STOCK MARKET WATCH, Monday 22 August

[ozymandius]

Monday August 22, 2005

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 3 YEARS, 152 DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 4 YEARS, 245 DAYS
WHERE'S OSAMA BIN-LADEN? 3 YEARS, 309 DAYS
DAYS SINCE ENRON COLLAPSE = 1366
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54


U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90

AT THE CLOSING BELL ON August 19, 2005

Dow... 10,559.23 +4.30 (+0.04%)
Nasdaq... 2,135.56 -0.52 (-0.02%)
S&P 500... 1,219.71 +0.69 (+0.06%)
10-Yr Bond... 4.21% -0.01 (-0.12%)
Gold future... 442.20 -2.50 (-0.57%)

GOLD, EURO, YEN, Dollars and Loonie




PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

[ozymandius]

1. WrapUp by Tim W. Wood

THE DOW REPORT
Market Non-Confirmations

Just as confirmations and non-confirmations between the Industrials and the Transports are key from a Dow theory perspective, there are also other indexes that are important to monitor for confirmations and non-confirmations. One such index is the Retail Holders. I have found that the retailers tend to form these non-confirmations at important turn points.

In October 2004 as the Industrials were moving into an intermediate term cycle low, the Retailers diverged, or formed a higher low. In other words, the Retailers did not confirm the Industrials and this non-confirmation was signaling that an upturn was in the making. This positive divergence is marked in green in the chart below.

Then, as price advanced into the March 2005 intermediate term cycle high, notice the bearish divergence that had been forming for some four months. Understand that these divergences are not timing tools. But, they are very good indicators that serve to telegraph or warn of a trend change. Then, just as with Dow theory, when both indexes break their previous secondary high or low point it serves to confirm the trend change.



These divergences or non-confirmations may be viewed as insignificant, but they aren’t. The fact that the Retailers, Banking and the Financial sectors are failing to confirm the Industrials is indeed a noteworthy factor. This is telling us that the Retailers are slowing and that the Banks and the Financial sectors are sensing something. Yes, this is telling us that all is not well and until these divergences are corrected they serve as a warning that cannot be ignored.

more...

http://www.financialsense.com/Market/wrapup.htm

[54anickel]

62. Summer Swing Will Tell Plenty

http://biz.yahoo.com/ts/050822/10239074.html

A few weeks back, I warned readers to be wary about buying pullbacks after the market rolled off its highs.
That has turned out to be good advice, at least to this point in time. But the three-week correction is sending mixed messages as we head toward Labor Day.

First off, the volume pattern during this decline is flat-out wrong. Take last week, for example. Options expiration normally triggers above-average volume due to position unwinding. Instead, Friday's session produced the lowest volume day since the last week of 2004.

Now check out price and volume on the S&P 500 futures so far this month. Volume actually contacted during the two major selloffs.

No, this isn't typical of a correction, healthy or otherwise. It's indicative of a market that has lost the capacity to attract any interest at all.

more...

[ozymandius]

2. Good morning all.

:donut:

Our internet connection was out all day Friday at work. I do not know if I will be able to post anything to the thread today either. So please keep this kicked for the fans. Thank you.

Another note: I will be in Los Angeles Thursday, Friday and Monday. Is anyone willing to post the thread in my stead? Please respond either here or PM me and we'll work out the details. Thank you!

Ozy :hi:

[Mnemosyne]

3. Morning Ozy!

Have a nice break!
:hi: :kick:

[UpInArms]

4. Hi Ozy! I'm back!

:hi:

I would be happy to start the thread for you while you take a well earned break :)

[54anickel]

10. Welcome back UIA - Missed ya!!! Hope you had a great time.

"Met" your "sis" here in another thread while you were away. :hi:

[UpInArms]

12. Thanks for the Welcome Back 54anickel!

It's good to be home and back at the SMW!

:hug:

[ozymandius]

26. internet connection fixed

Thanks goodness too. Welcome back UIA. I hope you and your family had a wonderful trip. Thanks for volunteering to fill in. I'll send you the details.

Ozy :hi:

[UpInArms]

55. Hiya Ozy!

Just let me know what the latest codes are and I'll do my best to only have 3 or 4 edits :D

[UpInArms]

5. daily dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 88.20 Change -0.38 (-0.43%)

Yen gains vs. dollar as election looms

http://www.marketwatch.com/news/story.asp?guid=%7B850B5045%2D70FC%2D4FE7%2DB8A2%2DBD1E264A99D3%7D&siteid=mktw

LONDON (MarketWatch) -- The Japanese yen was in focus Monday, with the dollar falling below the 110 yen barrier as investors expect continued reform in Japan following next month's election.

The dollar slipped 0.7% against the yen to 109.71 yen.

Adrian Foster, chief currencies strategist at Dresdner Kleinwort Wasserstein, said the market is being "pleasantly surprised" by Prime Minister Junichiro Koizumi's "propensity" in arguing for further reforms ahead of the general election on Sept. 11.

Koizumi called a snap election on Aug. 12 after parliament rejected the government's proposal to privatize the Post Office, effectively the world's largest bank by assets. Opinion polls show Koizumi is expected to win the election.

Foster said this election seems more like a genuine two-party debate about the direction of the country rather than the "whitewash" it has been for the last 50 years.

Since the Second World War, Koizumi's Liberal Democrats have ruled the country almost uninterrupted.

...more...

Forex: Koizumi Lead Sparks Rally

http://www.dailyfx.com/index.php?option=com_content&task=view&id=2949&Itemid=62

At the open of the Asian session, the yen was not far from the highs set just before the Friday’s close, but a rally on growing support for Prime Minister Junichiro Koizumi led a strong rally in the currencies favor. The USD/JPY pair opened the market at a lofty 110.45 with highs set mere hours and only inches higher at 110.55 by 23:00 GMT. After the market Japanese market settled into the trading session however, traders grasped on to reports of Koizumi’s growing popularity and began to flood the market with yen bid orders. The pair was setting new highs at 109.62 by 06:12 GMT.

Yen traders finally regained control of the USD/JPY at the open of the Asian session on Monday despite a poor convenience store sales number and rallying crude prices. Political news set the markets forex traders on the yen-rally early in the Asian session, after a recent poll released showed approval for the current administration was up 5.5 percentage points up from a month earlier to 53.2 percent. In addition to the poll’s favorable results for Koizumi, the opposing parties have begun to divide themselves into smaller factions, making the defeat of the current administration less and less probable. The news was so potent that it was able to overcome hard economic figures and an early session rise in crude prices. Crude oil prices inched their way back towards highs set in the middle of last week. The more surprising failure to turn the yen-rally was the 06:00 GMT release of convenience store sales for the month of July. The measure decelerated 4.7 percent for the month, the slowest pace since the record low set on July of 2003. The possible implications this indicator have for the country’s burdensome deflation, seem to be trumped by the more immediate effects that the Prime Minister’s reelection and postal privatization will have on the same worry.

...more...

No Reports today.

Have a Great Day Marketeers!

[54anickel]

27. Gold Bugs Flying High

http://www.thestreet.com/mutualfundmonday/mutualfundmondaygg/10237773.html

The gold bugs are having a summer picnic and everybody's invited.

Surging oil prices and a drooping dollar have pushed gold prices up 5% over the past month to more than $440 an ounce. The big move has precious metals investors atwitter with expectations that the shiny metal finally may be revving up for a big run past $500.

Of course, gold devotees have seen a number of false starts since last fall, marked by a series of so-called lower highs. But with oil now growing comfortable in the low-$60 per barrel range, it's getting harder and harder not to see inflation -- a gold bug's best friend -- in the economy, even if it is not showing up in the economic data.

snip>

A continued rally in gold prices depends on two things: the dollar and oil. If the dollar continues to weaken, as it has been doing lately, and oil prices keep heading higher, as they have been doing, then the implication is that inflation is on the way. That's why gold has been popular lately. It's a great two-way hedge against the dollar and against inflation.

snip>

This point has been very controversial. First of all, inflation is often delayed. Very often people don't realize inflation has arrived until they see it in the data. And by then it is too late.

Also, there is a big argument about the validity of the CPI and PPI. Many economists feel the baskets they track are outdated. Clearly, not only fuel has moved up in price, but health care and education have moved up significantly and it's not truly reflected in the indexes. On the other hand, cheap imported products from China are being weighed too heavily, which skews the data.

more...

[54anickel]

51. Gold up on fund buying, euro (Not anymore from the chart)

http://www.businessday.co.za/articles/markets.aspx?ID=BD4A82390

SPOT gold was higher today due to fund buying as well as a stronger euro against the US dollar, traders said.

In afternoon trade, spot gold was quoted at $439,80/oz up from a previous close of $438,60/oz. The euro was bid at $1,2232 from an overnight close of $1,2165.

"Gold is higher on fund buying as well as the strong euro. However, volume is very thin. In the next week, gold could test support at $435/oz and if it breaks that level it could fall to $432/oz. On the upside, gold is going to battle to break through $440/oz. In the longer term gold could test $445/oz," a London-based trader said.

[UpInArms]

6. Oil Prices Inch Up

http://www.forbes.com/home/feeds/ap/2005/08/22/ap2187302.html

Oil prices held above US$65 a barrel Monday as saboteurs forced Iraq's southern pipeline exports to a halt. That offset earlier price declines due to the partial resumption of crude production in Ecuador.

Still, analysts cautioned against putting too much emphasis on the effect of the Iraqi outages, saying it was too early to say how long the shortfalls in output would last.

Light, sweet crude for September delivery was up 3 cents to US$65.38 a barrel on the New York Mercantile Exchange by midday in Europe. The September contract, which expires later Monday, ended Friday at US$65.35, up US$2.08 after U.S. warships were fired upon in Jordan and production in Ecuador shut down.

Nymex crude for October slipped 4 cents to US$65.75 a barrel, after touching a high of US$66.14 earlier.

Front-month crude futures contracts reached an all-time high of US$67.10 on Aug. 12 - about 40 percent higher than a year ago.

In other Nymex prices, gasoline was down by more than half a cent at US$1.8965 a gallon (3.8 liters). Heating oil moved up to US$1.8295, indicating attention shifting from gasoline near the end of the summer driving season to heating oil for winter use.

...more...

[UpInArms]

7. interesting info regarding fuel consumption

Energy prices plummet as demand falls

http://ogj.pennnet.com/articles/article_display.cfm?Section=ONART&C=GenIn&ARTICLE_ID=234882&p=7

HOUSTON, Aug. -- Energy prices plummeted Aug. 18, but not to any bargain levels, as the American Petroleum Institute reported a big drop in US demand during July because of high fuel prices.

Energy futures markets also were impacted by a US Labor Department report of a larger-than-expected increase in wholesale prices in the same month, signaling that high energy costs also are affecting other segments of the economy.

Deliveries decline

Total domestic petroleum deliveries, a key measure of US demand, fell by 3% in July, marking the largest year-to-year drop in 3½ years, API reported Aug. 17. Higher retail prices caused a drop of 0.8% in gasoline deliveries, said API in its monthly statistical report. It said gasoline deliveries so far this year have been nearly flat, compared with a 2% increase in 2004.

<snip>

US crude production in July fell by 4.2% from June's level, the fifth month-to-month decline this year, marking the steepest percentage decline since September 2004 and the fifth largest in at least 35 years, API said. Precautionary shut-ins because of tropical storms in the Gulf of Mexico, combined with down time in Alaska, contributed to that decline. At 5.18 million b/d, crude production in July was down 5.1% from year-ago levels.

...more...

[AnneD]

29. Morning Marketeers

:donut: Good to see you back UIA. I have not liked Tasers from day one. I think any device that delivers an electrical shock to the body can disrupt the heart rhythm (By George, when they say clear and they are holding the paddles-you had better get out of the way). Tasers deliver a small shock but I have always thought that a small shock given to a compromised person could spell trouble. And of course, they peddle it as safe and police give people repeated shocks. A classic case of overpromise, underperform.

Sorry, posted on the wrong thread...blame it on working nights too.

[UpInArms]

47. Hiya AnneD!

It's good to be back!

:grouphug:

[UpInArms]

8. Lawsuits against Taser for injuries and deaths

http://www.stltoday.com/stltoday/news/stories.nsf/stlouiscitycounty/story/65D16305E0301E4286257063006E01F4?OpenDocument

A police chief in Boone County has filed suit against Taser International and two police equipment supply companies, saying he was severely injured when shocked with a Taser weapon during training.

The suit by Jacob "Pete" Herring joins more than 30 others from around the country that claim Tasers caused or contributed to injuries or deaths. More than 7,000 law enforcement agencies worldwide use the devices as a nonlethal alternative to firearms, according to company numbers.

The suit by Herring, chief of police in Hallsville, Mo., says he suffered at least two strokes, loss and impairment of his vision and hearing, neurological damage, a head injury and "significant cardiac damage" after being shocked by a Taser M26 during a class on April 20, 2004. He seeks unspecified financial damages.

<snip>

The village of Dolton, Ill., near Chicago, stopped using its Tasers in May and filed a class action lawsuit in federal court last month.

That suit says Taser's marketing portrays the unit as safe but that the product "has been involved in numerous deaths and serious injuries across the country" and has never been "adequately or independently tested for safety."

<snip>

Herring bought the Taser and allowed it to be tested on him because of Taser International ads, informational packets and product manuals that promised that the Taser posed a minimal risk of injury, the suit says. Herring's lawsuit says the company either knew its safety claims were false or didn't know whether they were true or false.

...more...

[UpInArms]

9. From the "It's Your Money" Department

8:31am 08/22/05 PEROT WINS DOE CONTRACT WORTH UP TO $20M

[UpInArms]

11. 9:33 EST opening and pre-opening blather

Dow 10,594.89 +35.66 (+0.34%)
Nasdaq 2,143.53 +7.97 (+0.37%)
S&P 500 1,223.36 +3.65 (+0.30%)
10-Yr Bond 42.31 +0.20 (+0.47%)

NYSE Volume 41,819,000
Nasdaq Volume 54,315,000

9:15AM: S&P futures vs fair value: +4.5. Nasdaq futures vs fair value: +7.0.

9:00AM: S&P futures vs fair value: +4.8. Nasdaq futures vs fair value: +7.0. Still shaping up to be a higher open for the major averages as futures indications hold steady above fair value... Perhaps also keeping investors more focused on the slew of upbeat corporate news has been the absence of notable economic data this morning during what is expected to be a rather quiet week in terms of key events

8:30AM: S&P futures vs fair value: +4.9. Nasdaq futures vs fair value: +7.5. Bullish bias persists in pre-market trading, setting the stage for stocks to start the day on an upbeat note... Blue chips could get a boost from Procter & Gamble (PG), which was mentioned favorably in Barron's, while better than expected Q1 (Jul) earnings from Heinz (HNZ) and a Citigroup upgrade on Archer Daniels Midland (ADM) should also keep Consumer Staples stocks in focus

8:00AM: S&P futures vs fair value: +5.1. Nasdaq futures vs fair value: +7.5. Futures market versus fair value suggesting a higher open for the cash market as fresh M&A activity provides an early floor of buying support... China National Petroleum Corp has agreed to buy PetroKazakhstan (PKZ) for $4.18 bln... Speaking of oil, a modest pullback in crude prices ($65.22/bbl -0.13) following Friday's 3.3% surge in the commodity may also be providing some relief following the S&P's biggest weekly disappointment (-0.9%) in two months

[54anickel]

13. Rebalancing Broadens Out (Roach)

http://www.morganstanley.com/GEFdata/digests/20050822-mon.html#anchor0

snip>

My fixation on global rebalancing dates back a little over three years (see Global Rebalancing, May 20, 2002). Since that time, I have placed a good deal of emphasis on the likelihood of a US-centric fix for an unbalanced world -- a fix highlighted by an eventual pullback of the over-extended American consumer. This, in my view, continues to be an unavoidable ingredient of America’s increasingly urgent current-account adjustment. With the US current account deficit widening from 4.6% of GDP in mid-2002 to 6.4% in early 2005, I remain unwavering in my conviction on this aspect of global rebalancing (see Beneath the Surface, August 15, 2005). Yet my emphasis on a US-led global adjustment has been due, in large part, to the absence of alternative candidates to drive the process -- underscored by lagging growth in domestic demand in other major economies of the world. While I have long noted that it is theoretically possible that the rest of the world could, in effect, rise up to meet the US part way, the odds of such an outcome have been exceedingly low over the last several years.

Those odds are now shifting. Japan and Germany -- the world’s second and third largest economies -- now appear to be reawakening from interminably long slumbers. Our Japan team has just made its most meaningful upgrade on Japanese economic prospects in over a decade (see From Bug to Butterfly, August 16, 2005), and there is an increasingly intriguing case supporting the view that Germany could now be next. Our Euro-zone team does not quite share my optimism with respect to Germany but they continue to be hopeful that further important progress is likely on the structural reform front in the aftermath of the upcoming national election (see Elga Bartsch’s, Come Election Night…, August 18, 2005). The significance of these potential developments should not be minimized. It now appears distinctly possible that Japan and Germany could regain more dominant positions as engines of global growth than is the case today.

There is, of course, a long way to go for that to happen. At current exchange rates, Japan and Germany collectively account for only about 18% of world GDP -- about 10 percentage points below America’s 28% share. By way of perspective, it should be noted that it wasn’t all that long ago -- 1995, to be precise -- when there was actual parity at about 25% between the US share of world GDP and the combined shares of Japan and Germany. But a once-balanced global economy then went down an extraordinarily unbalanced growth path. Over the seven-year, 1995 to 2002, interval, the United States accounted for fully 98% of the cumulative increase in world GDP at market exchange rates. Over the same time, the combined shares of Japan and Germany fell to 20-year lows, as Japan became mired in a corrosive post-bubble deflation and Germany sagged under the weight of reunification and an increasingly powerful cocktail of structural rigidities. A surging dollar, and the concomitant weakening of the yen and the Deutsche mark / euro, only served to reinforce this dramatic shift in the mix of world GDP as calculated at market exchange rates. The result was the opening up of a record disparity between the world’s current account deficits (mainly the US) and surpluses (mainly Asia, but to a lesser extent, Europe). With a lopsided world economy on an increasingly unstable path, rebalancing has been the centerpiece of my global macro view since mid-2002.

snip>

Barring an outright collapse in the dollar -- unfortunately a non-trivial possibility, given America’s outsize current-account deficit -- the next leg of global rebalancing will need to involve a convergence of global growth spreads. There are two extreme developments that can force such a realignment -- a slowing of the US or an acceleration of growth elsewhere in the world. And, of course, there is an intermediate strain of rebalancing that would involve a combination of these two extremes. For the longest time, it seemed as if a US slowdown was the only likely path to global rebalancing. A persistent sluggishness in most other quarters of the world ruled out the alternative. China was a possible exception to this trend, but its 4% share in world GDP underscored the relatively small role it could play in sparking a major shift in the mix of world GDP.

more...

[UpInArms]

14. Treasury rally sputters, yields rise

http://www.marketwatch.com/news/story.asp?guid=%7BB0FD7871%2DC9C4%2D4181%2D839E%2D6691667A2A12%7D&siteid=mktw

CHICAGO (MarketWatch) - A firmer stock market open, a soft dollar and at least near-term stability for record-high oil prices weighed modestly on Treasury prices to start the week.

In Monday morning trading, the benchmark 10-year note had slipped 3/32 to 100 7/32.

The slight drop in price lifted its yield ($TNX: news, chart, profile) to 4.22% from 4.21% on Friday.

Traders said some sellers emerged as benchmark yields at three-week lows weren't seen offering enough reward for the risk that solid economic growth will be enough to stir more-aggressive inflation.

Inflation eats up the value of fixed-income investments, with higher yields partially offseting that loss. Yield and price move inversely.

Mixed inflation readings in last week's economic statistics, but little sign of an immediate risk, was behind a drop in benchmark yields.

...more...

[UpInArms]

15. FHLB-Dallas to restate 4 yrs of financial results - derivative acctng

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-08-22T125952Z_01_N22463958_RTRIDST_0_FINANCIAL-FHLBDALLAS-RESTATEMENT-UPDATE-1.XML

NEW YORK, Aug 22 (Reuters) - The Federal Home Loan Bank (FHLB) of Dallas said Monday it plans to restate its financial statements for the last four years to correct accounting errors on derivatives, the third regional FHLB bank to make such a move since June.

FHLB-Dallas said its restatement could reduce retained earnings by about $25 million to $30 million before assessments to the FHLB system.

The restatement should not be material to the bank's total capital under generally accepted accounting principles (GAAP), the bank said in a statement.

In a related move, FHLB-Dallas said it has sold $1.2 billion in investment securities and ended the associated interest rate derivatives served to hedge those securities.

The elimination of the derivatives, whose accounting the bank is trying to correct, will stop future earnings volatility that would arise from the loss of hedge accounting for these transactions, the bank said.

...more...

[54anickel]

24. Ewww, so what does this really mean? Do they see trouble ahead?

These derivative markets are so damned hard to understand. There seems to be a HUGE difference between actual risks and what shows up on the books.

This is from the article in post #18

They're called derivatives because these synthetic securities are derived from paper such as bonds and mortgages by packing and bundling little bits of this and little bits of that. They've become a huge market because they promise to let financial giants seek profits wherever they may be, without regard to a situation's underlying risk. The risk, you see, has been lessened, controlled and maybe even eliminated by the correct mix of derivatives.

At least that's what the theory says. A recent report from the Counterparty Risk Management Group II, a self-selected group of financial veterans that has periodically taken a look at the risks in the derivative market, makes me wonder, though. According to the report, one bank, J.P. Morgan Chase (JPM:NYSE - news - research - Cramer's Take), had total derivative exposure of $41 trillion. (No, that's not a misprint. I do mean trillion with a T.) When all the risks were balanced in this portfolio according to the theories and rules for calculating risk employed on Wall Street, J.P. Morgan Chase's most recent financial statements list total exposure as a mere $60 billion.

You've got to wonder, of course, if all these instruments will act the way that the bankers expect.

[UpInArms]

44. Every time I think about derivatives, I think "Orange County"

http://www.gsm.uci.edu/~jorion/oc/case.html

Orange County Case:
Using Value at Risk
to Control Financial Risk

The purpose of this case is to explain how a municipality can lose $1.6 billion in financial markets. The case also introduces the concept of "Value at Risk" (VAR), which is a simple method to express the risk of a portfolio. After the string of recent derivatives disasters, financial institutions, end-users, regulators, and central bankers are now turning to VAR as a method to foster stability in financial markets. The case illustrates how VAR could have been applied to the Orange County portfolio to warn investors of the risks they were incurring.

(1) Introduction
In December 1994, Orange County stunned the markets by announcing that its investment pool had suffered a loss of $1.6 billion. This was the largest loss ever recorded by a local government investment pool, and led to the bankruptcy of the county shortly thereafter.

This loss was the result of unsupervised investment activity of Bob Citron, the County Treasurer, who was entrusted with a $7.5 billion portfolio belonging to county schools, cities, special districts and the county itself. In times of fiscal restraints, Citron was viewed as a wizard who could painlessly deliver greater returns to investors. Indeed, Citron delivered returns about 2% higher than the comparable State pool. Plot Citron's track record (Figure 1).

Citron was able to increase returns on the pool by investing in derivatives securities and leveraging the portfolio to the hilt. The pool was in such demand due to its track record that Citron had to turn down investments by agencies outside Orange County. Some local school districts and cities even issued short-term taxable notes to reinvest in the pool (thereby increasing their leverage even further). This was in spite of repeated public warnings, notably by John Moorlach, who ran for Treasurer in 1994, that the pool was too risky. Unfortunately, he was widely ignored and Bob Citron was re-elected.

The investment strategy worked excellently until 1994, when the Fed started a series of interest rate hikes that caused severe losses to the pool. Initially, this was announced as a ``paper'' loss. Shortly thereafter, the county declared bankruptcy and decided to liquidate the portfolio, thereby realizing the paper loss. How could this disaster have been avoided?

...more at link...

http://www.erisk.com/Learning/CaseStudies/ref_case_orangecounty.asp

On December 6 1994, Orange County, a prosperous district in California, declared bankruptcy after suffering losses of around $1.6 billion from a wrong-way bet on interest rates in one of its principal investment pools. The pool was intended to be a conservative but profitable way of managing the countys cashflows, and those of 241 associated local government entities. Instead, it triggered the largest financial failure of a local government in US history.

Robert Citron, the hitherto widely respected Orange County treasurer who controlled the $7.5 billion pool, had riskily invested the pools funds in a leveraged portfolio of mainly interest-linked securities. His strategy depended on short-term interest rates remaining relatively low when compared with medium-term interest rates. But from February 1994, the Federal Reserve Bank began to raise US interest rates, causing many securities in Orange Countys investment pool to fall in value.

During much of 1994, Citron ignored the shift in the interest rate environment and the mounting paper losses in his portfolio. But by the end of 1994, demands for billions of dollars of collateral from Citrons Wall Street counterparties, and the threat of a run on deposits from spooked local government investors, created a liquidity trap that he could not escape.

Citron could not have undertaken such a risky investment strategy if his actions had been subject to informed and independent risk oversight, and detailed risk-averse investment guidelines. Following the debacle, Orange County revised many aspects of its control procedures and its financial governance, and established a stricter set of investment policies.

Lessons Learnt:
- Beware the unconstrained star performer, even when he or she has a long track record. Where theres excess reward, theres risk though it might take time to surface;
- If the organisational structure, planning and risk oversight mechanisms of an institution are fractured, it is easy for powerful individuals to hide risk in the gaps;
- Borrowing short and investing long means liquidity risk, as every bank knows;
- Risk-averse investors must tie investment objectives to investment actions by means of a strict framework of investment policies, guidelines, risk reporting and independent and expert oversight;
- Risk reporting should be complete, and easily comprehensible to independent professionals. Strategies that are not possible to explain to third parties should not be employed by the risk averse.

...more...

[54anickel]

49. That last snippet could just as easily read "Lessons Forgotten" n/t

[UpInArms]

16. 10:02 EST numbers (damn we're happy!) and blather

Dow 10,638.68 +79.45 (+0.75%)
Nasdaq 2,149.54 +13.98 (+0.65%)
S&P 500 1,228.41 +8.70 (+0.71%)
10-Yr Bond 42.34 +0.23 (+0.55%)

NYSE Volume 219,362,000
Nasdaq Volume 208,832,000

9:40AM: Market opens on a strong note as investors embrace a batch of M&A news... China's CNPC has agreed to buy PetroKazakhstan (PKZ 54.23 +8.83) for $4.18 bln while OSI Pharmaceuticals (OSIP 32.60 -8.17) has agreed to acquire Eyetech Pharmaceuticals (EYET 18.05 +4.06) for $935 mln in cash and stock...

Speaking of mergers, comments out of Barron's about Procter & Gamble's (PG 55.28 +0.74) $57 bln deal for Gillette (G 53.46 +0.68) proving to be an important exception to the reality that so many deals have failed to produce promised benefits, have also underpinned a positive tone to early trading...

[UpInArms]

20. updated blather

10:00AM: Stocks extend their reach to the upside as every economic sector continues to push higher... Energy has led the charge as oil prices paring early losses help the sector extend Friday's 1.5% surge... Also climbing on the back of a weaker dollar has been the Materials sector while strength in HMOs and medical equipment offset continued weakness in Merck (MRK 27.64 -0.42) following Friday's $253 mln Vioxx-related verdict...

Providing the bulk of early leadership, however, has been Technology, following upbeat comments out of Goldman Sachs on EMC Corp. (EMC 13.29 +0.12) and a Banc of America upgrade on Linear Technology (LLTC 37.98 +0.62)...DJTA +0.5, DJUA +0.6, DOT +0.3, Nasdaq 100 +0.8, Russell 2000 +0.6, SOX +1.2, S&P Midcap 400 +0.4, XOI +1.3, NYSE Adv/Dec 1980/623, Nasdaq Adv/Dec 1613/784

[UpInArms]

17. Crude and NatGas prices rising

10:01am 08/22/05 SEPT CRUDE CLIMBS 35C TO $65.70/BRL IN EARLY NY TRADE

10:01am 08/22/05 SEPT NATGAS UP 28.9C, OR 3.2%, TO $9.40/MLN BTUS

[UpInArms]

45. still rising

12:41pm 08/22/05 SEPT CRUDE UP 65C, OR 1%, AT $66/BRL IN NY

12:41pm 08/22/05 SEPT NATGAS NEARS HIGH OF THE DAY, UP 7.6% AT $9.80/MLN BTUS

[54anickel]

18. Hero for Speculators: Davy Crockett

http://www.thestreet.com/funds/jubak/10238265.html

snip>

Why Crockett now? Crockett's career combined politics and real-estate speculation, showed that no risk was too big, emphasized flipping assets and left the grinding hard work of building real wealth to others. He is exactly the icon for our times.

snip>

If you're looking for signs that the market may be set to slow soon, you can take comfort in the growing affordability gap. The average initial mortgage payment for homebuyers climbed to $2,338 in the first quarter, up from $2,060 in the fourth quarter of 2004, according to Bear Stearns. With prices still climbing, this growing initial payment means that fewer buyers can afford the monthly mortgage charges that increasingly expensive homes require. According to the Federal Deposit Insurance Corp., home price appreciation climbed faster than income in 38 of 50 states in the year that ended in March.

snip>

Wall Street, in true Crockett fashion, has already lit out for a new frontier. The hot new thing isn't residential mortgages but securities backed by bundles of commercial mortgages. Last year, real estate owners borrowed $94 billion through commercial mortgage-backed securities, a new annual record. In this year's first half, borrowing through commercial mortgage-backed securities came to $72 billion, so we're well on the way to breaking last year's record with a vengeance. And of course, as long as there's plenty of money begging to be borrowed, commercial real estate prices will keep rising, justifying ever bigger loans, which, in turn, lead to ever higher prices.

The market for commercial mortgage-backed securities, however, is violating one of the rules of speculation that Crockett clearly understood. If you're going to take a bigger risk, such as the possibility that joining the Texas volunteers will lead to participation in a shooting war, you should get a bigger reward, such as, in Crockett's case, the potential for dibs on a big hunk of Texas.

snip>

As Crockett learned, not everything works out as planned. Instead of living to a ripe and wealthy old age as a Texas land baron, Crockett wound up surrounded by the Mexican army. It was just a bit peeved at plans to make a big profit from land that was still, in their minds, part of Mexico.

As I wage my campaign for a Davy Crockett national holiday to celebrate and honor the long American history of speculation, I have just one thing to say to the current generation of speculators: Remember the Alamo! :evilgrin:

more...

[54anickel]

19. Tough week ahead for Wall Street

Stocks to track oil prices, durable goods report

http://www.msnbc.msn.com/id/3683270/

NEW YORK - Stock investors will watch oil prices and durable goods orders next week to discern the strength of corporate and consumer spending.

snip>

“There is a growing impression that the consumer is weakening. We saw that in a lot of the retail data, Wal-Mart being most visible,” said Tim Ghriskey. chief investment officer of Solaris Asset Management in Bedford Hills, New York.

“It shows the high price of gas at the fuel pump in addition to the rise in short-term interest rates, which impacts a lot of the mortgages out there, are influencing consumers.”

Optimism in spite of oil costs

snip>

“The economy is still doing fine. Certainly, oil is very high and it is a matter for concern, but there’s no indication it will hit the economy in the next four or five months,” said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas. “Therefore, we expect companies’ results to still be strong through the end of the year.”

snip>

Durable goods and home sales

With no other major economic indicators on the calendar, data on orders for durable goods, which are products made to last three or more years, will garner attention as the report will give the market a clue as to how much capital investment companies are making.

more...

[UpInArms]

21. More Layoffs At Mittal Steel, Weirton

http://www.wvnstv.com/story.cfm?func=viewstory&storyid=4720

Workers at Mittal Steel, Weirton will soon learn their fate concerning as many as 100 more layoffs. I-S-U President, Mark Glyptis, says the layoffs are temporary--due to a voluntary cycle of layoffs coming to an end. A couple of meetings are scheduled for august 31st at the Weirton Knights of Columbus Hall to discuss details of the layoffs. Meeting times are 7am and 7pm.

...very short blurb...

[UpInArms]

22. What's Happening in Fort Collins, Colorado?

Economic focus turns 1

http://www.coloradoan.com/apps/pbcs.dll/article?AID=/20050822/NEWS01/508220314/1002

It's been more than a year since a group of community members stood before the Fort Collins City Council with a 29-page report it had prepared on strategies to improve the area's economy.

Since then, the high-tech industry has suffered hundreds of local layoffs, and several prominent small businesses have chosen to leave the area.

At the same time, the city's development review process has grown easier, and many small to medium-sized businesses across the city have expanded.

How much was all this because of the city's implementation of strategies in the report - or lack of implementation?

That's the million-dollar question.

A year after the city's first Economic Vitality and Sustainability Action Group, or EVSAG, prepared its landmark report, some group members can point to areas of the economy that have improved as the result of their suggestions. But others are skeptical about how much has really been done.

<snip>

The loss of high-tech jobs is a major issue in Fort Collins. Within the past six months alone, Celestica Inc., Hewlett-Packard Co. and Agilent Technologies have together announced thousands of layoffs.

...more...

[54anickel]

23. The hidden perils of pay-option loans

http://www.latimes.com/business/la-re-lew21aug21,1,1863665.story?coll=la-headlines-business

WASHINGTON — Borrowers with dangerous adjustable rate mortgages that give them the option of paying just about any way they like may find the loans even more perilous — and more expensive — than they ever imagined.

For starters, borrowers may find that as the rates on their mortgages adjust, they could be paying as many as three or four percentage points more than they would had they chosen a different type of adjustable mortgage.

Perhaps even worse, once borrowers realize they acted unwisely, they may not be able to get out of their loans without paying a hefty penalty. Even if you sell your house, you could be required to pay a prepayment fee totaling six months' interest to terminate the mortgage.

In exchange for all this, the broker who put his client in this precarious position is getting paid three times as much as he would had he placed the borrower in a more consumer-friendly adjustable mortgage.

snip>

"The kind of stuff going on out there is wrong," says Mitch Ohlbaum, a West Hollywood mortgage broker. "I think these loans work well when explained and priced properly. The problem is that no one is educating borrowers on what they are getting into."

more...

[54anickel]

25. Banks' rainy-day funds shrink

Gotta wonder how the new bankruptcy rules figured into their decisions. This does not look good to me.

http://www.post-gazette.com/pg/05234/558035.stm

The narrowing spread between short- and long-term interest rates is squeezing net-interest margins at some of the nation's banks. And as that so-called yield curve flattens, competition for loans and deposits is intense. So how did KeyCorp manage to increase its profit 22 percent in the second quarter?

It was easy. The Cleveland bank, with a stock-market value of roughly $14 billion and branches in 13 states, slashed the amount set aside for loans that might go bad. By adding only $20 million to its loan-loss reserves, instead of $74 million in last year's second quarter, KeyCorp boosted the bottom line by about $39 million -- or eight cents of its per-share profit of 70 cents, or $291 million. Without that, KeyCorp would have fallen about two cents short of Wall Street profit targets.

snip>

Saving less for a rainy day is becoming a popular earnings-enhancement strategy at U.S. banks increasingly stretched for profit growth. More than a dozen major banks took a lower loan-loss provision in the second quarter compared with a year earlier, and the industry's loan-loss reserves as a percentage of total loans and leases are at a 19-year low, according to the Federal Deposit Insurance Corp.

Besides some banks helping their profits with gains that don't necessarily reflect underlying success in attracting borrowers and depositors, some analysts are worried the banks are setting themselves up for trouble should the economy stumble. The inevitable loan-quality crunch might be particularly rough on such banks, which would need to replenish their reserves, badly bruising earnings as a result.

snip>

Regulators haven't made it easy for bankers to determine the magic number. The FDIC favors relatively high loan-loss reserve levels, while the Securities and Exchange Commission has been pushing banks to sock away less as a way of making it harder to juice earnings. The two agencies issued joint guidance to the industry in 1999. Mr. Storch says the FDIC closely tracks whether provision levels are "directionally consistent" with loan quality.

more...

[54anickel]

28. China's widening income gap threatening social stability: government

http://news.yahoo.com/s/afp/20050822/ts_afp/chinaeconomyincomepoverty_050822040904

BEIJING (AFP) - China's rapidly widening income gap has reached dangerous levels, risking social instability by 2010 if the present trend continues, a government report warns.

"China's growing income gap is likely to trigger social instability after 2010 if the government finds no effective solutions to end the disparity," the Ministry of Labour and Social Security warned in the China Daily.

Su Hainan, president of the ministry's income research institute, found income disparity in China had reached the crucial "yellow" stage -- the second most serious in a scale of four defined by the institute.

The situation would deteriorate to the most dangerous "red" stage in 2010 if no effective measures were taken within the next five years, he said.

snip>

The National Bureau of Statistics said in June that 10 percent of the nation's richest people enjoyed 45 percent of the country's wealth while the poorest 10 percent had only 1.4 percent of the nation's wealth.

Anyone got a handy link to similar figures for the US? Inquiring minds and all that.

more...

[RawMaterials]

56. US income gap

not the greatest link or source, but shows the point.

MM: How do economists measure levels of equality and inequality?

Wolff: The most common measure used, and the most understandable is: what share of total wealth \ is owned by the richest households, typically the top 1 percent. In the United States, in the last survey year, 1998, the richest 1 percent of households owned 38 percent of all wealth.

http://www.thirdworldtraveler.com/America/Wealth_Divide.html

[54anickel]

59. Thanks RM - it's an enlightening article. Good to "see" you again too.

edit to add snippet

Wolff: The top 5 percent own more than half of all wealth.
In 1998, they owned 59 percent of all wealth. Or to put it another way, the top 5 percent had more wealth than the remaining 95 percent of the population, collectively.
The top 20 percent owns over 80 percent of all wealth. In 1998, it owned 83 percent of all wealth.
snip>
MM: Where does that leave the bottom tiers?
Wolff: The bottom 20 percent basically have zero wealth. They either have no assets, or their debt equals or exceeds their assets. The bottom 20 percent has typically accumulated no savings.

[RawMaterials]

61. I took a nice vacation

out west by car, it still blows my mind why we aren't using ethanol more, in iowa gas was only 2.09/G with 10% ethanol mixed in, but my car went from 35mph highway to 42mph with the ethanol(not to mention the cheaper cost). Plus this could help with farmers subsidies, also we could have windmills in all of the great plains that could generate the power to make the ethanol.

end of rant,, good to see you guys as well.

rm

[ozymandius]

30. 11:29 numbers and blather

Dow 10,615.67 +56.44 (+0.53%)
Nasdaq 2,144.64 +9.08 (+0.43%)
S&P 500 1,226.73 +7.02 (+0.58%)
10-Yr Bond 42.39 +0.28 (+0.66%)
NYSE Volume 580,062,000
Nasdaq Volume 525,509,000

11:00AM: Little changed since the last update as buying remains widespread across most areas... Homebuilders (-0.4%), however, have recently turned negative as rising bond yields prompt more consolidation in a group that has surged 13% so far this year... Financial, another interest-rate sensitive area but one which has much more influence on the broader market, has actually shown resilience in the face of higher borrowing costs, as investors look for bargains in a sector that has underperformed all three of the major averages... NYSE Adv/Dec 2047/927, Nasdaq Adv/Dec 1663/1103

[54anickel]

31. Why a booming economy feels flat

http://www.christiansciencemonitor.com/2005/0822/p01s03-usec.html



snip>

Despite continued strong economic growth, this expansion is clouded with enough complications and uncertainties that, for many, it doesn't feel like good times.

The reason? A boom in corporate profits has not yet created a job market that makes workers feel secure, economists say. Hiring hasn't skyrocketed. Worse, wages are stagnant. This paycheck squeeze may prove more worrisome than soaring oil prices and concerns over a housing bubble. Some experts worry that wage stagnation may prove more permanent this time, because of an increasingly global market for labor.

snip>
"It's hard for me to see this as a good economy," says Dean Baker, codirector of the Center for Economic and Policy Research in Washington. "It's doing better than it had been," but given that the nation went for four years without creating any jobs to speak of, "we have a lot of ground to make up."

By contrast, the glass is way more than half full to Brian Wesbury, an economist at Claymore Securities. He's expecting the nation's output, or gross domestic product, to grow about 3.8 percent this year, and about the same next year, after last year's gain of 4.2 percent. All those numbers are impressive, in the sense that they are above the level that most experts say is sustainable over the long term without sparking inflation.

"There's been a significant rebound," Mr. Wesbury says. "I've been very confused by the coverage" in the media, with its focus on gas prices and alleged housing bubbles. For many economists, those concerns are real, but not necessarily as frightening as recent headlines might imply. :eyes:

more...

[AnneD]

36. Illustrating once again.....

Too many economists live 1)in the beltway or 2) in ivory towers and their feet have not touched Main Street in some time. It also proves that they continually neglect that the bulk of this economy is based on consumer spending. Wal Mart is learning that as their sales have plummeted recently. Just because WSJ etc say it is a fact don't make it true.

[54anickel]

32. Statehouse lobbying close to $1 billion (Check out the pie chart)

http://www.stateline.org/live/ViewPage.action?siteNodeId=136&languageId=1&contentId=47757

Corporations, labor unions, professional associations and state agencies spent nearly $953 million to lobby in the state capitols in 2004, according to an August 10 report from the non profit Center for Public Integrity (CPI).

While lobbyists and their employers spent the most money in California, Texas and New York last year, nine states, led by Mississippi, reported an increase of more than 20 percent in lobbying dollars.

At the same time, 11 states enacted new standards for who qualifies as a lobbyist and what kinds of spending they have to report. Eight states did not report a spending total for 2004, including Pennsylvania, the only state without a legal requirement for lobbyists to register and report their spending.

There are more than 38,000 individual lobbyists in the state capitols -- five for every state legislator -- advocating for everything from business tax breaks and tort reform to aid for the poor and tougher requirements for lobbyists.

more...

[54anickel]

33. China's Growth May Extend Commodity Boom, Helping BHP, Rio

Gee, too bad the US doesn't really produce anything "tangible" to sell anymore. About all we have to offer China is debt and finance. :shrug:

http://www.bloomberg.com/apps/news?pid=10000081&sid=aca9IvpKuubo&refer=australia

Aug. 22 (Bloomberg) -- United Group Ltd., Australia's biggest rail equipment maker, says demand from China will extend the boom in commodity prices for five more years.

``We expected by now to see a slowdown but that's just not happened,'' said Richard Leupen, chief executive of the Sydney- based company, which supplies locomotives and wagons to mining companies to carry iron ore and coal. ``If anything, it's accelerating,'' he said in an interview on Aug. 15.

China's economic growth unexpectedly picked up in the second quarter to 9.5 percent as exports surged and investment in power plants, mines and factories gathered pace. Commodity prices climbed to their highest in 24 years on Aug. 12 as crude oil, gasoline and copper rose to records and natural gas soared.

BHP Billiton, the world's biggest miner, Rio Tinto Group, both United Group customers, and Brazil's Cia. Vale do Rio Doce are spending $8.5 billion on mines, rails and ports in Brazil's Amazon and Australia's outback to supply raw materials to China, the globe's largest consumer of steel, copper and zinc.

``The skies look clear in the mining, metals and steel sector right now with a reacceleration of global growth supporting close to record share prices for many equities,'' said Merrill Lynch & Co. analyst Vicky Binns in a Aug. 16 report. Stock prices could rise another 30 percent should commodity prices remain near records for a year, and gains could be even bigger because of the ``China effect,'' she said.

more...

[54anickel]

34. Chinese imports cause logjam

http://www.dallasnews.com/sharedcontent/dws/bus/stories/082105dnbuschinaship.2281c4aa.html

snip>

But as the tidal wave of clothes, furniture and other items from China mounts each year, a once-adequate infrastructure for moving freight from Southern California to the East now finds itself strained.

Without improvements, the outcome could be disastrous, some experts fear. If ports and railroads become as clogged as some of the busiest U.S. highways, an economy increasingly dependent on China trade may suffer.

"Transportation is now embedded in the very fabric of our economy as never before," Jeffrey Shane, undersecretary for policy at the U.S. Department of Transportation, warned earlier this year. "Bottlenecks in the supply chain, if left unaddressed, will have far more serious economic consequences than ever before." Albert Pierce, executive director of the Transpacific Stabilization Agreement, a group representing 13 container shipping lines, puts it more succinctly: "We have major problems."

At current productivity and growth levels, North American ports and the rail systems that serve them will be severely congested by 2020, said M. John Vickerman, a principal at TranSystems Corp., a transportation services firm. And by 2010, he predicts, 75 percent of 16 key U.S. ports will be struggling with severe capacity problems.

snip>

TOP 10 IMPORTS FROM CHINA IN 2004

Last year, imports from China reached $197 billion, higher than any other U.S. trading partner except Canada.

1. Furniture

2. Toys

3. Footwear

4. Plastic products

5. Computers

6. Tools, screws, latches, etc.

7. Sporting goods

8. Cooking, ironing, heat appliances

9. Kitchenware

10. Electrical and electronic products


Meanwhile, U.S. exports to China totaled only $35 billion last year, but they have been growing.


TOP 10 EXPORTS TO CHINA IN 2004

1. Paper and paper waste

2. Mixed metal scrap

3. Fabrics and raw cotton

4. Newspapers

5. Foam waste and scrap

6. Logs and lumber

7. Wood pulp

8. Plastics

9. Frozen fish

10. Other synthetic resins

Need to add US debt to this list

[54anickel]

35. Saudi Arabia - The Next Mid East Flashpoint

http://www.321gold.com/editorials/ridley/ridley082205.html

The last thing the United States needs right now is another conflict in the Mid East to deal with, but unfortunately America's key ally in that troubled region is showing signs that they are on the brink of a civil war.

At stake here are 26% of the world's oil reserves and 204 trillion cubic feet of natural gas. If extremist revolutionaries get their way, they will attempt to bring the U.S. and the rest of the western world to their knees by jacking up oil prices to punitive levels.

For the worst possible reasons, the likelihood of oil and gold dropping much further in price seems highly unlikely. In fact, it is very possible we could see sharper price spikes.

Playing into the latest price surge over $60 has been the recent death of Saudi Arabia's King Faud, which has traders fretting the country's oil output could be disrupted as concerns of a civil war heighten. Just hours before the newly crowned King Abdullah arrived in the holy city of Medina, security forces killed the leader of al Qaeda in Saudi Arabia in a gun battle.

Earlier this month, terrorism concerns caused the U.S. to shut an embassy and two consulates. In an already skittish market, any unrest in Saudi Arabia is especially unnerving particularly given the fact that the major source for terrorism funding and manpower comes mostly from Saudi Arabia who are also world's leading supplier of oil.

Saudi Arabia has the potential to become the world's biggest political and economic disaster and is one of the major reasons why we are now paying more to fill up our cars.

more...

[54anickel]

37. Complacency Abounds!

http://www.321gold.com/editorials/chapman_d/chapman_d_082205.html

It's been a very hot summer. Hot hazy weather tends to slow us down. Good thing we work (or most of us anyway) in air-conditioned offices. But then with the sharply rising cost of oil and gas makes us look twice at our usage and maybe we set the levels on the AC a little higher. Indeed the sharply rising cost of oil and gas is the only thing that has been really hot in the stock market over the past few months. On the other side the rising cost of energy is beginning to show up in inflation numbers and it is impacting the profit (or outlook for profits) for host of sectors particularly the airlines, transportation and retail. The car companies (or at least the US car companies) in desperation to generate sales have dropped prices on their unsold inventories to the levels where employees buy them. That means effectively cost. And if that doesn't work? What's next - sell at a loss?

Everyone got excited because the market embarked on a summer rally. But then oddly the hot weather does for whatever reason start a summer rally. But overall it has been a pretty feeble rally energy aside. Just as we might have turned positive the market started to back off again. As of date the Dow Jones Industrials are actually down 2.1% on the year, the S&P 500 has eked out a 0.6% gain while the NASDAQ is down 1.8%. Some scorcher of a market. We call it churning. While the bulls got excited because of the rising 52-week highs and breadth they fell silent when it once again faltered. We should also say, "where's the beef" which in this case where's the volume. To be blunt it has been pitiful. What did we say, "Churning". Oh yes the TSX has been a scorcher up some 12.3%. But then energy is big component of the TSX and its up over 44%. The key financial group is up only 7.8% not bad but no great gains.

But all the action has not stopped the bulls. Investor sentiment rose to over 59% at its most recent peak lower then the 63% we saw last December but nonetheless at levels usually associated with a top. In the most recent survey the bulls were still at a lofty 57.3%. The VIX volatility indicator hit a low recently just above 10 but it has climbed to 13 over the past couple of weeks as the market has weakened. That's still well below the very bullish level of 15. Complacency abounds as the market just expects to hang in here and go higher. Oh did we remind you. This is a year ending in 5 and years ending in 5 have never had a down year or at least not in the history of the Dow Jones Industrial.

We have constantly pointed out that the market and the economy has been held aloft by record low interest rates and massive injections of liquidity from the Federal Reserve and the other world central banks. This has been the plan from the beginning of how Alan Greenspan would save us from the Kondratieff winter. But has he? We don't believe so but there are many who would disagree with us. We believe that all he has accomplished is to delay the inevitable and instead has contributed to keeping the stock market aloft when it should have been allowed to fall to more historical valuations levels eons ago.

more...

[UpInArms]

38. 12:18 EST numbers and noon blather

Dow 10,574.03 +14.80 (+0.14%)
Nasdaq 2,138.88 +3.32 (+0.16%)
S&P 500 1,222.30 +2.59 (+0.21%)
10-Yr Bond 42.36 +0.25 (+0.59%)

NYSE Volume 746,674,000
Nasdaq Volume 663,880,000

12:00PM: Market off its best levels midday but holding onto modest gains as M&A activity offsets higher oil prices and rising bond yields... Underpinning the bulk of improved sentiment have been reports of a $4.2 bln bid for PetroKazakhstan (PKZ 54.02 +8.62) from China's CNPC and a $935 mln offer from OSI Pharmaceuticals (OSIP 32.22 -8.55) to buy Eyetech Pharmaceuticals (EYET 18.13 +4.14)... A lack of economic data to perhaps overshadow upbeat corporate developments has also kept investors focused on finding bargains following the S&P 500's biggest weekly disappointment (-0.9%) in two months...

With regard to sector strength and weakness, Energy has paced the way higher as worries about supply disruptions in the Middle East have helped crude oil prices ($65.70/bbl +$0.35) extend gains... Technology has also turned in a respectable performance, getting a boost from Semiconductor following an analyst upgrade on Linear Technology (LLTC 37.84 +0.48) and ahead of Intel's (INTC 26.02 +0.37) Developer Forum (8/23-8/25)... Consumer Staples have been another influential leader to the upside, getting a lift after Procter & Gamble (PG 55.57 +1.03) was mentioned favorably in Barron's...

Better than expected Q1 (Jul) earnings from Heinz (HNZ 36.91 +0.61) and a Citigroup upgrade on Archer Daniels Midland (ADM 21.98 +0.98) have also provided support... Health Care has also shown relative strength but gains have been minimized by continued pressure on shares of Merck (MRK 27.45 -0.61) following Friday's $253 mln Vioxx-related verdict...


You've Lost That Lovin' Feelin' is playing in the background :D

[ozymandius]

40. love's gone

12:36
Dow 10,553.42 -5.81 (-0.06%)
Nasdaq 2,132.63 -2.93 (-0.14%)
S&P 500 1,219.44 -0.27 (-0.02%)
10-Yr Bond 42.26 +0.15 (+0.36%)
NYSE Volume 812,809,000
Nasdaq Volume 727,520,000

[fishnfla]

43. inneresting

sabotaged oil production in Iraq announced, market turns south

Powell to Bush: you break it, you buy it

Iraq is Bush's millstone

[UpInArms]

48. sad blather

12:30PM: Indices continue to weaken and now struggle to stay above the flat line as the afternoon session gets underway... While oil prices touching $66/bbl certainly has not helped underlying sentiment, it is worth noting that choppy trading within the last hour can also be traced to limited investor participation, as Nasdaq volume (692 mln shares) remains well below the 1.0 bln share mark... NYSE Adv/Dec 1890/1207, Nasdaq Adv/Dec 1564/1324

[54anickel]

42. China out on a shopping spree?

PetroChina's Parent Agrees to Buy PetroKazakhstan (Update4)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=agH7ltey.Po8&refer=home

Aug. 22 (Bloomberg) -- China National Petroleum Corp., the nation's biggest oil company, agreed to buy PetroKazakhstan Inc. for $4.18 billion, topping a bid by an Indian producer and securing supplies for the world's fastest-growing major economy.

China National Petroleum, the state-run parent of Hong Kong- listed PetroChina Co., agreed to pay $55 a share, or 21 percent more than its closing share price on Aug. 19, Calgary-based PetroKazakhstan said in a statement today. India's Oil & Natural Gas Corp. also bid for the company, which accounts for 12 percent of Kazakhstan's output.

The purchase marks a victory for China in a contest with India for oil reserves, after soaring demand in Asia's most- populous countries helped drive prices to a record. China's largest overseas acquisition follows three weeks after U.S. political opposition scuttled an $18.5 billion cash offer for Unocal Corp. by China's Cnooc Ltd.

``There is perceived to be a shortage of oil supplies, and Kazakhstan is one of the areas that is perceived to have the highest potential for reserves,'' said William Wells, chief executive of Pope Asset Management LLC in Memphis, Tennessee, which owned more than 720,000 PetroKazakhstan shares as of June 30. Wells made his comments before today's announcement.

Among former Soviet states, Kazakhstan is second only to Russia in oil production. Chinese President Hu Jintao in July visited his Kazakh counterpart Nursultan Nazarbayev to discuss construction of pipelines to transport oil and gas to China. Its economy grew 9.5 percent in the first half after tripling in a decade, forcing increased oil imports as local production failed to meet demand, which more than doubled in 10 years.

more...

[AnneD]

65. howz about

Chain of fools...

[54anickel]

39. What Will Cause the Next Recession?

$70 Tank of Gas
The Housing Market Starts to Show Signs of Weakness
Greenspan - Where's the Fire?
Malta? New York, London, Brussels, Sofia, Toronto, Etc.

http://www.321gold.com/editorials/mauldin/mauldin082005.html

It's a race to see what will be the cause, or maybe better put, what will be blamed for the next economic slowdown. Will it be oil and rising energy prices? What about a slowdown in the housing market? You can't count out the Fed raising interest rates as source of economic slowdown. If China slows down and thus has less money to invest in our bonds, will rates rise? There are so many potential culprits. We run through them and more as we try to peer into 2006.

One of my favorite cartoons is a picture of two scrawny vultures sitting on top of a cactus in the middle of the desert. One turns to the other and says, "Patience, hell. Let's go kill something." Patience is what we are going to need for the rest of this year.

$70 Tank of Gas

It happened to me for the first time this week. My gas tank topped out at over $60. Texans are not used to $2.65 a gallon. The local good old boys can now spend over $70 to fill their Ford F-150 pickups. Let's work the numbers on that. The truck gets 14 miles per gallon. In Texas, you can have a long commute to work. If you do 20,000 miles per year, you will need 1428 gallons. That is $3,785 or $72.80 a week. For a guy making $15 an hour or $600, less taxes, with say a take home pay of $500, that would be almost 15% of his paycheck! Tough to support a family on that! Can we say a second job?

snip>

As an aside, and for something else to add to your worry closet, my friend and expert natural resource analyst and economist, Don Coxe recently wrote about a fascinating report by the Association for the Study of Peak Oil and Gas, which refers to 1985 when OPEC members were "competing with each other to be allotted bigger OPEC quotas." Coxe writes "OPEC has always allotted quotas to members in proportion to their proven reserves. Kuwait's geologists must have had a pretty good year, because their reserves climbed from 64 bn bbls to 92 bn. But the Kuwaitis were pikers compared to their brethren in the Emirates, who said that, upon reflection, they needed to boost their reserves from 31 bn to 92 bn. Not to be outdone, Iran announced its real reserves were 93 bn, up just a tad from a previous 47 bn. The 1985 champ, though, was the savvy Saddam, who was not content with double digits: his reserves went to 100 bn, up slightly from the previous 47 bn." According to the Association for the Study of Peak Oil and Gas, those reserve figures remain today.

There are serious reasons to doubt the truth of OPEC oil reserves, or there ability to increase production fast enough to keep up with projected world demand. Oil prices may not be dropping back into the 30's or low 40's again, without a sharp worldwide recession lowering demand big-time.

more...

[UpInArms]

41. MBIA may be sued by SEC (more reinsurance scamming)

http://www.marketwatch.com/news/story.asp?guid=%7BA1CB4807%2DB7C0%2D44B4%2D85F4%2DE1152C6EFC9C%7D&siteid=mktw

SAN FRANCISCO (MarketWatch) -- MBIA Inc., one of the largest bond insurers, could be the target of a civil lawsuit by the Securities and Exchange Commission over its use of a controversial type of reinsurance that regulators worry has been abused by several companies.

Armonk, New York-based MBIA (MBI: news, chart, profile) said late Friday that it received a "Wells Notice" from the SEC informing the company that the agency's staff has recommended civil action against it for breaking federal securities laws.

A Wells Notice gives the recipient a chance to persuade the SEC not to take action and MBIA said it's in discussions with the regulator to try to resolve the charges.

MBIA also said it's talking with the office of New York Attorney General Eliot Spitzer and the New York Insurance Department to resolve any civil charges that Spitzer may bring.

<snip>

As a leading insurer of future bond payments, MBIA is a lynchpin of debt markets, so the outcome of regulators' investigations could have an impact beyond the company's reputation and financial health.

...more...

[54anickel]

46. How Oil Prices Are Affecting Business

More than one-third of executives in a new survey believe that their companies are vulnerable to rising oil prices and are scaling back expectations for revenue growth, new jobs, and investments.

http://www.cfo.com/article.cfm/4312548/c_4312566?f=home_todayinfinance

snip>

"In the second quarter, business leaders saw oil prices cross the $60-a-barrel marker for the first time," said John O'Connor, vice chairman of PricewaterhouseCoopers, in a press release. "It remains to be seen whether their reduced growth estimates, capital spending, and hiring plans represent a temporary case of the jitters, or a signal of something more."

Indeed, 52 percent of respondents reported that higher oil prices are having a strong (23 percent) or moderate (29 percent) negative impact on profit margins of companies in their industry. And 36 percent see higher oil prices as a prospective barrier to their company's growth. These oil-conscious businesses are projecting an average 5.9 percent revenue increase for the year ahead, compared with 7.9 percent for all others.

In addition, 35 percent of the oil-conscious businesses plan to increase staffing over the next 12 months, compared with 52 percent for all other companies. And only 39 percent of oil-conscious businesses plan major new capital investments during the next year, compared with 51 percent; their expected level of spending averages 5.2 percent of revenues, compared with 9.7 percent.

more...

[ozymandius]

50. 1:07 numbers and blather

Dow 10,548.71 -10.52 (-0.10%)
Nasdaq 2,132.74 -2.82 (-0.13%)
S&P 500 1,219.63 -0.08 (-0.01%)
10-Yr Bond 42.19 +0.08 (+0.19%)
NYSE Volume 895,168,000
Nasdaq Volume 805,959,000

1:00PM: Sellers continue to show their tenacity in response to oil's continued climb as the major averages now trade in negative territory... Weighing heavily on the proceedings has been the absence of leadership from influential sectors like Financial, Technology, Health Care and Industrials - all of which have reversed course within the last hour... Dow components recently slipping below the flat line include CAT, GE, JNJ, JPM, MO, SBC and VZ...NYSE Adv/Dec 1681/1429, Nasdaq Adv/Dec 1521/1502
12:30PM: Indices continue to weaken and now struggle to stay above the flat line as the afternoon session gets underway... While oil prices touching $66/bbl certainly has not helped underlying sentiment, it is worth noting that choppy trading within the last hour can also be traced to limited investor participation, as Nasdaq volume (692 mln shares) remains well below the 1.0 bln share mark... NYSE Adv/Dec 1890/1207, Nasdaq Adv/Dec 1564/1324

[54anickel]

52. U.S. Treasuries mixed as stocks turn lower

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-08-22T165644Z_01_N22451517_RTRIDST_0_MARKETS-BONDS-UPDATE-1.XML

NEW YORK, Aug 22 (Reuters) - U.S. Treasury debt prices were mixed on Monday as investors left stocks and moved into the bond market at the beginning of a slow summer week that will culminate with much-anticipated comments from Federal Reserve Chairman Alan Greenspan.

Traders said the bond market was reflecting flows into and out of the stock market, with the bond market retracing and then erasing early losses as the stock market gave back early gains.

"It's kind of the stocks thing, but there's really very little going on," said one Wall Street bond trader at a primary dealer.

Given a light schedule of economic data this week, the bond market will listen closely to Fed officials for clues on inflation at a time when spiking energy prices have heightened the focus on how price increases could affect the economy.

snip>

The week brings Wednesday's offering of two-year notes, data on durable goods orders and on new and existing home sales. Greenspan speaks on Friday, preceded on Wednesday by Michael Moskow, the president of the Chicago Federal Reserve Bank.

more...

[UpInArms]

53. U.S. stock prices sour as oil rises (to $66 bbl)

http://www.marketwatch.com/news/story.asp?guid=%7BD24DA6D1%2D2DAC%2D4D71%2D80B6%2D10E32697705B%7D&siteid=mktw

NEW YORK (MarketWatch) - U.S. stocks turned negative in early afternoon activity, after the crude futures once more ventured to $66 a barrel, eclipsing the early benefit of news of China's CNPC International Ltd.'s $4.18 billion deal to buy PetroKazakhstan Inc.

The Dow Jones Industrial Average ($INDU: news, chart, profile) , last was down 8.75 points at 10,550, well below an intraday high of 10,641. Only 13 of the average's 30 components in positive territory.

The S&P 500 ($SPX: news, chart, profile) was down 0.16 points at 1,219, and the Nasdaq composite ($COMPX: news, chart, profile) down 1.45 points at 2,134.

Volume was light, exaggerating the significance of the losses, after earlier in the day making initial gains seem more dramatic than they were. On the New York Stock Exchange 694 million shares were traded, while 831 million shares traded in the Nasdaq market.

The market lost hold of its early and dropped into negative territory shortly before 1 p.m.

<snip>

In addition, some investors had to take new positions early Monday, following Friday's monthly options expirations, and most of that activity ran its course by midday, depriving the market of much of its momentum, Suskind said.

Given the low volumes, Suskind said there also "wasn't much rationale" behind the market's rise early on Monday or its subsequent drop.

...more...

[Roland99]

54. I wonder how a new Islamic gov't in the Middle East will affect the market

[54anickel]

58. With the phenomenal success the Bush ME policy is having in

recruiting for jihad, I'd be willing to guess we'll all find out soon enough.

[Kathryn STone]

67. I thought the Saudi's were our friends

refer to Michael Moore's Farenheit 9/11 and Bush holding hands with that dude on his ranch

[ozymandius]

57. very anemic

2:06
Dow 10,554.05 -5.18 (-0.05%)
Nasdaq 2,136.12 +0.56 (+0.03%)
S&P 500 1,219.68 -0.03 (-0.00%)
10-Yr Bond 42.19 +0.08 (+0.19%)
NYSE Volume 1,082,475,000
Nasdaq Volume 958,755,000

1:30PM: Not much changed since the last update except that market internals now suggest a mixed tone to trading... Advancers on the NYSE outpace decliners by a 17 to 14 margin but declining issues now hold a slim 15 to 13 edge over advancing issues... The ratio of down to up volumes, however, suggests a modestly negative bias as the Dow, S&P and Nasdaq struggle to find initial support near 10530, 1215, 2130, respectively... NYSE Adv/Dec 1728/1413, Nasdaq Adv/Dec 1399/1540

[Roland99]

64. All's well now, nearing the close

DJIA 10,567.40 +8.20
Nasdaq 2,139.70 +4.14
S&P 500 1,221.25 +1.54
Russell 2000 656.52 +4.01
CBOE Volatility 13.45 +0.03
30 Yr Bond 4.43 +0.01
10 Yr Bond 4.22 +0.01

[54anickel]

60. Check out the latest record on the debt - another milestone

http://brillig.com/debt_clock/

The Outstanding Public Debt as of 22 Aug 2005 at 07:15:29 PM GMT is:



The estimated population of the United States is 296,808,256
so each citizen's share of this debt is $26,727.37.

[UpInArms]

63. Ex-Bristol-Myers execs face fraud charges

http://www.marketwatch.com/news/story.asp?guid=%7BE844BF95%2D61A4%2D4967%2D83BA%2DC6F0BCB0CA00%7D&siteid=mktw

WASHINGTON (MarketWatch) -- Federal regulators on Monday charged two former Bristol-Myers Squibb Co. executives with fraud for their alleged involvement in a scheme to manipulate company earnings data in 2000 and 2001.

The Securities and Exchange Commission said Frederick Schiff, who had served as chief financial officer, and Richard Lane, former worldwide medicine group president, directed the drugmaker (BMY: news, chart, profile) to sell large amounts of its products to wholesalers ahead of demand and improperly recognized revenue from $1.5 billion of these sales to its two largest wholesalers.

And, when results fell short of analysts' expectations and the company's own targets, Bristol-Myers improperly used reserves to inflate earnings, the SEC said.

Bristol-Myers paid $150 million to settle related SEC charges on Aug. 4, but the agency's now seeking fines against Schiff and Lane, plus a return of their ill-gotten gains. See related story.

Regulators also want to bar the two men from serving as officers or directors of publicly traded companies.

...more...

CEOs = Crooks R Us

[UpInArms]

66. closing numbers and yada

Dow 10,569.89 +10.66 (+0.10%)
Nasdaq 2,141.41 +5.85 (+0.27%)
S&P 500 1,221.73 +2.02 (+0.17%)
10-Yr Bond 42.19 +0.08 (+0.19%)

NYSE Volume 1,603,393,000
Nasdaq Volume 1,388,628,000

Close: Stocks finished the day to the upside but limited participation on the part of buyers provided little conviction behind's the session's performance... Before the bell, the market was shaping up to be quite a day for the bulls, as a fresh batch of M&A activity and some upbeat corporate news underpinned a bullish bias at the onset... China's CNPC made a $4.18 bln bid for PetroKazakhstan (PKZ 53.75 +8.35) while OSI Pharmaceuticals (OSIP 31.92 -8.85) agreed to acquire Eyetech Pharmaceuticals (EYET 18.13 +4.14) for $935 mln in cash and stock...

Speaking of mergers, a Barron's article highlighting Procter & Gamble's (PG 55.21 +0.67) $57 bln deal for Gillette (G 53.52 +0.74) as a vital exception to the fact that so many deals fail to produce promised benefits, also underpinned a positive tone to early trading that lifted the Dow as much as 0.8% in early action... But a midday spike in oil prices above $66/bbl, amid supply concerns in the Middle East, coupled with some deterioration in market technicals, prompted investors to lock in early market gains...

And while the major averages still posted modest gains, the absence of notable economic and earnings data left stocks mired in relatively tight afternoon trading ranges, as seven out of ten economic sector inched higher... Turning in the day's best performance was Utilities, due largely to reports that FPL Group's (FPL 42.61 +1.71) Florida Power & Light unit signed a settlement to eliminate a proposed $430 mln rate hike... However, as one of the least influential economic sectors, accounting for only 3.5% of the S&P's total weighting, the sector attracted little more than those interested in dividend-paying stocks...