CREDIT BUBBLE REPORT

http://prudentbear.com/index.php/CreditBubbleBulletinHome DOUG NOLAND

Setting the Backdrop for Stage Two:

Martin Feldstein, Harvard professor and former chairman of the President’s Council of Economic Advisors, wrote an op-ed piece in Wednesday’s Wall Street Journal – “Enough with Interest Rate Cuts” – worthy of comment.
“It’s time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage. Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may raise interest rates. Such contractionary policies would reduce real incomes and exacerbate political instability.
The impact of low interest rates on commodity-price inflation is different from the traditional inflationary effect of easy money. The usual concern is that lowering interest rates stimulates economic activity to a point at which labor and product markets cause wages and prices to rise. That is unlikely to happen in the U.S. in the coming year. The general weakness of the economy will keep most wages and prices from rising more rapidly. But high unemployment and low capacity utilization would not prevent lower interest rates from driving up commodity prices.
Many factors have contributed to the recent rise in the prices of oil and food, especially the increased demand from China, India and other rapidly growing countries. Lower interest rates also add to the upward pressure on these commodity prices – by making it less costly for commodity investors and commodity speculators to hold larger inventories of oil and food grains. Lower interest rates induce investors to add commodities to their portfolios. When rates are low, portfolio investors will bid up the prices of oil and other commodities to levels at which the expected future returns are in line with the lower rates. An interest rate-induced rise in the price of oil also contributes indirectly to higher prices of food grains. It does so by making it profitable for farmers to devote more farm land to growing corn for ethanol.”
While I concur with the basic premise of the article (stop the cuts!), the substance of Mr. Feldstein’s analysis leaves much to be desired. First of all, I find it strange than he would address the issues of overly accommodative Federal Reserve policy, commodity price risk, and inflationary pressures without so much as a cursory mention of our weak currency. The word “dollar” is nowhere to be found – not a mention of our Current Account Deficits. The focus is only on interest rates - and such one-dimensional analysis just doesn’t pass muster in our complex world.
Most remain comfortably oblivious to today’s inflation dynamics. Mr. Feldstein mentions increased demand from China and India. He seems to imply, however, that portfolio buying (financed by low interest rates) by “commodity investors and speculators” is providing the major impetus to rising inflationary pressures generally. Perhaps price gains could have something to do with the $2.5 TN increase in global official reserve positions over the past two years (85% growth). I would also counter that destabilizing speculative activity is an inevitable consequence – rather than a cause - of an alarmingly inflationary global backdrop.
I’ll remind readers that we live in a unique world of unregulated Credit. Excess has evolved to the point of being endemic to an apparatus that operates without any mechanism for adjustment or self-correction. There is, of course, no gold reserve system to restrain domestic monetary expansions. Some years back the dollar-based Bretton Woods global monetary regime lost its relevance. And, importantly, the market-based disciplining mechanism (“king dollar”) that emerged at times to ruthlessly punish financial profligacy around the globe throughout the nineties has morphed into a dysfunctional dynamic that these days nurtures self-reinforcing excesses. The “recycling” of our “Bubble dollars” (in the process inflating local Credit systems, asset markets, commodities and economies across the globe) directly back into our securities markets rests at the epicenter of Global Monetary Dysfunction.
A historic inflation in dollar financial claims was the undoing of anything resembling a global monetary system, and now this anchorless “system” of wildcat finance is the bane of financial and economic stability. To be sure, massive and unrelenting U.S. Current Account Deficits and resulting dollar impairment have unleashed domestic Credit systems around the globe to expand uncontrollably. Today, virtually any major Credit system can and does inflate domestic Credit to create the purchasing power to procure inflating global food, energy, and commodities prices.
The long-overdue U.S. Credit contraction and economic adjustment could change this dynamic. But for now there are reasons to expect this uninhibited Global Credit Bubble to instead run to precarious extremes - and for resulting Monetary Disorder to become increasingly problematic. Destabilizing price movements and myriad inflationary effects are poised to worsen. The specter of yet another year of near-$800bn Current Account Deficits coupled with huge speculative flows out of dollars is just too much for an acutely overheated and unstable global currency and economic “system” to cope with.
I hear pundits still referring to a “deflationary Credit collapse.” Well, the U.S. Credit system implosion was largely stopped in its tracks last month. The Fed bailed out Bear Stearns; opened wide its discount window to Wall Street; and implemented unprecedented liquidity facilities for the benefit of the marketplace overall. Central banks around the globe executed unparalleled concerted market liquidity operations. Here at home, the GSEs’ regulator spoke publicly about Fannie and Freddie having the capacity to add $200 billion of mortgages to their balances sheets, with the possibility of increasing their guarantee business as much as $2 TN this year (certainly including “jumbo” mortgages). The Federal Home Loan Bank system was given the ok to continue aggressive liquidity injections and balloon its balance sheet in the process. And now (see “GSE Watch” above) we see that the Federal Housing Administration (with its new mandate and $729,550 loan limit) is likely to increase federal government mortgage insurance by as much as $200bn this year, while Washington’s Ginnie Mae is in the midst of a securitization boom.
Together, the Fed and Washington have effectively nationalized a large portion of both mortgage and market liquidity risk. It is, as well, worth noting that JPMorgan Chase expanded assets by $80.7bn during the first quarter (20.7% annualized) to $1.642 TN, with six-month growth of $163.3bn (22.1% annualized). Goldman Sachs expanded its balance sheets by $69.2bn during Q1 (24.7% annualized) to $1.189 TN, with half-year growth of $143.2bn (27.4%). Even Wells Fargo grew assets at an almost 14% pace this past quarter. And we know that Bank Credit overall has expanded at a 12.6% rate over the past 38 weeks. Meanwhile, GSE MBS issuance has been ramped up to a record pace. And let’s not forget the Credit intermediation function now being carried out by the money fund complex – with assets having increased an unprecedented $371bn y-t-d (41.3% annualized) and $900bn over the past 38 weeks (47.7% annualized). It is also worth noting the $184bn y-t-d increase (29% annualized) in foreign “custody” holdings held at the Fed. Sure, the Credit system remains under significant stress, with additional mortgage and corporate Credit deterioration in the offing. But, at least for now, policymakers have successfully stemmed systemic deleveraging. The Credit system is simply not in deflationary collapse mode.
I could not be more pessimistic with regard to our economy’s prognosis. And certainly much more severe Credit problems lay ahead. I could argue further that recent Credit system developments are indeed consistent with the unfolding “worst-case scenario”. Yet I tend this evening to see benefits from analyzing the current backdrop in terms of the conclusion of the first Stage of the Crisis. The key aspect of this “first Stage” was a breakdown in Wall Street’s highly leveraged risk intermediation and securities speculation markets. The speed and force of the unwind was extraordinary and in notable contrast to traditional banking crises that track real economy developments. “Resolution” came only through the Federal Reserve and federal government assuming unprecedented risk – and at a cost of a policymaking mix of interest-rate cuts, marketplace interventions, and government guarantees. It is worth pondering some of the near-term ramifications.
First of all – and as the market recognized this week – yields have been driven to excessively low levels. Fed funds are today ridiculously priced in comparison both to the inflationary backdrop and to global rates. Mr. Feldstein is calling for a halt to rate cuts when it would be more appropriate for the Fed to move immediately to return rates to a more reasonable level. They, of course, would not contemplate as much. So I will presume that today’s non-imploding Credit system – replete with government-backed mortgage securitizations, government-guaranteed bank Credit, presumed government-backstopped money funds and a recovering debt issuance apparatus – will suffice in the near-term in generating Credit sufficient to perpetuate our enormous Current Account Deficits. This is no minor point.
I have in past Bulletins made the case that U.S. Credit and Economic Bubbles had become untenable – the scope of Credit and risk intermediation necessary to support the maladjusted economy had become too large. Extraordinary measures to effectively “nationalize” mortgage and market liquidity risk change somewhat the direction of the analysis. I would today argue that the risk of a precipitous economic downturn has been reduced in the near-term. As a consequence, U.S. Credit growth could surprise on the upside with risks to global Price Instability increasing markedly.
I would argue firmly that – in the face of a rapidly weakening economic backdrop - global inflation dynamics coupled with our highly maladjusted economy ensure intractable trade deficits. I would further argue that the current inflationary backdrop will prove an impetus to Credit creation – that then begets only more heightened inflationary pressures. There are certainly indications that the over-liquefied global “system” is not well situated today to handle more dollar liquidity (akin to throwing gas on a fire). Inflation and its consequences have quickly become major issues around the world.
With crude hitting a record $117 today, there is every reason to expect that newly created global liquidity will further inflate energy, food, and commodity prices generally. The Goldman Sachs Commodities index has gained 21% already this year. But when it comes to Monetary Instability, our financial markets might just prove the unappreciated wildcard. When the Fed and Washington radically altered the rules of U.S. finance last month, they placed in jeopardy huge positions that had been put in place to hedge against and profit from systemic crisis. With the end of “Stage one” arises a major short squeeze in the Credit, equities, and derivatives markets. And when it comes to contemplating the scope and ramifications of today’s “hedging” activities, we’re clearly in Uncharted Waters. It is not beyond reason that a disorderly unwind of “bearish” Credit market positions could incite a mini bout of liquidity, speculation, and Credit excess that exacerbates Global Monetary Instability - while Setting the Backdrop for Stage Two of the Crisis.

READ 'EM AND WEAP

RISING PRICES< FALLING ECONOMIC ACTIVY!! That's what the FED action has brought us< AND the 10 yr treasury yield is now near 3.8% !!! is this helping home owners?

LOOK at 200o on LEI chart....look at today, nuf said! hope is fine....if it's backed up

D

GOOG CHART

**Click chart to enlarge....I have labeled few areas of potential resistance, let's see how GOOG does, it will vault near $80 a share pre open

D

GOOG AND AM NEWS

Citigroup stumbles again
6:45am: Financial services giant records $5.1 billion loss, missing forecasts, after taking more than $12 billion in writedowns.


Oil nears $115, gas gets pricier



E*Trade cuts back as recession looms (not here yet?)


http://seekingalpha.com/article/72846-google-inc-q1-2008-earnings-call-transcript?source=yahoo (Goog transcript) 51% of rev's from overseas


Yahoo! appears to be pushing its luck. On April 10, the struggling Internet portal said it was testing a partnership to allow Google to host a small percentage of its search advertisements for two weeks. On Thursday, a week later, it inched further toward a long-term deal with Google because the companies are pleased with the initial results of the experiment, according to The Wall Street Journal.
The problem, as Microsoft (nasdaq: MSFT - news - people ) pointed out in a statement last week, is that any potential deal between Google (nasdaq: GOOG - news - people ) and Yahoo! (nasdaq: YHOO - news - people ) raises antitrust concerns: Google receives 67% of all searches, and Yahoo! hosts 20%, according to March data from Web traffic analysis firm Hitwise. Combined, the two would represent a near monopoly of the search market.
Sharing its ad space with Google would also mean a quick revenue bump for Yahoo!, thanks to Google's higher percentage of clicks on ads. But just how far can a Yahoo! and Google liaison go?
"I hate to admit it, but Microsoft is right," asserts Robert Lande, a member of the American Antitrust Institute. "The closer Google and Yahoo! get to a deal, the closer they get to some very serious antitrust problems."
At the same time,
SOMETHING IS FISHY>????

GOOG 4% QTR OVER QTR???!!
But Google said so-called paid clicks grew 20% in the first quarter over the same year-ago quarter, and 4% over 2007's fourth quarter.

Google is only paid by its search advertisers when users click on such links.
Recent data from comScore Inc. has shown tepid paid-click growth during the first quarter, stirring concerns about the impact of the U.S. economic slowdown on Google and helping send its shares more than 30% lower between the beginning of the year and Thursday's earnings report.
Earlier this week, comScore reported that Google's paid clicks rose only 1.8% in the quarter compared with the period a year earlier, though its data don't include Google's international search markets. Google said Thursday that its paid clicks actually grew 20% in the quarter compared with the period a year earlier.
During a conference call with analysts, Chief Executive Eric Schmidt noted that the paid-click growth was "much higher than has been speculated by third parties."
Still, Google's 20% paid-click growth nonetheless marked a slowdown compared with the 30% growth in Google's previous, fourth fiscal quarter.
That's because the company, according to Collins Stewart analyst Sandeep Aggarwal, seems to be making the most out of the clicks that it's managing to get. "Maybe they are getting higher keyword prices from their advertisers. It was a beat quarter."

Part of that maturation has involved overseas expansion. Google announced that its international revenue reached $2.65 billion, or 51% of its total, compared with 47% of the total in the same period a year earlier.

BULLISH? CNBC

Seems like a lot of short covering, but the theory is...what? Earnings out, brokers unlikely to get worse? Well, sort of. As one trader in financials noted to me, "earnings have to be real bad, not just in line" to keep short positions on.
That's true, but the case for getting bullish is broader than that. Simply put, here's out the bulls are explaining it to me:
1) The write downs mean anything anymore, the story is old, the numbers are meaningless.
2) Probably one or two more rounds of it but the sentiment doesnt really change that much.
3) They are historically cheap, they have survived the meltdown and had no problems raising outside capital.
The downside to this game, as others have noted, is that if the quarter progresses and business is not getting any better, shorts will go right back on again.

SPX 1400 RESISTANCE

**CLICK CHART TO ENLARGE
It's normal during bear rallies to rise and challenge the declining Moving Avg's, until I SEE differently, I remain defensive against a weekly close above this area, then I wil reasess.

GOOG up huge in AH trading, see is bulls can grab the ball and run with it. technology has been showing relative strength here.

Duratek

BILL BUCKLER OF PRIVATEER

BEST OF BILL BUCKLER
http://www.gloomdoom.com/thebestofbb04-10-08.html
April 10, 2008
After the many dramatic events over the past two weeks - we're all saved! At least that is the message being preached in the US.
The Dow is above 12,000 again. The S&P 500 is above 1300. The US Dollar even had a global rally in the lead-up to Easter. Its nemesis, Gold, fell nearly $US 86 in three trading days and Oil went back to $US 100.
That General Perception Is Entirely False:
In principle, not one economic or financial issue has been solved or even addressed. All the fundamental US problems are still there. They have been literally papered over. The Fed cut interest rates and slammed still more new fresh money into the US financial system to keep it liquid. The Fed is exposing its own balance sheet to an amazing degree, offering up $US 400 Billion in Treasuries as short duration "swaps" in return for unmarketable toxic sludge of US mortgage paper.
The Fed had held about $US 800 Billion in Treasury paper, paper that it acquired by "monetising" the US Treasury's debts. This paper is at the core of the Fed's financial holdings. It is the Fed's major "asset". Now, by having sent $US 400 Billion out the door, the Fed has in fact sold down its capital by half. Please note here that the Fed's liabilities – the US Federal Reserve Notes (US Dollars) - have not fallen in quantity.
If any private financial company had done what the Fed has done, most people in finance would instantly recognise that its liability to asset ratio had doubled. That alone would make holding its liabilities, US Dollars, much more dangerous. What is certain is that the Fed cannot repeat what it has just done. To do so would strip it entirely of capital on its own balance sheet. If the Fed is not now "done" - then it is done for!
A Financial Strategic Overview Of The US:
There are three main economic forces at work inside the US economy. The first is monetary and financial and involves an involuntary de-leveraging of US banks and financial institutions. Everybody is trying to contract credit issued while holding the cash still rolling in. This is contracting the volume of credit quite dramatically and adding to the liquidity crisis inside the US. The second is the situation inside the US economy as it rolls into recession, seen in the fact that nearly nine million US households now have "upside down" mortgages. For the first time ever, aggregate mortgage debt is bigger, by $US 836 Billion, than the total value of homeowner equity. A credit contraction augmented by (real estate) price deflation is a huge monetary and economic force. These two forces are mercilessly squeezing the third force, which is the Fed (aided by the US Treasury). The Fed is caught in a vice from which there is no escape.
The Walls Are Closing In On The Fed:
On March 18, the Fed Funds rate was cut by 0.75 percent to 2.25 percent. The Discount Rate was cut by 0.75 percent - after having been cut by 0.25 percent two days previously – to 2.50 percent. Here too the Fed's back is up against the wall. Having exposed its capital to genuine market risk, the Fed cannot make a similar move again or it would stand stripped of all its core capital.
In terms of the interest rates it offers to US banks and other US financial institutions, a few more emergency cuts would put the Fed in the same position as the Bank of Japan with rates of 0.5 percent. The Fed Funds rate is absurd with US internal consumer prices climbing at 4.3 percent annually.
The Climbing Danger To The US Dollar AND The US Treasury:
The alarm bells should be ringing all over New York and in Washington DC. Foreigners have noticed these recent massive falls in the US Dollar. On their own balance sheets, when accounted back into their own currencies, they are looking at enormous losses. So far, these losses have not been brought to book since that would knock huge holes in the balance sheets of their own commercial banks' and other financial institutions which hold US Dollars and/or US paper assets. That will come later this year. Most private banks normally only have to report in depth once a year. When large losses start appearing on the books of a bank - and they will - the usual reaction is a buyers' strike, followed by sales of the "asset".
International investors are now avoiding US financial assets, making it harder for the Treasury to fund a growing budget deficit. NET sales of US stocks and bonds by private foreign investors totalled $US 38.2 Billion in January, the most since September, the US Treasury Department reported on March 17.
This is the precise point where any further cuts in interest rates by the US Fed become deadly dangerous. The Fed could end up in a situation where its official interest rates are so low that no foreign buyers show up at a scheduled US Treasury auction! Were that to happen, it would be like a global call to all the rest of the world to STOP CREDIT to the USA! We are not there yet, but foreigners are slowly leaving.
To see this, examine what happened to Bear Stearns the week before it nearly crashed. It could not borrow funds from anywhere but it still had its scheduled payments to meet. In mid March, Bear Stearns' cash holdings fell from $US 17 Billion to less than $US 2 Billion. This is the direction in which the US Treasury is now heading. If the US Treasury cannot borrow from foreign sources of money, it cannot fund its fast climbing budget deficit! But the Treasury too still has to pay money out to finance the US government's $US 3 TRILLION plus budget. When the Treasury's till is empty, it will have to send all the sequential truckloads of debt paper over to the Fed, which will have to accept all it gets. Then, the Treasury's debts will be "monetised" to an extent never
seen before!
It is this, a Fed "monetisation" of US Treasury debt paper - where the Fed creates new US Dollars as fast as US Treasury's debts arrive - which is the greatest danger to the international value of the US Dollar.
Travelling Further Along The Road To Weimar:
This process too was a part of the three-year Weimar Republic sequence which destroyed Germany's currency. Back then, even if the German Treasury could report that total tax revenue had climbed by 600 percent, this was totally overpowered by the fact that internal prices in Germany had climbed by 8000 percent over the same time period. In fact, the German Treasury was short of money and government services all across Germany were contracting at ferocious speeds on that account alone.
The need to overcome this involuntary contraction of government services forced the German Treasury to send its debt paper straight over to the central bank which then looked at the face value amounts and printed ever more paper money, simply adding ever more " zeroes" to all of it.
Ó 2008 – The Privateer
http://www.the-privateer.com

MER BEATING EXPECTATIONS....IN WRONG WAY

Merrill Lynch posts first-quarter loss amid more write-downs on credit investments

NEW YORK (AP) -- Merrill Lynch has reported a steep first-quarter loss after more write-downs related to the troubled credit markets.
The world's largest brokerage says it lost $2.14 billion, or $2.19 per share, compared to a profit of $2.11 billion, or $2.26 per share, a year earlier. Revenue has fallen 69 percent to $2.93 billion from $9.6 billion a year earlier.
Thomson Financial says analysts expected a loss of $1.99 per share on $3.7 billion of revenue.
New York-based Merrill says it wrote down $1.5 billion related to troubled debt instruments and took a $3 billion adjustment related to protection on certain kinds of debt.

Watch 1400 on SPX if broken and held could be important....no matter what facts abound....did the FEd do enough and forstall the DAY OF RECKONING?

D

DOW MEASURED IN GOLD

http://safehaven.com/article-9992.htm

LONG TERM DOW CHART

**CLICK TO ENLARGE CHART

Areas I have drawn I think are support and resistance, if 2008 lows go good chance we go to 10,000, we now connect 2000 top with 2008 lows for that trend line.

If 10,000 goes I think we test 2002 lows...crazy right? 14,000 top is the HEAD....we have beuilt left now right shoulder http://www.chartpatterns.com/headandshoulders.htm

Recent action in trading range still, but weakish

D

FINANCIAL TSUNAMI

http://financialsense.com/series2/perspectives2.html

For those who haven't read, this guy was one of first to sound alarms, so INTELLIGENTLY DONE!

D

ED WALLACE'S WEB SITE

http://www.insideautomotive.com/

Interesting guy, some great resources and reads, especially on the ETHANOL SCAM.

Nothing will change until we together demand it.....

Welcome to my blog Monique, always great talking to you, hope you find something of interest!

D

"BAD MONEY" INTERVIEW ON NPR

http://www.npr.org/templates/story/story.php?storyId=89642189
Kevin Phillips
or
http://www.npr.org/templates/player/mediaPlayer.html?action=1&t=1&islist=false&id=89642189&m=89642143&live=1

"Knowledge is POWER" "the US $$ is the gladiator, and it's bleeding on the field"

Duratek

THE ONE BOOK YOU SHOULD READ NOW!

http://www.post-gazette.com/pg/08097/870372-148.stm?cmpid=entertainment.xml

Prepare for LEAN YEARS DOWN THE ROAD, power is shifting away from the US as we become net debtor ot the world....where foreign sovereign funds have to BAIL US OUT.

D

GE MISSES

GE Posts Lower 1Q Profit, Cuts Outlook- AP
General Electric Co. reported a smaller-than-expected first-quarter profit on Friday and lowered its outlook for the full year, sending its shares down almost 10 percent in premarket trading as a slowing U.S. economy sapped its financial services business.


WHen was last time GE MISSED? GE IS LIKE A CROSSSECTION OF OUR ECONOMY...WEAKNESS WAS WIDESPREAD ACROSS THEIR BUSINESSES

IMPORT prices up 1.1$ EX OIL???? largest jump in 20-30 years??? CAN FED KEEP LOWERING??? US $$ GETTING DUMPED AM. TREND IS OBVIOUS http://briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

....... Russel calling BULL from 1980 never ended....Brinker new highs for 2008......where is that light?

D

EPIC BULL OR GATHERING BEAR?

Most read MarketWatch stories
Richard Russell is forecasting epic bull...
U.S. stock futures flat as UPS warns
35 signs the market hasn't hit bottom

BEAR TO GATHER STEAM OR EPIC BULL???

Most read MarketWatch stories
Richard Russell is forecasting epic bull...
U.S. stock futures flat as UPS warns
35 signs the market hasn't hit bottom

DOUBLE EDGED SWORD CUTTING ACROSS AMERICA SLASHING PROFITS

MUSCATINE, Iowa (AP) -- HNI Corp. missed expectations in the first quarter because a deteriorating economy and waning consumer confidence are eating into sales, the home and office furniture maker said Wednesday.
The company said sales and profit in the office furniture segment declined significantly in the first quarter, falling 6 percent because of weak sales to small office and home office customers.
Swelling costs for materials and plant consolidations are also eating into profit, the company said.

BEAR CASE OR 6 PACK?

http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=8&mn=0&dy=0&id=p53661529646&a=135134819
Many ways to look at TA, this is just my view.

SNDK nice pop off lows, was telling friends last week has been in PAST good buy near $20, some decided to buy the 22.50 calls....RIMM ect good longs off lows....always a trade to be found, just like to know where I am in trend and cycle while doing it.
Gold and OIL I am not sure to be honest, think some beaten down good, and bull not show killed....

http://research.stlouisfed.org/publications/usfd/page3.pdf Largest growth in ADJ M in some time
.... Each of the past 2 easing cycles started from HIGHER RATES (more ammo) and ended at LOWER Rates (LESS AMMO) IN last 20 years I could not find another time of a faster cutting environment, and only found ONE other 75 BP cut (as far as Gov data I could find) That period incl longest runing bull mkt. LOWS were made when CUTTING cycle had ended (was a good time to buy.....) With MY TA telling me Bear is YOUNG (or NO bull signal yet)

I am keeping powder DRY and feel GOOD CHANCE we SEE 1% or LOWER rates ahead......

ALL and I MEAN ALL the biz people I talk to see NO LIGHT YET, ALL said environment is getting "WORSE" BUT WDIK....I hope this changes soon..... you tell me WHAT are the signs of improving LIQUIDITY? YOU tell me if a BUBBLE (CREDIT?DEBT ETC) can be reinflated as it is trying to deflate and UNWIND?

Duratek

BEAR BED

BEAR IN THE WOODS SAVED BY GRANDMA

Treasury Undersecretary Robert Steel echoed Bernanke's comments, noting that the government's focus was "not on this specific institution, but on the more strategic concern of the implications of a bankruptcy. "The failure of a firm that was connected to so many corners of our markets would have caused financial disruptions beyond Wall Street," he said. Jamie Dimon, JPMorgan's chief executive, said his firm would not have agreed to buy Bear without the Fed's financial backing, and insisted that JPMorgan did not "cherry pick" the best Bear assets. Under its deal with the Fed, JPMorgan will have to incur the first $1 billion in any losses should Bear's assets deteriorate further.

**HEY what's $30B to JPM??? this smells.....another bank will go... liquidity is drying up. banks dont want to lend...venture capital co's out of money...funded newbie companies folding....no IPO stream....NO HOME ATM'S...no wage growth, job losses, delcining home values,defaults rising,credit cards next,free money not flowing to Hedgies,deleveraging continues....levering up good..unwinding bad.......OK friends, what makes up for all this lost stream? exactly and I wonder who thinks SPX profits also arent coming back to earth as RIMM goes to 18X book 13X sales ASSININE

Duratek

INVESTORS IGNORE STOCK DILUTION

NEW YORK (AP) -- Shares of Lehman Brothers Holdings Inc. rose sharply Tuesday and helped rally broader markets, as the investment bank raised $4 billion in new capital to shore up its liquidity position.
It was $1 billion more than Lehman had said it planned to raise just Monday night; Lehman said the offering was oversubscribed.
Lehman (LEH, Fortune 500) shares rose $6.70, or 17.8%, to close at $44.34, as investors brushed off the dilution from the new shares, which will reduce their ownership stake in the company.
Lehman's efforts are aimed at reassuring investors that the company has enough cash to handle any market demands, unlike competitor Bear Stearns Cos. In March, Bear Stearns faced liquidity problems that led it to near-bankruptcy and forced its sale to JPMorgan Chase & Co. for about $10 per share.
Analysts were mixed about the size and timing of Lehman's preferred stock offering.
"It seems evident that Lehman is being pushed hard by the markets to prove its balance sheet is safe," Punk, Ziegel & Co. analyst Richard Bove wrote in a research note. "By raising additional capital and liquefying the balance sheet, the company hopes to put these fears to rest."
Bove expects the stock offering to raise enough cash to help reduce fears and push the stock higher.
But unlike Bove, Sandler, O'Neill & Partners LP analyst Jeff Harte said Lehman's raising of capital might be a red flag, as he questioned the timing of the offer.
"Management's willingness to raise a large amount of capital after the recent dramatic share price declines implies a more pressing capital need," Harte wrote in a research note. Shares of Lehman declined 42% during the first three months of the year.
Fitch Ratings affirmed its investment-grade "AA-" issuer default ratings for Lehman in the wake of the stock offering, but placed a negative outlook on the bank. The outlook represents Fitch's view that the bank could face earnings pressure because of continued weakness in the capital and mortgage markets.
Lehman was not the only bank to announce its capital raising intentions Tuesday. Swiss bank UBS said it plans to seek $15.1 billion in new cash as it looks to improve its capital position. UBS said it lost $12.1 billion during the first quarter, including a $19 billion write-down tied to deterioration in the mortgage markets.
Lehman will raise the money through the issuance of convertible preferred stock. The preferred stock will carry a dividend rate of 7.25%. Holders of the preferred stock, which is priced at $1,000 per share, will have the option of converting them at any time to 20.0509 shares of Lehman's common stock.
The conversion represents a price of about $49.87 per share of common stock. The deal will dilute the bank's current stock by about 80 million shares, or 14% of current common stock outstanding, Buckingham Research Group analyst James Mitchell said

PROPOSED NEW FED POWERS

The money manipulators only have two goals:

1. The destroy the wealth of every American as much as possible through inflation. While, at the same time trying to pretend they are fighting inflation. They do this by causing boom and bust cycles.
2. To use the financial meltdown to ratchet up their control over all money and credit systems.

Quote from Woodrow Wilson:

A great industrial nation is controlled by its system of credit.Our system of credit is concentrated. The growth of the nation,therefore, and all our activities are in the hands of a few men.
We have come to be one of the worst ruled, one of the most completelycontrolled and dominated governments in the civilized world.No longer a government by free opinion, no longer a government byconviction and the vote of the majority, but a government bythe opinion and duress of a small group of dominant men."Source

" this new power is essential......" "see the train coming and can ACT before......"

Aren't these the SAME BOZO'S who lowerd rates to 1% and kept them there too long and created the current mess and now are proposed NEW POWERS to pre empt markets?

Worse? preverbial FOX in the HENHOUSE! This SMELLS like similar road to Patriot Act

Duratek

INDIAN GIVER

FGIC Sees No Need to Honor Agreement With IKB, Calyon (Update5)
By Jody Shenn

March 26 (Bloomberg) -- FGIC Corp. said it's walking away from an agreement to provide $1.9 billion in guarantees on mortgage-linked securities because Credit Agricole SA and IKB Deutsche Industriebank didn't live up to their side of the deal.

FGIC ``has no further obligation'' because certain responsibilities weren't met and IKB, the German bank that's had to be bailed out four times since July, misrepresented its condition, the insurer said in a statement today. The three companies are fighting the matter in courts. If FGIC wins, the benefit ``could be material,'' the New York-based company said.

Bond insurers are seeking ways to relieve themselves of guarantees on collateralized debt obligations to temper their losses amid surging mortgage defaults. Security Capital Assurance Ltd.'s XL Capital Assurance Inc. last week was sued by Merrill Lynch & Co. after XL voided obligations on $3.1 billion of CDOs because of what it called a breach in agreements over rights to influence matters such as whether the CDOs should be liquidated.

``These guys should have a new motto: Heads we win, tails we rescind,'' said Julian Mann, the vice president for fixed income at First Pacific Advisors LLC, which manages $3.4 billion of bonds. Mann doesn't oversee positions in bond insurers, he said.
The contracts involved in FGIC's dispute include those that accounted for 75 percent of its loss reserves at the end of 2007, the company said. Fitch Ratings, which today lowered the company's insurance units to BBB from AA, said potential losses account for a ``material percentage'' of what it's projecting for FGIC, and that the tussle may take ``several years'' to settle.

Bank Losses

FGIC, the bond insurer owned by Blackstone Group LP and PMI Group Inc., named Credit Agricole's Calyon Credit Agricole CIB in a related lawsuit filed March 12 in New York Supreme Court. Caylon started court proceedings in the U.K. on March 17 seeking to enforce the contracts, FGIC said.

Joerg Chittka, a spokesman for Dusseldorf-based IKB, Anne Robert, a spokeswoman for Paris-based Credit Agricole, and Seth Faison, a spokesman for FGIC, declined to comment.
CDOs, which repackage mortgage bonds, buyout loans and other assets into new securities with varying risks, have been the biggest source of the more than $208 billion of writedowns and credit losses reported by the world's largest banks and securities firms since the beginning of last year. Credit Agricole's total $6.5 billion, while IKB's are $9 billion.

``Legal technicalities'' may be a big factor as losses are divvied up, JPMorgan Chase & Co. CDO analysts including Chris Flanagan and Kedran Garrison Panageas wrote in a March 24 report.

Risk Management
The disputed FGIC transaction was part of a series of deals in which Caylon agreed to buy CDOs from IKB's off-balance-sheet Rhineland fund if requested, with both FGIC and IKB providing credit guarantees if that happened, according to FGIC's complaint. The deal followed a similar arrangement involving IKB, Ambac Financial Group Inc. and a ``European bank,'' it said.
Bond insurers including FGIC and SCA were stripped of their AAA grades by ratings companies because of expectations for increasing losses on the more than $100 billion of mortgage-tied CDOs on which they provide default protection. Others including New York-based Ambac have been forced to raise capital to maintain top rankings. FGIC earlier this month reported a $1.89 billion fourth-quarter net loss.

IKB, forced into seeking emergency aid after Rhineland couldn't raise money because of its holdings of CDOs tied to U.S. homeowners with poor credit, has received assistance totaling 9 billion euros ($14.1 billion). KfW Group, the state- owned development bank that controls IKB, has provided some.

`Developing Problems'
IKB officials at a January 2007 conference in Las Vegas assured FGIC officials that their bank was the ``top of the class'' in the market for asset-backed commercial-paper conduits such as Rhineland, the insurer's complaint says. Such conduits rely on sales of short-term debt, with a sponsor such as IKB promising to buy out holders of the commercial paper who want to turn in the debt if cash isn't otherwise available.

A closing dinner in Dusseldorf for the transaction involving the Havenrock II vehicle set up by IKB to be the middleman for potential risk-sharing occurred on July 25, ``just three days before IKB announced its financial collapse,'' the complaint said. IKB officials downplayed ``developing problems,'' it said.

Lower Ratings
New York-based Blackstone, manager of the world's largest buyout fund, has written down its FGIC investment to ``a few cents on the dollar,'' President Tony James said March 10. Walnut Creek, California-based PMI, the second-largest U.S. mortgage insurer, reported a $776.1 million expense related to FGIC last quarter. General Electric Co. sold most of FGIC in 2003 for $2.2 billion. Cypress Group and CIVC Partners LP also took stakes.
New York-based Fitch today also downgraded Hamilton, Bermuda-based SCA's insurance units to BB, or six levels below investment grade, from A. The dispute with Merrill also may prove important, it said.

``While Fitch is not in a position to opine on the validity or merits of the termination, Fitch notes that a ruling in SCA's favor could have meaningful positive impact on the company's capital position and credit ratings in the future,'' the firm said in a statement, echoing language in its FGIC release.

Fitch cut the units of SCA and FGIC in January from AAA ratings in January. Moody's Investors Service and Standard & Poor's later did the same for both companies.

THEY'RE HIRING!!

NEW YORK, March 26 (Reuters) -
The Federal Deposit Insurance Corp plans to hire as many as 138 new workers to address the potential for rising bank failures, the Wall Street Journal said in its March 26 edition.

An agency spokesman said the FDIC plans to boost the number of workers in its Division of Resolutions & Receiverships to as many as 380 from the current 223, the newspaper said. The division is authorized to have 242 workers, so hiring may involve 138 new positions, of which half will be temporary, it said. Last month, speaking at the Reuters Regulation Summit in Washington, D.C., FDIC Chairman Sheila Bair said she expected bank failures to rise, but mainly among smaller institutions. The FDIC is also hiring because of the expected retirement of some employees, the newspaper said. At year-end, the agency had put 76 FDIC-insured banks with $22.2 billion of assets on its "problem list," up from 65 institutions with $18.5 billion of assets at the end of the third quarter. Only five U.S. banks have failed since 2004, including two this year. Analysts have predicted the failure rate will grow as losses from soured mortgages and other loans mount, and as regulators crack down on lenders that take too much risk. There are 8,535 banking institutions insured by the FDIC. Of these, 7,266 are commercial banks, 1,258 are thrifts and 11 are U.S. branches of foreign banks. More than 2,000 banks nationwide failed in the decade ending in 1992, encompassing the heart of the savings-and-loan crisis

AND

"A Dead Housing Bounce" - Wall Street applauded a glimmer of hope from a national home sales report on Monday, even though experts cautioned that the beleaguered real estate market is far from reaching its bottom.
The National Association of Realtors said 2.9 percent more homes changed hands in February than in January - the first time since July that sales volume increased month-to-month. That surprising news, combined with a higher sale price for struggling investment bank Bear Stearns, was enough to spark a stock market rally, despite the fact that home prices continued to tumble and year-to-year sales volume plunged. No one else was breaking out the Champagne. "It's a dead housing bounce," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, referring to the "dead cat bounce," a slight, temporary increase in a stock price that has already plummeted. "It is not a recovery. It is wrong to interpret it that way. Wall Street will grasp at any straw." Indeed, the rest of the national real estate report was grim, while a separate report on California home sales also was largely downbeat. Nationwide, a seasonally adjusted total of 5.03 million existing homes (including single-family, townhouses, condos and co-ops) closed escrow in February, NAR said. That was down 23.8 percent from 6.6 million homes in February 2007, but up 2.9 percent from 4.89 million units in January. Even the perpetually upbeat Realtors group declined to crow about the report. "You don't want to read too much into one month's number," said Paul Bishop, managing director of research for the trade group in Washington, D.C. Still, he said, it's a good sign that monthly national home sales have hovered around the 5 million mark since September. "Short of some other unexpected events that irk the housing market, that may be a sign we're scraping along the bottom before we experience a little stronger growth later in 2008 or early 2009," he said. Rosen said the report's most important finding was that February's national median sales price was $195,900, down 8.2 percent from $213,500 a year ago. "The (continued) house price decline is really bad news," he said. "Mostly the market is still in freefall." In addition, the median is lower because sellers are pricing their homes more realistically, foreclosures on the market are selling for big discounts, and the mix of homes sold is tilting more toward inexpensive houses. The national Realtors group said total housing inventory fell 3 percent in February to 4.03 million existing units for sale, representing 9.6 months worth of inventory, down from a 10.2-month supply in January. That means that at the current rate of sales, it would take 9.6 months to sell every house now on the market.

FINANCIAL EXCESS

http://www.contraryinvestor.com/mo.htm

IT"S DIFFERENT THIS TIME

IT'S DIFFERENT THIS TIME

http://arhaus.com/ Higher end home furn...salesman told me biz off more than 50%....

Area eateries
http://www.baltimoresun.com/business/bal-te.bz.smallbiz23mar23,0,7798947.story

Marco and Petra Pineyro, owners of Kiko's Mexican Restaurant in Perry Hall, tried everything to keep their restaurant running amid the worsening economy - they sought marketing advice, lowered prices and even offered a "dinner for a nickel" special.But squeezed between skyrocketing food, electricity and labor costs, as well as penny-pinching consumers who are eating out less, the Pineyros reached the end of the line. Kiko's - which had received good reviews from food critics and was named "Best Mexican Restaurant" in 2006 by Baltimore Magazine - is closing March 31, exactly three years after it opened.

FED policy working? 30-year mortgage rates move to 6.13% from 6.03%

Trickle down? http://www.baltimoresun.com/business/realestate/bal-bz.supplier20mar20,0,5756073.story


Fewer exhibitors and visitors have registered for this year's Builder Mart in Timonium, a little over 6,000 compared with more than 7,000 last year, amid the downturn for the homebuilding industry. (Sun photo by Kim Hairston / March 19, 2008)

Shelter Systems, a Westminster company that makes roof and floor trusses, had 220 employees in 2005. Now? Ninety.

Here come the lawsuits blame game
Bear Stearns Lawsuit
Explore Recovery Options for Losses From Bear Stearns Collapse.
http://www.stockbrokerfraudblog.com/
Moving BACK HOME
MILWAUKEE - After being laid off from her job as an events planner at an upscale resort, Jo Ann Bauer struggled financially. She worked at several lower-paying jobs, relocated to a new city and even declared bankruptcy.Then in December, she finally accepted her parents' invitation to move into their home -- at age 52. "I'm back living in the bedroom that I grew up in," she said.
BAIL ME OUT
Calls grow for U.S. to bail out homeowners, prevent foreclosures
Los Angeles Times Staff WriterFrom Wall Street to Capitol Hill, calls are growing for the government to get into the mortgage business as the only way out of the housing crisis roiling the economy and the financial markets. Proposals to shore up tottering home loans with taxpayer...
SEC ASLEEP
Securities and Exchange Commission Chairman Christopher Cox was asked on March 11 if he was concerned about the financial condition of Bear Stearns Cos.''We have a good deal of comfort about the capital cushions at these firms at the moment,'' Cox told reporters in Washington.Three days later, the Federal Reserve said it was pumping emergency funds into the 85-year-old securities firm through JPMorgan Chase & Co., the third-biggest U.S. bank by assets
EARLY EASTER DOESNT HELP
NEW YORK - The nation's stores are awash with orange patent leather sandals and coral printed dresses, but gray or black would be a better match to shoppers' moods these days."The climate out there is frightening," said Judith Lederman, a public relations executive who was laid off from Lord & Taylor three weeks ago. The Scarsdale, N.Y. resident says she'll bypass the mall and dig into her closet for her spring wardrobe.

COMMERCIAL SPACE
If anyone needed further proof that the economy is heading into recession, several reports on commercial real estate provide it, including one released Thursday that showed Chicago is not immune to a downturn in demand for office space."The housing recession is now migrating into other parts of the economy, and we are seeing a drop in employment," said Paul Kasriel, chief economist for Northern Trust Co. "That is going to lower the demand for office space."Jones Lang LaSalle's "Skyline Review," released Thursday, said Chicago's office market may get through 2008 without too much damage, but that 2009 will likely be much worse.The company said downtown Chicago's vacancy rate for top-quality offices is now a little below 8 percent."An economic downturn coupled with significant new inventory could push the Class A vacancy rate back up to 11 percent by late 2009," said Rena Christofidis, vice president of Chicago Market Research at Jones Lang.
HISTORIC ACTION
Wall Street firms take emergency Fed loans
Associated Press
Associated Press WASHINGTON—Big Wall Street investment companies are taking advantage of the Federal Reserve's unprecedented offer to secure emergency loans, the central bank reported Thursday. The lending is part of a major effort by the Fed...

BEAT EST GAME *(even though A..its acct fiction and B....they fell 50%)
Morgan Stanley 1Q Profit Tops Estimates
AP Business WriterMorgan Stanley posted better-than-expected quarterly earnings on Wednesday, joining those from two of its rivals and indicating that Wall Street may be getting a better grip on the credit crisis. The nation's second-largest investment bank was able to...

HOW THEY SPIN THE FRAUD EARNINGS and HUGE YR/YR DROP

Morgan Stanley Earnings Raise Wall Street Hopes
Associated PressMorgan Stanley posted better-than-expected quarterly earnings on Wednesday, joining those from two of its rivals and indicating that Wall Street may be getting a better grip on the credit crisis. The nation's second-largest investment bank was able to...

Help is around the corner
NEW YORK - A rise in jobless claims and a drop in a key forecasting gauge provided the latest evidence that the U.S. economy is faltering and may be slipping into recession.
The Conference Board, a business-backed research group, said yesterday that its index of leading economic indicators fell in February for the fifth consecutive month. The index, which is designed to forecast where the nation's economy is headed in the next three to six months, dipped 0.3 percent to 135.0 in February after slumping 0.4 percent the month before.
HOME LOANS HARDER TO GET
WASHINGTON - Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow - even for those with good credit.
http://www.baltimoresun.com/business/bal-bz.crunch21mar21,0,3806827.story

*The deleveraging has begun, and credit CONTRACTION.....any efforts will only make it worse, IMHO

Duratek

HOW TO TELL IF BULL OR BEAR MARKET

CLICK TO ENLARGE
Everyone will have an opinion, you will read and hear all kinds of things, CNBC being the source for most, you will get a horribly slanted opinion.

You may be confused yourself, reading some fundamental pieces which go against the action you see.

We ONLY know a top or bottom is in AFTER THE FACT, so what other than technical data do we have?

ABove I have used LONG TERM moving averages, and when they CROSS each other as shown going UP or DOWN, I PAY ATTENTION!

There is NO fighting it. IN 2003 when the 20 wk crossed the 50 wk and all lined up together rising....going against that is foolish and vice versa, as they are now declining to gether and crossed down....ALL I can deduce is we are early in this bear market.....and I will not know when it's over, until they look like they did in 2003.

YOU can also see/observe how price is SUPPOTED or TURNED BACK (resistance) when touching these moving avg's. YES they mean something....it negates ANY opinion someone might have.

Last Bear had several nice rallies, each ending in MUCH lower prices.

Is it time NOW for one of those (finally) multi week or month rallies? I am not certain, but I notice the Transport average is outperforming here and 600 points above its lows.....the DOLLAR is rallying as commodities fall, does that mean money now comes back to stocks?

We have now a period of CREDIT CONTRACTION....for MANY MANY years it has been EXPANDING (good for bulls) this is serious stuff..

SOme articles of interest

http://www.kwaves.com/kond_overview.htm K waves
http://www.gold-eagle.com/gold_digest_02/droke051602.html Cliff Droke from 2002
credit flow investor eye opener http://www.creditflowinvestor.com/

Duratek

BUBBLE VISION SAYS "Recession is over" ??

FEDEX

For its fiscal fourth quarter, FedEx sees earnings per share of $1.60 to $1.80, which is tantamount to a warning given that the current consensus estimate is $1.95. FedEx said its guidance assumes no additional increases to current fuel prices and no further weakening in the economy.
"Looking ahead to our fiscal 2009, we are expecting a continuation of fourth quarter trends, which would result in limited earnings growth next year. We are scrutinizing all expenses and investments to realign them with the current environment."

A BUST in commodities isn't necessarily a GOOD THING

http://www.safehaven.com/article-9731.htm

COMMODITY BUBBLE POPPED??

DCR DUG GAPPING!! BUBBLE POPPED? Is the "last" bubble popping burst?? or is it a PAUSE? oil wheat gold falling like BSC....not much warning before the dive...or sharp correction.

I am honest...I called the above 2 plays...but I also called LONG refiners, and was amiss with timing on 3 of the 4.....falling oil will help their margins...but currently GAS inventories are HIGH...and if R...sales will FALL...as margins had fallen....I still think I will continue keeping on radar for bottoming. I get feeling we have flattish day by EOD....with some swings.....

UNWINDING OF REAL ESTATE and THIS MESS WILL TAKE MUCH LONGER THAN PEOPLE THINK AND CONTINUE TO SPIRAL DOWNWARD AND SPEAD IF HOME VALUES DO SAME FED HAS NOT ENOUGH IN QUIVER TO DERAIL WHAT MUST UNWIND.....RISING COSTS IN SOME THINGS WE NEED.....DEFLATING ASSETS ON OTHER HAND...A VILE CONCOCTION....this smells like K winter has arrived.... was up to near 325% of GDP for total credit mkt debt.....wonder where it is now?

Duratek

COMMODITY BUBBLE BURST? HEDGIES IN TROUBLE?

The selling of all commodities....GOLD SILVER WHEAT COTTON OIL ETC smells of panic or forced selling to cover other losses.

Stephen Roach
http://www.morganstanley.com/views/gef/archive/2006/20060515-Mon.html

"The world is now in the midst of another bubble -- this one in commodities. It, too, will burst. The only question is when."

Duratek....share with a friend

PIANFUL REMINDER HOW WE GOT HERE

Memo To The Fed: Stop Those Rate Cuts
Robert P. Murphy and Lee Hoskins 03.17.08, 6:00 AM ET

The markets rallied last Tuesday in response to the Fed's growing assistance to holders of mortgage-backed securities. Yet many onlookers are convinced that an aggressive cut in the federal funds rate at the upcoming March 18 meeting is still necessary to avoid a painful recession. In our view, further loosening at this time would be a mistake, and would also send an alarming signal regarding future monetary policy.
The Fed needs to quit chasing declining GDP growth and instead focus on curbing inflation and anchoring inflation expectations. Recent allusions to the stagflation of the 1970s are appropriate. Gold has been hitting all-time nominal highs, and oil prices have shattered the inflation-adjusted record set in 1980 during the Iranian hostage crisis. The dollar, meanwhile, is trading at all-time lows against the euro.
Consumer price inflation was 4.1% in 2007 (the highest in 17 years) while the producer price index rose 7.4%--the most since 1981. Amid these alarming trends on the inflation side, output has stalled. Real GDP grew at a meager rate of 0.6% in the last quarter of 2007, and the private sector shed 101,000 jobs in February. The beginnings of stagflation are upon us.
In response, the Fed has slashed its target rate 2.25 percentage points since September, and has engaged in all manner of novel auction schemes to bolster liquidity, particularly among those holding the bag on soured mortgages. Yet despite momentary blips upward, the stock market and the overall economy continue to slide. Even as the Fed's actions pushed many short-term interest rates below the inflation rate, fixed mortgage rates have begun rising. As inflation expectations gather steam, the Fed will find itself painted into an ever-shrinking corner.
The explanation for all of this is simple yet sobering.
The Fed has abandoned the one thing it can truly control--the long-run increase in price levels--in a self-defeating attempt to keep the economy growing. A good portion of the housing mess itself is the result of Fed policy: In response to the 2000-2001 recession, chairman Alan Greenspan brought the federal funds rate down to a shocking 1% by June 2003, then held it there for a full year. The rate was then steadily ratcheted back up, reaching 5.25% by June 2006.
These actions first helped inflate the home-price bubble and then helped burst it. Naturally, there are many factors--and perhaps even villains--that helped create the housing bubble, but excessively low interest rates were surely a necessary ingredient.
Regardless of past mistakes, the Fed must now make the best of a bad situation. It must stop chasing the financial markets, and even the broader economy. Creating more dollar bills will not add to the nation's wealth, or make workers more productive.
The alleged trade-off between inflation and unemployment--the Phillips Curve--is no guide for action. Yes, an unexpected injection of new money can temporarily boost real output. But once people come to expect the higher rates of price inflation, the Phillips Curve simply shifts; it takes greater and greater injections to achieve the same stimulus. That is how a country becomes trapped in a stagflation spiral.
The painful and costly recessions of the early 1980s were the result of the inflationary policies of the Fed during the 1970s. In contrast, Fed policies during the 1980s and 1990s focused on curbing inflation and maintaining price stability; this shift in focus produced both low inflation and strong, steady real growth. It would be a terrible mistake to throw out that costly victory in an effort to avoid a recession today--one that's already baked in the cake.
The Fed should commit to long-term price stability, and it needs to back up that commitment with action. Recessions will always be with us, but they will be shallow and short when the Fed keeps inflation low and evenly paced. If the Fed continues cutting rates, we will simply get the worst of both worlds: prolonged recession and excessive inflation.
Robert P. Murphy is a senior fellow in business and economic studies at the Pacific Research Institute. Lee Hoskins is a senior fellow at the Pacific Research Institute and a former Cleveland Federal Reserve president.

DON HAROLD VIDEO OF BSC and CRAMER

http://news.goldseek.com/GoldSeek/1205778357.php

JPMorgan to buy Bear for $2 a share

By JOE BEL BRUNO and MADLEN READ, AP Business Writers 1 minute ago

Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.

The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.

The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.
"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."
JPMorgan Chase & Co. said it will guarantee all business — such as trading and investment banking — until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.
JPMorgan Chief Financial Officer Michael Cavanaugh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.
At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.
"Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanaugh said.
Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.
A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis — more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.
JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.
"The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."
Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks — it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.
After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.
This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.
Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities — and what was once a cash cow turned into the investment bank's undoing.
In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.
The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.
Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.
Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."
Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.
____
AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.

MY TA FOR BULL/BEAR SIGHTINGS

http://stockcharts.com/h-sc/ui?s=$SPX&p=M&b=5&g=0&id=p86607125724&a=133365291

FALLING RATES GOOD?

http://stockcharts.com/h-sc/ui?s=$TNX&p=M&b=1&g=0&id=p89461379592&a=82707588

OIL ABOVE $120 IN FUTURE?

If FED cuts 75 BP next week, and the dollar is the victim, maybe.

D

DAMN LIES AND CPI

http://www.the-tribulation-network.com/denemcgriff/lies.htm

Haaaa no inflation, CPI shows DROP in energy prices?? GO GO

D

GUSHER OF LIES

**(Market note, they'll hold up market for FED meeting.....still in range)

http://www.nytimes.com/2008/03/07/books/07book.html?_r=2&oref=slogin&pagewanted=print excerpt from ‘GUSHER OF LIES”

Also
Oil For WarThursday, March 13, 2008 - Ron Smith
Earlier this week, I mentioned an article in The American Conservative that absolutely blew me away by revealing the astounding amount of fuel being used to continue our failed occupation of Iraq.

Robert Bryce, the author of the piece, informs us that after invading one of the most petroleum-rich countries on the planet, the mighty U.S. military is running on empty, using more than five thousand tanker trucks to haul JP-8 gas – a blended jet fuel used to run both vehicles and aircraft – into Iraq, mostly from a huge refinery complex in Kuwait, but with some that’s run in from Turkey.

Last year alone, says Bryce, who is the managing editor of “Energy Tribune” magazine, the American forces in Iraq burned through more than 1.1 billion gallons of fuel.

“In November 2006,” says Bryce, “a study produced by the U.S. Military Academy estimated that delivering one gallon of fuel to U.S. soldiers in Iraq cost American taxpayers $42 – and that doesn’t include the costs of the fuel itself.”

Bottom line: In the war that Paul Wolfowitz famously predicted would “pay for itself,” the U.S. is spending $923 million per week on fuel-related logistics.

Why is this important? Bryce says, “While the U.S. military chases its own fuel tail in Iraq, a country that sits atop 115 billion barrels of oil – about 9.5 percent of the world’s total – the global energy industry is racing forward with new alliances and deals, many of which would have been unthinkable before the invasion.”

The global balance of power is shifting dramatically according to his analysis, in ways that indicate the effectiveness of militarism in controlling global energy trends is declining. Far from being the sole superpower of recent legend, the U.S. is flailing about in a world where the balance of power is realigning itself in ways that will leave America’s influence substantially diminished.

So much for those best-laid plans, you know, the ones where we invade Iraq and demonstrate to the entire world the futility of opposing our imperial desires.

Unfortunately, “Oil for War,” the article in question, isn’t yet available Online. But we will be talking this afternoon with Robert Bryce about it and also about his new book, “Gusher of Lies: The Dangerous Delusions of Energy Independence.”
WBAL Radio - Baltimorehttp://wbal.com/

LINK TO MY MONTHLY GOLD CHART FROM FEB

http://stockcharts.com/h-sc/ui?s=$GOLD&p=M&st=1978-02-16&id=p47864760935&a=130821433

FOOLS GOLD

It isn't ALWAYS about what you make, it's about what you DONT lose.

HEAVY SELLING IS COMING< YOU KNOW IT!! I think ususally you get a feeble rebound from 90% down day, we should get EXCELLENT short entry if not in one or add....or not

WHich at some point will lead to a pity rebound of some repute....we can try to find that support level. We already know I think which ETF'S to play.

I think gold is set up for a NASTY retreat, which will lead to one last amazing rise.

In face of dying dollar BELOW ANY KNOWN SUPPORT or known......with only a blind, impotent fool denying inflation....what will FED DO?

As the masses, and most will NEVER wise up to gold......they havent and wont....it will be the playa's betting agaisnt themselves as to how far it can be pushed......then no support and crash......the masses dont see this coming (DOW).....unlike gold, they will eventually DO SOMETHING PANIC and in the FACE of DIRE NEWS.....we wait to buy

Remember, in 70's we did not have China factor, we had "TOO MAN CHASING TOO FEW GOODS" BAMMMMMMMMMMMMMMMMMMMMMMM

Now we have the world's MANUFACTURING KING EXPORTING RISING COSTS INFLATION....from prosperity.....rising wages....SOARING COMMODITY PRICES..............I am on front lines as M2, they can NO Longer eat nor contain the rising costs of raw materials...shipping costs.....as the worst case we have SCANT WAGE GROWTH AND NEGATIVE SAVINGS RATE DEFLATING HOUSING MARKET OIL CRISIS FALLING SPX PROFITS RISING CREDIT DELIQUENCIES RISING TAXES SUB PRIME CONTAGION WORLWIDE FALING WORLD ECONOMIES A US RESERVE CURRENCY FALLING BELOW ANY PREVIOUS KNOWN VALUE


Can you spell S C R E W E D

Duratek

BEAR CROSSING SIGHTED

IMHO I THINK WE ARE IN early stages OF A nasty bear market!! as above chart elaborates, today was NASTY and over 90% down volume, NONE of the rally days could muster that.

I do not post much anymore because most of my loyal readers just lurk, I honestly don't know how many ready my blog. I get busy, I own a company.

But I'll post whenI can.

Is Bernanke FEEBLE or what? You had bubble in 90's, you reinflated with REDICULOUS low rates in the bull run of 2003-2007, that is OVER. But all it created was MORE BUBBLES and INFLATION. It killed manufacturing.

The infection known as "sub prime" was shipped ALL OVER THE WORLD...where the hell was the FED? or anyone? ALLOWED to fester rampant speculation and now look at the mess!

BANKS WONT LEND, M and A dead, CDO'S DEAD......FED trying same old tired tricks (they got nothing else) lowering rates again....but this time it isnt any fun!

Where is the money going? COMMODITIES!!!!!!!!!!! loo at OIL, GOLD WHEAT etc...damnit.

But good ole Ben isnt worried about inflation? IDIOT! US DOLLAR isnt worth wiping your ass with it my friends!

LISTEN to RON PAUL!!

http://www.contraryinvestor.com/mo.htm here's another bubble there another bubble.....no STEADY EDDY GROWTH JUST STUPID BUBBLES

As rates fall (short end) Long rates WERE stubborn but FEAR send the HERD there last few days...safety in Bonds....a big 3.6% 10 year whoopieee.

You got a FED just follows market, all they do and denies inflation, not worried about $100 OIL maybe $120 but not $100 oil. $970 GOLD ( setting all time highs) they cant talk inflation away..but who is really listening anyway?

Mono line rumors each day some bad most promise buyout or something.....look EVEN Warren BUffet won't touch them! only wants the good stuff?

Bank gets nationlized in England...Northern Rock

LONDON (AP) -- U.K. treasury chief Alistair Darling said Sunday that struggling bank Northern Rock PLC will be nationalized after the government rejected two private takeover bids.
Darling told a news conference that the ailing mortgage lender would be placed under temporary public ownership because both bids had failed to meet the government's criteria for protecting taxpayers.
"The new board and the company will operate at arm's length from the government, with complete commercial autonomy for their decisions," Darling said.

and this

NEW YORK (Fortune) -- Not long ago, Goldman Sachs alums Geoff Grant and Ron Beller looked like superstars. A prescient wager on the collapse of the subprime mortgage bond market generated last year a whopping 87 percent return for one of their hedge funds.
The twosome, who run London-based Peloton Partners, aren't looking so shrewd these days. They've been forced to liquidate their once high-flying ABS fund after gambling big on a mortgage bond rebound that didn't materialize. The $1.8 billion fund's collapse comes after a series of recent trades dropped sharply in value, leading to margin calls from creditors that the firm was unable to meet.
The ABS fund's implosion, coming just three years after Peloton Partners was formed, highlights the steep challenges that hedge funds face amid the credit crisis gripping Wall Street. Last week D.B. Zwirn & Co shut down its two biggest hedge funds amid investor defections. Citigroup halted earlier this month withdrawals from one of its hedge funds.

***D

RETIAL SALES SPIKES SPX FUTURES (BUT!!!!)

http://www.reuters.com/article/economicNews/idUSN1241744420080213
WASHINGTON, Feb 13 (Reuters) - Sales at U.S. retailers rose 0.3 percent in January, which was an unexpected pickup that partly reflected stronger sales of new cars and gasoline, according to a Commerce Department report on Wednesday.

January's sales increase followed a 0.4 percent decline in December and was contrary to Wall Street analysts' forecasts for a 0.2 percent decline.

Excluding autos, January sales still rose 0.3 percent, reversing a 0.3 percent decline in December sales. Wall Street analysts were expecting a 0.2 percent gain in sales excluding autos.

Despite the higher headline number for sales, there were declines in many categories that implied consumer spending was being pinched. Furniture sales fell 0.5 percent in January, building material sales were down 1.7 percent and department store sales declined by 1.1 percent.
Many analysts think the slowing U.S. economy is headed into recession if not already there and are closely watching for signs that consumers, who fuel 70 percent of national economic activity, will keep scaling back spending.

Gasoline sales rose 2 percent in January after being flat in December. But higher sales numbers can simply reflect increased sales prices and the report does not specify whether the volume of gasoline sales was up from December.

Excluding gasoline, January retail sales rose 0.1 percent.
(Reporting by Glenn Somerville, editing by Joanne Morrison)

DOMAIN FURNITURE 17 stores going PHTTTTTTTT!!!!!!

Duratek

FINANCIAL MELTDOWN

http://www.rgemonitor.com/blog/roubini MUST READ TO INFORM

The first quarter that the credit crunch should directly hit The CEO of accounting firm PricewaterhouseCoopers expects more non-financial U.S. companies to report write-downs linked to the credit crisis, showing the problem has the potential to infect a wide swath of corporate America.‘It's not just in banks,' CEO Samuel DiPiazza told reporters late on Tuesday. ‘These securities sit in cash equivalent accounts of industrials; they sit in investment portfolios of pensions.'‘We are having to deal with this with thousands of companies, not just a handful of big banks,' he said, and added that a ‘first wave' of write-downs was likely in the current audit cycle this quarter.Last month Bristol-Myers Squibb Co became among the first companies outside the financial sector to disclose its exposure to the world-wide credit crisis. Over the last few months, other non-financial companies such as networking-equipment maker Ciena Corp and software company Lawson Software Inc have also reported write-downs related to the credit crunch and the housing sector meltdown.

**BEING INFORMED MIGHT SAVE YOUR ASS!

my email to friends on Cramer this AM

Yeah, and this AM they trot out that idiot CRAMER......who each time he speaks sounds less credable and more carnival like.....CNBC is w/o any merit except amusement....surely they wont have Roubini on again!!

Yeah, how do they WARN their liseners to mover thier assets into a TREASURY MM as even reg MM's can fail?? so it makes you think what good is ANY TIP they give on flip side when all know at same time? is why they always PUKE afterwards.

WHy arent they asking that carnival barker why all his picks have lost fortunes for his lemmings? where did all the BOOYAH'S GO??

WHY did RR say we have great worldwide global boom coming at peak of mkt?
did you see the execution of NYX NMX and CME last night!!!!

WILL losses overseas cause liquidation of US assets?

ANOTHER inter-meeting cut? SPELLS? PANIC AT FED LOSS OF CRED?

WHY doesnt BB see a bear mkt? WHY DID MOST GURU'S underestimate the credit crisis?

I can hear that ahole downstairs...Ill shut him off, go in basemnt and play some blues! GREATEST story never told? was the liars den of thieves.... CSCSO WARNING SOBERING coming from the biggest tech smiler in bunch.. and it appears the few of us, avg Joe's are amng an elite group of mkt tech's that did not fall asleep at the wheel..

I have ALL my assets in a TREASURY MM for protection...but hey that's just me.

TURN OFF CNBC and start thinking for yourselves!

D