor