http://www.climatecrisis.net/
Yes, it's Al Gore, this is well researched, well presented, not irrefutable fact, but seems very plausable, very probable and more than worth considering and how each of us can make a change, a difference in lessening the possibility of irreversable damage to our environment and the world we live in.
Is it any miracle the #1 car maker in the world is TOYOTA? IS IT any wonder they lead in fleet miles per gallon? or are leaders in HYBRID SYNERGY TECHNOLOGY? WHO makes the HUMMER? WHO is $350 Billion in debt?
It is true you can be conscious about environment and be good for business. The BUSH ADM are frauds and lack any leadership in the world except war making and lies.
ONLY 2 countries have NOT signed KYOTO TREATY, the US is one of them.
Which country is hopelessly in debt and has $50 Trillion in unfunded liabilities?
One day you will wake up and wonder what the F**!! happened to the world, and wish you could have done something to change it!!
Vote for those who have of like mind and want to change the way things are done and what the priorities are.
By invading Iraq we have created 10X more terorists than we have killed, and the 1st country we freed and attacked terrorism is now slipping back into a haven...Afghanistan.
Talk TOUGH to IRAN now, see where that gets us too. But I digress, and well its my blog.
Duratek
Monday, March 12, 2007
Friday, March 09, 2007
CHINA CARRY TRADE OVER?
China to pursue higher returns on reserves
Beijing to create agency to oversee its investment of foreign currency reserves of more than $1 trillion; global investors wary of impact.
March 9 2007: 7:11 AM EST
BEIJING (Reuters) -- China is setting up a new investment agency to seek higher returns on its foreign currency reserves of more than $1 trillion, the largest stockpile in the world, Finance Minister Jin Renqing said Friday.
It was the first official confirmation of China's plans, which Premier Wen Jiabao foreshadowed in January by saying Beijing would actively explore new ways of using the reserves.
"The biggest priority is safety, and under the principle of security we will try to increase the efficiency of management and the investments' returns," Jin told a news conference.
He gave no details of how much money the fund would manage, let alone how it might invest, but he said Singapore's state-owned Temasek investment company would be one of its models.
"This company is still in the process of being formed, and it will let the public know when it has been formally set up," said Jin, who was speaking during the annual session of the National People's Congress, China's largely ceremonial parliament.
China's financial firepower means the fund has the potential over time to make a big impact on world markets.
"Some people in the market are concerned that if there is going to be a drastic change in the way the FX reserves are being managed, it could have a potentially important impact on capital flows and financial markets," said Grace Ng, an economist at JPMorgan Chase in Hong Kong.
Academic studies estimate that investment by China and other Asian countries in U.S. bonds has reduced long-term American interest rates by anything from half a percentage point to 2 percentage points - a boon to U.S. businesses and home buyers.
The State Administration of Foreign Exchange (SAFE), an arm of the central bank, currently manages all of China's reserves.
Where they are invested is a state secret, but bankers assume two-thirds or more are held in low-risk dollar bonds.
SAFE, which regulates China's currency, would continue to manage what Jin called China's "normal" reserves; the rest would be invested by the new agency.
As China's reserves have ballooned on the back of record trade surpluses, demands have grown for part of the hoard to be managed more aggressively.
Some researchers have argued for buying oil, natural resources and high-technology imports; others want the money to be converted back into yuan and spent relieving poverty at home.
Singapore model
Cheng Siwei, a leading lawmaker, told Reuters this week that China needed no more than $600 billion-$700 billion in reserves, and various state media reports have said the new agency could receive as much as $200 billion to manage.
Bankers, however, say a fund would take years to grow that big without driving the prices of assets it buys sharply higher.
To avoid rocking markets, one possibility for the new agency would to give it only part of China's new reserves, not its existing stash. The reserves are growing by about $20 billion a month.
"Given the way the Chinese government does things, it's likely to be a gradual process. Any impact on the market would likely to be gradual and manageable," said Ng at JPMorgan.
Reflecting the importance of the venture, the new agency will report directly to the State Council, China's cabinet, and not to either the finance ministry or the central bank.
Lou Jiwei, a former vice finance minister, was promoted to a cabinet-level post this week in a move that analysts saw as prefiguring his appointment to run the agency.
"We will draw upon the successful practices of other countries, for example Singapore's Temasek, to manage China's foreign exchange reserves," Jin said.
Temasek Holdings invests Singapore's fiscal surpluses, not its currency reserves. It owns stakes in several of Singapore's biggest firms and has expanded aggressively in Asia since 2002 to try to boost its long-term investment returns.
Temasek reported total shareholder return by market value of 24 percent in the year ending March 31, 2006, matching that of the city-state's main stock market index.
Over a 10-year period, its total shareholder return of 6 percent a year was also in line with the Singapore index.
Last year it paid $3.8 billion for Shin Corp., Thailand's biggest telecommunications firm, triggering a political crisis in Bangkok that culminated in a military coup against former prime minister Thaksin Shinawatra, who founded the company.
China has grown into an economic powerhouse in the last decade, becoming the home to manufacturing for products sold by Wal-Mart (Charts), Target (Charts), Lowe's (Charts), and Home Depot (Charts).
China looks to boost property rights
Paulson calls for change in China
Find this article at: http://money.cnn.com/2007/03/09/news/international/bc.china.economy.reserves.reut/index.htm
Beijing to create agency to oversee its investment of foreign currency reserves of more than $1 trillion; global investors wary of impact.
March 9 2007: 7:11 AM EST
BEIJING (Reuters) -- China is setting up a new investment agency to seek higher returns on its foreign currency reserves of more than $1 trillion, the largest stockpile in the world, Finance Minister Jin Renqing said Friday.
It was the first official confirmation of China's plans, which Premier Wen Jiabao foreshadowed in January by saying Beijing would actively explore new ways of using the reserves.
"The biggest priority is safety, and under the principle of security we will try to increase the efficiency of management and the investments' returns," Jin told a news conference.
He gave no details of how much money the fund would manage, let alone how it might invest, but he said Singapore's state-owned Temasek investment company would be one of its models.
"This company is still in the process of being formed, and it will let the public know when it has been formally set up," said Jin, who was speaking during the annual session of the National People's Congress, China's largely ceremonial parliament.
China's financial firepower means the fund has the potential over time to make a big impact on world markets.
"Some people in the market are concerned that if there is going to be a drastic change in the way the FX reserves are being managed, it could have a potentially important impact on capital flows and financial markets," said Grace Ng, an economist at JPMorgan Chase in Hong Kong.
Academic studies estimate that investment by China and other Asian countries in U.S. bonds has reduced long-term American interest rates by anything from half a percentage point to 2 percentage points - a boon to U.S. businesses and home buyers.
The State Administration of Foreign Exchange (SAFE), an arm of the central bank, currently manages all of China's reserves.
Where they are invested is a state secret, but bankers assume two-thirds or more are held in low-risk dollar bonds.
SAFE, which regulates China's currency, would continue to manage what Jin called China's "normal" reserves; the rest would be invested by the new agency.
As China's reserves have ballooned on the back of record trade surpluses, demands have grown for part of the hoard to be managed more aggressively.
Some researchers have argued for buying oil, natural resources and high-technology imports; others want the money to be converted back into yuan and spent relieving poverty at home.
Singapore model
Cheng Siwei, a leading lawmaker, told Reuters this week that China needed no more than $600 billion-$700 billion in reserves, and various state media reports have said the new agency could receive as much as $200 billion to manage.
Bankers, however, say a fund would take years to grow that big without driving the prices of assets it buys sharply higher.
To avoid rocking markets, one possibility for the new agency would to give it only part of China's new reserves, not its existing stash. The reserves are growing by about $20 billion a month.
"Given the way the Chinese government does things, it's likely to be a gradual process. Any impact on the market would likely to be gradual and manageable," said Ng at JPMorgan.
Reflecting the importance of the venture, the new agency will report directly to the State Council, China's cabinet, and not to either the finance ministry or the central bank.
Lou Jiwei, a former vice finance minister, was promoted to a cabinet-level post this week in a move that analysts saw as prefiguring his appointment to run the agency.
"We will draw upon the successful practices of other countries, for example Singapore's Temasek, to manage China's foreign exchange reserves," Jin said.
Temasek Holdings invests Singapore's fiscal surpluses, not its currency reserves. It owns stakes in several of Singapore's biggest firms and has expanded aggressively in Asia since 2002 to try to boost its long-term investment returns.
Temasek reported total shareholder return by market value of 24 percent in the year ending March 31, 2006, matching that of the city-state's main stock market index.
Over a 10-year period, its total shareholder return of 6 percent a year was also in line with the Singapore index.
Last year it paid $3.8 billion for Shin Corp., Thailand's biggest telecommunications firm, triggering a political crisis in Bangkok that culminated in a military coup against former prime minister Thaksin Shinawatra, who founded the company.
China has grown into an economic powerhouse in the last decade, becoming the home to manufacturing for products sold by Wal-Mart (Charts), Target (Charts), Lowe's (Charts), and Home Depot (Charts).
China looks to boost property rights
Paulson calls for change in China
Find this article at: http://money.cnn.com/2007/03/09/news/international/bc.china.economy.reserves.reut/index.htm
IT'S A NEW CENTURY
UPDATE: New Century Stops Accepting Loan Applications
March 08, 2007: 07:10 PM EST http://money.cnn.com/news/newsfeeds/articles/djhighlights/200703081910DOWJONESDJONLINE001264.htm
SAN FRANCISCO (Dow Jones) -- New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime- mortgage specialist's financial backers are refusing to provide access to financing.
New Century also said that it has received $150 million worth of margin calls from its so-called warehouse lenders. It has satisfied about $80 million of those calls, but $70 million remains, according to the company.
"As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement.
"The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added.
New Century shares fell 4.4% to $3.70 during after-hours trading on Thursday. The stock slumped 25% to close at $3.87 during regular trading, leaving it down more than 85% so far this year.
Subprime mortgages are offered to home buyers who fail to meet the strictest lending standards. Companies like New Century (NEW) that specialize in these loans have suffered as housing prices stopped rising and interest rates climbed from record lows.
Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.
On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation.
New Century said on Thursday that it has yet to get waivers on this covenant from five of its warehouse lenders, having made no progress on this point since Friday.
"Once you get hit with one of these crunches, warehouse lenders don't want to lend to you, so you're really done," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business and a visiting scholar at the Federal Deposit Insurance Corp.
Mason, who recently published a study on the subprime mortgage market, said he's expecting more bankruptcies in the sector.
Subprime originators usually sell their loans on to big banks or package them up into mortgage-backed securities for sale into the secondary market. The buyers of these assets have the right to send them back in certain circumstances, including when borrowers fail to make payments during the first month or two. In those cases, the originator is forced to repurchase the loans.
New Century said late Thursday that one of its financial backers forced the company to repurchase some loans. It didn't identify the lender.
One of New Century's lenders also has extended $265 million in financing that is mainly secured by its real-estate investment trust mortgage loan portfolio.
New Century also announced that it borrowed more money to help it refinance roughly $710 million in mortgage loans currently financed through another lending relationship.
The company said it's talking with lenders and other third parties about getting more access to financing, but warned that its efforts might fail.
"These firms that rely on funding mechanisms like securitizations are like sharks -- if they stop moving they die," Mason added.
In another blow earlier on Thursday, New Century said one of its directors - David Einhorn of hedge fund Greenlight Capital - resigned.
March 08, 2007: 07:10 PM EST http://money.cnn.com/news/newsfeeds/articles/djhighlights/200703081910DOWJONESDJONLINE001264.htm
SAN FRANCISCO (Dow Jones) -- New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime- mortgage specialist's financial backers are refusing to provide access to financing.
New Century also said that it has received $150 million worth of margin calls from its so-called warehouse lenders. It has satisfied about $80 million of those calls, but $70 million remains, according to the company.
"As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement.
"The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added.
New Century shares fell 4.4% to $3.70 during after-hours trading on Thursday. The stock slumped 25% to close at $3.87 during regular trading, leaving it down more than 85% so far this year.
Subprime mortgages are offered to home buyers who fail to meet the strictest lending standards. Companies like New Century (NEW) that specialize in these loans have suffered as housing prices stopped rising and interest rates climbed from record lows.
Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.
On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation.
New Century said on Thursday that it has yet to get waivers on this covenant from five of its warehouse lenders, having made no progress on this point since Friday.
"Once you get hit with one of these crunches, warehouse lenders don't want to lend to you, so you're really done," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business and a visiting scholar at the Federal Deposit Insurance Corp.
Mason, who recently published a study on the subprime mortgage market, said he's expecting more bankruptcies in the sector.
Subprime originators usually sell their loans on to big banks or package them up into mortgage-backed securities for sale into the secondary market. The buyers of these assets have the right to send them back in certain circumstances, including when borrowers fail to make payments during the first month or two. In those cases, the originator is forced to repurchase the loans.
New Century said late Thursday that one of its financial backers forced the company to repurchase some loans. It didn't identify the lender.
One of New Century's lenders also has extended $265 million in financing that is mainly secured by its real-estate investment trust mortgage loan portfolio.
New Century also announced that it borrowed more money to help it refinance roughly $710 million in mortgage loans currently financed through another lending relationship.
The company said it's talking with lenders and other third parties about getting more access to financing, but warned that its efforts might fail.
"These firms that rely on funding mechanisms like securitizations are like sharks -- if they stop moving they die," Mason added.
In another blow earlier on Thursday, New Century said one of its directors - David Einhorn of hedge fund Greenlight Capital - resigned.
Thursday, March 08, 2007
THE WORM TURNS
DOW (should be resistance)
100 EMA 12,283
.382 Fib 12,329
12,247.40
12,353.47
12,650 ish
As it looks we have similar setup to JULY bottom!!! how could that be?? series of 80-90% down volume days and now we have had one 90% up day, and today has good chance of doubling that!
World markets appear to have gotten their footing back, lost their fear already. VIX shedding points like SUMO wrestler in steam room.
ANother 90% upside day could set stage to challenge previous highs, as strange as that seams to me.
100 EMA 12,283
.382 Fib 12,329
12,247.40
12,353.47
12,650 ish
As it looks we have similar setup to JULY bottom!!! how could that be?? series of 80-90% down volume days and now we have had one 90% up day, and today has good chance of doubling that!
World markets appear to have gotten their footing back, lost their fear already. VIX shedding points like SUMO wrestler in steam room.
ANother 90% upside day could set stage to challenge previous highs, as strange as that seams to me.
Tuesday, March 06, 2007
WE HIT BOTTOM YET?
http://money.cnn.com/2007/03/06/news/economy/bernanke.reut/index.htm Fannie Mae and MAc trouble
http://money.cnn.com/2007/03/05/markets/yen_carry/index.htm yen carry trade bet
Don't be a Lemming, read, educate yourself, form your OWN opinion or Wall Street will give it to you, the kind that make you grab your ankles.
D
http://money.cnn.com/2007/03/05/markets/yen_carry/index.htm yen carry trade bet
Don't be a Lemming, read, educate yourself, form your OWN opinion or Wall Street will give it to you, the kind that make you grab your ankles.
D
90% SURE
Market makes a top, then quickly has 2 90% DOWN days, one was 99% DOWNSIDE VOLUME!
Today we had a 90% up day. It is VERY unusual to have a market top followed by 2 such HUGE downside volume days, stay tuned, should we go down again and break the recent lows near 12,000 with similar volume, the health of this bull is definately in question, and the BEAR must be potentially entertained, IMHO
Today IMHO is nothing more than a normal bounce from HUGE oversold, see if it lasts.
D
Today we had a 90% up day. It is VERY unusual to have a market top followed by 2 such HUGE downside volume days, stay tuned, should we go down again and break the recent lows near 12,000 with similar volume, the health of this bull is definately in question, and the BEAR must be potentially entertained, IMHO
Today IMHO is nothing more than a normal bounce from HUGE oversold, see if it lasts.
D
Thursday, March 01, 2007
500 POINT WARNIG SHOT, MASSES ABOUT TO BE BURNED AGAIN
To my many loyal readers, to the lurkers, or those like an insect accidently landed here in my web, stay awhile while I weave a web of intrigue, espionage, danger, and warning.
The 500 point jugernaught decline 2 days ago IMHO is a wanring shot, not a one day wonder or blip on the chart, some mistake or a reaction to rumor. If you try to figure out fundamentally why anything happens, you will parse away the meaning, and lose your way.
We may never know exactly why anything happens, what we can do is look at a move in context of where we are, how far we have come, and what it means technically.
It may that when you add the news from China, and the tightening going on in Japan, that what the 500 PT drop is warning is that the WORLD LIQUIDITY GAME IS COMING TO AN END. And that is ALL that is carrying this game forward for so long.
WE have now accumulated historic levels of debt, and imbalances, and the scales are tipped toward Deflation, there seems to be plenty of everything.......from China that is.
How do we pay for these things? With credit, from foreign purchases of our debt, of which China holds near $1 Triillion. Their currency is 40% or more undervalued, and they have NO intention of making any rude changes.
We have had WILD and damaging real estate specualtion here, it is rippling through our economy, a 4.5% 10 yr bond, which is lower in yield than the 2 yr and the 90 day, has been warning of trouble.
Durable goods orders plummeting, construction spending, home sales off the charts, but today our Manufaturing index inched up and all is well!?? LOL reason for stock turnaround given.
The Dow hit previous reaction lows andbounced, no doubt program buying came to recue.
Very good argument can be laid we have seen the highs for this market.
If it isnt cars and housing, tell me what will drive the economy?
Under current conditions, I am stepping aside and feel profits are profits, and sitting idle and letting them slip away would not be prudent.
I think the tenor of market has been changed, shocked into recognition or it should be that a direction stock prices can and do go in once in awhile is down.
Duratek
The 500 point jugernaught decline 2 days ago IMHO is a wanring shot, not a one day wonder or blip on the chart, some mistake or a reaction to rumor. If you try to figure out fundamentally why anything happens, you will parse away the meaning, and lose your way.
We may never know exactly why anything happens, what we can do is look at a move in context of where we are, how far we have come, and what it means technically.
It may that when you add the news from China, and the tightening going on in Japan, that what the 500 PT drop is warning is that the WORLD LIQUIDITY GAME IS COMING TO AN END. And that is ALL that is carrying this game forward for so long.
WE have now accumulated historic levels of debt, and imbalances, and the scales are tipped toward Deflation, there seems to be plenty of everything.......from China that is.
How do we pay for these things? With credit, from foreign purchases of our debt, of which China holds near $1 Triillion. Their currency is 40% or more undervalued, and they have NO intention of making any rude changes.
We have had WILD and damaging real estate specualtion here, it is rippling through our economy, a 4.5% 10 yr bond, which is lower in yield than the 2 yr and the 90 day, has been warning of trouble.
Durable goods orders plummeting, construction spending, home sales off the charts, but today our Manufaturing index inched up and all is well!?? LOL reason for stock turnaround given.
The Dow hit previous reaction lows andbounced, no doubt program buying came to recue.
Very good argument can be laid we have seen the highs for this market.
If it isnt cars and housing, tell me what will drive the economy?
Under current conditions, I am stepping aside and feel profits are profits, and sitting idle and letting them slip away would not be prudent.
I think the tenor of market has been changed, shocked into recognition or it should be that a direction stock prices can and do go in once in awhile is down.
Duratek
Wednesday, February 28, 2007
Tuesday, February 27, 2007
MARKET CRASH ALERT
*(click to enlarge)Been pretty boring until today, record NYSE volume, HUGE down day, near 99% down volume, a huge 64% SPIKE in VIX (volatility index) to over 18.
QID gained $4.50 (proshort Q's) and it doubled its normal volume!!! Previous PEAK volume day (was around 7.5 m shares) was near high for move (near end of selloff).
Is there a global liquidty short circuit? Will the Chinese follow through on RUMORS to tighten speculation, add capital gains taxes, rein in fever. Is it a rumor?
70 High cranes seen in Shanghai city alone.
BOJ raising rates, YEN higher, Dollar weaker, is US DOLLAR in trouble?
When a move in the markets is followed by VOLUME, in this case record volume, I don't think it smart to dismiss it. Instead of one day wonder could be kickoff to much larger decline. As my chart shows, a trip down to 100 wk would not surprise me, not all at once of course.
Today SELLING PRESSURE came back in a big way.
MARGIN DEBT, those stupid enough to buy stocks on CREDIT hit a NEW ALL TIME HIGH, yes higher than in bubble top of 2000 !!!!
Margin calls could beget more selling which begts more selling until it exstiguishes itself.
I expect a possible green open then reversal, then maybe another reversal, BUYERS MUST come in and soon to stem the rout, sellers will get aggresive again, get their nerve back.
Little guy did nothing today, dont get him worried.
Why guess, my moving averages show no cross, when they do the debacle will be in full swing, volatility will be back in big way and to stay for awhile.
Bull is OLD, on last legs, MANY may want to lock in gains, instead of sit around and watch it possibly whither away again like in 2000-2003. Many are in much better shape now, gaining a lot back, maybe better off.......will the little guy sit by this time around should a bear market come back?
I am in CASH my friends, I get a check each month, no risk, I felt best of bull had come and gone, so WHY risk it.
I know HARD to time short, so for most best to wait for bargains to appear, if they do, you will need CASH to buy.
Market MAY stabilize for a few days not sure, will be watching overseas markets tonight, if China etc does better, we may too.
I think this is severe warning shot, money fled to bonds yielding scant nothing.
INVERTED yield curve has been screaming trouble, Wall Street Shills said don't worry.
Durable goods PLUNGED over 7% today. Anyone suggesting housing slump isn't hurting business wake up.
LOTS of damage done today, record volume, I am not long are you? I am in preserve mode, live to fight another day.
Record volume in QID tells me NAZ selloff should level off here, but I hope today is not shortly forgotten should the PPT get us going again , not to worry, at some point you better have an exit strategy IMHO.....I mean who wants to be last there selling AGAIN at the lows......you NEED CASH to BUY, how much of your portfolio is cash?
Take care, I am hoping the world economy is not unraveling as we speak, liquidity and speculation got us here, and it can also unwind and take us down!
Duratek
Friday, February 16, 2007
Thursday, February 15, 2007
BRIEFLY
http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm
Industrial production plunges
Capacity ute swan dives
NET foreign purchases disappears!!
Initial claims UP sharply
MKT rallies
Industrial production plunges
Capacity ute swan dives
NET foreign purchases disappears!!
Initial claims UP sharply
MKT rallies
Tuesday, February 13, 2007
SUBPRIME TIME BOMB
Subprime Time Bomb
With HSBC and New Century Financial suffering losses from subprime borrowers, which other mortgage lenders face an unpleasant reckoning?
by Maya Roney
As investors swallowed negative news from two of the biggest players in the subprime mortgage market on Feb. 8, the "housing bottom" question took a backseat to a new debate: Who will get crushed in the subprime shakeout, and who will emerge unscathed?
The market started showing more signs of subprime jitters when HSBC Finance, the Prospect Heights (Ill.)-based consumer lending unit of British banking giant HSBC Holdings (HBC) said it was setting aside 20% more than analysts had estimated for bad loans in 2006 because of weakening in the U.S. mortgage business. Shares of the bank were off 3% early afternoon on Feb. 8.
More bad news came from Irvine (Calif.)-based lender New Century Financial (NEW). New Century, the second-largest subprime mortgage originator in the U.S., announced it would restate results for the first three quarters of 2006 to correct accounting errors related to loan repurchase losses, sending the stock down 30% on Feb. 8. The company expects to see a loss for the fourth quarter of 2006 due to early payment defaults.
Defaults Aren't the Whole Story
Shares of other big mortgage players, Countrywide Financial (CFC) and Washington Mutual (WM), were down more than 2% on Feb. 8. Smaller subprime lenders were hit even harder: Kansas City (Mo.)-based Novastar Financial (NFI) shares fell 13%, and San Diego-based Accredited Home Lenders Holding (LEND) dropped 7%.
As investors become more aware of the problems with subprime loans, lenders that focus on customers with poor credit histories will have to face the music. But it may be for different reasons than people think.
"Just because some subprimers are bad doesn't mean all are," says Stuart Plesser, a mortgage lender and insurer analyst for Standard & Poor's Equity Research. "Countrywide will suffer because they are going to face a pricing issue." Plesser has a "sell" rating on Countrywide, the No. 1 mortgage originator and fourth largest subprime mortgage originator in the U.S., according to National Mortgage News.
Many mortgage lenders, including Countrywide and New Century, sell their loans to banks and investors that are attracted to the high interest rates they carry. HSBC got into subprime during the U.S. housing market boom, but when the market began to cool and foreclosure trends accelerated, the bank found itself in trouble. Washington Mutual, another big player in the subprime market, said in January that its mortgage business lost $122 million in the fourth quarter thanks entirely to losses in its subprime segment.
Price Competition
"This is the leitmotif of this whole thing: These people don't really know what they are doing in mortgage banking," says Plesser. "They are writing whatever loans just to write loans, thinking they will worry about it later. But now it's later."
Regular lenders also suffer when banks get into their territory. Companies like Countrywide have been forced to price loans lower since investment banks started buying up subprime loans and pricing them aggressively. Banks assumed they were covered from potential losses by the revenue streams from their myriad other businesses.
Despite the headwinds, lenders like Countrywide, which only has 10% of its business in subprime production, could weather the housing slump better than nearly pure subprime companies, like New Century and Novastar.
"Countrywide is diversified and will start picking it up when everyone goes out of business," says Piper Jaffray analyst Bob Napoli, who has a "buy" rating on the stock. Napoli also says Accredited, though a pure subprime company, could also "get to the other side."
Diversified Against Danger
As for New Century, Napoli says that although the earnings restatement came as a surprise, he has been looking for an ugly fourth quarter from a company that "grew way too fast for their infrastructure." Still, the analyst has a "market perform" rating on New Century shares, which he says are "not yet a certain sell."
Several other analysts downgraded New Century to "sell" on the news Feb. 8, including Kenneth Bruce of Merrill Lynch (MER). "In short, we think New Century will shift to survival mode, putting shareholders at further risk," the analyst wrote in a report.
Diversification will also be the key factor in keeping banks afloat in 2007. That may be why Bear Stearns (BSC) wasn't afraid to buy the subprime loan business last October of another Irvine-based lender, ECC Capital (ECR).
"Because they are so big and [Bear Sterns has] so many businesses, it doesn't go straight to their bottom line," says Plesser. By 2008, the analyst expects many of the big banks to unload their subprime portfolios and leave the business to the regular lenders.
Let That Be a Lesson
Even if banks decide to stick with their subprime segments, HSBC's profit warning and New Century's restatement may prevent other banks from getting into it in the future. Despite the profit warning, Standard & Poor's Ratings Services affirmed its "AA" long-term and "A1" short-term credit ratings on HSBC Holdings on Feb. 8 and said the outlook for the company remains positive. "The positive outlook reflects the potential for HSBC's diversification to generate very strong group performance even when some business lines are performing weakly," wrote credit analyst Michelle Brennan.
"They are going to look really stupid for making these acquisitions," says Napoli. "Things like this remind people that it's not an easy business."
Click here to see the U.S. cities with the highest foreclosure rates. (newsweek)
With HSBC and New Century Financial suffering losses from subprime borrowers, which other mortgage lenders face an unpleasant reckoning?
by Maya Roney
As investors swallowed negative news from two of the biggest players in the subprime mortgage market on Feb. 8, the "housing bottom" question took a backseat to a new debate: Who will get crushed in the subprime shakeout, and who will emerge unscathed?
The market started showing more signs of subprime jitters when HSBC Finance, the Prospect Heights (Ill.)-based consumer lending unit of British banking giant HSBC Holdings (HBC) said it was setting aside 20% more than analysts had estimated for bad loans in 2006 because of weakening in the U.S. mortgage business. Shares of the bank were off 3% early afternoon on Feb. 8.
More bad news came from Irvine (Calif.)-based lender New Century Financial (NEW). New Century, the second-largest subprime mortgage originator in the U.S., announced it would restate results for the first three quarters of 2006 to correct accounting errors related to loan repurchase losses, sending the stock down 30% on Feb. 8. The company expects to see a loss for the fourth quarter of 2006 due to early payment defaults.
Defaults Aren't the Whole Story
Shares of other big mortgage players, Countrywide Financial (CFC) and Washington Mutual (WM), were down more than 2% on Feb. 8. Smaller subprime lenders were hit even harder: Kansas City (Mo.)-based Novastar Financial (NFI) shares fell 13%, and San Diego-based Accredited Home Lenders Holding (LEND) dropped 7%.
As investors become more aware of the problems with subprime loans, lenders that focus on customers with poor credit histories will have to face the music. But it may be for different reasons than people think.
"Just because some subprimers are bad doesn't mean all are," says Stuart Plesser, a mortgage lender and insurer analyst for Standard & Poor's Equity Research. "Countrywide will suffer because they are going to face a pricing issue." Plesser has a "sell" rating on Countrywide, the No. 1 mortgage originator and fourth largest subprime mortgage originator in the U.S., according to National Mortgage News.
Many mortgage lenders, including Countrywide and New Century, sell their loans to banks and investors that are attracted to the high interest rates they carry. HSBC got into subprime during the U.S. housing market boom, but when the market began to cool and foreclosure trends accelerated, the bank found itself in trouble. Washington Mutual, another big player in the subprime market, said in January that its mortgage business lost $122 million in the fourth quarter thanks entirely to losses in its subprime segment.
Price Competition
"This is the leitmotif of this whole thing: These people don't really know what they are doing in mortgage banking," says Plesser. "They are writing whatever loans just to write loans, thinking they will worry about it later. But now it's later."
Regular lenders also suffer when banks get into their territory. Companies like Countrywide have been forced to price loans lower since investment banks started buying up subprime loans and pricing them aggressively. Banks assumed they were covered from potential losses by the revenue streams from their myriad other businesses.
Despite the headwinds, lenders like Countrywide, which only has 10% of its business in subprime production, could weather the housing slump better than nearly pure subprime companies, like New Century and Novastar.
"Countrywide is diversified and will start picking it up when everyone goes out of business," says Piper Jaffray analyst Bob Napoli, who has a "buy" rating on the stock. Napoli also says Accredited, though a pure subprime company, could also "get to the other side."
Diversified Against Danger
As for New Century, Napoli says that although the earnings restatement came as a surprise, he has been looking for an ugly fourth quarter from a company that "grew way too fast for their infrastructure." Still, the analyst has a "market perform" rating on New Century shares, which he says are "not yet a certain sell."
Several other analysts downgraded New Century to "sell" on the news Feb. 8, including Kenneth Bruce of Merrill Lynch (MER). "In short, we think New Century will shift to survival mode, putting shareholders at further risk," the analyst wrote in a report.
Diversification will also be the key factor in keeping banks afloat in 2007. That may be why Bear Stearns (BSC) wasn't afraid to buy the subprime loan business last October of another Irvine-based lender, ECC Capital (ECR).
"Because they are so big and [Bear Sterns has] so many businesses, it doesn't go straight to their bottom line," says Plesser. By 2008, the analyst expects many of the big banks to unload their subprime portfolios and leave the business to the regular lenders.
Let That Be a Lesson
Even if banks decide to stick with their subprime segments, HSBC's profit warning and New Century's restatement may prevent other banks from getting into it in the future. Despite the profit warning, Standard & Poor's Ratings Services affirmed its "AA" long-term and "A1" short-term credit ratings on HSBC Holdings on Feb. 8 and said the outlook for the company remains positive. "The positive outlook reflects the potential for HSBC's diversification to generate very strong group performance even when some business lines are performing weakly," wrote credit analyst Michelle Brennan.
"They are going to look really stupid for making these acquisitions," says Napoli. "Things like this remind people that it's not an easy business."
Click here to see the U.S. cities with the highest foreclosure rates. (newsweek)
TIME TO LOOK AT TAIWAN?
*(click to enlarge chart)MA'S rising nicely, but IMHO looks like EWT might be taking a little breather as it has on way up as my TA suggests good chance that has begun. If I decide to nibble, I will wait at least until indicators turn up as shown before.
D
Sunday, February 11, 2007
Friday, February 09, 2007
Thursday, February 08, 2007
NEW LOW FOR COPPER
We have new lows for copper (in BEAR MKT IMHO) we have had inverted yield curve for an extended period of time, near collapse of housing mkt, near exhaustion of cash out refi's, all of which point to some kind of economic slowdown or Recession, but none in sight? strange very strange.
Dow and Transports now in synch with new highs (9 months after Trannies first made new high w/o Dow) the NAZ 50% below previous 2000 bubble highs is LAGGING badly, even after CSCO earnings hype.
Several of my trusted subs say NO NEW HIGH IN SIGHT, uptrend should continue for "at least 4 more months".hmmmmmm
As prices rise, we need to see buying demand diminish, selling pressure must rise, new highs vs new lows must fall.
I see even now a VERY SELECTIVE rally, it hs been called a "stock pickers market".
VIX (volatility index) extremely LOW, no one buying put protection.
I am looking for interest rates to rise (10 yr) above 5%, will be initial sign of trouble IMHO.
Weren't a slew of mortgages supposed to rise this year in payments?
Early year money pump is right on schedule propping things up.
Bullish is year after mid term elections historical bullsihness.
I would abandon WEAK performers in favor of strong stocks in the strong sectors, if you feel you must be IN. IMHO
When was the LAST serious correction?
D
Saturday, February 03, 2007
"ON THE WINGS OF A BUTTERFLY"
In honor of my father's passing on Monday Jan 29th at 82 years old, I love you dad and will miss you terribly, this poem is also for anyone who has lost someone.ON THE WINGS OF A BUTTERFLY, I AM FREE
I AM FREE OF THE WORLD’S TROUBLES
I AM FREE TO FLY ABOVE ALL THE WORRIES
I AM FREE TO LEAVE THIS WORLD AND ENTER
A NEW ONE
A NEW WOLRD FREE OF STRIFE AND TURMOIL
FREE OF HATE AND INJUSTICE
FREE OF CRIME AND INPATIENCE
FREE OF THE HANDS OF TIME
ON THE WINGS OF A BUTTERFLY, I AM FREE
I AM FREE TO GO WHERE I WANT
I AM FREE OF ALL PAIN
I AM LIGHT AS A FEATHER AND HAVE NO WORRIES
ON THE WINGS OF A BUTTERFLY
I HAVE ONLY ONE REGRET IN LEAVING THIS WORLD
AND THAT IS THAT I CANNOT BE WITH YOU ANYMORE
YOU HAVE BROUGHT ME SO MUCH JOY IN MY LIFE
I HOPE YOU KNOW HOW MUCH I LOVED YOU
ON THE WINGS OF A BUTTERFLY I AM FREE,
BUT I CANNOT HAVE YOU
BUT WHAT I DO HAVE, AS DO YOU IS A LIFETIME OF MEMORIES
OF HAPPY TIMES AND OF LOVE AND JOY
I KNOW WHAT WE MEANT TO EACH OTHER
THE SADNESS AND EMPTYNESS WILL LIFT
ON THE WINGS OF A BUTTERFLY I AM LIFTED FROM MY SORROW
AND AM UPLIFTED WHEN I THINK OF YOU, OUR LIFE TOGETHER
YOU WILL BE THAT BUTTERFLY SOMEDAY,
AND I AM SURE WE WILL MEET AGAIN
HIGH ABOVE THE WORLD
WITHOUT A CARE, IN TOTAL PEACE
AND TOGETHER AGAIN.
Thursday, February 01, 2007
NEW LOW
(Personal Savings Rate for 2006 Tumbles to Negative 1 Percent, the Lowest Level in 74 Years. ) I'm sure you saw this , but all is good? Hard to think of embarking on NEW ERA with this stat?
http://biz.yahoo.com/ap/070201/economy.html?.v=15
http://biz.yahoo.com/ap/070201/economy.html?.v=15
Monday, January 29, 2007
CREDIT BUBBLE BULLETIN
http://prudentbear.com/articles/show/298 This is an EYE OPENER, the liquidity splurge that began at he 2002/3 lows is alive and well. It MUST continue to expand or die.
At some point it will end, when it does, there will be a worldwide implosion of historic proportions as equal to its expansion.
D
At some point it will end, when it does, there will be a worldwide implosion of historic proportions as equal to its expansion.
D
Saturday, January 27, 2007
Prudent Article
http://www.prudentbear.com/articles/show/299
Short term volatility does not mean uptrend is over, just getting more selective. When it does dry up I think we will have making of important top.
Year after mid-term elections tend to be jiggy, so we'll see. I like my MM return for now for safe stash, ride trends with a little.
Commercials upping shorts on gold, no weakness yet. Watch interest rates, bonds getting oversold IMHO due for rebound of sorts, see if 4.% holds any retreat, seem headed for 5%
D
Short term volatility does not mean uptrend is over, just getting more selective. When it does dry up I think we will have making of important top.
Year after mid-term elections tend to be jiggy, so we'll see. I like my MM return for now for safe stash, ride trends with a little.
Commercials upping shorts on gold, no weakness yet. Watch interest rates, bonds getting oversold IMHO due for rebound of sorts, see if 4.% holds any retreat, seem headed for 5%
D
Thursday, January 25, 2007
HIJACKED DEMOCRACY by THE FAT CATS
http://www.pbs.org/wgbh/pages/frontline/darkside/ I KNOW the facts, the LIES, the DECEIT, this show laid it all out. and now our boys pay the price with blood.
Democracy has been hijacked, and we're getting jacked up! And now against Congress and the wishes of the American public, BVush sends 20,000 more troops to Iraq.
D
FORD POSTS WORST LOST IN HISTORY
http://news.yahoo.com/s/ap/20070125/ap_on_bi_ge/earns_ford HOLY &%!!@ over $12 B !!
Did you know the CHinese are now NET EXPORTERS of commodities? GOLD and copper were flying as they were net importers, is commodity bull over?
D
Did you know the CHinese are now NET EXPORTERS of commodities? GOLD and copper were flying as they were net importers, is commodity bull over?
D
Wednesday, January 24, 2007
OIL USAGE DROPS IN 2006
SeekingAlpha
Reflecting On 2006: Oil Usage Dropped in Developed NationsWednesday January 24, 5:35 am ET
Neal Dikeman submits : Thank you to the millions that used less oil in 2006. For the first time in 20 years, the International Energy Agency shows that oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6% in 2006. The drop was slight, but most encouraging to all who seek energy independence, averting a climate crisis and healing an economy “addicted to oil.”
Yes, global oil demand did grow in 2006, but only by 0.9% in 2006, compared to 3.9% growth in 2004 and 1.5% in 2005. Oil demand may be moderating for a number of reasons, including these:
1. When oil prices rose, demand shifted to more energy efficiency.2. Some vehicles have become more fuel efficient by reducing vehicle weight, air and road resistance, and by using hybrid technology.3. Less heating oil was needed due to global warming.4. The Kyoto Protocol is starting to work.5. Biofuels are increasingly used to substitute for fuels refined from oil.6. Clean distributed energy and more reliable grids reduced the usage of diesel generators, propane and butane.7. The ratio of people living in cities increased relative to suburbs. Oil demand per person is less in cities due to effective public transit and closer proximity of home and work. The U.N. forecasts that 80% of people will live in cities by 2050.8. More people are riding together by car pooling and using public transit.9. Trucks and buses are reducing the wasteful idling that keeps engines running up to 40% more than is necessary. Use of auxiliary power units are increasing.10. People spend more time working and shopping at home using broadband Internet services.
Neal Dikeman commented on the OECD drop, “That really is huge news. Supply and demand economics does work after all, despite what some people may think. Historically, new supply discoveries drove price declines (in the first half of the century). Since OPEC however, supply shocks and constraints have driven major price increases, and overestimated demand / negative demand shocks have driven declines.” Mr. Dikeman is a merchant banker, originally from Houston, Texas, and now a partner with Jane Capital.
Moderation of oil usage is timely. Next week, the first phase of the Intergovernmental Panel on Climate Change will be released. This will be a major update from the respected 2001 report that involved hundreds of leading scientists globally. "The smoking gun is definitely lying on the table as we speak," said top U.S. climate scientist Jerry Mahlman, who reviewed all 1,600 pages of the first segment of a giant four-part report. "The evidence ... is compelling." (See CNN Report.)
As the oil reduction numbers are analyzed, a picture may emerge about how to continue our path to a brighter future. To all of you who conserved – Thank You!
Author John Addison will be coming out with his book, "Save Gas, Save the Planet" shortly
Reflecting On 2006: Oil Usage Dropped in Developed NationsWednesday January 24, 5:35 am ET
Neal Dikeman submits : Thank you to the millions that used less oil in 2006. For the first time in 20 years, the International Energy Agency shows that oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6% in 2006. The drop was slight, but most encouraging to all who seek energy independence, averting a climate crisis and healing an economy “addicted to oil.”
Yes, global oil demand did grow in 2006, but only by 0.9% in 2006, compared to 3.9% growth in 2004 and 1.5% in 2005. Oil demand may be moderating for a number of reasons, including these:
1. When oil prices rose, demand shifted to more energy efficiency.2. Some vehicles have become more fuel efficient by reducing vehicle weight, air and road resistance, and by using hybrid technology.3. Less heating oil was needed due to global warming.4. The Kyoto Protocol is starting to work.5. Biofuels are increasingly used to substitute for fuels refined from oil.6. Clean distributed energy and more reliable grids reduced the usage of diesel generators, propane and butane.7. The ratio of people living in cities increased relative to suburbs. Oil demand per person is less in cities due to effective public transit and closer proximity of home and work. The U.N. forecasts that 80% of people will live in cities by 2050.8. More people are riding together by car pooling and using public transit.9. Trucks and buses are reducing the wasteful idling that keeps engines running up to 40% more than is necessary. Use of auxiliary power units are increasing.10. People spend more time working and shopping at home using broadband Internet services.
Neal Dikeman commented on the OECD drop, “That really is huge news. Supply and demand economics does work after all, despite what some people may think. Historically, new supply discoveries drove price declines (in the first half of the century). Since OPEC however, supply shocks and constraints have driven major price increases, and overestimated demand / negative demand shocks have driven declines.” Mr. Dikeman is a merchant banker, originally from Houston, Texas, and now a partner with Jane Capital.
Moderation of oil usage is timely. Next week, the first phase of the Intergovernmental Panel on Climate Change will be released. This will be a major update from the respected 2001 report that involved hundreds of leading scientists globally. "The smoking gun is definitely lying on the table as we speak," said top U.S. climate scientist Jerry Mahlman, who reviewed all 1,600 pages of the first segment of a giant four-part report. "The evidence ... is compelling." (See CNN Report.)
As the oil reduction numbers are analyzed, a picture may emerge about how to continue our path to a brighter future. To all of you who conserved – Thank You!
Author John Addison will be coming out with his book, "Save Gas, Save the Planet" shortly
Friday, January 19, 2007
OIL INVENTORIES
EnergyOil Tumbles After Inventory BuildBy Simon ConstableTheStreet.com Staff Reporter1/18/2007 3:47 PM ESTURL: http://www.thestreet.com/markets/energy/10333313.htmlUpdated from 2:14 p.m. EST
Oil prices fell again Thursday and neared the psychologically important $50 level following news of higher inventories in the U.S.
Front-month crude contracts closed down $1.76 to $50.48 a barrel on the New York Mercantile Exchange, and other key products in the energy space were lower, as well. Heating oil was down 3 cents at $1.47 a gallon, while gasoline was lower by 2 cents to $1.36 a gallon.
Natural gas was the one riser, gaining 9 cents to $6.32 per million British thermal units.
The decline in oil came after the Energy Information Administration said that stocks of crude oil grew 2.2% last week to 322 million barrels. Inventories of gasoline and distillate fuel oils also were up, the EIA said.
"It seems the world is flush with oil, especially relative to recent years," says Peter Rodriguez, professor of economics at the Darden Graduate School of Business Administration and an energy market watcher. "This is the opposite of what one would expect this time of year," he says, noting that warm weather had reduced demand for heating fuels in the Northern Hemisphere.
With inventories so high, Rodriguez expects crude prices to remain closer to $50 a barrel than $60 for the next several weeks. In turn, that should help keep a lid on consumer price inflation, he says.
The energy exchange-traded funds -- the U.S. Oil (USO) fund and the iPath Goldman Sachs Crude Oil Index (OIL) -- were both losing 2.2% in recent action.
Turning to the energy complex, Fortis Bank upped its stock price target on Range Resources (RRC) to $36 a share from $32 and reiterated a buy rating. The stock was recently down 0.5% at $27.62.
Elsewhere, RBC Capital Markets hit Whiting Petroleum (WLL) with a downgrade, cutting its rating on the stock to underperform from sector perform. Shares recently were down 75 cents, or 1.8%, at $41.60.
Among the major energy companies, Exxon Mobil (XOM) was losing 1.1%, while Royal Dutch Shell (RDS.A) was down a fraction.
Oil prices fell again Thursday and neared the psychologically important $50 level following news of higher inventories in the U.S.
Front-month crude contracts closed down $1.76 to $50.48 a barrel on the New York Mercantile Exchange, and other key products in the energy space were lower, as well. Heating oil was down 3 cents at $1.47 a gallon, while gasoline was lower by 2 cents to $1.36 a gallon.
Natural gas was the one riser, gaining 9 cents to $6.32 per million British thermal units.
The decline in oil came after the Energy Information Administration said that stocks of crude oil grew 2.2% last week to 322 million barrels. Inventories of gasoline and distillate fuel oils also were up, the EIA said.
"It seems the world is flush with oil, especially relative to recent years," says Peter Rodriguez, professor of economics at the Darden Graduate School of Business Administration and an energy market watcher. "This is the opposite of what one would expect this time of year," he says, noting that warm weather had reduced demand for heating fuels in the Northern Hemisphere.
With inventories so high, Rodriguez expects crude prices to remain closer to $50 a barrel than $60 for the next several weeks. In turn, that should help keep a lid on consumer price inflation, he says.
The energy exchange-traded funds -- the U.S. Oil (USO) fund and the iPath Goldman Sachs Crude Oil Index (OIL) -- were both losing 2.2% in recent action.
Turning to the energy complex, Fortis Bank upped its stock price target on Range Resources (RRC) to $36 a share from $32 and reiterated a buy rating. The stock was recently down 0.5% at $27.62.
Elsewhere, RBC Capital Markets hit Whiting Petroleum (WLL) with a downgrade, cutting its rating on the stock to underperform from sector perform. Shares recently were down 75 cents, or 1.8%, at $41.60.
Among the major energy companies, Exxon Mobil (XOM) was losing 1.1%, while Royal Dutch Shell (RDS.A) was down a fraction.
Thursday, January 18, 2007
BERNANKE SPEAKS
"If early and meaningful action is not taken, the U.S. economy could be seriously weakened," Bernanke said in testimony to the Senate Budget Committee.
It marked the Fed chief's most extensive comments to date on the challenges facing the United States with the looming retirement of 78 million baby boomers, the oldest of whom will start retiring next year.
This huge wave of retirees will hit the U.S. budget as well as the economy, he said.
Absent policy changes by Congress and the White House, rising budget deficits are likely in the years ahead to increase the amount of federal debt outstanding to unprecedented levels, Bernanke said.
That could propel interest rates for consumers and businesses upward, which would be a worrisome development, he said.
"Thus a vicious cycle may develop in which large deficits lead to rapid growth in debt and interest payments, which in turn adds to subsequent deficits," he said.
THIS IS POLITICAL SUICIDE, NO ONE WANTS TO DEAL WITH THE $TRILLIONS OF UNFUNDED LIABILITIES NEAR $70 TRILLION, THIS CAN'T BE PUT OFF FOREVER.
2007 mild? 2008 BAMM!!!
It marked the Fed chief's most extensive comments to date on the challenges facing the United States with the looming retirement of 78 million baby boomers, the oldest of whom will start retiring next year.
This huge wave of retirees will hit the U.S. budget as well as the economy, he said.
Absent policy changes by Congress and the White House, rising budget deficits are likely in the years ahead to increase the amount of federal debt outstanding to unprecedented levels, Bernanke said.
That could propel interest rates for consumers and businesses upward, which would be a worrisome development, he said.
"Thus a vicious cycle may develop in which large deficits lead to rapid growth in debt and interest payments, which in turn adds to subsequent deficits," he said.
THIS IS POLITICAL SUICIDE, NO ONE WANTS TO DEAL WITH THE $TRILLIONS OF UNFUNDED LIABILITIES NEAR $70 TRILLION, THIS CAN'T BE PUT OFF FOREVER.
2007 mild? 2008 BAMM!!!
Friday, January 12, 2007
Thursday, January 11, 2007
CASH IS TRASH>>>?????
Recent Bill Auction Results
Per $100 CUSIP YIELD
28-DAY 01-11-2007 02-08-2007 4.800 4.885 99.626667 912795YS4
91-DAY 01-11-2007 04-12-2007 4.940 5.072 98.751278 912795ZB0
WHY RISK MONEY IN MARKET WITH 5% 90 day yields??????
D
Per $100 CUSIP YIELD
28-DAY 01-11-2007 02-08-2007 4.800 4.885 99.626667 912795YS4
91-DAY 01-11-2007 04-12-2007 4.940 5.072 98.751278 912795ZB0
WHY RISK MONEY IN MARKET WITH 5% 90 day yields??????
D
Monday, January 08, 2007
FABER SAYS CAUTION WARRANTED
Global Markets Face `Severe Correction,' Faber Says (Update3)
By Ian C. Sayson and Pimm Fox
Jan. 8 (Bloomberg) -- Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a ``severe correction'' and says it's time to sell.
``In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.''
Faber, founder and managing director of Hong Kong-based Marc Faber Ltd., advised investors to buy gold in 2001, which has since more than doubled. His company manages about $300 million in assets.
The bullish outlook of traders in everything from bonds, equities and commodities to real estate and art suggests valuations are peaking, Faber said. Last year, the Morgan Stanley Capital International World Index of developed stock markets jumped 18 percent, while a survey of Wall Street's biggest bond- trading firms predicted U.S. Treasuries will post the best gains in five years during 2007.
``I am not a great buyer of assets now,'' Faber said. ``We may be in a situation where consumer-price inflation comes back and will have a negative impact on the valuation of assets.''
Faber, publisher of the Gloom, Boom & Doom Report, does have some favorites. Singapore and Vietnam are his top picks in Asia because stocks in Singapore aren't ``terribly expensive compared with interest rates'' in the city-state, while Vietnam's equities have ``incredible potential in the long run.''
Vietnam, Singapore
Vietnam's Ho Chi Minh Stock Index more than doubled last year and was Asia's best-performing benchmark. Singapore's Straits Times Index climbed 27 percent, beating a 15 percent increase in the Morgan Stanley Capital International Asia-Pacific Index.
So far in 2007, Vietnam's index has surged 10 percent, again leading gains in the region, and Singapore's is up 0.6 percent. The MSCI has dropped 1 percent.
Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.
``Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares,'' Faber said. ``I'd also be careful of buying China and India shares now.''
Russia's dollar-denominated RTS Index surged 75 percent last year, while the Hang Seng China Enterprise Index, which tracks Hong Kong-listed shares of Chinese companies, jumped 94 percent. India's Sensex Index, which more than quadrupled in the past five years, is valued at 25 times estimated earnings.
Thailand, Japan
Faber also advises investors stay away from shares in Thailand, where he and his family are based. The nation's SET Index has been the world's worst-performing benchmark in the past month, sliding 15 percent as currency controls introduced by the central bank and bombs in Bangkok spooked investors.
``Valuations in Thailand are very inexpensive but I wouldn't buy tomorrow,'' said Faber. `` We have some political problems in Thailand right now. I'd wait for a couple of months.''
The SET is valued at 10 times estimated earnings, the lowest among 14 Asia-Pacific markets tracked by Bloomberg. MSCI's regional index is valued at 18 times.
On a more positive note, Japanese stocks may prove good bets this year, Faber said. The Nikkei 225 Stock Average climbed 6.9 percent in 2006 and the broader Topix index added 1.9 percent, the smallest gains among benchmarks for the world's 10 biggest markets.
Gold, Oil
In addition, the fund manager said gold should rally further on expectations that supply of the precious metal will decline and demand for it will increase to hedge against inflation. Gold climbed 23 percent last year, its sixth year of gains.
``The price of gold will continue to go up and probably very substantially,'' Faber said. ``In the long run, it's very clear that central banks are basically increasing the supply of money and the supply of gold is obviously very limited.''
Oil prices are also tipped to rise as political instability in the Middle East and other petroleum-producing areas threatens supply and global demand increases. Crude oil in New York added less than 0.1 percent to $61.05 a barrel in 2006, after tripling in the previous four years.
``Everyday the world is burning more oil than new reserves are added,'' Faber said. ``You wont see $12 dollars again'' for every barrel of oil. ``The trend is likely more to be upside because demand in Asia is going to double over time.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net and Pimm Fox in New York at at Pfox11@bloomberg.net
By Ian C. Sayson and Pimm Fox
Jan. 8 (Bloomberg) -- Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a ``severe correction'' and says it's time to sell.
``In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.''
Faber, founder and managing director of Hong Kong-based Marc Faber Ltd., advised investors to buy gold in 2001, which has since more than doubled. His company manages about $300 million in assets.
The bullish outlook of traders in everything from bonds, equities and commodities to real estate and art suggests valuations are peaking, Faber said. Last year, the Morgan Stanley Capital International World Index of developed stock markets jumped 18 percent, while a survey of Wall Street's biggest bond- trading firms predicted U.S. Treasuries will post the best gains in five years during 2007.
``I am not a great buyer of assets now,'' Faber said. ``We may be in a situation where consumer-price inflation comes back and will have a negative impact on the valuation of assets.''
Faber, publisher of the Gloom, Boom & Doom Report, does have some favorites. Singapore and Vietnam are his top picks in Asia because stocks in Singapore aren't ``terribly expensive compared with interest rates'' in the city-state, while Vietnam's equities have ``incredible potential in the long run.''
Vietnam, Singapore
Vietnam's Ho Chi Minh Stock Index more than doubled last year and was Asia's best-performing benchmark. Singapore's Straits Times Index climbed 27 percent, beating a 15 percent increase in the Morgan Stanley Capital International Asia-Pacific Index.
So far in 2007, Vietnam's index has surged 10 percent, again leading gains in the region, and Singapore's is up 0.6 percent. The MSCI has dropped 1 percent.
Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.
``Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares,'' Faber said. ``I'd also be careful of buying China and India shares now.''
Russia's dollar-denominated RTS Index surged 75 percent last year, while the Hang Seng China Enterprise Index, which tracks Hong Kong-listed shares of Chinese companies, jumped 94 percent. India's Sensex Index, which more than quadrupled in the past five years, is valued at 25 times estimated earnings.
Thailand, Japan
Faber also advises investors stay away from shares in Thailand, where he and his family are based. The nation's SET Index has been the world's worst-performing benchmark in the past month, sliding 15 percent as currency controls introduced by the central bank and bombs in Bangkok spooked investors.
``Valuations in Thailand are very inexpensive but I wouldn't buy tomorrow,'' said Faber. `` We have some political problems in Thailand right now. I'd wait for a couple of months.''
The SET is valued at 10 times estimated earnings, the lowest among 14 Asia-Pacific markets tracked by Bloomberg. MSCI's regional index is valued at 18 times.
On a more positive note, Japanese stocks may prove good bets this year, Faber said. The Nikkei 225 Stock Average climbed 6.9 percent in 2006 and the broader Topix index added 1.9 percent, the smallest gains among benchmarks for the world's 10 biggest markets.
Gold, Oil
In addition, the fund manager said gold should rally further on expectations that supply of the precious metal will decline and demand for it will increase to hedge against inflation. Gold climbed 23 percent last year, its sixth year of gains.
``The price of gold will continue to go up and probably very substantially,'' Faber said. ``In the long run, it's very clear that central banks are basically increasing the supply of money and the supply of gold is obviously very limited.''
Oil prices are also tipped to rise as political instability in the Middle East and other petroleum-producing areas threatens supply and global demand increases. Crude oil in New York added less than 0.1 percent to $61.05 a barrel in 2006, after tripling in the previous four years.
``Everyday the world is burning more oil than new reserves are added,'' Faber said. ``You wont see $12 dollars again'' for every barrel of oil. ``The trend is likely more to be upside because demand in Asia is going to double over time.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net and Pimm Fox in New York at at Pfox11@bloomberg.net
Monday, January 01, 2007
ADJUSTED MONETARY BASE CLICK FOR LINK.
level is DEAD ON JAN high, so NO growth since then. DEAD ON the lows from that peak.. WILL JAN look like 2006 with a meteoric VAULT? ANY further decline destroys a multi yr if not decade pattern of yr/yr higher highs!!!!
MARGIN DEBT LEVELS APPROACHING 2000 levels!!! 1,3 and 6 month/month RECORDS for increase.
THIS market is HIGHLY LEVEREDGED for GAINS!!!!!! as was or more so than in 2000 !!!
I say some kind of top appears first 2 weeks of JAN, then MIGHT pay off to be short term......short........will be very interesting going forward.
2007 is a year after mid term elections, known to be bullish.
D
level is DEAD ON JAN high, so NO growth since then. DEAD ON the lows from that peak.. WILL JAN look like 2006 with a meteoric VAULT? ANY further decline destroys a multi yr if not decade pattern of yr/yr higher highs!!!!
MARGIN DEBT LEVELS APPROACHING 2000 levels!!! 1,3 and 6 month/month RECORDS for increase.
THIS market is HIGHLY LEVEREDGED for GAINS!!!!!! as was or more so than in 2000 !!!
I say some kind of top appears first 2 weeks of JAN, then MIGHT pay off to be short term......short........will be very interesting going forward.
2007 is a year after mid term elections, known to be bullish.
D
Friday, December 29, 2006
Thursday, December 28, 2006
MULTIPLE BUBBLES FORMING
(from NPR this AM)
M and A activity, mostly PRIVATE EQUITY FIRMS!
8 of the 10 LARGEST deals ever were done in last few years and were private equity firms.
More and more of these are running after the same deals pushing up prices paid, HUGE multiples and premiums being paid saddling new companies with mountains of debt.
“the things that used to turn the economy/markets no longer do…” chances for defaults because of huge premiums is growing.
Money continues to FLOW into these private equity firms.
In some ways me bucko’s this is MUCH LARGER THAN 2000 action, it just isn’t seen as same as before meaning huge runups in penny stocks etc, the BUBBLE is in the MA activity and the higher multiples being paid, too MUCH money running after too few deals pushing prices paid up way beyond reasonable value.
Investors are complacent and comfortable with only blue skies seen ahead.
D
M and A activity, mostly PRIVATE EQUITY FIRMS!
8 of the 10 LARGEST deals ever were done in last few years and were private equity firms.
More and more of these are running after the same deals pushing up prices paid, HUGE multiples and premiums being paid saddling new companies with mountains of debt.
“the things that used to turn the economy/markets no longer do…” chances for defaults because of huge premiums is growing.
Money continues to FLOW into these private equity firms.
In some ways me bucko’s this is MUCH LARGER THAN 2000 action, it just isn’t seen as same as before meaning huge runups in penny stocks etc, the BUBBLE is in the MA activity and the higher multiples being paid, too MUCH money running after too few deals pushing prices paid up way beyond reasonable value.
Investors are complacent and comfortable with only blue skies seen ahead.
D
Tuesday, December 26, 2006
XMAS CHEER?
http://seattlepi.nwsource.com/business/297204_holiday26.html Holiday retail sales fall short of estimates, deeper discounts coming equal weaker profits from retailers.
SIGNS OF AN IMPENDING TOP
Transports very weak, sensitive to economic conditions. Have not confirmed new highs in the Dow.
Several FED indiactors showing contraction of economy.
DOA residential housing.
Democratic control of both houses means stagnation and less possibility of keeping or adding tax incentives.
Bull market long in tooth in cycle.
Peter Eliades points out MANY cycles predicting top between Jan0March period.
NAZ underperforming. Strength becoming more selective. Energy weak.
This may be a period where one would weed out weaker performers in portfolio, I may not be short just yet, but I am on defensive and not long. JMHO
D
SIGNS OF AN IMPENDING TOP
Transports very weak, sensitive to economic conditions. Have not confirmed new highs in the Dow.
Several FED indiactors showing contraction of economy.
DOA residential housing.
Democratic control of both houses means stagnation and less possibility of keeping or adding tax incentives.
Bull market long in tooth in cycle.
Peter Eliades points out MANY cycles predicting top between Jan0March period.
NAZ underperforming. Strength becoming more selective. Energy weak.
This may be a period where one would weed out weaker performers in portfolio, I may not be short just yet, but I am on defensive and not long. JMHO
D
Thursday, December 21, 2006
Wednesday, December 20, 2006
Saturday, December 16, 2006
SATURDAY MORNING POST
REQUIRED READING
http://www.hussmanfunds.com/wmc/wmc061211.htm DR JOHN HUSSMAN
http://www.stockmarketcycles.com/current_observations.htm PETER ELIADES
http://www.safehaven.com/article-6516.htm JOHN MAULDIN
http://www.safehaven.com/article-6515.htm DOUG NOLAND
http://www.safehaven.com/article-6514.htm DR RICHEBACHER
Corrections are short and painless, advance decline line continues to advance, life appears good for the ongoing bull market. As this bull from 2002 lows has exceeded its previous highs, we can consider it a Secular trend, most cyclical bull markets were long since dead.
What has also helped the market is the comeback of the hated weak sister US DOLLAR, mostly because sentiment got too negative, once this works off, new lows are possible.
Interest rates are still LOW historically speaking, and money is easy to obtain, it is possible that the housing sector has temporarally stabilized as some buyers may be inticed to come back into market. Sellers still reluctant to lower prices aggresively, but in ost areas they have stopped going up or have come down slightly, 2nd chance buyers may appear.
http://www.hussmanfunds.com/wmc/wmc061211.htm DR JOHN HUSSMAN
http://www.stockmarketcycles.com/current_observations.htm PETER ELIADES
http://www.safehaven.com/article-6516.htm JOHN MAULDIN
http://www.safehaven.com/article-6515.htm DOUG NOLAND
http://www.safehaven.com/article-6514.htm DR RICHEBACHER
Corrections are short and painless, advance decline line continues to advance, life appears good for the ongoing bull market. As this bull from 2002 lows has exceeded its previous highs, we can consider it a Secular trend, most cyclical bull markets were long since dead.
What has also helped the market is the comeback of the hated weak sister US DOLLAR, mostly because sentiment got too negative, once this works off, new lows are possible.
Interest rates are still LOW historically speaking, and money is easy to obtain, it is possible that the housing sector has temporarally stabilized as some buyers may be inticed to come back into market. Sellers still reluctant to lower prices aggresively, but in ost areas they have stopped going up or have come down slightly, 2nd chance buyers may appear.
HEAVY foreign investment money is still POURING in, money supply has begun to grow again http://research.stlouisfed.org/publications/usfd/page3.pdf but this years growth has been stunted.
Merger and acqusition activity has reached new extremes beyond even 2000 top, there is a LOT of money sloshing about.
Fund managers want extreme bonuses too, so year end performance should remain in bullish control. Early next year we could see some weakness, but not sure it will amount to much, yet.
This may be the first time in market history where a NEW BULL MARKET began near historic extreme valuations, valuations have come down because of record margins and profits also at record levels, but now SPX PE of 18 is getting pricey especially if profit gains slow or regress.
Everything returns to its norm sooner or later, that trip for the stock market will not be a pretty sight, from a BELOW 10 VIX (volatility) there is a TON of FEAR to feed on, but I must say a new BEAR MARKET is nowhere in sight.
A well diversified portfolio must be doing rather well, the question is, when the winds of change DO finally come, are you prepared to make changes?
Question marks, last bull market charge led all to new highs, near the end, the Transports began to fall onths ahead of final top in DOW, then NAZ in March. The SPX is still below its 2000 top, the NAZ 50% below. The Transports have not CONFIRMED the NEW HIGHS in the DOW, according to Dow Theory, these non confirmations have led to MAJOR MARKET TOPS!
So, I am watching the TRansports to see if they can rally to new highs with DOW, the NAZ? not gonna happen. However, the NAZ is VERY close to an area of HUGE resistance, of which a month ago I charted and pointed out if it could "get inside" this area, a SURGE on 100's of points should occur.
I also charted the double tops on Q's near $43.30 once broken could be riden long, a buy near $43.50 on a close above was there and use of $43.25 (just below breakout) would define a well controlled stop loss. We're about a dollar above that now.
FED meeting and OPEX Fri wnet with a whimper, bulls in control UNTIL SERIOUS SELLING PRESSURE arrives.
I will attempt to post every Sat, so check back until then take care
D
Wednesday, December 13, 2006
SUMMATION
http://stockcharts.com/charts/indices/McSumNASD.html
There is underlying weakness on the nazdaq IMHO, market may go higher, I feel within next 4-6 weeks a severe correction will be upon us.
That said, I cannot rule out Bull mkt continues, as adv/decline line is rising as does mkt.
D
There is underlying weakness on the nazdaq IMHO, market may go higher, I feel within next 4-6 weeks a severe correction will be upon us.
That said, I cannot rule out Bull mkt continues, as adv/decline line is rising as does mkt.
D
Saturday, November 25, 2006
The DR is in
SUICIDAL TRADE DEFICIT (gold-eagle.com)
Dr. Kurt Richebächer
On the surface, it seems that there are diametrically different views at work in the markets. While the rising bond prices and the falling commodity prices apparently suggest underlying distinct economic bearishness, the sudden surge in stock prices and persistent record-low credit spreads appear to reflect very optimistic expectations about the economy.
The turn in the bond market started in June with yields of 10-year Treasury notes at 5.25%. A decline to 4.7% generated a 5% return for investors within just three months. Annualized, this comes to a return of 20%. Take further into account that there is generally heavy leverage involved, multiplying this return between 10-20 times.
Considering further that this rate of decline of long-term rates has occurred against the backdrop of a firmly inverted yield curve, implying that expenses of carry trade exceed current yields, the strength of this move seems a bit surprising. The quick capital gains, though, have richly offset these interest expenses - for the time being. But to maintain these highly leveraged positions, it will need at least one of two things: either a further sharp fall in long-term rates providing new capital gains or rate cuts by the Fed reducing the costs of carry trade.
More surprising is the new bull run of the stock market in the face of an economic slowdown. Approaching recessions have always tended to depress stock markets in expectation of falling profits. Well, there is a tremendous difference between past and present experience.
Past recessions were all triggered by true monetary tightening, hitting both the economy and the markets. The current economic downturn is unfolding against the backdrop of unmitigated monetary looseness. While the Fed has raised credit costs from unusually low levels, it has done nothing to tighten credit. Its expansion has kept accelerating.
Credit demand has been running wild for consumption, housing and financial speculation. There is just one striking and ominous exception: Corporate credit demand for fixed investment remains zero. Corporations, too, have been borrowing heavily, but for mergers, acquisitions and stock buybacks, not for productive investment.
In 2005, nonfinancial corporations spent $136.8 billion less than their cash flow from retained profits and depreciations on capital expenditures. Simultaneously, they spent $363.6 billion on mergers, acquisitions and stock buybacks. Given their moderate cash surplus, one has to assume that the stock purchases were generally financed with borrowed money.
It is certainly reasonable to regard the strong trend of corporate stock purchases as an early negative indicator of investment intentions. Principally, there are two different ways for corporations to expand and to raise profits. One is the old-fashioned way of organic growth through creating new plant and equipment. The other is to purchase economic growth and higher earnings through mergers and acquisitions by going more deeply into debt.
What, then, has been happening more lately to mergers and acquisitions? In short, they have gone crazy. During the first quarter of 2006, they hit an amount of $558 billion at annual rate, and in the second quarter another $554.8 billion.
This compares with continuously weak capital investment. In the first quarter, it was $2.7 billion below cash flow, and in the second quarter, $43.2 billion above cash flow. There is an interesting comparison with the year 2000. Then, capital expenditures of nonfinancial corporations exceeded their cash flow by $310.8 billion, compared with net stock purchases of $118.2 billion.
We would say that these figures indicate a continuous, rather dramatic change in corporate policies of expansion away from new capital investment and toward "purchasing" growth and earnings. It started in the 1980s. It strongly intensified during the 1990s, and during the last few years has gone to extremes.
Stating this, we primarily have the long-term development in mind. But in the same vein, we are pondering what is going to happen to business investment in the short run, when consumer spending slows, or even slumps, in the wake of the bursting housing bubble. The generally highly optimistic expectations and forecasts about investment spending taking over from consumption as the driver of the economy greatly puzzle us.
To stress one important point, which appears to be generally overlooked: Some rise in capital spending is not enough. Given its much smaller share of GDP than consumer spending, it needs a very strong rise to offset even a minor decline in consumer spending.
While the markets seem to reflect highly conflicting views about the U.S. economy's outlook, we nevertheless presume one underlying common view, and that is the perception of very little risk of a possible recession because the Fed would, in any case, swiftly act to head off any gathering weakness. What matters from this perspective both in the bond and stock markets are impending rate cuts.
In essence, this is in line with the conventional thinking that the U.S. Great Depression of the 1930s, as well as Japan's prolonged malaise since the early 1990s, could have been avoided by prompter monetary easing. Whoever believes in this is entitled to be bullish both on stocks and bonds.
U.S. stock prices received their lift since June/July mainly from lower oil prices and lower long-term interest rates. To keep heading higher, it will now need sufficient earnings growth. After an unusually steep rise in profits during 2005, analysts are predicting more of the same. Our focus is on aggregate profits, as calculated and reported by the Bureau of Economic Analysis within the National Income and Product Accounts (NIPA).
The customary way of making forecasts of economic developments is to extrapolate the recent past. Profit growth in the United States during the last two years has been at its best for the whole postwar period. Profits of the nonfinancial sector in 2005 have jumped to $900.1 billion, from $584 billion in 2004 and $411.8 billion in 2003. These figures compare with a profit peak of $508.4 billion for the sector in 1997 and a profit low of $322.0 billion in 2001.
If you look at the profit development of U.S. corporations over the last 10 years, you will see that it is an awkward picture. Profits fared very poorly during the "New Paradigm" years of the late 1990s, presumably a time of excellent economic performance. No less astounding is their sudden steep rise in the course of 2005, from $624.2 billion in the fourth quarter of 2004 to $1,027.7 billion in the first quarter of 2006, happening while the economy distinctly slowed.
The irony is that after a strong rise during the first half of the 1990s, profits abruptly turned down during the "New Paradigm" years of the late 1990s. For six years, from the recession year 1991-97, the nonfinancial sector's profits had soared from $227.3 billion to $508.4 billion. As a percentage of GDP, these profits had risen from 3.8% to 4.9%.
While "New Paradigm" ballyhoo and stock prices flourished after 1997, business profits, as officially measured, suddenly slumped. As a percentage of GDP, they were a little higher at the height of the dot-com bubble than in the recession year 1991.
Coming to the recent recovery years, we must point to some irritating observations. On the surface, it looks like a fabulous profit development. From recession year 2001 to 2005, profits of businesses in the nonfinancial sector have more than tripled, from $322 billion to almost $1,100 billion. It was the best profit performance of all time.
However, this good-looking total consisted of two extremely different parts. It was in the first quarter of 2004 that profits exceeded their peak of 1997 for the first time. From there, they shot up almost vertically. Typically, it has been inverse that the very first years of recovery were best for profits.
21 November 2006
Dr Kurt Richebächerfor The Daily Reckoningwww.dailyreckoning.com
Editor's Note: Dr. Richebächer has found the best investments to protect your portfolio, no matter what lies ahead for us in 2007. See his full report here:
Wealth Insurancewww.isecureonline.com/Reports/RCH/ERCHG805
Dr. Kurt Richebächer
On the surface, it seems that there are diametrically different views at work in the markets. While the rising bond prices and the falling commodity prices apparently suggest underlying distinct economic bearishness, the sudden surge in stock prices and persistent record-low credit spreads appear to reflect very optimistic expectations about the economy.
The turn in the bond market started in June with yields of 10-year Treasury notes at 5.25%. A decline to 4.7% generated a 5% return for investors within just three months. Annualized, this comes to a return of 20%. Take further into account that there is generally heavy leverage involved, multiplying this return between 10-20 times.
Considering further that this rate of decline of long-term rates has occurred against the backdrop of a firmly inverted yield curve, implying that expenses of carry trade exceed current yields, the strength of this move seems a bit surprising. The quick capital gains, though, have richly offset these interest expenses - for the time being. But to maintain these highly leveraged positions, it will need at least one of two things: either a further sharp fall in long-term rates providing new capital gains or rate cuts by the Fed reducing the costs of carry trade.
More surprising is the new bull run of the stock market in the face of an economic slowdown. Approaching recessions have always tended to depress stock markets in expectation of falling profits. Well, there is a tremendous difference between past and present experience.
Past recessions were all triggered by true monetary tightening, hitting both the economy and the markets. The current economic downturn is unfolding against the backdrop of unmitigated monetary looseness. While the Fed has raised credit costs from unusually low levels, it has done nothing to tighten credit. Its expansion has kept accelerating.
Credit demand has been running wild for consumption, housing and financial speculation. There is just one striking and ominous exception: Corporate credit demand for fixed investment remains zero. Corporations, too, have been borrowing heavily, but for mergers, acquisitions and stock buybacks, not for productive investment.
In 2005, nonfinancial corporations spent $136.8 billion less than their cash flow from retained profits and depreciations on capital expenditures. Simultaneously, they spent $363.6 billion on mergers, acquisitions and stock buybacks. Given their moderate cash surplus, one has to assume that the stock purchases were generally financed with borrowed money.
It is certainly reasonable to regard the strong trend of corporate stock purchases as an early negative indicator of investment intentions. Principally, there are two different ways for corporations to expand and to raise profits. One is the old-fashioned way of organic growth through creating new plant and equipment. The other is to purchase economic growth and higher earnings through mergers and acquisitions by going more deeply into debt.
What, then, has been happening more lately to mergers and acquisitions? In short, they have gone crazy. During the first quarter of 2006, they hit an amount of $558 billion at annual rate, and in the second quarter another $554.8 billion.
This compares with continuously weak capital investment. In the first quarter, it was $2.7 billion below cash flow, and in the second quarter, $43.2 billion above cash flow. There is an interesting comparison with the year 2000. Then, capital expenditures of nonfinancial corporations exceeded their cash flow by $310.8 billion, compared with net stock purchases of $118.2 billion.
We would say that these figures indicate a continuous, rather dramatic change in corporate policies of expansion away from new capital investment and toward "purchasing" growth and earnings. It started in the 1980s. It strongly intensified during the 1990s, and during the last few years has gone to extremes.
Stating this, we primarily have the long-term development in mind. But in the same vein, we are pondering what is going to happen to business investment in the short run, when consumer spending slows, or even slumps, in the wake of the bursting housing bubble. The generally highly optimistic expectations and forecasts about investment spending taking over from consumption as the driver of the economy greatly puzzle us.
To stress one important point, which appears to be generally overlooked: Some rise in capital spending is not enough. Given its much smaller share of GDP than consumer spending, it needs a very strong rise to offset even a minor decline in consumer spending.
While the markets seem to reflect highly conflicting views about the U.S. economy's outlook, we nevertheless presume one underlying common view, and that is the perception of very little risk of a possible recession because the Fed would, in any case, swiftly act to head off any gathering weakness. What matters from this perspective both in the bond and stock markets are impending rate cuts.
In essence, this is in line with the conventional thinking that the U.S. Great Depression of the 1930s, as well as Japan's prolonged malaise since the early 1990s, could have been avoided by prompter monetary easing. Whoever believes in this is entitled to be bullish both on stocks and bonds.
U.S. stock prices received their lift since June/July mainly from lower oil prices and lower long-term interest rates. To keep heading higher, it will now need sufficient earnings growth. After an unusually steep rise in profits during 2005, analysts are predicting more of the same. Our focus is on aggregate profits, as calculated and reported by the Bureau of Economic Analysis within the National Income and Product Accounts (NIPA).
The customary way of making forecasts of economic developments is to extrapolate the recent past. Profit growth in the United States during the last two years has been at its best for the whole postwar period. Profits of the nonfinancial sector in 2005 have jumped to $900.1 billion, from $584 billion in 2004 and $411.8 billion in 2003. These figures compare with a profit peak of $508.4 billion for the sector in 1997 and a profit low of $322.0 billion in 2001.
If you look at the profit development of U.S. corporations over the last 10 years, you will see that it is an awkward picture. Profits fared very poorly during the "New Paradigm" years of the late 1990s, presumably a time of excellent economic performance. No less astounding is their sudden steep rise in the course of 2005, from $624.2 billion in the fourth quarter of 2004 to $1,027.7 billion in the first quarter of 2006, happening while the economy distinctly slowed.
The irony is that after a strong rise during the first half of the 1990s, profits abruptly turned down during the "New Paradigm" years of the late 1990s. For six years, from the recession year 1991-97, the nonfinancial sector's profits had soared from $227.3 billion to $508.4 billion. As a percentage of GDP, these profits had risen from 3.8% to 4.9%.
While "New Paradigm" ballyhoo and stock prices flourished after 1997, business profits, as officially measured, suddenly slumped. As a percentage of GDP, they were a little higher at the height of the dot-com bubble than in the recession year 1991.
Coming to the recent recovery years, we must point to some irritating observations. On the surface, it looks like a fabulous profit development. From recession year 2001 to 2005, profits of businesses in the nonfinancial sector have more than tripled, from $322 billion to almost $1,100 billion. It was the best profit performance of all time.
However, this good-looking total consisted of two extremely different parts. It was in the first quarter of 2004 that profits exceeded their peak of 1997 for the first time. From there, they shot up almost vertically. Typically, it has been inverse that the very first years of recovery were best for profits.
21 November 2006
Dr Kurt Richebächerfor The Daily Reckoningwww.dailyreckoning.com
Editor's Note: Dr. Richebächer has found the best investments to protect your portfolio, no matter what lies ahead for us in 2007. See his full report here:
Wealth Insurancewww.isecureonline.com/Reports/RCH/ERCHG805
Friday, November 17, 2006
FOR NOW MARKET CHOOSES TO IGNORE
Home builders slam on the brakes
Housing starts hit six-year low while permits, a key sign of builder confidence, slide to the lowest since 1997.
By Chris Isidore, CNNMoney.com senior writer
November 17 2006: 1:04 PM EST
NEW YORK (CNNMoney.com) -- New housing starts sank to the lowest level in more than six years in October and a key measure of builders' confidence in the market hit a nine-year low, a government report showed Friday.
Both housing starts and applications for new building permits tumbled well below Wall Street forecasts - a sign that the slumping housing market has not yet hit bottom.
"Today's figures clearly reveal that a quick turnaround in this sector is not just around the corner," said Anthony Chan, chief economist for JPMorgan Chase Private Client Services. "Any real turnaround may not be forthcoming until the central bank reverses course and begins to lower short-term rates again."
Housing starts plunged nearly 15 percent to a seasonally adjusted annual rate of 1.49 million in October from a revised 1.74 million in September, according to the Census Bureau report. That was the lowest reading since July 2000.
The pace of single family housing starts in October was down nearly 32 percent from the year-ago period when the home building boom was still roaring forward.
Building permits, seen as a measure of builder confidence in the real estate market, fell to the their lowest pace since December 1997, coming in at 1.54 million, down from 1.64 million in September. Permits for single family homes are also off 32 percent from the year-ago levels.
Economists surveyed by Briefing.com forecast that starts would fall to an annual rate of 1.68 million and permits to 1.625 million.
"Housing starts reported this morning was a shocker," said Phillip Neuhart, an economist with Wachovia. "The South -- the strongest home building region during the recent housing boom -- had by far the weakest month of any."
In some ways the slowdown in starts and permits is a positive for the housing market, since it will reduce the inventory of homes on the market, which as been depressing prices for both new and existing homes. But Neuhart said as inventory-induced slowdown is likely to depress the gross domestic product, the broad measure of the nation's economic activity, throughout all of 2007.
"We do not see healthy inventory levels being reached until at least the second quarter of next year," he said.
Another sign of weakness in the housing market came when a realty tracking firm reported Friday that home foreclosures rose once again in October, climbing 42 percent from year-earlier levels.
Still, before Friday's report, there had been hopes from other recent real estate reports that perhaps the slump in home sales and home building had bottomed out.
The National Association of Home Builders' survey of builder confidence for November posted a modest increase for the second month, even though far more builders still saw the market as poor rather than good. And housing starts rose in September, although permits fell.
In addition, mortgage rates fell sharply this week, with the average 30-year fixed rate mortgage dropping to 6.24 percent from 6.33 percent a week earlier, according to mortgage financier Freddie Mac. Mortgage applications climbed to their highest level since January in the most recent weekly reading from the Mortgage Bankers Association.
But other reports have showed weakness in prices for both new and existing homes, as inventories of both types of homes available for sale climbed to record levels. And home builders have reported having to offer attractive deals to move homes they have completed.
Major home builders have been reporting lower earnings and cutting forecasts for future results due to the downturn in new home sales.
Pulte Home (Charts), the nation's largest home builder, became the latest to report a stepper-than expected drop in earnings earlier this week, and cut its outlook.
"You can count us among the companies that would like to see this be the beginning of a more stable operating environment," said Pulte CEO Richard Dugas, after he cited some of the hopeful signs of improvement in the housing market during his call with investors following Pulte's earnings report. "But for now we will wait for the trends to continue and to broaden before we conclude that the bottom is being reached."
He said that it was important that Pulte and other builders cut back on housing starts, especially so called "spec homes" that are begun without a sales contract in hand.
"There is no need for us to aggravate existing market difficulties by throwing unnecessary supply into the market," he said.
Other home buildings reporting problems reduced earnings and or sales outlooks include Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Builders to buyers: Take this house, please!
October foreclosures jump 42 percent
Housing starts hit six-year low while permits, a key sign of builder confidence, slide to the lowest since 1997.
By Chris Isidore, CNNMoney.com senior writer
November 17 2006: 1:04 PM EST
NEW YORK (CNNMoney.com) -- New housing starts sank to the lowest level in more than six years in October and a key measure of builders' confidence in the market hit a nine-year low, a government report showed Friday.
Both housing starts and applications for new building permits tumbled well below Wall Street forecasts - a sign that the slumping housing market has not yet hit bottom.
"Today's figures clearly reveal that a quick turnaround in this sector is not just around the corner," said Anthony Chan, chief economist for JPMorgan Chase Private Client Services. "Any real turnaround may not be forthcoming until the central bank reverses course and begins to lower short-term rates again."
Housing starts plunged nearly 15 percent to a seasonally adjusted annual rate of 1.49 million in October from a revised 1.74 million in September, according to the Census Bureau report. That was the lowest reading since July 2000.
The pace of single family housing starts in October was down nearly 32 percent from the year-ago period when the home building boom was still roaring forward.
Building permits, seen as a measure of builder confidence in the real estate market, fell to the their lowest pace since December 1997, coming in at 1.54 million, down from 1.64 million in September. Permits for single family homes are also off 32 percent from the year-ago levels.
Economists surveyed by Briefing.com forecast that starts would fall to an annual rate of 1.68 million and permits to 1.625 million.
"Housing starts reported this morning was a shocker," said Phillip Neuhart, an economist with Wachovia. "The South -- the strongest home building region during the recent housing boom -- had by far the weakest month of any."
In some ways the slowdown in starts and permits is a positive for the housing market, since it will reduce the inventory of homes on the market, which as been depressing prices for both new and existing homes. But Neuhart said as inventory-induced slowdown is likely to depress the gross domestic product, the broad measure of the nation's economic activity, throughout all of 2007.
"We do not see healthy inventory levels being reached until at least the second quarter of next year," he said.
Another sign of weakness in the housing market came when a realty tracking firm reported Friday that home foreclosures rose once again in October, climbing 42 percent from year-earlier levels.
Still, before Friday's report, there had been hopes from other recent real estate reports that perhaps the slump in home sales and home building had bottomed out.
The National Association of Home Builders' survey of builder confidence for November posted a modest increase for the second month, even though far more builders still saw the market as poor rather than good. And housing starts rose in September, although permits fell.
In addition, mortgage rates fell sharply this week, with the average 30-year fixed rate mortgage dropping to 6.24 percent from 6.33 percent a week earlier, according to mortgage financier Freddie Mac. Mortgage applications climbed to their highest level since January in the most recent weekly reading from the Mortgage Bankers Association.
But other reports have showed weakness in prices for both new and existing homes, as inventories of both types of homes available for sale climbed to record levels. And home builders have reported having to offer attractive deals to move homes they have completed.
Major home builders have been reporting lower earnings and cutting forecasts for future results due to the downturn in new home sales.
Pulte Home (Charts), the nation's largest home builder, became the latest to report a stepper-than expected drop in earnings earlier this week, and cut its outlook.
"You can count us among the companies that would like to see this be the beginning of a more stable operating environment," said Pulte CEO Richard Dugas, after he cited some of the hopeful signs of improvement in the housing market during his call with investors following Pulte's earnings report. "But for now we will wait for the trends to continue and to broaden before we conclude that the bottom is being reached."
He said that it was important that Pulte and other builders cut back on housing starts, especially so called "spec homes" that are begun without a sales contract in hand.
"There is no need for us to aggravate existing market difficulties by throwing unnecessary supply into the market," he said.
Other home buildings reporting problems reduced earnings and or sales outlooks include Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Builders to buyers: Take this house, please!
October foreclosures jump 42 percent
Thursday, November 16, 2006
Tuesday, November 14, 2006
THE BULL ROMPS
Until the BEars stop trying to call the TOP, and IMHO until the CPC (put call ratio) takes a hard dive this rally can feed off the newbie dopes who might keep getting in front of it as it has feasted on the ones already run over.
When ALL have given into its hypnotic cry of riches and any stock can rise, obviously this is not the Titanic yet, it seems topsy, it seems unreal, it seems like it needs a breather, it keeps going up. The animal is loose when the techs lead the way, we might be in that phase now.
PPI shows almost deflationary drop, maybe market loved that, FED will soon cut? Can they? The YIELD CURVE says they MUST! 10 yr near 4.5% but 90 day money is near 5% ??!!! woweeee the shits upside down and being ignored.
ENERGY TRUSTS have been GORED by tax fears, even if not taking effect until 2011 !!!!
I am licking my chops to nibble, but it is always toughest when something is getting blown up, right ow maybe too hot to handle, I am charting the secrot now, but if OIL does not hold this area and falls below recent low range, they could be whollapped again.
Consumer spending falls for second straight month.
Housing stocks rumbled today? what happened to the bubble?? saying low rates here we come!
Well if bonds are soaring money not coming out of there, money also in stocks, liquidity floats all boats.
I could say when this party is over, the market of 2001-2003 will look tame, but I wont.
I am NOT short any more, even though my charts tell me a comeupins is NEAR, I mean what I see has held true last 5 years on my indidcators......but only once did the market NOT bottom in OCT, in last 10 years!!! well make that 2 now in over 10 years...it tricked us and bottomed in JUly.
I see where the NAZ has declined most years in Jan quarter, but these days, I dont know if I want to bet on it.
One lesson all must learn for sure, you can find ALL the fundamental reasons, and charts that say this ish ow IT SHOULD BE, but shoulda coulda dont make you money, not fighting the trend does.
Specialist short position just SKYROCKETED, I thought I'd throw that in.
http://tal.marketgauge.com/dvMGPro/Charts/Charts.asp?chart=SPCSRT It doesnt have to lead to a huge retrace, but it normally is good NOT to bet against these guys while they are at an extreme.
Money managers MUST run after performance, evryone is running to and running from.
http://research.stlouisfed.org/publications/usfd/page3.pdf I am concerned with this chart.
So have fun while the fun lasts, I have a sip, but I sure as hell am not staying long enough to get drunk. For I am at least of memory of 2001-2003 and know that NO BEAR MARKET has ended with the SPX PE ratio and DIVIDEND yields where they were in 2003 bottom.
We are in the stratosphere of performance historically, and sooner or later you revert to the mean.
I get the feeling at some point next year this might be visable, but then no year after MIdterms has evern been a disaster, and most quite good, more history for you....not a guarantee.
If Dem's go after BUsh, all bets are off and tax cuts, but we dont know just yet what 2007 holds, for all of us I hope promise, and no worse than muddle thru.
Trillions in mortages are set to go much higher in 2007, and could greatly effect consumer spending. Savings rate still negative.
When ALL have given into its hypnotic cry of riches and any stock can rise, obviously this is not the Titanic yet, it seems topsy, it seems unreal, it seems like it needs a breather, it keeps going up. The animal is loose when the techs lead the way, we might be in that phase now.
PPI shows almost deflationary drop, maybe market loved that, FED will soon cut? Can they? The YIELD CURVE says they MUST! 10 yr near 4.5% but 90 day money is near 5% ??!!! woweeee the shits upside down and being ignored.
ENERGY TRUSTS have been GORED by tax fears, even if not taking effect until 2011 !!!!
I am licking my chops to nibble, but it is always toughest when something is getting blown up, right ow maybe too hot to handle, I am charting the secrot now, but if OIL does not hold this area and falls below recent low range, they could be whollapped again.
Consumer spending falls for second straight month.
Housing stocks rumbled today? what happened to the bubble?? saying low rates here we come!
Well if bonds are soaring money not coming out of there, money also in stocks, liquidity floats all boats.
I could say when this party is over, the market of 2001-2003 will look tame, but I wont.
I am NOT short any more, even though my charts tell me a comeupins is NEAR, I mean what I see has held true last 5 years on my indidcators......but only once did the market NOT bottom in OCT, in last 10 years!!! well make that 2 now in over 10 years...it tricked us and bottomed in JUly.
I see where the NAZ has declined most years in Jan quarter, but these days, I dont know if I want to bet on it.
One lesson all must learn for sure, you can find ALL the fundamental reasons, and charts that say this ish ow IT SHOULD BE, but shoulda coulda dont make you money, not fighting the trend does.
Specialist short position just SKYROCKETED, I thought I'd throw that in.
http://tal.marketgauge.com/dvMGPro/Charts/Charts.asp?chart=SPCSRT It doesnt have to lead to a huge retrace, but it normally is good NOT to bet against these guys while they are at an extreme.
Money managers MUST run after performance, evryone is running to and running from.
http://research.stlouisfed.org/publications/usfd/page3.pdf I am concerned with this chart.
So have fun while the fun lasts, I have a sip, but I sure as hell am not staying long enough to get drunk. For I am at least of memory of 2001-2003 and know that NO BEAR MARKET has ended with the SPX PE ratio and DIVIDEND yields where they were in 2003 bottom.
We are in the stratosphere of performance historically, and sooner or later you revert to the mean.
I get the feeling at some point next year this might be visable, but then no year after MIdterms has evern been a disaster, and most quite good, more history for you....not a guarantee.
If Dem's go after BUsh, all bets are off and tax cuts, but we dont know just yet what 2007 holds, for all of us I hope promise, and no worse than muddle thru.
Trillions in mortages are set to go much higher in 2007, and could greatly effect consumer spending. Savings rate still negative.
Saturday, November 11, 2006
Doug Noland from Prudent Bear
The explosion of Credit derivatives and top-rated corporate securities issuance is a Monetary Development of historic proportions. I have written about the “Moneyness of Credit” issue over the past few years, but never did I imagine it would come to this. Marketplace perceptions of safety and liquidity are today being grossly distorted on a scale – multi-trillions of securities from one corner of the world to another - that so overshadow the technology Bubble – that overshadow anything previously experienced in the history of finance.
Following in the footsteps of the technology derivatives Bubble, the mania in Credit “insurance” ensures a collapse. It today feeds a self-reinforcing boom, but when this cycle inevitably reverses, the scope of Credit losses will quickly overwhelm the thinly capitalized speculators that have been more than happy to book premiums directly to profits. Undoubtedly, an unfolding bust will find this “insurance” market in complete disarray. Much of the marketplace today expects that they will - when things begin to turn sour - either obtain Credit “insurance” or hedge/”reinsure” protection already written. But when much of the marketplace moves to offload Credit risk there will simply be no one to take the other side of the trade. As losses mount, the market will then face the harsh reality that minimal “insurance” reserves are actually available to make good on all the protection written. This will have a profoundly negative impact on both Credit Availability and marketplace liquidity – ruining the plans of many expecting – and requiring – that “money” always flow so freely.
A major problem with the current monetary boom – the “Moneyness of Credit Bubble” – is the enormous and widening gulf between the market's perception of safety and liquidity and the acute vulnerability of the actual underlying Credits. Runaway booms invariably destroy the “money” – in whatever form it takes – whose inflationary expansion was responsible for fueling the Bubble. This lesson should have been learned from the late-twenties experience, or various other fiascos as far back as John Law. When current perceptions change – when $ trillions of Credit instruments are reclassified and revalued as risky instruments as opposed to today’s coveted “money” – Dr. Bernanke will learn why a central bank’s monetary focus must be in restraining “money” and Credit excesses during the boom. And the longer this destabilizing period of transforming risky Credits into perceived “money” is allowed to run unchecked, the more impotent his little “mop-up” operations will appear in the face of widespread financial and economic dislocation – on a global scale.
http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=60232
Following in the footsteps of the technology derivatives Bubble, the mania in Credit “insurance” ensures a collapse. It today feeds a self-reinforcing boom, but when this cycle inevitably reverses, the scope of Credit losses will quickly overwhelm the thinly capitalized speculators that have been more than happy to book premiums directly to profits. Undoubtedly, an unfolding bust will find this “insurance” market in complete disarray. Much of the marketplace today expects that they will - when things begin to turn sour - either obtain Credit “insurance” or hedge/”reinsure” protection already written. But when much of the marketplace moves to offload Credit risk there will simply be no one to take the other side of the trade. As losses mount, the market will then face the harsh reality that minimal “insurance” reserves are actually available to make good on all the protection written. This will have a profoundly negative impact on both Credit Availability and marketplace liquidity – ruining the plans of many expecting – and requiring – that “money” always flow so freely.
A major problem with the current monetary boom – the “Moneyness of Credit Bubble” – is the enormous and widening gulf between the market's perception of safety and liquidity and the acute vulnerability of the actual underlying Credits. Runaway booms invariably destroy the “money” – in whatever form it takes – whose inflationary expansion was responsible for fueling the Bubble. This lesson should have been learned from the late-twenties experience, or various other fiascos as far back as John Law. When current perceptions change – when $ trillions of Credit instruments are reclassified and revalued as risky instruments as opposed to today’s coveted “money” – Dr. Bernanke will learn why a central bank’s monetary focus must be in restraining “money” and Credit excesses during the boom. And the longer this destabilizing period of transforming risky Credits into perceived “money” is allowed to run unchecked, the more impotent his little “mop-up” operations will appear in the face of widespread financial and economic dislocation – on a global scale.
http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=60232
SAT MORNING POST
Briefly, a mild pullback seems in order, but high beta NAZ issues are holding strong, but I do see multiple bearish divergences, at some point should come into play.
High volume selloff was not followed though Friday. Options expiration is Fri and MAX PAIN has Q's at $42 Area just above current price has been resistance, if broken price could run.
Commodities after brief pullback could be good place to be. Same for OIL.
LArge caps still outperforming, some newsletters calling for rally into 2007, top making data near non existant. Opinions dont matter, market action does.
Sometimes you need to be watching when good stuff gets battered AKA EBAY at $22 or YHOO at $23. HOT stock HANS been gored. Dem's in charge has some selling in big pharma.
I think a top of mega years in duration appears early 2007, but year after mid term elections decisively bullish, if still so, maybe the market holds together even longer than now expected. One thing is will consumers with Bush spanking and Dem's in charge have a giddy rise in Consumer Sentiment?
D
High volume selloff was not followed though Friday. Options expiration is Fri and MAX PAIN has Q's at $42 Area just above current price has been resistance, if broken price could run.
Commodities after brief pullback could be good place to be. Same for OIL.
LArge caps still outperforming, some newsletters calling for rally into 2007, top making data near non existant. Opinions dont matter, market action does.
Sometimes you need to be watching when good stuff gets battered AKA EBAY at $22 or YHOO at $23. HOT stock HANS been gored. Dem's in charge has some selling in big pharma.
I think a top of mega years in duration appears early 2007, but year after mid term elections decisively bullish, if still so, maybe the market holds together even longer than now expected. One thing is will consumers with Bush spanking and Dem's in charge have a giddy rise in Consumer Sentiment?
D
"SOME HEADS ARE GONNA ROLL?"
A Time For Accounting
Joseph L. Galloway
November 10, 2006
Joseph L. Galloway is former senior military correspondent for Knight Ridder newspapers, columnist for McClatchy Newspapers, and co-author of the national best-seller We Were Soldiers Once ... and Young. Readers may write to him at: P.O. Box 399, Bayside, Texas 78340; e-mail: jlgalloway2@cs.com.
Better late than never.
Secretary of Defense Donald H. Rumsfeld is gone, but there's little time for celebration, even for those of us who long ago began calling for his removal. The damage that men do lives after them, and it's time at last for an accounting. The nation’s voters have spoken, and it's reasonable to expect that the Congress finally will begin to exercise some oversight of the wars in Iraq and Afghanistan after five years of serving as rubber stamp and doormats.
Can you spell "subpoena?"
For the Democrats who will soon take charge of the House of Representatives and perhaps the Senate, too, here's a preliminary laundry list of some of the things that need doing:
A comprehensive investigation of the pre-war intelligence on Iraq and how it was perverted, how the mine was salted, and by whom.
A thorough investigation of what pre-war advice was offered by senior American military commanders on troop strength, equipment requirements and strategy and tactics. Did even one general ignore the bullying from on high and ask for more troops, and how did Defense Secretary Donald H. Rumsfeld respond?
Why did the Pentagon send American troops into battle without enough armored vests, armored vehicles, rifles, ammunition, food and water? Who's responsible for that debacle which cost so much in blood and money?
Where did our money go? Billions of dollars of taxpayer money disappeared down various rat holes in Iraq, forked over to contractors without even so much as a handwritten receipt. Who got the money? What did they do for it? This is a fertile field that can be drilled for years, with a steady stream of indictments, trials and prison sentences.
What about those no-bid Defense Department contracts that were parceled out to the Halliburtons and KBRs and Blackwaters in Iraq and Afghanistan, and other more costly weapons and equipment contracts that went to big defense industry conglomerates accustomed to writing very generous checks to the Republicans?
Why did an administration that was hell-bent on going to war, with the inevitable and terrible human casualties among our troops, consistently underfund the Veterans Administration, which is charged with caring for our wounded and disabled?
What's been the effect of the grotesque politicization of the selection and promotion system for senior military commanders by the office of the Secretary of Defense? What failures have resulted from that ill-conceived action? What responsibility do those generals and admirals chosen by Donald H. Rumsfeld bear for the failure to prepare for and conduct effective action against an inevitable Iraqi insurgency?
Who at the top bears responsibility for the torture and mistreatment of prisoners and detainees at Abu Ghraib prison and the Guantanamo detention camp? A score of Pentagon investigations got to the bottom of the chain of command but declared that the top, in Rumsfeld’s office and the White House, was innocent.
Who's responsible for breaking our understrength Army and Marine Corps with endless combat duty tours in Iraq and Afghanistan? Who refused all suggestions that the force was too small for the mission, and that 50,000 or 100,000 more men and women were needed in uniform? Who stubbornly refused even to consider the inevitable consequences of an Army so tied down trying to man these wars that it no longer could react to an emergency anywhere else in a dangerous world?
Simply put, the jig is up. President George W. Bush, Vice President Dick Cheney and Rumsfeld have come to the end of their free ride. No longer can they act without thought or ignore the boundaries of the Constitution, the law and common sense.
Did they really think they could get away with all of this without ever being called to answer to history and the American people?
They all deserve what's about to descend on their heads. They deserve every subpoena. They deserve every indictment. Most of all, they deserve a reserved place atop the ash heap of history.
Joseph L. Galloway
November 10, 2006
Joseph L. Galloway is former senior military correspondent for Knight Ridder newspapers, columnist for McClatchy Newspapers, and co-author of the national best-seller We Were Soldiers Once ... and Young. Readers may write to him at: P.O. Box 399, Bayside, Texas 78340; e-mail: jlgalloway2@cs.com.
Better late than never.
Secretary of Defense Donald H. Rumsfeld is gone, but there's little time for celebration, even for those of us who long ago began calling for his removal. The damage that men do lives after them, and it's time at last for an accounting. The nation’s voters have spoken, and it's reasonable to expect that the Congress finally will begin to exercise some oversight of the wars in Iraq and Afghanistan after five years of serving as rubber stamp and doormats.
Can you spell "subpoena?"
For the Democrats who will soon take charge of the House of Representatives and perhaps the Senate, too, here's a preliminary laundry list of some of the things that need doing:
A comprehensive investigation of the pre-war intelligence on Iraq and how it was perverted, how the mine was salted, and by whom.
A thorough investigation of what pre-war advice was offered by senior American military commanders on troop strength, equipment requirements and strategy and tactics. Did even one general ignore the bullying from on high and ask for more troops, and how did Defense Secretary Donald H. Rumsfeld respond?
Why did the Pentagon send American troops into battle without enough armored vests, armored vehicles, rifles, ammunition, food and water? Who's responsible for that debacle which cost so much in blood and money?
Where did our money go? Billions of dollars of taxpayer money disappeared down various rat holes in Iraq, forked over to contractors without even so much as a handwritten receipt. Who got the money? What did they do for it? This is a fertile field that can be drilled for years, with a steady stream of indictments, trials and prison sentences.
What about those no-bid Defense Department contracts that were parceled out to the Halliburtons and KBRs and Blackwaters in Iraq and Afghanistan, and other more costly weapons and equipment contracts that went to big defense industry conglomerates accustomed to writing very generous checks to the Republicans?
Why did an administration that was hell-bent on going to war, with the inevitable and terrible human casualties among our troops, consistently underfund the Veterans Administration, which is charged with caring for our wounded and disabled?
What's been the effect of the grotesque politicization of the selection and promotion system for senior military commanders by the office of the Secretary of Defense? What failures have resulted from that ill-conceived action? What responsibility do those generals and admirals chosen by Donald H. Rumsfeld bear for the failure to prepare for and conduct effective action against an inevitable Iraqi insurgency?
Who at the top bears responsibility for the torture and mistreatment of prisoners and detainees at Abu Ghraib prison and the Guantanamo detention camp? A score of Pentagon investigations got to the bottom of the chain of command but declared that the top, in Rumsfeld’s office and the White House, was innocent.
Who's responsible for breaking our understrength Army and Marine Corps with endless combat duty tours in Iraq and Afghanistan? Who refused all suggestions that the force was too small for the mission, and that 50,000 or 100,000 more men and women were needed in uniform? Who stubbornly refused even to consider the inevitable consequences of an Army so tied down trying to man these wars that it no longer could react to an emergency anywhere else in a dangerous world?
Simply put, the jig is up. President George W. Bush, Vice President Dick Cheney and Rumsfeld have come to the end of their free ride. No longer can they act without thought or ignore the boundaries of the Constitution, the law and common sense.
Did they really think they could get away with all of this without ever being called to answer to history and the American people?
They all deserve what's about to descend on their heads. They deserve every subpoena. They deserve every indictment. Most of all, they deserve a reserved place atop the ash heap of history.
Thursday, November 09, 2006
VOLUME ALERT
NYSE traded close to 3 billion shares today on DECLINE, when a move is made on increasing volume it is to be taken seriously. Selling pressure picked up today that is for sure, why it did is for speculation.
I have reasoned that IF the Repub's and their inside cronies goosed the market by buying futures togive the party a lift, now seeing it was for naught, might sustain new buying as the reason to do so is no longer there.
The Q's were held right at their previous 52 wk high leaving a double top in place, it is very interesting how stocks and indexes act at important levels be they previous support now resistance or other way around. Its full meaning is for now unclear, but what is sure, is a pause was necessary.
Will this lead to a meaningful correction? SHOW ME I say, but if high volume continues on declines, be very cautious.
D
I have reasoned that IF the Repub's and their inside cronies goosed the market by buying futures togive the party a lift, now seeing it was for naught, might sustain new buying as the reason to do so is no longer there.
The Q's were held right at their previous 52 wk high leaving a double top in place, it is very interesting how stocks and indexes act at important levels be they previous support now resistance or other way around. Its full meaning is for now unclear, but what is sure, is a pause was necessary.
Will this lead to a meaningful correction? SHOW ME I say, but if high volume continues on declines, be very cautious.
D
Saturday, November 04, 2006
BUSH IS A SELLOUT
http://www.youtube.com/watch?v=IonpUlJluH8&NR SEND HIM A MESSAGE LOUD AND CLEAR, WE WILL ACCEPT NO MORE BULLSHIT AND GIVE UP NO MORE FREEDOMS, AND HEAR NO MORE LIES
D
D
SATURDAY MORNING POST "ELECTION DAY"
Bush is stumping on his Economic record and sending fears of tax hikes if Dem's gain control as only reason to vote R.
ENGLEWOOD, Colo. -
President Bush said Saturday his tax-cutting policies have created jobs and promoted growth, economic progress he contended is jeopardized by the prospect of Democratic victories on Election Day.
"Americans are finding jobs and they're taking home more pay. The main reason for our growing economy is that we cut taxes and left more money in the hands of families and workers and small business owners," the president said in his weekly radio address, delivered live from Mile High Coffee in suburban Denver.
Campaigning on the final weekend before Tuesday's vote, Bush told reporters just before the broadcast that he "feels good. It's quite a campaign coming down the stretch."
On the radio, he said Democrats consistently have opposed his tax cuts and they predicted the tax would not create jobs or increase wages and "would cause the federal deficit to explode."
"American workers and entrepreneurs have proved all those predictions wrong. But Democrats are still determined to raise taxes. And if they gain control of the Congress, they can do so without lifting a finger," said Bush, seated at table in the shop as patrons sipped coffee and snacked.
Bush's main tax cut was a cut in dividend tax rates in which the avg American gained very little, however the insiders and already rich in the higher tax brackets with much larger stock portfolio's have gained mightily.
Bush's policies have widened the gulf between the have's and the have not's. The avg American is falling deeper and deeper into debt.
ALL we have gotten from Bush policies is asset inflation and dollars fleeing this country to Asia. China now holds a record $1 trillion dollar of US debt, even more than Japan.
It takes 250,000 jobs a month just to keep up with those coming into work force. Yet last 2 months we have averaged less than 100,000 and unemployment rate drops dramatically?
Only once has the market rallied in OCT, now make it twice in 10 years. just a coincidence?
I think the short term health of the stock market will be determined by the outcome of the Tues election, if the Repulican's lose their grip I think the market will react badly, but you never know the Republican's might pull it off again, and then we see a SWIFT rise.
The markets recent mild pullback is telling us it doesn't know for sure how it will all come out, I do not expect much until we get Wednesdays reaction.
If you like the way things are going, if you support the war in Iraq, and don't mind losing some of your constitutional rights, vote R. If you think a STRONG message needs to be sent to the Republican majority and BUSH we don't agree with his policies and ignoring criminally the constitution......you know what to do
Duratek
ENGLEWOOD, Colo. -
President Bush said Saturday his tax-cutting policies have created jobs and promoted growth, economic progress he contended is jeopardized by the prospect of Democratic victories on Election Day.
"Americans are finding jobs and they're taking home more pay. The main reason for our growing economy is that we cut taxes and left more money in the hands of families and workers and small business owners," the president said in his weekly radio address, delivered live from Mile High Coffee in suburban Denver.
Campaigning on the final weekend before Tuesday's vote, Bush told reporters just before the broadcast that he "feels good. It's quite a campaign coming down the stretch."
On the radio, he said Democrats consistently have opposed his tax cuts and they predicted the tax would not create jobs or increase wages and "would cause the federal deficit to explode."
"American workers and entrepreneurs have proved all those predictions wrong. But Democrats are still determined to raise taxes. And if they gain control of the Congress, they can do so without lifting a finger," said Bush, seated at table in the shop as patrons sipped coffee and snacked.
Bush's main tax cut was a cut in dividend tax rates in which the avg American gained very little, however the insiders and already rich in the higher tax brackets with much larger stock portfolio's have gained mightily.
Bush's policies have widened the gulf between the have's and the have not's. The avg American is falling deeper and deeper into debt.
ALL we have gotten from Bush policies is asset inflation and dollars fleeing this country to Asia. China now holds a record $1 trillion dollar of US debt, even more than Japan.
It takes 250,000 jobs a month just to keep up with those coming into work force. Yet last 2 months we have averaged less than 100,000 and unemployment rate drops dramatically?
Only once has the market rallied in OCT, now make it twice in 10 years. just a coincidence?
I think the short term health of the stock market will be determined by the outcome of the Tues election, if the Repulican's lose their grip I think the market will react badly, but you never know the Republican's might pull it off again, and then we see a SWIFT rise.
The markets recent mild pullback is telling us it doesn't know for sure how it will all come out, I do not expect much until we get Wednesdays reaction.
If you like the way things are going, if you support the war in Iraq, and don't mind losing some of your constitutional rights, vote R. If you think a STRONG message needs to be sent to the Republican majority and BUSH we don't agree with his policies and ignoring criminally the constitution......you know what to do
Duratek
Wednesday, November 01, 2006
The Brilliant Hans Sennholz "An Unstable Dollar Standard"
An Unstable Dollar Standard
We live in a period of world-wide economic expansion and prosperity. The world economy is said to grow this year at some five percent, which will be the third year above the historic average. Even if, in the coming year, the growth rate should decline a little, the global economy looks bright and prosperous. Led by some Asiatic countries, especially China and Japan, more countries than ever before are reporting rapid economic expansion.
But no matter how bright the economic outlook may be, the international prosperity is exposed to a looming risk, which has even grown in recent months. The war in Iraq and the skirmishes in Afghanistan are an ever-present danger that may destabilize the Middle East and spread the conflict to more countries. The Islamic republic of Iran, which does not hesitate to confront American interests and concerns, may upend the peace at any time. But the greatest concern of many economists is the global economic imbalance which is clearly visible in the huge balance-of-payments deficits of the United States and in the corresponding surpluses of the creditor countries. Americans are said to consume some 70 percent of the world’s savings while Japan, China, and other developing countries are financing the deficits and accumulating American IOUs. Many economists are convinced that such disproportions and imbalances are unsustainable in the long run.
Surely, American foreign debt has increased significantly, but so has individual income and wealth. Total domestic debt has risen visibly over the last decade, but so have productivity and income. This economic harmony nevertheless is burdened by considerable risk of global imbalances that may cause disruption and upheaval in the future. The debt-and-credit differences of the large national economies continue to grow, the balance-of-payment deficits of the United States surpass all national surpluses. In 2005 the deficits amounted to some $790 billion, which, in relation to gross national product, exceeded six percent. So far this year, it may exceed $800 billion, or 6.5 percent of GDP. Moreover, the federal government continues to suffer huge budget deficits which enlarge the national debt and add weight to the international concern.
The American mountain of debt is matched by large balance-of-payment surpluses in developing Asian countries, as well as by most oil-exporting countries. Many creditors welcome the surpluses. They keep the exchange rates of their currencies low which, in turn, boosts their exports and gives employment to millions of workers who, with American assistance and technology, are learning to produce for the world market. Chinese banks now hold nearly $1 trillion, which is the highest reserve position in the world, having passed Japan this year with some $865 billion. Without such dollar purchases, their currencies would rise immediately, which would boost all export prices, curb exports, and depress economic production and employment.
A few critics believe that the U.S. trade deficits may be the greatest threat to the economic order. Yet the deficits have neither impaired the U.S. dollar nor undermined the position of the United States as the primary economic engine and power. Many observers, therefore, question and disclaim the dangers of American balance-of-payments deficits. They not only cast doubt on official statistics that may exaggerate the case, but also point to the stable rates of exchange which all participants maintain voluntarily. Stability, after all, benefits everyone.
This economist, nevertheless, is convinced that a correction is unavoidable. All markets function to adjust and readjust any maladjustment. They are burdened and strained by the growing mountain of debt which raises the question of American ability to meet its obligations. If there ever should be any doubt about the stability of the American economy, the world-wide demand for U.S. dollars would decline, which would cause the dollar exchange rate to plummet. American imports would decline, dampening the surge of consumption and slowing the very growth engines of export countries such as Japan, China, and many others. The whole world would feel the American instability. A weaker dollar and rising import prices also would accelerate the inflation rate which would pressure the Federal Reserve to raise interest rates. Higher rates would slow the American economy and boost the rate of unemployment.
Despite such international imbalances, the U.S. dollar has not weakened significantly in recent months, and the world economy has not fallen into a global recession. At first, Asian central banks, and then also the oil-exporting countries, financed the huge deficits. It is in the economic interest of the Asian developing countries to keep their exchange rates low in order to keep export prices low and thus keep the export motor running. Massive purchases of federal obligations support the exchange rate of the dollar and increase Asian currency reserves.
It is in the interest of the United States, as well as the Asian countries, that the U.S. dollar maintain its high exchange value. Some American economists like to speak of a “Bretton Woods II” arrangement, which would resemble the international system in effect between the Second World War and 1973. Participating countries supported each other’s currencies and thus sustained stable exchange rates.In Bretton Woods I, the member countries supported each other’s currencies – in Bretton Woods II, they eagerly support the dollar. The European Central Bank, which actively pursues employment policies, manages to avoid the influx of U.S. dollars by keeping interest rates very low and liquidity plentiful. According to some estimates, the quantity of money in euro countries, since 2000, has increased some 25 percent faster than the gross product. In the United States, it has grown some 10 percent, and in Japan by 15 percent. The European Central Bank even surpassed the Bank of Japan, which is inflating its currency in order to counter powerful deflationary forces. In short, euro liquidity is plentiful and interest rates, seen historically, are exceptionally low.
As the U.S.-Asian imbalances continue to mount, the forces of readjustment are gaining strength. There are indications that the imbalances are correcting slowly and in an orderly fashion. Most governments agree that greater flexibility of the exchange rates, especially of the Asian currencies, is an orderly step toward the correction of the global imbalances. But most governments cling to their old policies. The interest rate differences are closing slowly, which causes more and more investors to shun the dollar risk. Moreover, the American real estate market has cooled off significantly without dramatic crashes. The boom, according to Fed Chairman Ben Bernanke, has given way in an orderly and moderate fashion. But there cannot be any doubt that the decline in the housing market will be felt throughout the economy in months to come.
Some Americans will have to curtail their spending which is bound to slow down the economy. Will it drag the world economy with it? The rate of expansion in many Asian countries undoubtedly will decline, but by less than pessimists predict. Most economic expansion in China, India, and other developing countries in recent years has been driven by domestic demand and supply. Yet we must not underestimate the weighty and consequential role played by the United States in world financial markets. A huge debt casts a shadow on any market; the rapidly growing international debt of the United States is clouding the world economy. It cannot grow perpetually; it will be settled sooner or later either in an orderly and upright fashion or in financial crisis and economic recession.
The finale of the scenario may be played by the Federal Reserve System. It may seek to reassure and pacify numerous Asian creditors by maintaining high market rates of interest or at least approximate them, or cater to the notions and wishes of most legislators and their constituents who usually favor monetary stimulation. Sooner or later Federal Reserve governors will have to choose between economic consideration or political preference. Their choice will determine the future of the U. S. dollar.
Hans F. Sennholzwww.sennholz.com
We live in a period of world-wide economic expansion and prosperity. The world economy is said to grow this year at some five percent, which will be the third year above the historic average. Even if, in the coming year, the growth rate should decline a little, the global economy looks bright and prosperous. Led by some Asiatic countries, especially China and Japan, more countries than ever before are reporting rapid economic expansion.
But no matter how bright the economic outlook may be, the international prosperity is exposed to a looming risk, which has even grown in recent months. The war in Iraq and the skirmishes in Afghanistan are an ever-present danger that may destabilize the Middle East and spread the conflict to more countries. The Islamic republic of Iran, which does not hesitate to confront American interests and concerns, may upend the peace at any time. But the greatest concern of many economists is the global economic imbalance which is clearly visible in the huge balance-of-payments deficits of the United States and in the corresponding surpluses of the creditor countries. Americans are said to consume some 70 percent of the world’s savings while Japan, China, and other developing countries are financing the deficits and accumulating American IOUs. Many economists are convinced that such disproportions and imbalances are unsustainable in the long run.
Surely, American foreign debt has increased significantly, but so has individual income and wealth. Total domestic debt has risen visibly over the last decade, but so have productivity and income. This economic harmony nevertheless is burdened by considerable risk of global imbalances that may cause disruption and upheaval in the future. The debt-and-credit differences of the large national economies continue to grow, the balance-of-payment deficits of the United States surpass all national surpluses. In 2005 the deficits amounted to some $790 billion, which, in relation to gross national product, exceeded six percent. So far this year, it may exceed $800 billion, or 6.5 percent of GDP. Moreover, the federal government continues to suffer huge budget deficits which enlarge the national debt and add weight to the international concern.
The American mountain of debt is matched by large balance-of-payment surpluses in developing Asian countries, as well as by most oil-exporting countries. Many creditors welcome the surpluses. They keep the exchange rates of their currencies low which, in turn, boosts their exports and gives employment to millions of workers who, with American assistance and technology, are learning to produce for the world market. Chinese banks now hold nearly $1 trillion, which is the highest reserve position in the world, having passed Japan this year with some $865 billion. Without such dollar purchases, their currencies would rise immediately, which would boost all export prices, curb exports, and depress economic production and employment.
A few critics believe that the U.S. trade deficits may be the greatest threat to the economic order. Yet the deficits have neither impaired the U.S. dollar nor undermined the position of the United States as the primary economic engine and power. Many observers, therefore, question and disclaim the dangers of American balance-of-payments deficits. They not only cast doubt on official statistics that may exaggerate the case, but also point to the stable rates of exchange which all participants maintain voluntarily. Stability, after all, benefits everyone.
This economist, nevertheless, is convinced that a correction is unavoidable. All markets function to adjust and readjust any maladjustment. They are burdened and strained by the growing mountain of debt which raises the question of American ability to meet its obligations. If there ever should be any doubt about the stability of the American economy, the world-wide demand for U.S. dollars would decline, which would cause the dollar exchange rate to plummet. American imports would decline, dampening the surge of consumption and slowing the very growth engines of export countries such as Japan, China, and many others. The whole world would feel the American instability. A weaker dollar and rising import prices also would accelerate the inflation rate which would pressure the Federal Reserve to raise interest rates. Higher rates would slow the American economy and boost the rate of unemployment.
Despite such international imbalances, the U.S. dollar has not weakened significantly in recent months, and the world economy has not fallen into a global recession. At first, Asian central banks, and then also the oil-exporting countries, financed the huge deficits. It is in the economic interest of the Asian developing countries to keep their exchange rates low in order to keep export prices low and thus keep the export motor running. Massive purchases of federal obligations support the exchange rate of the dollar and increase Asian currency reserves.
It is in the interest of the United States, as well as the Asian countries, that the U.S. dollar maintain its high exchange value. Some American economists like to speak of a “Bretton Woods II” arrangement, which would resemble the international system in effect between the Second World War and 1973. Participating countries supported each other’s currencies and thus sustained stable exchange rates.In Bretton Woods I, the member countries supported each other’s currencies – in Bretton Woods II, they eagerly support the dollar. The European Central Bank, which actively pursues employment policies, manages to avoid the influx of U.S. dollars by keeping interest rates very low and liquidity plentiful. According to some estimates, the quantity of money in euro countries, since 2000, has increased some 25 percent faster than the gross product. In the United States, it has grown some 10 percent, and in Japan by 15 percent. The European Central Bank even surpassed the Bank of Japan, which is inflating its currency in order to counter powerful deflationary forces. In short, euro liquidity is plentiful and interest rates, seen historically, are exceptionally low.
As the U.S.-Asian imbalances continue to mount, the forces of readjustment are gaining strength. There are indications that the imbalances are correcting slowly and in an orderly fashion. Most governments agree that greater flexibility of the exchange rates, especially of the Asian currencies, is an orderly step toward the correction of the global imbalances. But most governments cling to their old policies. The interest rate differences are closing slowly, which causes more and more investors to shun the dollar risk. Moreover, the American real estate market has cooled off significantly without dramatic crashes. The boom, according to Fed Chairman Ben Bernanke, has given way in an orderly and moderate fashion. But there cannot be any doubt that the decline in the housing market will be felt throughout the economy in months to come.
Some Americans will have to curtail their spending which is bound to slow down the economy. Will it drag the world economy with it? The rate of expansion in many Asian countries undoubtedly will decline, but by less than pessimists predict. Most economic expansion in China, India, and other developing countries in recent years has been driven by domestic demand and supply. Yet we must not underestimate the weighty and consequential role played by the United States in world financial markets. A huge debt casts a shadow on any market; the rapidly growing international debt of the United States is clouding the world economy. It cannot grow perpetually; it will be settled sooner or later either in an orderly and upright fashion or in financial crisis and economic recession.
The finale of the scenario may be played by the Federal Reserve System. It may seek to reassure and pacify numerous Asian creditors by maintaining high market rates of interest or at least approximate them, or cater to the notions and wishes of most legislators and their constituents who usually favor monetary stimulation. Sooner or later Federal Reserve governors will have to choose between economic consideration or political preference. Their choice will determine the future of the U. S. dollar.
Hans F. Sennholzwww.sennholz.com
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