http://prudentbear.com/index.php/CreditBubbleBulletinHome MUST READ
The Fannie and Freddie doomsday scenario
It's time to wonder what would happen if Fannie Mae and Freddie Mac failed.
By Katie Benner, writer-reporter
Last Updated: July 11, 2008: 3:03 PM EDT
NEW YORK (Fortune) -- Here's a scary, and relevant, question to ponder as the housing market continues to slide: What would it take for the government to step in and help Fannie Mae and Freddie Mac, and how would a rescue affect you, the taxpayer?
It's been a brutal week for Freddie (FRE, Fortune 500) and Fannie (FNM, Fortune 500). A Lehman analyst report Monday kicked off a stock rout that had shares in the mortgage finance giants hitting fresh multi-year lows Thursday. Freddie plummeted 22% Thursday. Fannie was down nearly 14%.
The beating continued Friday. Freddie and Fannie shares tumbled in early trading before recovering some of their lost ground. In afternoon trading, Freddie shares were down 14%; Fannie was off more than 26%.
The stock plunge, together with Fed Chairman Ben Bernanke's downbeat housing outlook on Tuesday, is forcing investors to consider what would happen if a bailout is needed - a prospect raised Thursday when William Poole, the former president of the St. Louis Federal Reserve, told Bloomberg the companies are already "insolvent."
Also on Thursday, The Wall Street Journal reported that officials at the U.S. Treasury Department have been monitoring the companies for months as part of its normal contingency planning, but that discussions about what to do should they collapse have picked up in recent weeks.
A grim outlook
Fannie Mae and Freddie Mac are government-sponsored enterprises that help the mortgage market function by purchasing pools of loans and packaging them into securities. If one or both couldn't function, the result would be chaos.
At the end of last year, Fannie alone had packaged and guaranteed about $2.8 trillion worth of mortgages, approximately 23% of all outstanding U.S. mortgage debt. And these securities are highly rated and sold to investors all over the world.
"If Fannie or Freddie failed, it would be far worse than the fall of [investment bank] Bear Stearns," says Sean Egan, head of credit ratings firm Egan Jones. "It could throw the economy into depression or something close to it."
Clearly, investors are concerned. Credit default swaps - a kind of insurance against the possibility of Fannie and Freddie defaulting on their corporate bonds, are at their most expensive levels in 14 weeks; both companies are expected to report steep losses for the second quarter; and their main business, mortgage securitization, is under pressure as home price values decline and foreclosure numbers rise.
"The major issue is that these are very leveraged financial institutions, leveraged much more than any other bank, and they have lots of mortgage assets. As real estate values decline every day, the value of [the mortgages that it bundles, guarantees, and sells] are called into question," says Dalton Investments co-founder Steve Persky, who has been focused on distressed mortgage assets.
The possibility of government aid looms because it's hard to see how the private market can help the companies. Their stock market values have dropped so low that it would be difficult for them to raise money. For example, Egan estimates that Freddie alone will need to raise $7 billion over the next two quarters due to writedowns and losses. But the company's market capitalization - the number of outstanding shares times the share price stands at $8.7 billion.
"An investment banker would be hard pressed to raise an amount of money nearly equal to the value of the entire company," Egan says.
What's more, both companies have already raised a total of $13 billion by issuing preferred stock at the end of 2007; and they reduced their dividend payments to conserve cash.
The disaster scenarios
The Federal Reserve and the Treasury have taken great pains to point out that the government is not obligated to bail out either Fannie or Freddie if they face insolvency.
It's debatable where the legal obligations lie, but as a practical matter, the government can't let these institutions fail because they are being counted up on to help fix the mortgage mess. If Fannie and Freddie were unable to buy and back loans, banks would stop originating them and the pool of homebuyers would shrink, causing home prices to fall even further.
"If the government believes the companies serve an essential role in the market, which they do, they cannot let them fail," says Joseph Mason, an economics professor with the University of Louisiana who focuses on the mortgage markets.
So what would force the Treasury and Fed to step in?
Fannie and Freddie are among the most highly-leveraged companies around, meaning the amount of capital they have on hand is nowhere close to the level of assets they control.
Fannie and Freddie must constantly borrow money in order to operate; if for any reason borrowing costs rose sharply they would not be able to make good on their guarantees or even fund their day to day operations. This is when the government would feel intense pressure to step in and, at the very least, pay contracts in a timely manner.
In an April report, Standard & Poor's said an Armageddon scenario whereby Fannie and Freddie are insolvent is unlikely, but that the mere possibility of failure at either is a greater threat to the economy than the actual collapse of any investment bank.
The bailout scenarios
So what might it look like if the government had to lend a hand? Outright nationalization is an unlikely option given that neither the current administration nor the presidential candidates could afford to support such a move in an election year.
More likely, the Treasury Department or the Federal Reserve would come in and provide a liquidity backstop, in the form of a loan or guarantee to bondholders that they will be paid. Fannie and Freddie could even do a preferred stock deal with the government, much like the deal forged by Citigroup with the Abu Dhabi Investment Authority, says Egan.
That would allow give officials the ability to argue that they weren't bailing out the companies, but rather making an investment that would pay off in the long run.
Mason has a diffferent twist on a possible intervention. If either were to face insolvency, he says the government should purchase a large voting block of equity in the institution and use that as a tool to eliminate any dividends, replace officers and manage the firms back to solvency.
"But [a rescue] would be a political situation, so it would be messy," says Mason. "Fannie and Freddie would fight against having officers replaced. They would want to keep the dividend."
The doomsday scenario could cost taxpayers more than $1 trillion, says the S&P report. The report went so far as to say that a government bailout of Fannie or Freddie could force the agency to lower its rating on the creditworthiness of the United States.
Saturday, July 12, 2008
INDY MAC BANK TAKEN OVER
Latest victim of mortgage crisis, IndyMac taken over
By Jonathan Burton & John Letzing, MarketWatch
Last update: 8:31 p.m. EDT July 11, 2008
SAN FRANCISCO (MarketWatch) -- IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis on Friday, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.
The Federal Deposit Insurance Corp. said in a statement it will take over operations of IndyMac (IMB
IndyMac Bancorp IncIMB) , which will open for business on Monday as IndyMac Federal Bank. The thrift had total assets of $32.01 billion as of March 31.
Much of IndyMac's business was built on Alt-A single family mortgages, which were often made to borrowers with poor credit. As the secondary market for these loans collapsed, IndyMac's financial condition became precarious.
"IndyMac has been in trouble for a long time, in part because of the way it funded itself with a large reliance on broker deposits, interest-rate sensitive deposits, and Alt-A mortgage lending," said Bert Ely, a banking consultant in Alexandria, Va.
IndyMac is the second-largest financial institution to fail in U.S. history, according to the Office of Thrift Supervision, which had regulated IndyMac.
Regulators said the "immediate cause" of IndyMac's failure was a deposit run in recent days that began after a June 26 letter to the OTS and the FDIC from New York Senator Charles Schumer was made public. The letter voiced concerns about IndyMac's soundness.
By July 10, depositors had pulled more than $1.3 billion from their accounts, the OTS said in a statement.
"The institution failed today due to a liquidity crisis," said OTS Director John Reich. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."
Schumer couldn't immediately be reached for comment late Friday.
Serious questions about IndyMac's viability had surfaced earlier this week, when the bank reported that regulators said that its business was no longer "well capitalized."
The company had agreed to a new business plan with regulators that included halting new mortgages to shrink its balance sheet and improve capital ratios, while announcing it would cut more than half of its workforce. See related story.
Ely said that while Schumer's letter did have an impact, IndyMac's collapse was only a matter of time. "What Schumer did was wrong and irresponsible, and I'm not sure what he was trying to accomplish," Ely noted. "But IndyMac was already well-known to be a forthcoming failure."
Shares of IndyMac fell more than 60% after hours, to 11 cents. A year ago, the stock traded as high as $29.91.
Jonathan Burton is an assistant personal finance editor for MarketWatch, based in San Francisco.
By Jonathan Burton & John Letzing, MarketWatch
Last update: 8:31 p.m. EDT July 11, 2008
SAN FRANCISCO (MarketWatch) -- IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis on Friday, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.
The Federal Deposit Insurance Corp. said in a statement it will take over operations of IndyMac (IMB
IndyMac Bancorp IncIMB) , which will open for business on Monday as IndyMac Federal Bank. The thrift had total assets of $32.01 billion as of March 31.
Much of IndyMac's business was built on Alt-A single family mortgages, which were often made to borrowers with poor credit. As the secondary market for these loans collapsed, IndyMac's financial condition became precarious.
"IndyMac has been in trouble for a long time, in part because of the way it funded itself with a large reliance on broker deposits, interest-rate sensitive deposits, and Alt-A mortgage lending," said Bert Ely, a banking consultant in Alexandria, Va.
IndyMac is the second-largest financial institution to fail in U.S. history, according to the Office of Thrift Supervision, which had regulated IndyMac.
Regulators said the "immediate cause" of IndyMac's failure was a deposit run in recent days that began after a June 26 letter to the OTS and the FDIC from New York Senator Charles Schumer was made public. The letter voiced concerns about IndyMac's soundness.
By July 10, depositors had pulled more than $1.3 billion from their accounts, the OTS said in a statement.
"The institution failed today due to a liquidity crisis," said OTS Director John Reich. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."
Schumer couldn't immediately be reached for comment late Friday.
Serious questions about IndyMac's viability had surfaced earlier this week, when the bank reported that regulators said that its business was no longer "well capitalized."
The company had agreed to a new business plan with regulators that included halting new mortgages to shrink its balance sheet and improve capital ratios, while announcing it would cut more than half of its workforce. See related story.
Ely said that while Schumer's letter did have an impact, IndyMac's collapse was only a matter of time. "What Schumer did was wrong and irresponsible, and I'm not sure what he was trying to accomplish," Ely noted. "But IndyMac was already well-known to be a forthcoming failure."
Shares of IndyMac fell more than 60% after hours, to 11 cents. A year ago, the stock traded as high as $29.91.
Jonathan Burton is an assistant personal finance editor for MarketWatch, based in San Francisco.
Friday, July 11, 2008
MARKET ALERT
http://research.stlouisfed.org/publications/usfd/page3.pdf not growing fast enough.
Dow has briefly broken below 11K, yes 11K, the decline from MArch has been precipitous.
Break in oil rise last week fed a weak rally attempt, now its $10 higher and at new record highs, we aint going anywhere with $140 plus oil....question to ask when is it baked in? when PANIC buying returns.....
I AM looking for some kind of bottom (short term) to come in here.....if today is 90% down volume that or one more might do it......will 11K be the # to put up a bull fight? battle raging now
amazing action folks.....and I still think we have ways to go, this stop is not the garage...
D
Dow has briefly broken below 11K, yes 11K, the decline from MArch has been precipitous.
Break in oil rise last week fed a weak rally attempt, now its $10 higher and at new record highs, we aint going anywhere with $140 plus oil....question to ask when is it baked in? when PANIC buying returns.....
I AM looking for some kind of bottom (short term) to come in here.....if today is 90% down volume that or one more might do it......will 11K be the # to put up a bull fight? battle raging now
amazing action folks.....and I still think we have ways to go, this stop is not the garage...
D
GOVE FANNIE TAKEOVER (I mean TAXPAYER BENDOVER BAILOUT WE PAY)
**(Now do you understand you dont usually try to pick a bottom or catch a falling stock (knife?)....you'll end up with NO FINGERS to press buy button later....short has been BEST place to be.....as atteempts to get past even feeble resistance fails......both stocks to open single digits!!!! and these are WIDELY HELD FOLKS GE IS TOO ...dont think GE's numbers were good enough to pull mkt up.....NEW LURKERS I encourage you to GO BACK in time on my site and see WHAT I SAID and WHEN I SAID IT)
Today could be another 90% down volume day.......on our way to a ST bottom)
Fannie, Freddie: 30% and sinking fast
Continue sharp slide in shares of mortgage finance firms raises new concerns about need for new capital, threat of government takeover.
July 11, 2008: 8:35 AM EDT
NEW YORK (CNNMoney.com) -- The growing anxiety over Fannie Mae and Freddie Mac escalated on Friday as shares of the mortgage finance giants plunged in pre-market trading.
About 60 minutes before the market open shares of Fannie (FNM, Fortune 500) were off nearly 50%, while shares of Freddie (FRE, Fortune 500) were off 38% from their already battered close on Thursday.
This week has already seen shares of Fannie lose 30% of their value, while Freddie shares tumbled 45%. For the year, Fannie is down 67% and Freddie 77%.
The two firms own or back more than $5 trillion of home mortgages and are a crucial source of funding for banks and other home lenders looking to make additional loans. If they were unable to do so, it would significantly raise the cost and availability of mortgage loans, causing significantly more problems for already battered housing prices and sales.
The Wall Street Journal reported a number of scenarios it said are being discussed by bankers and analysts to deal with investors' current crisis of confidence in the firms, including possibly having the Federal Reserve purchasing some of their debt or mortgage-backed securities, having the Fed make large, 10-year loans to the companies or even having the Treasury buying stock in the companies.
The paper's report did not indicate if the government is moving to take any of these steps, but it reported comments from many leading officials that the firms are too important to the housing market and the overall economy to be allowed to fail.
The paper said that the Office of Federal Housing Enterprise Oversight, the regulator of Fannie and Freddie, could take control of the firms if their capital falls too far below required levels. The paper said it is unclear how the firms would operate in that situation, known as a conservatorship.
It is unclear if current shareholders would see their holdings wiped out under some of these options - leading to the pre-market sell-off.
A Fannie spokesman said the company had no comment Friday morning, while a spokeswoman for Freddie was not available for immediate comment. Both firms issued statements Thursday saying they had the necessary capital to continue operating, adding they would not comment on the decline in their stock value. But the decline in their stock makes raising additional capital that much more expensive and difficult.
Today could be another 90% down volume day.......on our way to a ST bottom)
Fannie, Freddie: 30% and sinking fast
Continue sharp slide in shares of mortgage finance firms raises new concerns about need for new capital, threat of government takeover.
July 11, 2008: 8:35 AM EDT
NEW YORK (CNNMoney.com) -- The growing anxiety over Fannie Mae and Freddie Mac escalated on Friday as shares of the mortgage finance giants plunged in pre-market trading.
About 60 minutes before the market open shares of Fannie (FNM, Fortune 500) were off nearly 50%, while shares of Freddie (FRE, Fortune 500) were off 38% from their already battered close on Thursday.
This week has already seen shares of Fannie lose 30% of their value, while Freddie shares tumbled 45%. For the year, Fannie is down 67% and Freddie 77%.
The two firms own or back more than $5 trillion of home mortgages and are a crucial source of funding for banks and other home lenders looking to make additional loans. If they were unable to do so, it would significantly raise the cost and availability of mortgage loans, causing significantly more problems for already battered housing prices and sales.
The Wall Street Journal reported a number of scenarios it said are being discussed by bankers and analysts to deal with investors' current crisis of confidence in the firms, including possibly having the Federal Reserve purchasing some of their debt or mortgage-backed securities, having the Fed make large, 10-year loans to the companies or even having the Treasury buying stock in the companies.
The paper's report did not indicate if the government is moving to take any of these steps, but it reported comments from many leading officials that the firms are too important to the housing market and the overall economy to be allowed to fail.
The paper said that the Office of Federal Housing Enterprise Oversight, the regulator of Fannie and Freddie, could take control of the firms if their capital falls too far below required levels. The paper said it is unclear how the firms would operate in that situation, known as a conservatorship.
It is unclear if current shareholders would see their holdings wiped out under some of these options - leading to the pre-market sell-off.
A Fannie spokesman said the company had no comment Friday morning, while a spokeswoman for Freddie was not available for immediate comment. Both firms issued statements Thursday saying they had the necessary capital to continue operating, adding they would not comment on the decline in their stock value. But the decline in their stock makes raising additional capital that much more expensive and difficult.
Thursday, July 10, 2008
BLOG AT WORK
Anonymous said... JBR
D
Thanks for your comments.If you are 100% in treasury MMF, in my opinion you are being modest since that would make you very good, not lucky. Similarly, like you, I am in T-Bills (in my name not street name, at Treasury Direct, no institutional or counterparty risk). I am smart enough to know I am not smart enough to time this. My only risk is being wrong on the deflation vs inflation call. It could happen but I doubt it will work out that way. If that turns out to be the case I will need to hedge (ie, 50% gold and 50% cash). IMHO, we are now in a phase that is not business (trading) as usual. This is the way the market works. It works the same way for long enough to condition everyone to respond to specific patterns. But then, every 80 years or so, the rules change just long enough to exert maximum pain and bankrupt the most people possible. Now is such a time. A few will take the big risks and win (more likely by luck than not) but most will lose that bet. I think we are facing an ongoing cascading of built up structural problems and devolving emotions. Discovery by the masses of the magnitude of the underlying structural problems will inevitably lead to ongoing deleveraging along with escalating anxiety, confusion, and fear punctuated with political errors (ie, "fixes" leading to horrible unintended consequences) and periodic devastating black swans. I would need to be a hell of a lot smarter than I am to trade around THAT environment. Until and unless the macro environment changes, I intend to stay hunkered down for now and keep my powder dry. My number one tip for survival: don't be greedy. jbr
12:12 AM
Duratek said...
JBR,
You are VERY ASTUTE and an asset to my blog, asppreciate you taking time to share your thoughts....I realize I am talking to someone who has been paying attentiion, maybe even in the financial field.Being short is OK, not for everyone, hard to time, DUG moved sharp last 5 trading days...who called the top to oil prices to the day? Me personally, I was waiting for that one day ZUTZ move and reversal...above $150...below $125 might be sign top is in....so I am watching OIL very close...a close back above $140 may be warning...IRAN keeping many on edge...saftey to gold....Most of my market buddies and gals own BAGS OF GOLD AND SILVER.....some looking for pullback sharp before final top is in...up sharply today to $940 area..top is %1,033.I wont be able to see the bottom for refiners until it has past, prices keep falling....I am snooping hard there....when OIL CRASHES they should recover...gas consumption and crack spread hurting them.GE is FRI AM and last time sparked a 500 pt move up....we continue oversold...setting 1 of 2 scenarios....a HUGE MOVE in either direction looming.VIX to me says washout not here yet....if GE Misses a LOWERED expectation game (THEY OWN CNBC !!!) then I think the worst kind of sucking sound will be heard....but I have no crystal ball, when it becomes like Las Vegas......you "hunker down" we will get a technical all's clear not TOO FAR above eventual bottom....patience.
D
D
Thanks for your comments.If you are 100% in treasury MMF, in my opinion you are being modest since that would make you very good, not lucky. Similarly, like you, I am in T-Bills (in my name not street name, at Treasury Direct, no institutional or counterparty risk). I am smart enough to know I am not smart enough to time this. My only risk is being wrong on the deflation vs inflation call. It could happen but I doubt it will work out that way. If that turns out to be the case I will need to hedge (ie, 50% gold and 50% cash). IMHO, we are now in a phase that is not business (trading) as usual. This is the way the market works. It works the same way for long enough to condition everyone to respond to specific patterns. But then, every 80 years or so, the rules change just long enough to exert maximum pain and bankrupt the most people possible. Now is such a time. A few will take the big risks and win (more likely by luck than not) but most will lose that bet. I think we are facing an ongoing cascading of built up structural problems and devolving emotions. Discovery by the masses of the magnitude of the underlying structural problems will inevitably lead to ongoing deleveraging along with escalating anxiety, confusion, and fear punctuated with political errors (ie, "fixes" leading to horrible unintended consequences) and periodic devastating black swans. I would need to be a hell of a lot smarter than I am to trade around THAT environment. Until and unless the macro environment changes, I intend to stay hunkered down for now and keep my powder dry. My number one tip for survival: don't be greedy. jbr
12:12 AM
Duratek said...
JBR,
You are VERY ASTUTE and an asset to my blog, asppreciate you taking time to share your thoughts....I realize I am talking to someone who has been paying attentiion, maybe even in the financial field.Being short is OK, not for everyone, hard to time, DUG moved sharp last 5 trading days...who called the top to oil prices to the day? Me personally, I was waiting for that one day ZUTZ move and reversal...above $150...below $125 might be sign top is in....so I am watching OIL very close...a close back above $140 may be warning...IRAN keeping many on edge...saftey to gold....Most of my market buddies and gals own BAGS OF GOLD AND SILVER.....some looking for pullback sharp before final top is in...up sharply today to $940 area..top is %1,033.I wont be able to see the bottom for refiners until it has past, prices keep falling....I am snooping hard there....when OIL CRASHES they should recover...gas consumption and crack spread hurting them.GE is FRI AM and last time sparked a 500 pt move up....we continue oversold...setting 1 of 2 scenarios....a HUGE MOVE in either direction looming.VIX to me says washout not here yet....if GE Misses a LOWERED expectation game (THEY OWN CNBC !!!) then I think the worst kind of sucking sound will be heard....but I have no crystal ball, when it becomes like Las Vegas......you "hunker down" we will get a technical all's clear not TOO FAR above eventual bottom....patience.
D
JUST WHAT WE NEED MORE FOXXES IN HENHOUSE!
Fed chief: Empower financial regulators
By JEANNINE AVERSA, AP Economics Writer
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told Congress Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.
Their recommendations were part of a broader debate before the House Financial Services Committee about the best ways to revamp the country's antiquated regulatory system. The idea is to brace the system to better respond to modern-day crises like the housing and credit debacles that have badly bruised the economy.
Both Bernanke and Paulson endorsed creating new procedures by which the government can guide an orderly liquidation of a failing investment bank in an effort to minimize any fallout that might be inflicted on the broader financial system and the overall economy. Such procedures, which are in place for commercial banks, might have made the dissolution of investment firm Bear Stearns more orderly.
"In light of the Bear Stearns episode, Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools," Bernanke said.
Paulson, who recently laid out such a proposal, said: "It is clear that some institutions, if they fail, can have a systemic impact." However, financial players need to be disciplined in managing risk and not expect the government to fly to their rescue, he added. "For market discipline to effectively constrain risk, financial institutions must be allowed to fail," he said.
The Fed's financial backing of JPMorgan Chase's takeover of the troubled Bear Stearns has drawn criticism from Democrats, who call it a government bailout that could put billions of taxpayer dollars at risk. Both Democrats and Republicans lawmakers said changes need to be made to protect taxpayers in the future should another big firm get into trouble.
Rep. Spencer Bachus, R-Ala., said a "shock absorber" is needed to make sure that "taxpayers are not holding the bag. ... This is a tall order."
The Treasury chief also sought Thursday to calm investor jitters about the financial health of mortgage giants, Fannie Mae and Freddie Mac. They are "working through this challenging period," Paulson told Congress. "Their regulator has made clear that they are adequately capitalized."
Shares of Fannie and Freddie tumbled on Monday after a Lehman Brothers report said that an accounting change could force the companies to raise billions in new capital. That sent a tremor through financial markets.
Bernanke in recent days has called for stronger oversight of big Wall Street firms, which are regulated by the Securities and Exchange Commission. Those firms have been given unprecedented — albeit temporary — access to tap the Fed for emergency loans, a privilege that has been granted for years to commercial banks, which are more tightly regulated.
With credit problems persisting, the Fed may extend the lending privilege to investment banks into next year, Bernanke has said.
The Fed chief called on Congress to consider giving the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms as well as banks.
And, he recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the Securities and Exchange Commission's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
"The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy," Bernanke said. "This experience indicates a clear need for careful attention to financial regulation and stability by the Congress and other policymakers."
The Fed, which regulates banks, and the SEC, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system. With the Fed lending money to Wall Street firms, it needs to have a firm grasp of their financial shape.
Paulson has put forward an ambitious overhaul that would turn the Fed into a super cop in charge of financial market stability. But the plan would remove the Fed from day-to-day banking supervision, which Bernanke opposes. The financial regulatory structure dates back to the Civil War.
No action is expected this year on such a regulatory overhaul and the debate is likely to spill over to the next president and the next Congress.
However, the sudden demise of the once mighty Bear Stearns, which was forced to the edge of bankruptcy after a run on the investment bank, underscored how quickly fortunes can change and raised new questions about the effectiveness of the regulatory system.
By JEANNINE AVERSA, AP Economics Writer
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told Congress Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.
Their recommendations were part of a broader debate before the House Financial Services Committee about the best ways to revamp the country's antiquated regulatory system. The idea is to brace the system to better respond to modern-day crises like the housing and credit debacles that have badly bruised the economy.
Both Bernanke and Paulson endorsed creating new procedures by which the government can guide an orderly liquidation of a failing investment bank in an effort to minimize any fallout that might be inflicted on the broader financial system and the overall economy. Such procedures, which are in place for commercial banks, might have made the dissolution of investment firm Bear Stearns more orderly.
"In light of the Bear Stearns episode, Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools," Bernanke said.
Paulson, who recently laid out such a proposal, said: "It is clear that some institutions, if they fail, can have a systemic impact." However, financial players need to be disciplined in managing risk and not expect the government to fly to their rescue, he added. "For market discipline to effectively constrain risk, financial institutions must be allowed to fail," he said.
The Fed's financial backing of JPMorgan Chase's takeover of the troubled Bear Stearns has drawn criticism from Democrats, who call it a government bailout that could put billions of taxpayer dollars at risk. Both Democrats and Republicans lawmakers said changes need to be made to protect taxpayers in the future should another big firm get into trouble.
Rep. Spencer Bachus, R-Ala., said a "shock absorber" is needed to make sure that "taxpayers are not holding the bag. ... This is a tall order."
The Treasury chief also sought Thursday to calm investor jitters about the financial health of mortgage giants, Fannie Mae and Freddie Mac. They are "working through this challenging period," Paulson told Congress. "Their regulator has made clear that they are adequately capitalized."
Shares of Fannie and Freddie tumbled on Monday after a Lehman Brothers report said that an accounting change could force the companies to raise billions in new capital. That sent a tremor through financial markets.
Bernanke in recent days has called for stronger oversight of big Wall Street firms, which are regulated by the Securities and Exchange Commission. Those firms have been given unprecedented — albeit temporary — access to tap the Fed for emergency loans, a privilege that has been granted for years to commercial banks, which are more tightly regulated.
With credit problems persisting, the Fed may extend the lending privilege to investment banks into next year, Bernanke has said.
The Fed chief called on Congress to consider giving the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms as well as banks.
And, he recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the Securities and Exchange Commission's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
"The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy," Bernanke said. "This experience indicates a clear need for careful attention to financial regulation and stability by the Congress and other policymakers."
The Fed, which regulates banks, and the SEC, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system. With the Fed lending money to Wall Street firms, it needs to have a firm grasp of their financial shape.
Paulson has put forward an ambitious overhaul that would turn the Fed into a super cop in charge of financial market stability. But the plan would remove the Fed from day-to-day banking supervision, which Bernanke opposes. The financial regulatory structure dates back to the Civil War.
No action is expected this year on such a regulatory overhaul and the debate is likely to spill over to the next president and the next Congress.
However, the sudden demise of the once mighty Bear Stearns, which was forced to the edge of bankruptcy after a run on the investment bank, underscored how quickly fortunes can change and raised new questions about the effectiveness of the regulatory system.
CHART OF THE DAY
CLICK TO ENLARGE*** LENDER OF LAST RESORT? YIKES!! GE TO REPORT FRI AM<>>>GE IS 1/2 it's 2000 price!
Wednesday, July 09, 2008
82% DOWN VOLUME
FLEETING RALLY WIPED OUT....in the face of some xtreme oversold readings the market has failed to ATTRACT enough buyers to reverse the trend...is DOWN.
It may take several more wipe out days to have any chance of tradable bottom......1240 and below here we come, who to rescue????
See about TRYING to pick bottoms? refiners hit hard today...FRE and FNM too....dangerous market friends stay tuned
Duratek
It may take several more wipe out days to have any chance of tradable bottom......1240 and below here we come, who to rescue????
See about TRYING to pick bottoms? refiners hit hard today...FRE and FNM too....dangerous market friends stay tuned
Duratek
TOUGH IN RETAILVILLE and HNI LEADS ECONOMY
CLICK TO ENLARGE
When BIZ execs are feeling good they begin to buy new furniture, when they smell trouble they shed jobs, Hon is right there to feel it...... TODAY MKT puked hairball, SO WEAKKKKKKKKK
JBR comments and Response
*lurkers please take the time to read comments and LEAVE comments on the blog, it makes this a much better place to come......
JBR
Thanks for your comments and the link.
Maybe it will be the same with gold this time around, maybe not, since history doesn't repeat but it often does rhyme. We are no longer on the gold standard - will that make a big difference? Perhaps it will. On the gold standard, gold IS money. When not on the gold standard, gold is NOT money. Yet people are creatures of habit and emotion, and old habits die hard, so many people will still think of gold as money so it's a tough call to be sure. Interestingly, the author states: "note that spot gold and spot silver prices bottomed in the midst of the Great Depression" so gold the commodity did fall before it rose (ie, the opportunity to buy gold may be later). The author also says "gold shares began to appreciate in value before the bottom in gold and commodity prices in 1933". So one needs to distinguish between the commodity and the shares, historically with the shares leading. What makes all this speculation treacherous is of course the potential for "double dips" (ie, back to back depressions which in fact have happened before). So it seems there are speculative opportunities in gold down the road as the deflationary progression ensues, but cash still seems like a viable way to ride out the whipsaws and potential for double dips without the need to get the turning points exactly right each time. History does show that many a brilliant trader survived the initial deflationary crashes only to go bankrupt on subsequent deflationary echoes. Do you feel lucky? jbr
2:00 AM
Duratek said...
JBR,I feel LUCKY because I am in Treasury MM 100% cash. Had we seen the inflationary FED for what it was back in 2001 with dollar near 120 on the index GOLD and OIL was place to be. Financials topped well short of the OCT highs, already many shares 20% off their highs....Just finished reading a copy of the Harry Schultz Newsletter, interesting guy....has made some good calls on the golds, he seems to think the Juniors will not takes off until the "PUBLIC" LOVES GOLD, most are OBLIVIOUS to the metal.When the sucking sound from financials intensifies wont the PPT pull our all stops to inflate?The metal may not be a good investment, but it is a store house with NO debt attatched.The HON company's lead x'z out to 9 weeks (office furn)they must be short handed and closed down some production beng stupid not figuring orders placed to beat A) July price increase and B) school orders...don't think will help profits, I LIKE the company LONG TERM stock looks interesting here, might fall to lower levels though..Maybe we rally for a few weeks, bottom line each tradable bottom had certain buying power characteristics....and each BEAR MKT bottom had unmistakable selling panics to create a safer buying ZONE.....the little guy hasn't panicked yet...
.D
5:00 AM
JBR
Thanks for your comments and the link.
Maybe it will be the same with gold this time around, maybe not, since history doesn't repeat but it often does rhyme. We are no longer on the gold standard - will that make a big difference? Perhaps it will. On the gold standard, gold IS money. When not on the gold standard, gold is NOT money. Yet people are creatures of habit and emotion, and old habits die hard, so many people will still think of gold as money so it's a tough call to be sure. Interestingly, the author states: "note that spot gold and spot silver prices bottomed in the midst of the Great Depression" so gold the commodity did fall before it rose (ie, the opportunity to buy gold may be later). The author also says "gold shares began to appreciate in value before the bottom in gold and commodity prices in 1933". So one needs to distinguish between the commodity and the shares, historically with the shares leading. What makes all this speculation treacherous is of course the potential for "double dips" (ie, back to back depressions which in fact have happened before). So it seems there are speculative opportunities in gold down the road as the deflationary progression ensues, but cash still seems like a viable way to ride out the whipsaws and potential for double dips without the need to get the turning points exactly right each time. History does show that many a brilliant trader survived the initial deflationary crashes only to go bankrupt on subsequent deflationary echoes. Do you feel lucky? jbr
2:00 AM
Duratek said...
JBR,I feel LUCKY because I am in Treasury MM 100% cash. Had we seen the inflationary FED for what it was back in 2001 with dollar near 120 on the index GOLD and OIL was place to be. Financials topped well short of the OCT highs, already many shares 20% off their highs....Just finished reading a copy of the Harry Schultz Newsletter, interesting guy....has made some good calls on the golds, he seems to think the Juniors will not takes off until the "PUBLIC" LOVES GOLD, most are OBLIVIOUS to the metal.When the sucking sound from financials intensifies wont the PPT pull our all stops to inflate?The metal may not be a good investment, but it is a store house with NO debt attatched.The HON company's lead x'z out to 9 weeks (office furn)they must be short handed and closed down some production beng stupid not figuring orders placed to beat A) July price increase and B) school orders...don't think will help profits, I LIKE the company LONG TERM stock looks interesting here, might fall to lower levels though..Maybe we rally for a few weeks, bottom line each tradable bottom had certain buying power characteristics....and each BEAR MKT bottom had unmistakable selling panics to create a safer buying ZONE.....the little guy hasn't panicked yet...
.D
5:00 AM
REFINERS
Energy Q&A Part II: Investing in Oil Refiners and Oil Service Companies
By: Jutia Group
http://www.istockanalyst.com/article/viewarticle+articleid_2302341~title_Energy-Q~amp;A-Part-II:.html
Friday, June 20, 2008 9:24 Q: “Why is it that the refiners aren’t making any money with oil as high as it is? Aren’t they charging more for their services?”
Refiners make money on the “crack spread”. They profit from the difference between the price of crude oil they buy and they price they receive when they sell the refined product. But right now, refiners are squeezed between rising crude prices and consumer resistance at the gas pump.
Refiners have to pay the world price for crude oil. The markets dictate that price. Right now, there are no major physical shortages in the reports from the oil patches of the world. That is, the people who lift oil from the ground all seem to be saying that they can meet the current demand from customers. So the oil is out there. But the world price is what it is. If you are a refiner, that’s the price you have to pay.
At the retail level of the gas pump, people are buying less gasoline. Overall, U.S. consumption is down about 2% so far this year, compared with 2007. (The statistic varies from region to region within the U.S.) People are driving less, according to Federal Highway Administration estimates. Just look at your own behavior. Are you changing your driving habits with gas at $4 or more per gallon?
So with consumers resisting at the pump, refiners have trouble making price increases stick. At $4 per gallon, the refiners are selling less gas. Consumers are fighting back against high prices. Perhaps resistance is not futile, after all.
So the refining sector has taken some hits. For example, Chevron (whos vice chairman I spoke with) lost money on “downstream” operations (meaning refining) in the first-quarter 2008. This loss for Chevron came despite the “upstream” (crude-extracting) operations being immensely profitable.
Any price pullback in oil should benefit refiners, particularly Valero (VLO: NYSE) and Tesoro (TSO: NYSE). These companies have gotten beaten up in the stock markets lately. They are due for a short-term rebound.
Same Goes for Oil Service Companies…
An oil price pullback might also pull down the stock prices and create more opportunity investing in oil service companies, like Apache (APA: NYSE), Halliburton (HAL: NYSE), Superior Energy (SPN: NYSE) and Baker Hughes (BHI: NYSE). Long term, oil is going back up and these are great companies to own. As the saying goes, “Buy the dips.”
By: Jutia Group
http://www.istockanalyst.com/article/viewarticle+articleid_2302341~title_Energy-Q~amp;A-Part-II:.html
Friday, June 20, 2008 9:24 Q: “Why is it that the refiners aren’t making any money with oil as high as it is? Aren’t they charging more for their services?”
Refiners make money on the “crack spread”. They profit from the difference between the price of crude oil they buy and they price they receive when they sell the refined product. But right now, refiners are squeezed between rising crude prices and consumer resistance at the gas pump.
Refiners have to pay the world price for crude oil. The markets dictate that price. Right now, there are no major physical shortages in the reports from the oil patches of the world. That is, the people who lift oil from the ground all seem to be saying that they can meet the current demand from customers. So the oil is out there. But the world price is what it is. If you are a refiner, that’s the price you have to pay.
At the retail level of the gas pump, people are buying less gasoline. Overall, U.S. consumption is down about 2% so far this year, compared with 2007. (The statistic varies from region to region within the U.S.) People are driving less, according to Federal Highway Administration estimates. Just look at your own behavior. Are you changing your driving habits with gas at $4 or more per gallon?
So with consumers resisting at the pump, refiners have trouble making price increases stick. At $4 per gallon, the refiners are selling less gas. Consumers are fighting back against high prices. Perhaps resistance is not futile, after all.
So the refining sector has taken some hits. For example, Chevron (whos vice chairman I spoke with) lost money on “downstream” operations (meaning refining) in the first-quarter 2008. This loss for Chevron came despite the “upstream” (crude-extracting) operations being immensely profitable.
Any price pullback in oil should benefit refiners, particularly Valero (VLO: NYSE) and Tesoro (TSO: NYSE). These companies have gotten beaten up in the stock markets lately. They are due for a short-term rebound.
Same Goes for Oil Service Companies…
An oil price pullback might also pull down the stock prices and create more opportunity investing in oil service companies, like Apache (APA: NYSE), Halliburton (HAL: NYSE), Superior Energy (SPN: NYSE) and Baker Hughes (BHI: NYSE). Long term, oil is going back up and these are great companies to own. As the saying goes, “Buy the dips.”
Tuesday, July 08, 2008
FED TO THE RESCUE
"Unless and until the economic clouds part, we'll likely see the housing market continue to struggle," Mike Larson, analyst at Weiss Research, said of the National Association of Realtors' measure of pending-home sales, which fell 4.7% in May. Read Economic Report .
Ahead of the opening bell, stock-index futures had trimmed their losses as Bernanke said that the Federal Reserve might extend the time frame for embattled brokerages to tap the central bank for emergency funds. Read The Fed.
The Fed move offered assurances that "there is little risk of actual bankruptcy for the [financial] sector," said Ali.
Worries that Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) may have to raise more capital, along with a report that Lehman Brothers Holdings Inc. (NYSE:LEH - News) was temporarily barred from trading oil contracts reignited financial-sector worries ahead of second-quarter earnings season, prompting stocks to slide on Monday.
On Tuesday, shares of Fannie and Freddie gained some ground with comments by analysts and regulators easing worries the big mortgage buyers might have to return to the capital markets due to pending accounting-rule changes.
Adding his voice to the mix, Richmond Fed President Jeffrey Lacker said the Federal Reserve shouldn't wait too long before raising interest rates.
OK OK I am wondering like you are wondering, can I ride this rally, is the summer rally begun?
You could buy some SPX longs using the ETF'S and use tight stops, or maybe concentrate on getting rid what is weak in your portfolio, of course get your financial advisor to assist, but I dont think we have hit THE BOTTOM, so I am remaining patient for the supper, not worried about the snack.
Today buyers rushed in at a 72% or so up volume pace, we are absent the selling panic I like to see. I do not expect corporate earning to be there to support current valuations.
I am snooping some things, and may NIBBLE on some beaten down stuff, the REFINERS have been killed.....I dont like financials to hold (though maybe a pop can be played here) as I think most will dilute current investor value.
I thought refiners would do better today as oil prices declined. SNDK is usually a good LONG TERM BUY at these levels down the road....
BUT the credit debt issues have not been culled out yet, and I dont think in the stocks yet.....and the VIX hasn't shown enough fear for a bottom, buying has not reversed Bear signal.
Below is AP story on HOusing, where isour economy going w/o housing healing?
Housing market slump seen stretching furtherTuesday July 8, 4:37 pm ET By Alan Zibel, AP Business Writer
Realtors' pending home sales report shows housing slump continues, could drag on another year
WASHINGTON (AP) -- Signs are emerging that the U.S. housing market's long slump is likely to fester through the summer, and the real estate market may not recover for at least another year.
The latest report, the National Association of Realtors' pending home sales index, slipped by 4.7 percent in May to the third-lowest reading on record. The decline "suggests we are not out of the woods by any means," said the trade group's chief economist Lawrence Yun.
The bad news came as the regulator for Fannie Mae and Freddie Mac tried to reassure investors that an accounting rule change wouldn't force the government-chartered mortgage finance companies to raise tens of billions in capital to offset losses.
With more negative data about the housing market continuing to emerge as the economy weakens and job losses accelerate, economists are reluctant to say the worst is over.
"Even if housing market activity does manage to bottom out later this year, it is likely that any recovery would be exceedingly slow," Jeffrey Lacker, president of the Federal Reserve Bank of Richmond said in a speech in Washington.
While home sales are likely to fall to their lowest point late this year or early next year, any recovery is likely to be weak through at least 2010, said Mark Vitner, senior economist with Wachovia Corp.
Meanwhile, prices shouldn't hit bottom for another year at the earliest, Vitner said, since the housing market is glutted with unsold new homes and foreclosed properties.
Making matters worse, rates on 30-year mortgages have been above 6 percent since late May, leading to a steep decline in new applications.
The Realtors' seasonally adjusted index of pending sales for existing homes fell 4.7 percent to 84.7 from an upwardly revised April reading of 88.9. The index was 14 percent below year-ago levels. Sales are considered pending when the seller has accepted an offer, but the deal has not yet closed.
Wall Street economists surveyed by Thomson/IFR had predicted the index would come in at 87. The index, which sunk to a record low of 83 in March, stood at 98.5 in May 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Pending sales fell around the U.S., sinking the most in the South, and the least in the West.
Despite the negative numbers, "the worst of the hemorrhaging is behind us" and a modest recovery is likely to take shape next year, said Bernard Baumohl, managing director of the Economic Outlook Group.
Homeowners shouldn't get too excited, though, as Baumohl predicts median prices will show year-over-year gains of no more than 6 percent by next year.
By the Realtors' measurement, prices nationwide were down 6.3 percent in May, but are falling faster in big cities. The Standard & Poor's/Case-Shiller home price index of 20 cities fell by 15.3 percent in April compared with a year ago, dropping prices to their lowest levels since August 2004.
Meantime, shares of mortgage financiers Fannie Mae and Freddie Mac stabilized Tuesday, a day after plunging to early-1990s levels on worries they might need billions of dollars in new capital if a new accounting rule is put into effect.
Fannie Mae shares rose $1.88, or 11.9 percent, to $17.62 Tuesday, a day after plunging more than 16 percent. Freddie Mac shares rose $1.55, or 13 percent, to $13.46 after sliding nearly 18 percent Monday.
The federal regulator for the two companies, Office of Federal Housing Enterprise Oversight Director James Lockhart, said in a CNBC interview the accounting changes "would really have no impact on the risk of these firms." It would "make no sense" to mandate extra capital due to accounting changes, he said.
While the government is widely expected to stand behind Fannie and Freddie's debt should the companies be unable to meet their obligations, shareholders' interests are not protected.
"The shareholders are the ones who are at huge risk here ... they could potentially get wiped out," said Nigel Gault, chief U.S. economist at Global Insight.
Highlighting those risks, shares of mortgage lender IndyMac Bancorp Inc. plummeted to an all-time low of 34 cents Tuesday morning before recovering slightly, a day after the mortgage lender said it halted accepting new loan submissions in its main mortgage lending divisions and plans to slash more than half its work force.
As the housing market and broader economy continue to sag, Senate lawmakers appeared on track to approve -- possibly by week's end --a rescue plan designed to save hundreds of thousands of homeowners from foreclosure.
But it was still uncertain whether lawmakers would reach a deal with the White House, which is balking at key portions of the bill, particularly $3.9 billion included for buying and fixing up foreclosed properties. Democrats argue the money is key to preventing neighborhood blight, but most Republicans call it a bailout for lenders who helped cause the mortgage mess.
Speaking Tuesday to a mortgage-lending forum in Arlington, Va., Treasury Secretary Henry Paulson emphasized the limits of what the government can do to help.
"Many of today's unusually high number of foreclosures are not preventable," Paulson said. "There is little public policymakers can, or should, do to compensate for untenable financial decisions."
AP Business Writer Stephen Bernard in New York contributed to this report.
Ahead of the opening bell, stock-index futures had trimmed their losses as Bernanke said that the Federal Reserve might extend the time frame for embattled brokerages to tap the central bank for emergency funds. Read The Fed.
The Fed move offered assurances that "there is little risk of actual bankruptcy for the [financial] sector," said Ali.
Worries that Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) may have to raise more capital, along with a report that Lehman Brothers Holdings Inc. (NYSE:LEH - News) was temporarily barred from trading oil contracts reignited financial-sector worries ahead of second-quarter earnings season, prompting stocks to slide on Monday.
On Tuesday, shares of Fannie and Freddie gained some ground with comments by analysts and regulators easing worries the big mortgage buyers might have to return to the capital markets due to pending accounting-rule changes.
Adding his voice to the mix, Richmond Fed President Jeffrey Lacker said the Federal Reserve shouldn't wait too long before raising interest rates.
OK OK I am wondering like you are wondering, can I ride this rally, is the summer rally begun?
You could buy some SPX longs using the ETF'S and use tight stops, or maybe concentrate on getting rid what is weak in your portfolio, of course get your financial advisor to assist, but I dont think we have hit THE BOTTOM, so I am remaining patient for the supper, not worried about the snack.
Today buyers rushed in at a 72% or so up volume pace, we are absent the selling panic I like to see. I do not expect corporate earning to be there to support current valuations.
I am snooping some things, and may NIBBLE on some beaten down stuff, the REFINERS have been killed.....I dont like financials to hold (though maybe a pop can be played here) as I think most will dilute current investor value.
I thought refiners would do better today as oil prices declined. SNDK is usually a good LONG TERM BUY at these levels down the road....
BUT the credit debt issues have not been culled out yet, and I dont think in the stocks yet.....and the VIX hasn't shown enough fear for a bottom, buying has not reversed Bear signal.
Below is AP story on HOusing, where isour economy going w/o housing healing?
Housing market slump seen stretching furtherTuesday July 8, 4:37 pm ET By Alan Zibel, AP Business Writer
Realtors' pending home sales report shows housing slump continues, could drag on another year
WASHINGTON (AP) -- Signs are emerging that the U.S. housing market's long slump is likely to fester through the summer, and the real estate market may not recover for at least another year.
The latest report, the National Association of Realtors' pending home sales index, slipped by 4.7 percent in May to the third-lowest reading on record. The decline "suggests we are not out of the woods by any means," said the trade group's chief economist Lawrence Yun.
The bad news came as the regulator for Fannie Mae and Freddie Mac tried to reassure investors that an accounting rule change wouldn't force the government-chartered mortgage finance companies to raise tens of billions in capital to offset losses.
With more negative data about the housing market continuing to emerge as the economy weakens and job losses accelerate, economists are reluctant to say the worst is over.
"Even if housing market activity does manage to bottom out later this year, it is likely that any recovery would be exceedingly slow," Jeffrey Lacker, president of the Federal Reserve Bank of Richmond said in a speech in Washington.
While home sales are likely to fall to their lowest point late this year or early next year, any recovery is likely to be weak through at least 2010, said Mark Vitner, senior economist with Wachovia Corp.
Meanwhile, prices shouldn't hit bottom for another year at the earliest, Vitner said, since the housing market is glutted with unsold new homes and foreclosed properties.
Making matters worse, rates on 30-year mortgages have been above 6 percent since late May, leading to a steep decline in new applications.
The Realtors' seasonally adjusted index of pending sales for existing homes fell 4.7 percent to 84.7 from an upwardly revised April reading of 88.9. The index was 14 percent below year-ago levels. Sales are considered pending when the seller has accepted an offer, but the deal has not yet closed.
Wall Street economists surveyed by Thomson/IFR had predicted the index would come in at 87. The index, which sunk to a record low of 83 in March, stood at 98.5 in May 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Pending sales fell around the U.S., sinking the most in the South, and the least in the West.
Despite the negative numbers, "the worst of the hemorrhaging is behind us" and a modest recovery is likely to take shape next year, said Bernard Baumohl, managing director of the Economic Outlook Group.
Homeowners shouldn't get too excited, though, as Baumohl predicts median prices will show year-over-year gains of no more than 6 percent by next year.
By the Realtors' measurement, prices nationwide were down 6.3 percent in May, but are falling faster in big cities. The Standard & Poor's/Case-Shiller home price index of 20 cities fell by 15.3 percent in April compared with a year ago, dropping prices to their lowest levels since August 2004.
Meantime, shares of mortgage financiers Fannie Mae and Freddie Mac stabilized Tuesday, a day after plunging to early-1990s levels on worries they might need billions of dollars in new capital if a new accounting rule is put into effect.
Fannie Mae shares rose $1.88, or 11.9 percent, to $17.62 Tuesday, a day after plunging more than 16 percent. Freddie Mac shares rose $1.55, or 13 percent, to $13.46 after sliding nearly 18 percent Monday.
The federal regulator for the two companies, Office of Federal Housing Enterprise Oversight Director James Lockhart, said in a CNBC interview the accounting changes "would really have no impact on the risk of these firms." It would "make no sense" to mandate extra capital due to accounting changes, he said.
While the government is widely expected to stand behind Fannie and Freddie's debt should the companies be unable to meet their obligations, shareholders' interests are not protected.
"The shareholders are the ones who are at huge risk here ... they could potentially get wiped out," said Nigel Gault, chief U.S. economist at Global Insight.
Highlighting those risks, shares of mortgage lender IndyMac Bancorp Inc. plummeted to an all-time low of 34 cents Tuesday morning before recovering slightly, a day after the mortgage lender said it halted accepting new loan submissions in its main mortgage lending divisions and plans to slash more than half its work force.
As the housing market and broader economy continue to sag, Senate lawmakers appeared on track to approve -- possibly by week's end --a rescue plan designed to save hundreds of thousands of homeowners from foreclosure.
But it was still uncertain whether lawmakers would reach a deal with the White House, which is balking at key portions of the bill, particularly $3.9 billion included for buying and fixing up foreclosed properties. Democrats argue the money is key to preventing neighborhood blight, but most Republicans call it a bailout for lenders who helped cause the mortgage mess.
Speaking Tuesday to a mortgage-lending forum in Arlington, Va., Treasury Secretary Henry Paulson emphasized the limits of what the government can do to help.
"Many of today's unusually high number of foreclosures are not preventable," Paulson said. "There is little public policymakers can, or should, do to compensate for untenable financial decisions."
AP Business Writer Stephen Bernard in New York contributed to this report.
Sunday, July 06, 2008
GOLD IN DEFLATIONARY ECONOMY
http://www.gold-eagle.com/editorials_99/ascani012699.html
Hope this helps.....will it be different this time?
Duratek
Hope this helps.....will it be different this time?
Duratek
RECENT COMMENT ON BLOG and my RESPONSE
Anonymous said...
Yes trouble abounds. My two cents:Overall environment is massively deflationary. The commodity price inflation we currently see is just the tail of the prior credit expansion (which always lags) combined with speculation (based in part on currency trends which also are lagging effects). Personally I think in this environment cash is king. IMHO gold is a tough call but not likely to be the a great investment in this environment. In a long term deflationary environment, gold will lose value. In the short term it could rise or fall significantly due to many temporary factors but those moves will not be sustainable. The wild card is what is the potential for a dollar/bond crisis due to capital flight? I suspect the credit crisis and developing recession/depression are global (with a lag) which means NO DECOUPLING, so there will be no capital flight and instead dollar with actually appreciate as deflation progresses here and globally. jbr
1:07 AM
Duratek said...
JBR,Great comments. Very possibly the US $$ could appreciate here if the ECB stops raising rates, or to reduce overly bearish sentiment...but the rally off the 70.00 lows looks to have stalled."Cash is king" YES YES....it is where I have been for some time WAITING....nowmy patience is being rewarded, even my 401K is all CASH....I have sold my oil/gold position....not wanting greed....my returns MEAGER, my losses NONE,Deflation is a REAL THREAT, hence my BLACK HOLE photos.....it seems to me the attempt to reflate assets has failed....sucking from housing,banking and now stock market drawing in the forces of stupidity and recklessness.Gold did well during depression relatively speaking, flight to safety has been US TREASURIES AND COMMODITIES and my friend......what ELSE? is left to inflate and TRAP the Johnny come lately's......workers are being shed at a good clip I fear that WILL intensify as companies MUST stop red ink anyway possible.I have just read June 27th Elliot Wave and it shows in many charts that FEAR considering all that is out in the open and recent market action is not reflected in VIX and I think the Bear is in a nacent stage...take care
D
Yes trouble abounds. My two cents:Overall environment is massively deflationary. The commodity price inflation we currently see is just the tail of the prior credit expansion (which always lags) combined with speculation (based in part on currency trends which also are lagging effects). Personally I think in this environment cash is king. IMHO gold is a tough call but not likely to be the a great investment in this environment. In a long term deflationary environment, gold will lose value. In the short term it could rise or fall significantly due to many temporary factors but those moves will not be sustainable. The wild card is what is the potential for a dollar/bond crisis due to capital flight? I suspect the credit crisis and developing recession/depression are global (with a lag) which means NO DECOUPLING, so there will be no capital flight and instead dollar with actually appreciate as deflation progresses here and globally. jbr
1:07 AM
Duratek said...
JBR,Great comments. Very possibly the US $$ could appreciate here if the ECB stops raising rates, or to reduce overly bearish sentiment...but the rally off the 70.00 lows looks to have stalled."Cash is king" YES YES....it is where I have been for some time WAITING....nowmy patience is being rewarded, even my 401K is all CASH....I have sold my oil/gold position....not wanting greed....my returns MEAGER, my losses NONE,Deflation is a REAL THREAT, hence my BLACK HOLE photos.....it seems to me the attempt to reflate assets has failed....sucking from housing,banking and now stock market drawing in the forces of stupidity and recklessness.Gold did well during depression relatively speaking, flight to safety has been US TREASURIES AND COMMODITIES and my friend......what ELSE? is left to inflate and TRAP the Johnny come lately's......workers are being shed at a good clip I fear that WILL intensify as companies MUST stop red ink anyway possible.I have just read June 27th Elliot Wave and it shows in many charts that FEAR considering all that is out in the open and recent market action is not reflected in VIX and I think the Bear is in a nacent stage...take care
D
Saturday, July 05, 2008
BOTTOM PICKERS UNITE
http://stockcharts.com/h-sc/ui?s=TSO&p=D&yr=1&mn=0&dy=0&id=p10535913633&a=141568865 chart for TSO
Why you don't usually want to buy a stock in a DOWNTREND.
D
Why you don't usually want to buy a stock in a DOWNTREND.
D
NORTHERN TRUSTS KASRIEL
http://www.financialsense.com/economy/northern/kasriel/archive.html Must read to understand current situation.
Most recent reading shows how BANK LENDING HAS GONE NEGATIVE....(first time in over 30 years?) how in the HELL does the economy and corporate profits do well then?
D
Most recent reading shows how BANK LENDING HAS GONE NEGATIVE....(first time in over 30 years?) how in the HELL does the economy and corporate profits do well then?
D
Friday, July 04, 2008
BEHIND THE "BUSH" MANDATE FOR ETHANOL IS FRAUD
Biofuels behind food price hikes: leaked World Bank report
Fri Jul 4, 3:34 AM ET
Biofuels have caused world food prices to increase by 75 percent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday.
The daily said the report was finished in April but was not published to avoid embarrassing the US government, which has claimed plant-derived fuels have pushed up prices by only three percent.
Biofuels, which supporters claim are a "greener" alternative to using fossil fuel and cut greenhouse gas emissions, and rising food prices will be on the agenda when G8 leaders meet in Japan next week for their annual summit.
The report's author, a senior World Bank economist, assessed that contrary to claims by US President George W. Bush, increased demand from India and China has not been the cause of rising food prices.
"Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases," the report said.
Droughts in Australia have also not had a significant impact, it added. Instead, European and US drives for greater use of biofuels has had the biggest effect.
The European Union has mooted using biofuels for up to 10 percent of all transport fuels by 2020 as part of an increase in use of renewable energy.
All petrol and diesel in Britain has had to include a biofuels component of at least 2.5 percent since April this year.
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," the report said.
It added that the drive for biofuels has distorted food markets by diverting grain away from food for fuel, encouraging farmers to set aside land for its production, and sparked financial speculation on grains.
But Brazil's transformation of sugar cane into fuel has not had such a dramatic impact, the report said.
"The basket of food prices examined in the study rose by 140 percent between 2002 and this February," The Guardian said.
"The report estimates that higher energy and fertiliser prices accounted for an increase of only 15 percent, while biofuels have been responsible for a 75 percent jump over that period."
Fri Jul 4, 3:34 AM ET
Biofuels have caused world food prices to increase by 75 percent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday.
The daily said the report was finished in April but was not published to avoid embarrassing the US government, which has claimed plant-derived fuels have pushed up prices by only three percent.
Biofuels, which supporters claim are a "greener" alternative to using fossil fuel and cut greenhouse gas emissions, and rising food prices will be on the agenda when G8 leaders meet in Japan next week for their annual summit.
The report's author, a senior World Bank economist, assessed that contrary to claims by US President George W. Bush, increased demand from India and China has not been the cause of rising food prices.
"Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases," the report said.
Droughts in Australia have also not had a significant impact, it added. Instead, European and US drives for greater use of biofuels has had the biggest effect.
The European Union has mooted using biofuels for up to 10 percent of all transport fuels by 2020 as part of an increase in use of renewable energy.
All petrol and diesel in Britain has had to include a biofuels component of at least 2.5 percent since April this year.
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," the report said.
It added that the drive for biofuels has distorted food markets by diverting grain away from food for fuel, encouraging farmers to set aside land for its production, and sparked financial speculation on grains.
But Brazil's transformation of sugar cane into fuel has not had such a dramatic impact, the report said.
"The basket of food prices examined in the study rose by 140 percent between 2002 and this February," The Guardian said.
"The report estimates that higher energy and fertiliser prices accounted for an increase of only 15 percent, while biofuels have been responsible for a 75 percent jump over that period."
Thursday, July 03, 2008
BEAR RIPS MARKET A NEW ONE!
Hi friends,
Short and sweet, just got back from Fla, warm....ocean wonderful...saw my good friends SSKRAM, and his lovely wife Edwina and Justin too...relaxing...Im back and ready to ROCK and recharged.
Market is now turning on the last? bastion of strength the commodity sector, anytime you party this hardy don't overstay welcome bank some profits.....
Look, I haven;t charted squat, but I have lots to share.......market has broken down BIG TIME, do NOT believe the stats they throw at you.....the real world even has Burns Steakhouse in Tampa with biz down......Tampa Rays not down, saw Mon game.....
I will try to get it all down this SAT, in a more detailed post....look back then or SUnday, and I will do my best to keep my site active!
take care, enjoy 4th....and if you've been with me you've been no worse than IN CASH and SAFE!
Duratek
Short and sweet, just got back from Fla, warm....ocean wonderful...saw my good friends SSKRAM, and his lovely wife Edwina and Justin too...relaxing...Im back and ready to ROCK and recharged.
Market is now turning on the last? bastion of strength the commodity sector, anytime you party this hardy don't overstay welcome bank some profits.....
Look, I haven;t charted squat, but I have lots to share.......market has broken down BIG TIME, do NOT believe the stats they throw at you.....the real world even has Burns Steakhouse in Tampa with biz down......Tampa Rays not down, saw Mon game.....
I will try to get it all down this SAT, in a more detailed post....look back then or SUnday, and I will do my best to keep my site active!
take care, enjoy 4th....and if you've been with me you've been no worse than IN CASH and SAFE!
Duratek
Monday, June 23, 2008
SLOPE OF HOPE SLIPPERY WITH OIL!!!
UPS Drastically Cuts Outlook- AP
UPS, the world's largest shipping carrier, says it is lowering its earnings expectations for the second quarter because of slowing U.S. economic growth and high fuel costs.
Boy that's a surprise huh? It's in words they choose...in bold. New 52 wk low in AH
No sign of bottom nor rally.....rally on what? No one has any clarity...vision of future biz.
FED will keep steady on rates.....headlines read....then will inflation and th0se watching take heed from this, will US $ get dumped...interest rates may rise....ROCK N HARD PLACE instead of ROLL
Maybe see ya July 5th
D
UPS, the world's largest shipping carrier, says it is lowering its earnings expectations for the second quarter because of slowing U.S. economic growth and high fuel costs.
Boy that's a surprise huh? It's in words they choose...in bold. New 52 wk low in AH
No sign of bottom nor rally.....rally on what? No one has any clarity...vision of future biz.
FED will keep steady on rates.....headlines read....then will inflation and th0se watching take heed from this, will US $ get dumped...interest rates may rise....ROCK N HARD PLACE instead of ROLL
Maybe see ya July 5th
D
Saturday, June 21, 2008
BEAR ING DOWN ON THE WORLD And LAST POST FOR AWHILE
Last post for awhile?
Mainly because I put lots of time, thoguht and effort here, and I am not getting an adequate amount of lurker feedback, so there is NO way other than YOU leaving a comment here for me and others that I can tell if ANYONE reads what I post.
SO w/o further ado
Pressure of inflation on profits, declining consumer confidence and ability to ramp up consumption, trouble at the major banks around the world, meaning money available is ONLY ST money, needing to be repaid to the FED, they NEED investors to loan them LONGER term money at some point CONFIDENCE gets restored in CDO’s and other instruments of CREDIT EXPANSION.
I do not think too many are even aware of the Kondratieff cycle (or know how to spell it), and what kind of power it will exert going forward.
What is happening now is needed to correct the imbalances and gorging that has come before it, and normally it happens much faster and retraces back to its beginning.
How far is needed to correct this in terms of Dow points we won’t know until it is over, a shock it would be if we find ourselves challenging the 2002 or 2003 lows!
The markets break and close below 12,000 is significant and the problems created by the commodity bubble are just now being felt and dealt with.
We have WEAK economy, we have inflation, we have already LOW interest rates, a murdered dollar, so where to now…..
Duratek
Mainly because I put lots of time, thoguht and effort here, and I am not getting an adequate amount of lurker feedback, so there is NO way other than YOU leaving a comment here for me and others that I can tell if ANYONE reads what I post.
SO w/o further ado
Pressure of inflation on profits, declining consumer confidence and ability to ramp up consumption, trouble at the major banks around the world, meaning money available is ONLY ST money, needing to be repaid to the FED, they NEED investors to loan them LONGER term money at some point CONFIDENCE gets restored in CDO’s and other instruments of CREDIT EXPANSION.
I do not think too many are even aware of the Kondratieff cycle (or know how to spell it), and what kind of power it will exert going forward.
What is happening now is needed to correct the imbalances and gorging that has come before it, and normally it happens much faster and retraces back to its beginning.
How far is needed to correct this in terms of Dow points we won’t know until it is over, a shock it would be if we find ourselves challenging the 2002 or 2003 lows!
The markets break and close below 12,000 is significant and the problems created by the commodity bubble are just now being felt and dealt with.
We have WEAK economy, we have inflation, we have already LOW interest rates, a murdered dollar, so where to now…..
Duratek
Friday, June 06, 2008
DON'T LOSE YOUR HEAD OVER THESE SHOULDERS
I Just got confirmed from my REP HON company (one of top 3 in country) is raising prices in July 3% but in last 3 months they have been forced to take more action, IN OCT they will pass along an avg of 8.5% ADDT’L INCREASE!!!!!!!!!!!!!!!!!!!!!!!!
OIL could go to $0 tomorrow, and it will take MANY months for this shit to filter thru and or out…recent Head and Shoulders I see on SPX has been broken (by my charting) (meaning trip down to 1325 for sure at min)
MY friends, maybe the IN CROWD and play with this mkt some more, but I suspect this BEAR is JUST getting started
Europe will raise rates to ward off inflation (fight it), FED is done and the US $$ toilet paper as it is is under siege again.
I talk to a LOT of people, my bass teacher (34 yr old guy) knows the problem…..”FED PRINTING PRESS’….DEFEND OUR SHORES DEFEND OUR CURRENCY….none of the knuckleheads running have a clue
OIL could go to $0 tomorrow, and it will take MANY months for this shit to filter thru and or out…recent Head and Shoulders I see on SPX has been broken (by my charting) (meaning trip down to 1325 for sure at min)
MY friends, maybe the IN CROWD and play with this mkt some more, but I suspect this BEAR is JUST getting started
Europe will raise rates to ward off inflation (fight it), FED is done and the US $$ toilet paper as it is is under siege again.
I talk to a LOT of people, my bass teacher (34 yr old guy) knows the problem…..”FED PRINTING PRESS’….DEFEND OUR SHORES DEFEND OUR CURRENCY….none of the knuckleheads running have a clue
Tuesday, June 03, 2008
END OF DAYS
Fed signals end to rate cuts TheStar.com -
Business - Fed signals end to rate cuts
May 25, 2008 JEANNINE AVERSAAP Economics Writer
WASHINGTON (AP) – Sounding a gong couldn't have made it clearer. Federal Reserve officials are putting out the word that further interest rate cuts are unlikely.
Fed Governor Kevin Warsh ditched the central bank's cryptic word tangles and actually waxed poetic. "Even if the economy were to weaken somewhat further, we should be inclined to resist expected, reflexive calls to trot out the hammer again," Warsh said, referring to the Fed's key interest rate.
Speaking more central-bankerly, the Fed's No. 2 official, Vice Chairman Donald Kohn, said the current stance of interest-rate policy "appears to be appropriately calibrated for now." Janet Yellen, president of the Federal Reserve Bank of San Francisco, called the current level of rates "appropriate.''
They are amplifying a signal sent by Chairman Ben Bernanke and his colleagues last month that the Fed's most aggressive rate-cutting campaign in two decades may be winding down – finally. The cuts started in September and take months to work their way through the economy.
That does not mean the economy, badly bruised by housing, credit and financial woes, is out of the woods. The Fed, though, is hoping its powerful doses of cuts, along with the government's relief plan of tax rebates and breaks will help lift the economy in the second half of this year.
Zooming prices for energy and food and other commodity prices are raising some concerns that inflation could take off and spread through the economy. Further reductions in interest rates would aggravate the situation.
In fact, the Fed's last rate reduction in late April was "a close call," according to recently released documents of those private deliberations. At that time, two Fed members favored no cut at all, given the concerns about inflation.
Many economists believe the Fed will hold its key rate steady at 2 percent, a four-year-low, at its next meeting on June 24-25 and probably through much, if not all, of 2008.
Holding rates at this level should help foster better economic and employment conditions and moderate inflation, Kohn said.
"The Fed's advertised reluctance to cut again is a wise one,'' said Terry Connelly, dean of Golden Gate University's Ageno School of Business.
Here's what Fed policymakers are up against: Cut rates and bolster a weak economy where employers are eliminating jobs and consumers are pulling back; raise rates and fend off inflation.
With the housing market still flailing and foreclosures at record highs, policymakers probably would shy from pushing up rates – even with the specter of inflation – as the country prepares to vote for a new president, some analysts said.
"The Fed has spent the last eight months ushering homeowners with adjustable-rate mortgages to safety by repeatedly cutting interest rates. They won't want to throw them back under the bus by raising interest rates too much, too soon," said Greg McBride, senior financial analyst at Bankrate.com. "Candidates would have a field day," he said.
Bernanke has said the election would not color the Fed's decisions. "Political considerations will play no role. We will be objective. We will be analytical, and we will do what is right for the economy," he said.
The Fed's political independence is crucial to its ability to maintain credibility with investors on Wall Street and around the globe.
The combination of slow growth and rising inflation has raised fears the country may be headed for a bout of stagflation for the first time since the 1970s. Bernanke and other Fed officials, however, say that is not the case.
Oil prices are marching past $130 a barrel, gasoline prices are closing in on $4 a gallon nationally and food prices are skyrocketing. Given all that, Fed officials cannot afford to let inflation take hold. Once that happens, it can be difficult and painful to break inflation. It could force the Fed to raise rates, which would puts the brakes on spending. Inflation eats into paychecks, whittles away the value of investments and cuts into corporate profits.
"Inflation has been elevated for some time and prices of commodities are surging," Warsh said. "I find these trends particularly vexing at a time when global demand growth, most likely, has slowed," he said.
The Fed's rate reductions since last year have contributed to the drop in value of the dollar. The diminished greenback has been a factor pushing up prices for oil and other commodities. Kohn, however, believed the sagging dollar's role in rising commodity prices "probably has been a small one.''
For now, the Fed is forecasting slower economic growth, higher unemployment and a bigger pickup in inflation for this year than it thought just a few months ago. But Fed officials acknowledge the uncertain environment makes them less confident in their projections.
And conditions can change quickly.
In October the Fed signaled it was going to hit the pause button on rate-cutting campaign. At the time, Fed officials believed additional cuts might not be needed to help the economy survive housing and credit stresses. Then conditions deteriorated, forcing the Fed to do an about-face and lower rates again in December.
AP-ES-05-25-08 1055EDT
Business - Fed signals end to rate cuts
May 25, 2008 JEANNINE AVERSAAP Economics Writer
WASHINGTON (AP) – Sounding a gong couldn't have made it clearer. Federal Reserve officials are putting out the word that further interest rate cuts are unlikely.
Fed Governor Kevin Warsh ditched the central bank's cryptic word tangles and actually waxed poetic. "Even if the economy were to weaken somewhat further, we should be inclined to resist expected, reflexive calls to trot out the hammer again," Warsh said, referring to the Fed's key interest rate.
Speaking more central-bankerly, the Fed's No. 2 official, Vice Chairman Donald Kohn, said the current stance of interest-rate policy "appears to be appropriately calibrated for now." Janet Yellen, president of the Federal Reserve Bank of San Francisco, called the current level of rates "appropriate.''
They are amplifying a signal sent by Chairman Ben Bernanke and his colleagues last month that the Fed's most aggressive rate-cutting campaign in two decades may be winding down – finally. The cuts started in September and take months to work their way through the economy.
That does not mean the economy, badly bruised by housing, credit and financial woes, is out of the woods. The Fed, though, is hoping its powerful doses of cuts, along with the government's relief plan of tax rebates and breaks will help lift the economy in the second half of this year.
Zooming prices for energy and food and other commodity prices are raising some concerns that inflation could take off and spread through the economy. Further reductions in interest rates would aggravate the situation.
In fact, the Fed's last rate reduction in late April was "a close call," according to recently released documents of those private deliberations. At that time, two Fed members favored no cut at all, given the concerns about inflation.
Many economists believe the Fed will hold its key rate steady at 2 percent, a four-year-low, at its next meeting on June 24-25 and probably through much, if not all, of 2008.
Holding rates at this level should help foster better economic and employment conditions and moderate inflation, Kohn said.
"The Fed's advertised reluctance to cut again is a wise one,'' said Terry Connelly, dean of Golden Gate University's Ageno School of Business.
Here's what Fed policymakers are up against: Cut rates and bolster a weak economy where employers are eliminating jobs and consumers are pulling back; raise rates and fend off inflation.
With the housing market still flailing and foreclosures at record highs, policymakers probably would shy from pushing up rates – even with the specter of inflation – as the country prepares to vote for a new president, some analysts said.
"The Fed has spent the last eight months ushering homeowners with adjustable-rate mortgages to safety by repeatedly cutting interest rates. They won't want to throw them back under the bus by raising interest rates too much, too soon," said Greg McBride, senior financial analyst at Bankrate.com. "Candidates would have a field day," he said.
Bernanke has said the election would not color the Fed's decisions. "Political considerations will play no role. We will be objective. We will be analytical, and we will do what is right for the economy," he said.
The Fed's political independence is crucial to its ability to maintain credibility with investors on Wall Street and around the globe.
The combination of slow growth and rising inflation has raised fears the country may be headed for a bout of stagflation for the first time since the 1970s. Bernanke and other Fed officials, however, say that is not the case.
Oil prices are marching past $130 a barrel, gasoline prices are closing in on $4 a gallon nationally and food prices are skyrocketing. Given all that, Fed officials cannot afford to let inflation take hold. Once that happens, it can be difficult and painful to break inflation. It could force the Fed to raise rates, which would puts the brakes on spending. Inflation eats into paychecks, whittles away the value of investments and cuts into corporate profits.
"Inflation has been elevated for some time and prices of commodities are surging," Warsh said. "I find these trends particularly vexing at a time when global demand growth, most likely, has slowed," he said.
The Fed's rate reductions since last year have contributed to the drop in value of the dollar. The diminished greenback has been a factor pushing up prices for oil and other commodities. Kohn, however, believed the sagging dollar's role in rising commodity prices "probably has been a small one.''
For now, the Fed is forecasting slower economic growth, higher unemployment and a bigger pickup in inflation for this year than it thought just a few months ago. But Fed officials acknowledge the uncertain environment makes them less confident in their projections.
And conditions can change quickly.
In October the Fed signaled it was going to hit the pause button on rate-cutting campaign. At the time, Fed officials believed additional cuts might not be needed to help the economy survive housing and credit stresses. Then conditions deteriorated, forcing the Fed to do an about-face and lower rates again in December.
AP-ES-05-25-08 1055EDT
SURGING USE OF CREDIT CARDS
Credit-Card Use Is Surging, Risking Another Debt CrisisTuesday June 3, 1:56 pm ET CNBC
Cash-strapped Americans are ringing up more and more purchases on their credit and debit cards, but there could be a steep price to pay ahead.
Though the trend is a boon for the companies that issue the cards, analysts worry that there could be long-term problems not only for consumers but for the anemic economy and the already-troubled banks that will be underwriting all that risky debt.
"Right now what we're seeing is the US consumer losing their disposable income as they have to spend more and more on necessities because of higher prices for gas and food," says Ron Ianieri, a market strategist and co-founder of the Options University investor education center.
"Normally when you have a certain budget and you can't keep up with the budget one of the easy steps is to extend that budget using credit."
One of the main problems with that is US consumers--and their counterparts in Europe as well--already are delinquent on their credit card payments in numbers not seen in six years. The Federal Reserve last week said credit card delinquencies hit 4.86 percent in the first quarter in 2008, while revolving debt--or the type used in credit purchases--hit $957.2 billion in March, a 7.9 percent increase.
As all that risky, high-interest debt keeps accumulating, consumers will find themselves deeper in a hole that threatens to keep the economy in its sluggish state. Economists worry that the problems are being exacerbated by consumers using credit not only to buy big-screen TVs and patio furniture, but also to pay their mortgages and shop for groceries.
"There's a significant risk to people who are using credit cards to help them try to bridge the gaps that they're facing," says Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "The reality is the economic picture isn't going to clear up instantaneously."
Meanwhile, the banks that underwrite the credit card debt stand to lose as the delinquencies continue to rise. Standard & Poor's on Monday issued a dour forecast for banks in 2008, in part because of their exposure to bad debt.
Ianieri ranks his "starting five" in terms of exposure to risky debt: Lehman Brothers (NYSE:LEH - News), Citigroup (NYSE:C - News), Bank of America (NYSE:BAC - News), UBS (NYSE:UBS - News) and Merrill Lynch (NYSE:MER - News).
"It's a disaster, it's a time bomb," Ianieri says. "The credit crisis is a lot more severe than it's being made out to be. I think the government is doing everything it can to keep the severity of this situation under wraps from the general population. I think they're just trying to bide time for these banks."
For the credit card companies, though, it's a different story.
Little to Lose
Visa and Mastercard back comparatively little of the credit actually issued through their cards, meaning they have a low level of risk for defaults and other payment issues. They get paid a fee each time someone uses their cards, and the banks that issue the cards assume responsibility for the debt.
As such, investors and analysts are fawning over the two companies in the face of consumer cash issues and the growth of emerging markets, where credit cards are only beginning to find
popularity.
"The reality is probably some of it is hype, but some is based on fact," Snaith says. "'Check or cash' has been replaced by 'debit or credit' and that's going to be a continuing trend not just in the US but spreading worldwide."
In a note issued last Thursday, Lehman Brothers raised its outlook on Mastercard, escalating its price target to $335 from $300. Other analysts have joined in the enthusiasm, with Stifel Nicolaus on Tuesday jacking up its price target from $312 to $367.
Visa has gained from the enthusiasm for Mastercard. As of noontime trade Tuesday, both Visa (NYSE:V - News) and Mastercard (NYSE:MA - News) were up more than 12 percent since May 23.
"They have no risk. It's per transaction," says Nadav Baum, managing director of investments at BPU Investment Management. "That's why Visa and Mastercard are bucking the trend when it comes to the other financial companies. Even though they group them as a financial company, they're really not."
Lehman analyst Bruce Harting, in his research note on Mastercard, pointed out that the company believes it can duplicate its US business model in countries including Brazil, Hungary, Poland, Russia, India and China, nations where it projects 39 percent revenue growth.
Similarly, Americans shopping abroad might be more inclined to use their plastic as the dollar begins to gain ground against other currencies. A purchase in euros now could cost fewer dollars
by the time the next monthly bill rolls around if the US currency continues to appreciate.
"That's another reason why Mastercard and Visa will continue to do well," Baum says. "It's all hand-in-hand."
Finally, there are the responsible consumers who pay their bills in full every month and are joining the legions of people who no longer want to carry cash. They enjoy taking advantage of the rapid growth of retailers and restaurants offering debit options, plus using points they can
accumulate by utilizing their cards.
"The danger is in painting with a broad brush and casting all consumers as reluctant or unable to spend," says Greg McBride, senior analyst at Bankrate.com. "There are a lot of consumers that are not in the state of distress and can continue to spend in a manner that's not very different than a year or two ago when the economy was stronger. The card-holders that pay their balance in full every month, the incentive is for them to use the cards as much as possible."
*Fact is, many using credit cards to PAY BILLS, etc is of LAST RESORT and at 20% PLUS rates.....
D
Cash-strapped Americans are ringing up more and more purchases on their credit and debit cards, but there could be a steep price to pay ahead.
Though the trend is a boon for the companies that issue the cards, analysts worry that there could be long-term problems not only for consumers but for the anemic economy and the already-troubled banks that will be underwriting all that risky debt.
"Right now what we're seeing is the US consumer losing their disposable income as they have to spend more and more on necessities because of higher prices for gas and food," says Ron Ianieri, a market strategist and co-founder of the Options University investor education center.
"Normally when you have a certain budget and you can't keep up with the budget one of the easy steps is to extend that budget using credit."
One of the main problems with that is US consumers--and their counterparts in Europe as well--already are delinquent on their credit card payments in numbers not seen in six years. The Federal Reserve last week said credit card delinquencies hit 4.86 percent in the first quarter in 2008, while revolving debt--or the type used in credit purchases--hit $957.2 billion in March, a 7.9 percent increase.
As all that risky, high-interest debt keeps accumulating, consumers will find themselves deeper in a hole that threatens to keep the economy in its sluggish state. Economists worry that the problems are being exacerbated by consumers using credit not only to buy big-screen TVs and patio furniture, but also to pay their mortgages and shop for groceries.
"There's a significant risk to people who are using credit cards to help them try to bridge the gaps that they're facing," says Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "The reality is the economic picture isn't going to clear up instantaneously."
Meanwhile, the banks that underwrite the credit card debt stand to lose as the delinquencies continue to rise. Standard & Poor's on Monday issued a dour forecast for banks in 2008, in part because of their exposure to bad debt.
Ianieri ranks his "starting five" in terms of exposure to risky debt: Lehman Brothers (NYSE:LEH - News), Citigroup (NYSE:C - News), Bank of America (NYSE:BAC - News), UBS (NYSE:UBS - News) and Merrill Lynch (NYSE:MER - News).
"It's a disaster, it's a time bomb," Ianieri says. "The credit crisis is a lot more severe than it's being made out to be. I think the government is doing everything it can to keep the severity of this situation under wraps from the general population. I think they're just trying to bide time for these banks."
For the credit card companies, though, it's a different story.
Little to Lose
Visa and Mastercard back comparatively little of the credit actually issued through their cards, meaning they have a low level of risk for defaults and other payment issues. They get paid a fee each time someone uses their cards, and the banks that issue the cards assume responsibility for the debt.
As such, investors and analysts are fawning over the two companies in the face of consumer cash issues and the growth of emerging markets, where credit cards are only beginning to find
popularity.
"The reality is probably some of it is hype, but some is based on fact," Snaith says. "'Check or cash' has been replaced by 'debit or credit' and that's going to be a continuing trend not just in the US but spreading worldwide."
In a note issued last Thursday, Lehman Brothers raised its outlook on Mastercard, escalating its price target to $335 from $300. Other analysts have joined in the enthusiasm, with Stifel Nicolaus on Tuesday jacking up its price target from $312 to $367.
Visa has gained from the enthusiasm for Mastercard. As of noontime trade Tuesday, both Visa (NYSE:V - News) and Mastercard (NYSE:MA - News) were up more than 12 percent since May 23.
"They have no risk. It's per transaction," says Nadav Baum, managing director of investments at BPU Investment Management. "That's why Visa and Mastercard are bucking the trend when it comes to the other financial companies. Even though they group them as a financial company, they're really not."
Lehman analyst Bruce Harting, in his research note on Mastercard, pointed out that the company believes it can duplicate its US business model in countries including Brazil, Hungary, Poland, Russia, India and China, nations where it projects 39 percent revenue growth.
Similarly, Americans shopping abroad might be more inclined to use their plastic as the dollar begins to gain ground against other currencies. A purchase in euros now could cost fewer dollars
by the time the next monthly bill rolls around if the US currency continues to appreciate.
"That's another reason why Mastercard and Visa will continue to do well," Baum says. "It's all hand-in-hand."
Finally, there are the responsible consumers who pay their bills in full every month and are joining the legions of people who no longer want to carry cash. They enjoy taking advantage of the rapid growth of retailers and restaurants offering debit options, plus using points they can
accumulate by utilizing their cards.
"The danger is in painting with a broad brush and casting all consumers as reluctant or unable to spend," says Greg McBride, senior analyst at Bankrate.com. "There are a lot of consumers that are not in the state of distress and can continue to spend in a manner that's not very different than a year or two ago when the economy was stronger. The card-holders that pay their balance in full every month, the incentive is for them to use the cards as much as possible."
*Fact is, many using credit cards to PAY BILLS, etc is of LAST RESORT and at 20% PLUS rates.....
D
THIS GUY DOESN'T CARE FOR BENANKE
http://globaleconomicanalysis.blogspot.com/
I am looking for a little more rally here, then good chance STEEP retrace is due.
D
I am looking for a little more rally here, then good chance STEEP retrace is due.
D
Wednesday, May 28, 2008
REAL WORLD INFLATION
Dow Chemical blames Washington for price hikesWednesday May 28, 10:52 am ET
Dow Chemical to raise prices up to 20 percent, blasts Washington for 'true energy crisis'
MIDLAND, Mich. (AP) -- Dow Chemical Co. will raise product prices by up to 20 percent almost immediately to offset the soaring cost of energy and raw materials, and the CEO of the chemical giant lashed out Washington on Wednesday for failing to develop a sound energy policy.
Dow Chemical to raise prices up to 20 percent, blasts Washington for 'true energy crisis'
MIDLAND, Mich. (AP) -- Dow Chemical Co. will raise product prices by up to 20 percent almost immediately to offset the soaring cost of energy and raw materials, and the CEO of the chemical giant lashed out Washington on Wednesday for failing to develop a sound energy policy.
BANKS MISS EASY FIX
Banks miss an easy housing fix
Lenders say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 28, 2008: 7:32 AM EDT
NEW YORK (CNNMoney.com) -- Banks say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money.
Lenders are taking much longer than necessary to approve short sales, according to Duane LeGate, of House Buyers Network, a short sale specialist.
In a short sale, a homeowner who cannot keep up with their loan asks the lender to take a dollar amount less than what is owed on a home's mortgage, and forgive the remainder of the unpaid debt.
So if a borrower has a mortgage balance of $100,000 and finds a buyer who will pay $95,000 for the house, the lender agrees to accept that $95,000 and close out the loan.
"There was a much greater chance of success with these in the past," said LeGate
Ideally in a short sale, everyone wins. Borrowers avoid the ugly foreclosure process that destroys their credit, while lenders recoup more of their costs than they would by spending the time and money it takes to kick an owner out and resell the property.
Lenders typically lose about 19% of a mortgage's value in a short sale, according to Clayton Holdings, a Conn.-based, provider of loan analytics, while they lose an average of 40% on loans that go into foreclosure.
Coldwell Banker CEO Jim Gillespie agrees that short sales are taking too long to complete. And he speaks from firsthand experience; a short-sale offer he made on a house in Marin County, Calif. in late fall didn't win approval until April.
But most buyers can't, or won't, wait that long."That's been our biggest challenge - keeping the buyers interested long enough as we wait and wait for an answer," said Jeff Morrell, a Colorado Springs real estate agent who specializes in short sales.
Running out the clock
John Fitzmorris, a short-sale expediter in East Stroudsburg, Pa., was working with Robson and Laura Pereira, who were behind on their mortgage, to market their home before a foreclosure would take it away.
"She worked, but he had a construction business that went defunct," said Fitzmorris. "That put them in trouble."
Falling home prices in the area made a normal sale impossible; the couple was upside-down in their mortgage, owing more on the property than it was worth on the current market.
After they fell behind on their payments, Laura Pereira said, "the bank sent me a letter asking me to call for help. I called them four or five times and they never got back to me. We had three [short sale] offers on the house at the time."
Fitzmorris, who has been doing short sales for more than 20 years, contacted the bank about a short sale well before the foreclosure date.
"We sent an authorization letter listing us as the contact for a short sale, a sales agreement, a completed seller's information document as well as listing and marketing information to First American Loss Mitigation, which was handling the Pereira's foreclosure process, on January 24," he said. The buyer was very interested - enough to pay for a title search.
A month later, Fitzmorris sent another complete package, including a sales contract, to the bank and started to call daily for feedback on the short-sale offer.
Greystone didn't respond until March 10, when it said that it had the file and would process it.
But by March 27 the bank still hadn't approved the short sale, and the Pereira's property went to sheriff's sale.(The bank did not respond to several requests for comment.)
"The offer we sent to the bank was $129,500," said Fitzmorris. "But another investor, TM Builders, bought the property at the sheriff's sale for $100,265."
By the time the Pereira's lost their house, they owed a total of $160,000, including principal of $144,500 in addition to late fees, legal fees, and so forth. So in the end, the bank lost $60,000 on the loan, when it could have lost $30,000 by doing a short sale.
Ironically, TM Builders flipped the home to Fitzmorris's buyer for the $129,500 short-sale price, money the bank would have gotten had it acted more quickly.
"The sellers did what they could to mitigate the problem but the bank didn't respond, which hurt both the sellers - with an unnecessary foreclosure permanently impacting their credit - and the bank," said Fitzmorris.
Usual suspect
The difficulty in getting short sales approved stems from the same hurdles facing all the other foreclosure prevention efforts. The fact that the majority of mortgages are pooled and securitized makes it hard to get approval to change the terms of the mortgages.
"It has to do with who owns the loan," said LeGate. "If a mortgage is stuck in a pool somewhere, when something goes wrong, no one knows who the actual owner of the note is."
Additionally, the volume of troubled borrowers makes it hard for lenders to keep up. The housing crisis has put an enormous burden on mortgage servicers, the companies that manage loans for securities investors.
At many servicers, said LeGate, "There's no one really skilled at loss mitigation, and these guys have more work than they were prepared to do."
And with foreclosure filings breaking new records each month, there's no sign that this problem will ease any time soon.
Says Laura Pereira, "I feel the bank really let us down."
Lenders say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 28, 2008: 7:32 AM EDT
NEW YORK (CNNMoney.com) -- Banks say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money.
Lenders are taking much longer than necessary to approve short sales, according to Duane LeGate, of House Buyers Network, a short sale specialist.
In a short sale, a homeowner who cannot keep up with their loan asks the lender to take a dollar amount less than what is owed on a home's mortgage, and forgive the remainder of the unpaid debt.
So if a borrower has a mortgage balance of $100,000 and finds a buyer who will pay $95,000 for the house, the lender agrees to accept that $95,000 and close out the loan.
"There was a much greater chance of success with these in the past," said LeGate
Ideally in a short sale, everyone wins. Borrowers avoid the ugly foreclosure process that destroys their credit, while lenders recoup more of their costs than they would by spending the time and money it takes to kick an owner out and resell the property.
Lenders typically lose about 19% of a mortgage's value in a short sale, according to Clayton Holdings, a Conn.-based, provider of loan analytics, while they lose an average of 40% on loans that go into foreclosure.
Coldwell Banker CEO Jim Gillespie agrees that short sales are taking too long to complete. And he speaks from firsthand experience; a short-sale offer he made on a house in Marin County, Calif. in late fall didn't win approval until April.
But most buyers can't, or won't, wait that long."That's been our biggest challenge - keeping the buyers interested long enough as we wait and wait for an answer," said Jeff Morrell, a Colorado Springs real estate agent who specializes in short sales.
Running out the clock
John Fitzmorris, a short-sale expediter in East Stroudsburg, Pa., was working with Robson and Laura Pereira, who were behind on their mortgage, to market their home before a foreclosure would take it away.
"She worked, but he had a construction business that went defunct," said Fitzmorris. "That put them in trouble."
Falling home prices in the area made a normal sale impossible; the couple was upside-down in their mortgage, owing more on the property than it was worth on the current market.
After they fell behind on their payments, Laura Pereira said, "the bank sent me a letter asking me to call for help. I called them four or five times and they never got back to me. We had three [short sale] offers on the house at the time."
Fitzmorris, who has been doing short sales for more than 20 years, contacted the bank about a short sale well before the foreclosure date.
"We sent an authorization letter listing us as the contact for a short sale, a sales agreement, a completed seller's information document as well as listing and marketing information to First American Loss Mitigation, which was handling the Pereira's foreclosure process, on January 24," he said. The buyer was very interested - enough to pay for a title search.
A month later, Fitzmorris sent another complete package, including a sales contract, to the bank and started to call daily for feedback on the short-sale offer.
Greystone didn't respond until March 10, when it said that it had the file and would process it.
But by March 27 the bank still hadn't approved the short sale, and the Pereira's property went to sheriff's sale.(The bank did not respond to several requests for comment.)
"The offer we sent to the bank was $129,500," said Fitzmorris. "But another investor, TM Builders, bought the property at the sheriff's sale for $100,265."
By the time the Pereira's lost their house, they owed a total of $160,000, including principal of $144,500 in addition to late fees, legal fees, and so forth. So in the end, the bank lost $60,000 on the loan, when it could have lost $30,000 by doing a short sale.
Ironically, TM Builders flipped the home to Fitzmorris's buyer for the $129,500 short-sale price, money the bank would have gotten had it acted more quickly.
"The sellers did what they could to mitigate the problem but the bank didn't respond, which hurt both the sellers - with an unnecessary foreclosure permanently impacting their credit - and the bank," said Fitzmorris.
Usual suspect
The difficulty in getting short sales approved stems from the same hurdles facing all the other foreclosure prevention efforts. The fact that the majority of mortgages are pooled and securitized makes it hard to get approval to change the terms of the mortgages.
"It has to do with who owns the loan," said LeGate. "If a mortgage is stuck in a pool somewhere, when something goes wrong, no one knows who the actual owner of the note is."
Additionally, the volume of troubled borrowers makes it hard for lenders to keep up. The housing crisis has put an enormous burden on mortgage servicers, the companies that manage loans for securities investors.
At many servicers, said LeGate, "There's no one really skilled at loss mitigation, and these guys have more work than they were prepared to do."
And with foreclosure filings breaking new records each month, there's no sign that this problem will ease any time soon.
Says Laura Pereira, "I feel the bank really let us down."
Monday, May 26, 2008
Friday, May 23, 2008
BEAR ALIVE AND KICKING?
Donwtrend line was tested broken but more importantly IMHO it didnt HOLD (not enough BUYING UMMPGHHHH) and now it is back where it belongs..........but rising MA'S as shown (up red arrow) MIGHT help......we should now work our way down to the lows IMHOMONEY as TOILET PAPER only works for so long,
FED is shown now as worthless POS, f'd up the whole system...created money out or THIN AIR to BAIL OUT BSC.....and the money center whores.......insiders get paid.....lemmings dont get laid...what a mouth I have today.....
BANKS would implode if all the freebie money sent out as helping stimulus were presented at same time.
FED created this mess......FED should be closed down.
D
Thursday, May 22, 2008
Thursday, May 15, 2008
NO INFLATION?
Martin desk rep came in..on $7K order (from San Diego) freight was 17%....$1,190 NOW fuel surcharge added 40% of the $1,190 adds addtl $476 making my freight now 25% of the $7K
This our reo was told was as “cheap as its gonna get….” This 40% will apply to almost EVERYTHING SHIPPED TO SELL IN THIS COUNTRY!!
Duratek
Monday, May 12, 2008
INTERESTING STATS
P/Es & Yields on Major Indexes
Dow Indexes
Find Historical Data WHAT'S THIS?
Friday, May 09, 2008
http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=topnav_2_3000
Dow Indexes
Find Historical Data WHAT'S THIS?
Friday, May 09, 2008
http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=topnav_2_3000
Sunday, May 11, 2008
CATCH 22
Transport rally stemmed from Buffets interest and higher oil? (alternative to trucking?)
Investment in alt energy funds or stocks key ahead of Dem's victory?
How wounded gold bull? With $$ rally oil's rise suspect along with WANING DEMAND FROM YES R?? NO!!!!!
Price back below my recent downtrend line, ominous PEEK above preceded.
Strength is VERY SELECTIVE....APPL etc.
INFLATION WHERE IT HURTS.....food energy etc.....( I have FUEL SURCHARGES NOW FROM MOST SOURCES) price increases coming mid year now and now incl's CHinese manuf
DEFLATION WHERE IT KILLS....ASSETS...stocks....HOUSING one of MAIN drivers of economy.
HOUSING PRICES NOT STABLE OR BOTTOMED......leads to addt'l Banking write downs.....
CREDIT CRUNCH NOT CREDIT EXPANSION.....banks tighten standards.....STRANGLING ECONOMY
SOME SPENDING YES.....BIZ out there, but for those who shake a fist of paper....
Happy Mothers Day!
Duratek
Investment in alt energy funds or stocks key ahead of Dem's victory?
How wounded gold bull? With $$ rally oil's rise suspect along with WANING DEMAND FROM YES R?? NO!!!!!
Price back below my recent downtrend line, ominous PEEK above preceded.
Strength is VERY SELECTIVE....APPL etc.
INFLATION WHERE IT HURTS.....food energy etc.....( I have FUEL SURCHARGES NOW FROM MOST SOURCES) price increases coming mid year now and now incl's CHinese manuf
DEFLATION WHERE IT KILLS....ASSETS...stocks....HOUSING one of MAIN drivers of economy.
HOUSING PRICES NOT STABLE OR BOTTOMED......leads to addt'l Banking write downs.....
CREDIT CRUNCH NOT CREDIT EXPANSION.....banks tighten standards.....STRANGLING ECONOMY
SOME SPENDING YES.....BIZ out there, but for those who shake a fist of paper....
Happy Mothers Day!
Duratek
Friday, May 09, 2008
CLOUDY< GLOOMY MONRING IN B'MORE
I AM SHORT AGAINST 1400 SPX (actually slightly above stop loss 1405.....this is MY position from yesterday, I never suggest YOU take any action....for amusement only!@) just putting my cards on table
Using RENKO charts...more later.
http://money.cnn.com/2008/05/09/news/economy/creditcards/index.htm?postversion=2008050905 Americans barely getting by using Credit cards....STORY NEVER TOLD.
Rally had become INCREASINGLY SELECTIVE....less stock going up.
WE have INLFATION and DEFLATION (housing)
http://money.cnn.com/2008/05/08/news/inflation_crunch.fortune/index.htm
I personally think stock prices will follow.....Friday has makings of BIG DOWNER....watch GOLD and Interest rates too for clues...
Duratek
Using RENKO charts...more later.
http://money.cnn.com/2008/05/09/news/economy/creditcards/index.htm?postversion=2008050905 Americans barely getting by using Credit cards....STORY NEVER TOLD.
Rally had become INCREASINGLY SELECTIVE....less stock going up.
WE have INLFATION and DEFLATION (housing)
http://money.cnn.com/2008/05/08/news/inflation_crunch.fortune/index.htm
I personally think stock prices will follow.....Friday has makings of BIG DOWNER....watch GOLD and Interest rates too for clues...
Duratek
Wednesday, May 07, 2008
WHAT IS THE BALTIC DRY INDEX
>>The Baltic Dry Index is an index covering dry bulk shipping rates and managed by the Baltic Exchange in London. According to Baltic Exchange, the index provides:
an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers supramax, panamax and capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.
The index is made up of an average of the Baltic Supramax, Panamax and Capesize indices. These indices are based on professional assessments made by a panel of international shipbroking companies.<<
http://www.slate.com/id/2090303/
http://www.slate.com/id/2090303/
an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers supramax, panamax and capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.
The index is made up of an average of the Baltic Supramax, Panamax and Capesize indices. These indices are based on professional assessments made by a panel of international shipbroking companies.<<
http://www.slate.com/id/2090303/
http://www.slate.com/id/2090303/
WHY ARE THE MARKETS GOING UP???
Is it all about "ROTATION"......are those "FREE" FED Treasuries being converted into stock purchases? WATCH INT RATES CLOSELY IMHO
Read this from an intelligent poster on another board friend sent me:
When is it going to sink in again?
mannfm11
NEW 5/6/2008 11:25:42 PM
That we are in a real mess? I think we are about to see a real crisis, the quasi public banks like the Fed, FHLB and the GSE's going into crisis. If you read the agreements behind this auction stuff, the Fed has the right to require repurchase or to sell the stuff any time they get ready. Since the books only have to balanced overnight, this stuff is actually repoed daily. What happens if the bank that has the stuff can't perform and the Fed is suddenly stuck with some illiquid stuff? Well, I would venture the taxpayer gets the bill until the Fed earns enough money to pay back the government. The government, probably in return for the New Deal owns 100% of the profits of the Fed, save the preferred stock dividend. The Federal Home Loan banks are somewhat different and I don't know how they work. It seems though that they might be somewhat like FNMA and FHLMC, except I don't exactly know how. I do know I read recently the one in Chicago and the one in Dallas were discussing a merger, which tells me they aren't exactly public entities any more. I am wondering what happens to the bank that has propped up CFC? I don't think CFC is going away as a problem and it will be bigger than Bear. There are significant problems that have nothing but a band-aid on them. The auction loans are one of them, as they are nothing more than a method of keeping insolvents solvent until hope and time bail them out. They are clearly hoping that bad paper can in fact rise from the grave and walk on water, across the Pacific to some sucker fund in China. Surely the world isn't so stupid as to make more deals for Wall Street junk? One thing that I keep bringing up that they keep bringing someone to the table on CNBC is that credit problems like these cause economic problems and I am not talking about cyclical recessions. FNM needs another $6 billion. How much is Merrill going to need the next go around? When is Goldman going to come clean with the losses out of their $60 billion in level 3 assets? When is Wells Fargo going to come clean with its mortgage losses, as it is next to impossible for me to believe that everyone in that business made across the board bad loans except them? We are just seeing the tip of the iceberg on the prime mortgage front of losses from mortgages. Truth is the good stuff was junk and the junk was basically akin to making loans to heroin junkies. There is a supply problem in housing. Nothing is going to make this go away except a hell of a lot of well to do population. Wetbacks from Mexico aren't going to float the housing market at todays prices or even prices 50% of todays prices. It is clear the consumer credit game isn't going to be the same and corporate profits are fueled with consumer bucks. Consumer spending isn't 70% of the economy, it is all the economy either directly or indirectly. Same for the rest of the world. 5% of the US economy is somewhere around $600 billion depending on whose figures you believe. This is about what is going to be missing out of home equity extraction due to refinance or sale the next few years. It is the entire trade deficit, something that has fed the rest of the world with money to create a boom. But, that money is now owed, not free to circulate and there has to be some new real credit. Credit that was being created by virtue of a myriad of derivatives that no longer can be marketed. These CDO losses I can assure you will be more than subprime mortgages by the time they are done.The boom was perpetuated by subprime financing. The other side of this game is the long term investment projects are in full swing, but at some point it is going to be clear that the money was loaned at too low a rate, according to Mises, and the game is going to fall apart. The game is being played in China, but it is being financed by American consumer credit. It won't be long before they suddenly realize they don't have money to finish what they started and the minerals game comes back to earth. They aren't breaking their necks to keep the American financials afloat because they like losing money, but because they need the fresh money created in the US. There are some statistics that tell us the game is coming back. I don't think the consumer balance sheet and some of the more speculative ventures are going to work. I don't think gasoline is the drag it is said to be, but more the idea that the consumer is out of credit and it is going to be that much more difficult to balance the trade balance. Ditto China and Asia, which could be sending more money to the US in trade, but having to send it to OPEC instead. One thing I read a long time ago was that 80% of GDP was the real valuation line for the entire stock market capitalization and we are still way above that, probably in the 140% range. 3% was the dividend rate that capped markets for the past century, but not now. It is clear that only financial bubbles prop markets at these rates. The bulls like to spout a lot of statistics, but few of them are true. The SPX reached it old top solely because stock buybacks reduce the divisor, while dividends don't. Had they back adjusted for the roughly $200 billion to $300 billion shortfall in dividends for the past 10 years, it would have clearly shrunk. Stock buybacks do little for the holder of stock other than increase his proportion of ownership only so far as the stock remains out of the market. It is what used to be called for tax purposes, a partial liquidation. The Dow is up only by virtue of some by chance almost perfect portfolio management. If we reversed the Dow splits and then allowed for the portfolio changes, we would have a hard time having a real new high in the Dow from 2000. There was 60 points of losses saved in the split of GE alone, not to mention another 100 roughly out of the split of INTC. Prior to the last inclusion of new companies, I think BAC and Chevron (CVT?) were put in place of MO and HON, just to make the index match the split adjusted points of 1/14/00, it took 12,610 to reach a real new high. Had they left these lost points in the index, the Dow would be even another 1000 points lower. Quite interesting, MO put about 500 points on the Dow, then they threw it out before it could be bashed apart. The Nasdaq also shows the bear never really ended, only making 50% of its prior high while the big cap NDX, never got close to 50% of its old high.I think this is a speculators market, which means that not one thing I have written means a damn thing, not even the news going forward. What it does mean is that buy and hold to make money in stocks is dead. There is no doubt until the true valuations are back in stocks in the market in general, holding for long term real gains is not going to work for a good while and faces a highly risky near future. No one with a brain would hold any portfolio of stocks, unless they knew how to rotate around losses.
Read this from an intelligent poster on another board friend sent me:
When is it going to sink in again?
mannfm11
NEW 5/6/2008 11:25:42 PM
That we are in a real mess? I think we are about to see a real crisis, the quasi public banks like the Fed, FHLB and the GSE's going into crisis. If you read the agreements behind this auction stuff, the Fed has the right to require repurchase or to sell the stuff any time they get ready. Since the books only have to balanced overnight, this stuff is actually repoed daily. What happens if the bank that has the stuff can't perform and the Fed is suddenly stuck with some illiquid stuff? Well, I would venture the taxpayer gets the bill until the Fed earns enough money to pay back the government. The government, probably in return for the New Deal owns 100% of the profits of the Fed, save the preferred stock dividend. The Federal Home Loan banks are somewhat different and I don't know how they work. It seems though that they might be somewhat like FNMA and FHLMC, except I don't exactly know how. I do know I read recently the one in Chicago and the one in Dallas were discussing a merger, which tells me they aren't exactly public entities any more. I am wondering what happens to the bank that has propped up CFC? I don't think CFC is going away as a problem and it will be bigger than Bear. There are significant problems that have nothing but a band-aid on them. The auction loans are one of them, as they are nothing more than a method of keeping insolvents solvent until hope and time bail them out. They are clearly hoping that bad paper can in fact rise from the grave and walk on water, across the Pacific to some sucker fund in China. Surely the world isn't so stupid as to make more deals for Wall Street junk? One thing that I keep bringing up that they keep bringing someone to the table on CNBC is that credit problems like these cause economic problems and I am not talking about cyclical recessions. FNM needs another $6 billion. How much is Merrill going to need the next go around? When is Goldman going to come clean with the losses out of their $60 billion in level 3 assets? When is Wells Fargo going to come clean with its mortgage losses, as it is next to impossible for me to believe that everyone in that business made across the board bad loans except them? We are just seeing the tip of the iceberg on the prime mortgage front of losses from mortgages. Truth is the good stuff was junk and the junk was basically akin to making loans to heroin junkies. There is a supply problem in housing. Nothing is going to make this go away except a hell of a lot of well to do population. Wetbacks from Mexico aren't going to float the housing market at todays prices or even prices 50% of todays prices. It is clear the consumer credit game isn't going to be the same and corporate profits are fueled with consumer bucks. Consumer spending isn't 70% of the economy, it is all the economy either directly or indirectly. Same for the rest of the world. 5% of the US economy is somewhere around $600 billion depending on whose figures you believe. This is about what is going to be missing out of home equity extraction due to refinance or sale the next few years. It is the entire trade deficit, something that has fed the rest of the world with money to create a boom. But, that money is now owed, not free to circulate and there has to be some new real credit. Credit that was being created by virtue of a myriad of derivatives that no longer can be marketed. These CDO losses I can assure you will be more than subprime mortgages by the time they are done.The boom was perpetuated by subprime financing. The other side of this game is the long term investment projects are in full swing, but at some point it is going to be clear that the money was loaned at too low a rate, according to Mises, and the game is going to fall apart. The game is being played in China, but it is being financed by American consumer credit. It won't be long before they suddenly realize they don't have money to finish what they started and the minerals game comes back to earth. They aren't breaking their necks to keep the American financials afloat because they like losing money, but because they need the fresh money created in the US. There are some statistics that tell us the game is coming back. I don't think the consumer balance sheet and some of the more speculative ventures are going to work. I don't think gasoline is the drag it is said to be, but more the idea that the consumer is out of credit and it is going to be that much more difficult to balance the trade balance. Ditto China and Asia, which could be sending more money to the US in trade, but having to send it to OPEC instead. One thing I read a long time ago was that 80% of GDP was the real valuation line for the entire stock market capitalization and we are still way above that, probably in the 140% range. 3% was the dividend rate that capped markets for the past century, but not now. It is clear that only financial bubbles prop markets at these rates. The bulls like to spout a lot of statistics, but few of them are true. The SPX reached it old top solely because stock buybacks reduce the divisor, while dividends don't. Had they back adjusted for the roughly $200 billion to $300 billion shortfall in dividends for the past 10 years, it would have clearly shrunk. Stock buybacks do little for the holder of stock other than increase his proportion of ownership only so far as the stock remains out of the market. It is what used to be called for tax purposes, a partial liquidation. The Dow is up only by virtue of some by chance almost perfect portfolio management. If we reversed the Dow splits and then allowed for the portfolio changes, we would have a hard time having a real new high in the Dow from 2000. There was 60 points of losses saved in the split of GE alone, not to mention another 100 roughly out of the split of INTC. Prior to the last inclusion of new companies, I think BAC and Chevron (CVT?) were put in place of MO and HON, just to make the index match the split adjusted points of 1/14/00, it took 12,610 to reach a real new high. Had they left these lost points in the index, the Dow would be even another 1000 points lower. Quite interesting, MO put about 500 points on the Dow, then they threw it out before it could be bashed apart. The Nasdaq also shows the bear never really ended, only making 50% of its prior high while the big cap NDX, never got close to 50% of its old high.I think this is a speculators market, which means that not one thing I have written means a damn thing, not even the news going forward. What it does mean is that buy and hold to make money in stocks is dead. There is no doubt until the true valuations are back in stocks in the market in general, holding for long term real gains is not going to work for a good while and faces a highly risky near future. No one with a brain would hold any portfolio of stocks, unless they knew how to rotate around losses.
Tuesday, May 06, 2008
THE GAME PLAN
Meatpuddle *(poster from another board)
Chateau Mouton Rothschild Online
This is THE story. Forget about the stock market, that is meaningless and easy to control (for now). Large FCB (foreign central bank) purchases of agencies and treasuries have kept rates artificially low for a LONG TIME and have led to added "slosh", some of which undoubtedly winds up in the stock market. Here's the downside: As the US economy slows and the dollar falls, the perpetual dollar-recyclers (Arabs and Asians) are having a hard time pegging their currencies with the reduced net inflows so they must print to make up the difference. This printing (not in USD but in foreign currencies) is leading to a crack-up-boom in the commodity complex and is leading to food riots, hoarding, civil unrest, etc. in those countries and a small amount of this even in the US.Now some may be asking, "why would the recyclers continue this when they are stoking hyperinflation in their own currencies?" and this is a good question that I can sum up with a simple phrase: Godfather Protection Racket. So our fleet is stationed in the gulf to provide "protection" to those oil-producing nations that still want to maintain USD pegs and give support to fictitious capital and US bond bubbles. For those that choose not to support the GSE’s and bond bubble, well they might not get our protection and then who can say what bad things might happen to them? So basically they have no choice but to make large blank-check purchases. In order to facilitate this recycling, oil especially must be very high in price. This (somewhat) offsets the reduced demand and gives the Arabs some cash to recycle back into treasuries and GSE debt, but not enough without printing.The above helps explain a lot of the continuing "strength" in the oil markets. The Arabs NEED oil to be very high, and so do the US pigmen. These interest are aligned, albeit at the end of a gun barrel for the Arabs. The end-game is afoot related to all of this and that is basically a gutting of the GSE's by the pigmen. They will drive all of the FCB's into GSE debt (and the FCB have been on an absolute ****ing buying binge recently) and then collapse the GSE's with a feigned liquidity "crises" where they give the FCB's 10 cents on the dollar for the assets in a huge looting operation. This will be similar to the BSC looting operation where certain IB's (with a Fed backstop) will devour the carcass of the GSE's and then the IB's will hold the mountain foreclosures and BINGO the banking insolvency problem is resolved.Gen has said repeatedly that constant trashing of treasury and Fed balance sheets could lead to a TLT collapse, and this is correct. I just wanted to point out that a lot of this trashing is being done on purpose to orchestrate the final looting end-game scenario. Shuffle all of the crap onto the GSE balance sheets and then gut them by engineering a crises and then cherry picking the best stuff. Think BSC or CFC, etc. except on a very large scale.Have you ever asked yourself why the conforming ratios and capital reserve requirements and everything else at the GSE's have been falling into the bilge category? Well now you know the answer. The GSE's are being set up on purpose to implode.
----------"Choose! Choose the form of the Destructor!' The choice is made!" - Gozer"the idea that you're "entitled" to a 5 or 6 percent 30 year mortgage is horse****, and so is the housing prices that it has created." - Genesis
Chateau Mouton Rothschild Online
This is THE story. Forget about the stock market, that is meaningless and easy to control (for now). Large FCB (foreign central bank) purchases of agencies and treasuries have kept rates artificially low for a LONG TIME and have led to added "slosh", some of which undoubtedly winds up in the stock market. Here's the downside: As the US economy slows and the dollar falls, the perpetual dollar-recyclers (Arabs and Asians) are having a hard time pegging their currencies with the reduced net inflows so they must print to make up the difference. This printing (not in USD but in foreign currencies) is leading to a crack-up-boom in the commodity complex and is leading to food riots, hoarding, civil unrest, etc. in those countries and a small amount of this even in the US.Now some may be asking, "why would the recyclers continue this when they are stoking hyperinflation in their own currencies?" and this is a good question that I can sum up with a simple phrase: Godfather Protection Racket. So our fleet is stationed in the gulf to provide "protection" to those oil-producing nations that still want to maintain USD pegs and give support to fictitious capital and US bond bubbles. For those that choose not to support the GSE’s and bond bubble, well they might not get our protection and then who can say what bad things might happen to them? So basically they have no choice but to make large blank-check purchases. In order to facilitate this recycling, oil especially must be very high in price. This (somewhat) offsets the reduced demand and gives the Arabs some cash to recycle back into treasuries and GSE debt, but not enough without printing.The above helps explain a lot of the continuing "strength" in the oil markets. The Arabs NEED oil to be very high, and so do the US pigmen. These interest are aligned, albeit at the end of a gun barrel for the Arabs. The end-game is afoot related to all of this and that is basically a gutting of the GSE's by the pigmen. They will drive all of the FCB's into GSE debt (and the FCB have been on an absolute ****ing buying binge recently) and then collapse the GSE's with a feigned liquidity "crises" where they give the FCB's 10 cents on the dollar for the assets in a huge looting operation. This will be similar to the BSC looting operation where certain IB's (with a Fed backstop) will devour the carcass of the GSE's and then the IB's will hold the mountain foreclosures and BINGO the banking insolvency problem is resolved.Gen has said repeatedly that constant trashing of treasury and Fed balance sheets could lead to a TLT collapse, and this is correct. I just wanted to point out that a lot of this trashing is being done on purpose to orchestrate the final looting end-game scenario. Shuffle all of the crap onto the GSE balance sheets and then gut them by engineering a crises and then cherry picking the best stuff. Think BSC or CFC, etc. except on a very large scale.Have you ever asked yourself why the conforming ratios and capital reserve requirements and everything else at the GSE's have been falling into the bilge category? Well now you know the answer. The GSE's are being set up on purpose to implode.
----------"Choose! Choose the form of the Destructor!' The choice is made!" - Gozer"the idea that you're "entitled" to a 5 or 6 percent 30 year mortgage is horse****, and so is the housing prices that it has created." - Genesis
FNM WOOOOOF (Issuing new shares+ screwing existing shareholders)
Fannie Mae (FNM 28.29) announced this morning plans to increase its capital position by issuing new shares and cutting its dividend. Though the announcement has a dilutive effect on existing shareholders, the plan should help provide a boon for the housing market in the long-term.
The mortgage lender's revenues climbed 28% year-over-year to $3.78 billion. But Fannie Mae still reported a loss of $2.19 billion, or $2.57 per share, for the first quarter. One year ago Fannie Mae earned $961 million, or $0.85 per share.
The negative results were driven by losses from derivatives and trading securities, which totaled $4.4 billion, as well as credit expenses related to higher charge-offs from defaults and loan losses, which totaled $3.2 billion, according to this morning's edition of The Wall Street Journal.
The mortgage credit book of business grew by 3%, and estimated market share increased to approximately 50% of new single-family mortgage-related securities issued.
Core capital totaled $42.7 billion at the end of the quarter, $5.1 billion above the company's current regulatory requirements.
Fannie Mae announced plans to raise $6 billion in new capital through common stock public offerings, noncumulative mandatory convertible preferred stock, noncumulative, nonconvertible preferred stock. The new capital is intended to enhance the company's balance sheet and provide stability to the secondary mortgage market. By increasing its capital base, Fannie Mae can lend additional funds and also increase its protection against future hiccups in its loan portfolio.
According to the company, the Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae's watchdog, would reduce the required 20% capital level to 15% upon completing the capital-raising plan. Fannie Mae also said OFHEO indicated the required capital surplus would be trimmed by an additional five percentage points to a 10% surplus requirement in September 2008, based upon the company's continued maintenance of excess capital above its required level. This, of course, assumes no material adverse changes to the company's ongoing regulatory compliance.
As part of Fannie Mae's capital raise, the company will reduce its quarterly dividend. Beginning in the third quarter, the company will cut its dividend to $0.25 per share from $0.35 per share, which will free an additional $390 million of capital per year.
Separately, Fannie Mae is planning a series of initiatives to provide liquidity, stability, and affordability to the housing and mortgage markets for the long term. The plan intends to keep struggling borrowers in their homes, assist prospective homebuyers, and stabilize communities affected by the mortgage market downturn. Such moves will ultimately help restore the housing market by providing further support to the industry. Such support is essential to helping boost economic health.
--Jeffrey Ham, Briefing.com
The mortgage lender's revenues climbed 28% year-over-year to $3.78 billion. But Fannie Mae still reported a loss of $2.19 billion, or $2.57 per share, for the first quarter. One year ago Fannie Mae earned $961 million, or $0.85 per share.
The negative results were driven by losses from derivatives and trading securities, which totaled $4.4 billion, as well as credit expenses related to higher charge-offs from defaults and loan losses, which totaled $3.2 billion, according to this morning's edition of The Wall Street Journal.
The mortgage credit book of business grew by 3%, and estimated market share increased to approximately 50% of new single-family mortgage-related securities issued.
Core capital totaled $42.7 billion at the end of the quarter, $5.1 billion above the company's current regulatory requirements.
Fannie Mae announced plans to raise $6 billion in new capital through common stock public offerings, noncumulative mandatory convertible preferred stock, noncumulative, nonconvertible preferred stock. The new capital is intended to enhance the company's balance sheet and provide stability to the secondary mortgage market. By increasing its capital base, Fannie Mae can lend additional funds and also increase its protection against future hiccups in its loan portfolio.
According to the company, the Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae's watchdog, would reduce the required 20% capital level to 15% upon completing the capital-raising plan. Fannie Mae also said OFHEO indicated the required capital surplus would be trimmed by an additional five percentage points to a 10% surplus requirement in September 2008, based upon the company's continued maintenance of excess capital above its required level. This, of course, assumes no material adverse changes to the company's ongoing regulatory compliance.
As part of Fannie Mae's capital raise, the company will reduce its quarterly dividend. Beginning in the third quarter, the company will cut its dividend to $0.25 per share from $0.35 per share, which will free an additional $390 million of capital per year.
Separately, Fannie Mae is planning a series of initiatives to provide liquidity, stability, and affordability to the housing and mortgage markets for the long term. The plan intends to keep struggling borrowers in their homes, assist prospective homebuyers, and stabilize communities affected by the mortgage market downturn. Such moves will ultimately help restore the housing market by providing further support to the industry. Such support is essential to helping boost economic health.
--Jeffrey Ham, Briefing.com
Saturday, May 03, 2008
REVISITING FINANCIAL ARBITRAGE CAPITALISM
http://www.prudentbear.com/index.php/CreditBubbleBulletinHome Doug Noland, always intelligently written!
Indeed, Washington’s validation of the current dysfunctional Credit system structure could very well lay the groundwork for extreme global price distortions, volatility, and social/political unrest. On the current course of things, it’s difficult for me to not think in terms of NASDAQ 1999 or subprime 2006. Throw additional liquidity on overheated Credit, inflationary, and speculative “biases” and be prepared for the spectacular.
When Financial Arbitrage Capitalism’s excesses were spurring acute U.S. securities market inflation, the system enjoyed a period of perceived rising wealth to go with a boom in Wall Street securities issuance (to help offset inflated demand). When this Structure’s excesses were directed at the Mortgage Finance Bubble, the upshots were inflating home prices along with attendant construction and consumption booms. Now, however, with acute inflationary effects prevailing throughout global markets for food, energy, and commodities, one should be prepared for the likes of problematic supply bottlenecks and shocks, hoarding, trade frictions and interruptions, and generally heightened geopolitical instability.
I argued back in 2002 that the overriding systemic issue was not “deflation” but rather myriad risks associated with an unfolding U.S. Credit Bubble. Now, some years later, these risks have expanded alarmingly, as runaway Credit Bubbles have ballooned both at home and abroad.
Indeed, Washington’s validation of the current dysfunctional Credit system structure could very well lay the groundwork for extreme global price distortions, volatility, and social/political unrest. On the current course of things, it’s difficult for me to not think in terms of NASDAQ 1999 or subprime 2006. Throw additional liquidity on overheated Credit, inflationary, and speculative “biases” and be prepared for the spectacular.
When Financial Arbitrage Capitalism’s excesses were spurring acute U.S. securities market inflation, the system enjoyed a period of perceived rising wealth to go with a boom in Wall Street securities issuance (to help offset inflated demand). When this Structure’s excesses were directed at the Mortgage Finance Bubble, the upshots were inflating home prices along with attendant construction and consumption booms. Now, however, with acute inflationary effects prevailing throughout global markets for food, energy, and commodities, one should be prepared for the likes of problematic supply bottlenecks and shocks, hoarding, trade frictions and interruptions, and generally heightened geopolitical instability.
I argued back in 2002 that the overriding systemic issue was not “deflation” but rather myriad risks associated with an unfolding U.S. Credit Bubble. Now, some years later, these risks have expanded alarmingly, as runaway Credit Bubbles have ballooned both at home and abroad.
Friday, May 02, 2008
BEAR MARKET KILLED?
briefing.com has daily economic data......job "losses" better than expected.....90,000 SERVICE jobs added, huge manufacturing job losses....CNBC heralding the results FUTURES JUMP GREEN!!
The breach above of 80.00 in the US $ index broke a Head and Shoulders formation, US $$ could fall to 40.00 (distance from neckline 80.0 to head 120.0 than subtract from 80) BUT not uncommon to TEST break....this could cause falling commodities, unwinding of that speculation and BACK into equities.
Lasr Fri I put 50% of my 401K cash in to equities....will avg in each week, holding back other 50% for confirmation Bear is dead...or to buy at new lows.
FED has gone ALL OUT to rescue the markets, it may have succeeded....for now.
Recent chart showing price above 20 month moving avg is important......see if BROAD BUYING COMES IN looking for 90% upside volume today for more confirmation some kind of low is IN.
Duratek
Thursday, May 01, 2008
ELLIOT WAVE GUY TONY
http://caldaroew.spaces.live.com/blog/cns!D2CB8C5EBA2ADE86!8139.entry
Like how this guy presents market data.
D
Like how this guy presents market data.
D
BEAR BREAKING POINT
**Click chart above to enlarge. Using this method, if MUCH progress is made and the close stays above the MA shown, the bear may be knocked out, crazy as it sounds....so far it still looks a lot like 2001.....we should know soon.
**click to enlarge.Falling VIX (volatility index) is uaually bullish. If this keeps up Bear is going into hibernation IMHO.
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