STOCK MARKET WATCH, Thursday April 3, 2008

[Demeter]

Source: DU

STOCK MARKET WATCH, Thursday April 3, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 293
DAYS SINCE DEMOCRACY DIED (12/12/00) 2629 DAYS
WHERE'S OSAMA BIN-LADEN? 2355 DAYS
DAYS SINCE ENRON COLLAPSE = 2646
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
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
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON March 28,
2008>

Dow....... 12,608.92 -45.44 (-0.36%)
Nasdaq......2,361.40 -1.35 (-0.06%)
S&P 500.... 1,367.53 -2.65 (-0.19%)
Gold future...900.20 +12.40 (+1.38%)
30-Year Bond 4.39% +0.01 (+0.11%)
10-Yr Bond... 3.58% +0.04 (+1.07%)






GOLD, EURO, YEN, Loonie and Silver

---

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>

---

No link yet.

[Demeter]

1. Tipping Points? BY CHRIS PUPLAVA

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

Various undercurrents in the economy are pointing to shifts currently underway that are hinting at trend changes in the making. Two topics that have remained of interest are nonresidential real estate and vehicle sales data and composition. It is no secret that nonresidential real estate lags residential real estate, but the actual peak in this cycle for nonresidential real estate has yet to be determined or garner main stream media attention. Additionally, another trend that appears to be in the making is that high energy prices have finally led to a shift in consumer preferences, as is the result in a free-market economy where price dictates the balance between supply and demand and affects consumer preferences. The first topic to be covered below is the likely tipping point in nonresidential real estate.

Nonresidential Real Estate: Right on Cue?

We received the first hint that nonresidential real estate may have peaked last year as the year-over-year (YOY) rate of growth had steadily declined from the peak rate of 24.5% in Q3 2006 to 17.0% in Q4 2007. The reason why monitoring nonresidential real estate is so important and why the decline in residential fixed investment has had a more muted affect on GDP growth is that the growth in real nonresidential fixed investment in 2007 completely offset the decline in residential fixed investment. In 2007, real nonresidential fixed investment grew by $97.9 billion while real residential fixed investment fell by $96.7 billion, more than offsetting the entire decline from the housing recession last year.

Though nonresidential fixed investment offset residential fixed investment last year, that may not be the case this year as nonresidential fixed investment in structures (commercial real estate) appears to be peaking right on cue with a lag of two years after residential real estate, with both likely trending down in 2008.

One caveat, the type of recession we are likely to have will be different than 2001, and thus have different outcomes to both nonresidential and residential fixed investment. The 2001 recession was a business-led recession, and so the decline in commercial real estate was much more drastic than residential real estate as seen below. Conversely, as this present recession is more likely to be characterized as a consumer-led recession resulting consumers pulling back the reigns on spending while corporate balance sheets remain healthy, commercial real estate is not likely to decline to the same degree that residential real estate has. The roles are likely to be reversed below, with the decline in commercial real estate likely to show a milder decline than residential real estate.

The Tipping Point in Consumer Vehicle Preferences?

As the price of oil over the years continued to rise, there were many arguments that high oil prices would derail the economy. The price of oil at which economists maintained this would occur kept rising, first to $40 oil, then $50 oil, $60, $70, $80, then $90 oil. Oil continued to rise with many economists and financial analysts baffled at the economy’s resiliency to continue to grow in the face of higher oil and gasoline prices. The ability of the economy to grow in spite of higher oil prices sparked the question, “What price of oil WILL derail the economy?” An attempt to quantify this answer showed in a previous WrapUp (U.S. Economic Energy Intensity) that the breaking point for the economy will likely be seen with oil above $150//barrel. The current resiliency of the U.S. economy to high oil prices is the result of its transition to a service economy from a manufacturing economy, leading to a decline in our petroleum consumption per unit of GDP, which has continued to decline over the last several decades.

Though the report showed that it would take oil north of $150/barrel to derail the aggregate economy, the report did not address at what price oil prices might begin to affect consumer preferences for vehicles, which would likely occur at a point before the entire economy would be derailed by higher oil prices. The release of yesterday’s March vehicle sales report sparked renewed curiosity to this question. While reading the March sales report, two trends were clearly evident; domestic auto producers continue to lose ground to foreign automakers as are truck sales relative to car sales.

[InsultComicDog]

12. I've often wondered about the effect on consumer vehicle preferences

I figure that if gas prices continue to rise I may do something counterintuitive and try to get a highly discounted gas hog (used). We don't put many miles on our cars and would still be using much less gas than most people driving, say, a Camry. For now, that's just a thought. But who knows? There may be a glut of these vehicles in the market if the price continues to climb.

[Demeter]

2. Today's Reports

Initial Claims 03/29 Unemployment

Briefing.com 360K
Consensus 365K
Prior 366K


ISM Services Mar

Briefing.com 49.0
Consensus 48.5
Prior 49.3

[UpInArms]

19. U.S. weekly initial jobless claims rise 38,000 to 407,000 - last wk rev'd up 4,000

05. U.S. 4-wk. avg. continuing claims rise to 2.86 million
8:30 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

06. U.S. continuing jobless claims rise 97,000 to 2.94 million
8:30 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

07. U.S. 4-wk. avg. jobless claims rise 15,750 to 374,500
8:30 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

08. U.S. weekly initial jobless claims rise 38,000 to 407,000
8:30 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

[UpInArms]

24. Initial jobless claims are a bad omen

http://www.marketwatch.com/news/story/weekly-us-jobless-claims-highest/story.aspx?guid=%7BDEE66DAB%2D14E7%2D4462%2D95A9%2D26094F1092A3%7D

WASHINGTON (MarketWatch) -- First-time applications for state unemployment benefits rose last week, the Labor Department reported Thursday -- the eve of the release of pivotal data on the state of the nation's job market.

Claims for the week ended March 29 rose by 38,000 to reach 407,000, marking the highest level seen for this economic indicator since mid-September 2005.

The four-week average of initial claims also rose, increasing by 15,750 to 374,500, and thus hit the highest since the beginning of October 2005.

Economists see readings consistently higher than 350,000 as signaling significant weakening in the labor market. Initial claims ranging from about 300,000 to 325,000 are consistent with a healthy rate of U.S. employment growth.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.

...more...

[UpInArms]

32. ISM non-manufacturing index rises to 49.6% in March from 49.3% in February

01. ISM non-manufacturing index rises to 49.6% in March
10:08 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

02. Economists expected 48.5% reading on ISM services
10:08 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

03. ISM services' new orders increases to 50.2%
10:08 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

04. ISM services employment flat in March, says survey
10:08 AM ET, Apr 03, 2008 | Comments: 0 | Tags: none

[Demeter]

3. Oil near mid-$104 after overnight jump By GILLIAN WONG, AP

http://news.yahoo.com/s/ap/oil_prices;_ylt=AjHegrSjDLVFRyYgRwS_zvFv24cA

Oil prices were steady Thursday after jumping more than $3 a barrel in the previous session after the U.S. government reported a larger than expected decline in gasoline stockpiles. Traders brushed aside a large increase in crude oil inventories reported by the U.S. Energy Department Wednesday, focusing instead on the third straight week that gasoline inventories fell.

Light, sweet crude for May delivery fell 41 cents to $104.42 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract on Wednesday jumped $3.85 to settle at $104.83 a barrel.

The department's Energy Information Administration said gasoline supplies fell 4.5 million barrels last week, twice the decline forecast by analysts surveyed by Dow Jones Newswires. Falling gasoline inventories suggest supplies are tightening as the peak summer driving season approaches. That could boost prices of the motor fuel further, and keep oil prices elevated. But some suggested oil's gains in the previous session were overdone.

"In my view, the reaction to the gasoline inventory draw was a knee-jerk overreaction," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Refiners are reacting to the soft demand and therefore they are not processing as much crude, so it should not have been a surprise to see the crude inventory build and the gasoline draw because refiners were making less," Shum said.

The EIA reported that demand for gasoline over the four weeks ended March 28 was 0.5 percent lower than a year earlier, averaging nearly 9.2 million barrels a day — although it rose by nearly 1 percent last week when compared to the same week last year.

"Demand so far this year for gasoline has been lower versus the same time period last year and that's a result of the U.S. economic downturn and possibly some demand destruction due to the high oil prices," Shum said. He added that he did not expect oil prices to pull back too much, saying there is support for oil at around the $100 level. "Even though demand in the U.S. has been softening, demand elsewhere is strong," Shum said. "China is increasing imports of gasoline, in part as stock building ahead of the Olympics."

EIA data showed crude oil inventories grew 7.4 million barrels last week, more than three times the increase analysts had expected.

[Demeter]

4. Venezuela diverts Exxon oil to China

http://business.smh.com.au/venezuela-diverts-exxon-oil-to-china/20080329-22b8.html



Venezuela is sending to China all the oil it previously shipped to a US refinery jointly owned with Exxon Mobil amid a legal battle between the OPEC nation and the US oil giant, Energy Minister Rafael Ramirez said on Friday.

Exxon and Venezuela have been in dispute over supplies to the Louisiana-based Chalmette refinery since Exxon won court orders freezing $US12 billion in Venezuelan assets as part of a legal battle over compensation for Exxon assets Venezuela nationalized in 2007. State oil company PDVSA halted supplies to Chalmette, a 50-50 joint venture that can process about 193,000 barrels per day of crude, after Exxon began rejecting some of the cargoes that Venezuela destined for the refinery. Ramirez said PDVSA rerouted the supplies in protest, which he said were meant to pressure Venezuela as part of an international arbitration over the 2007 nationaliSation of the Cerro Negro heavy oil project that Exxon once ran.

Exxon wants at least $US5 billion in compensation, though PDVSA says it is due less than $US1 billion.

A London court this month lifted one of the freeze orders, though Exxon still has similar injunctions in Netherlands and Netherlands Antilles courts.

Venezuelan President Hugo Chavez is keen to export more oil to Asia to reduce traditional dependence on United States energy markets.

[Demeter]

5. Opec chief sees oil at $80-110

http://english.aljazeera.net/NR/exeres/00EF0F91-97DB-4D22-B7A7-741D6C397102.htm


OPEC ministers have left oil output unchanged despite calls from consuming nations
Chakib Khalil, the president of the Organisation of the Petroleum Exporting Countries (Opec), has said that oil prices will range between $80 and $110 per barrel for the rest of 2008. Khalil, who is also Algerian energy and mines minister, dismissed on Saturday suggestions that Opec is responsible for the rise in prices. Instead Khalil, interviewed on Algerian television, blamed the falling value of the dollar and economic problems in the US. He said that Opec faced pressure from consuming nations, who portray the group as responsible for high oil prices.

At a meeting in Vienna earlier this month, Opec decided to keep its output steady despite calls from consuming countries for it to be increased in order to halt high prices.


No Opec role

Khalil has previously said that Opec has not played a role in rising oil prices in recent months but instead the market is responding to US economic problems and the falling US dollar.

"The truth is that the current prices are linked to the US economic problems as well as to the value of the dollar."

He said Algeria's oil and gas sector would continue to do business in the US dollar.

[Demeter]

9. Gas prices match record high

http://money.cnn.com/2008/04/02/news/economy/gas_prices/index.htm?postversion=2008040206



NEW YORK (CNNMoney.com) -- Average gasoline prices are back at their record high, a key survey conducted for the motorist group AAA showed Wednesday. The nationwide average price of regular rose a tenth of a cent to $3.287 a gallon, matching the record high reported on Monday, according to AAA's Web site. Regular was $3.165 a gallon on average at this time last month and $2.696 a gallon a year ago, according to AAA.

The average price-per-gallon of diesel fuel rose slightly to $4.025 a gallon. Diesel was at $3.674 last month and $2.855 a year ago. The high price of diesel fuel has been a major concern for workers in the trucking industry. Trucking companies, and especially independent truckers, are increasingly faced with high fuel costs that can drive them out of business.

Hawaii continued to lead the country in average gas prices, with drivers paying around $3.66 per gallon. Gas prices in California were also above $3.60.

Prices hit $3.046 in New Jersey, which remained the only state where gas prices stayed below $3.10 a gallon.

The AAA survey, updated daily, tracks prices at roughly 80,000 service stations across the country. It is conducted for the group by Oil Price Information Service.

[DemReadingDU]

16. SW Ohio. Yesterday, our gas went from $3.04 to $3.26

Thankfully, I filled up using my Kroger card on Tuesday for $2.94.

[Roland99]

18. Went from $3.09 to $3.39 here.

found one still at a lower price and filled up. and i'm getting ready for a 1500 mile round trip this weekend. wheee!!

[CountAllVotes]

37. $3.82 here (cheapest stuff to be found!)

:mad:

:kick:

[AnneD]

88. Where is here

:shrug:

[Demeter]

6. Wall Street pulls back as oil spikes By JOE BEL BRUNO, AP

http://news.yahoo.com/s/ap/wall_street;_ylt=AkoPnoC5rLHRPdZyJrJBL.is0NUE

Wall Street turned lower Wednesday as investors worried that a sharp jump in oil prices could be another sign that consumers are under stress in an economy that is already showing signs of a recession. The major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Department's report of an unexpected jump in gasoline demand. That could lead to higher prices at the pump, a troublesome trend given that retail gas prices are expected to rise further as the summer approaches and put more financial pressure on consumers.

Consumer spending, which makes up about two-thirds of the U.S. economy, is watched closely by the Federal Reserve. Earlier Wednesday, Fed Chairman Ben Bernanke said he expects the economy to contract in the first half — a trend that would mean the U.S. is in a recession.

Crude oil rose $3.85 to settle at $104.83 a barrel on the New York Mercantile Exchange.

"The oil uptick took away some of the optimism that we've seen recently," said Richard Cripps, chief market strategist for Stifel Nicolaus. "Higher gasoline price would mean less in the pocket for Americans, and there's also continued worries about a recession."

The credit crisis and weak economy have sent stocks tumbling over the past six months. But the market had shown some renewed confidence that the worst of the credit problems might be behind Wall Street; that upbeat sentiment sent stocks up nearly 400 points on Tuesday, the first day of the second quarter.

Some of the pullback late Wednesday also was pinned on profit taking after that big advance

[Demeter]

7. Stocks set for bumpy ride: Futures point to higher open but economic worries persist

http://money.cnn.com/2008/04/03/markets/stockswatch/index.htm?postversion=2008040305

LONDON (CNNMoney.com) -- U.S. stocks were poised for a slightly higher open Thursday, but trading could be volatile as investors remain shaken about the economic outlook.

At 4:46 a.m. ET, Nasdaq and S&P futures were lower, although a comparison to fair value suggested a positive start for Wall Street.

Stocks finished a choppy session lower Wednesday after Fed Chairman Ben Bernanke said a U.S. recession was possible. His statements come as investors are gearing up for Friday's closely watched employment report. The report is expected to show a decline of 50,000 jobs in March.

The Fed chief heads back to Capitol Hill today to face more questions about the central bank's role in the rescue of Bear Stearns. He will be joined by executives from JPMorgan Chase (JPM, Fortune 500) and Bear Stearns (BSC, Fortune 500).

In global trade, shares in Asia finished higher. European markets slipped in early trading. To top of page

[Demeter]

8. The underemployment rate is rising

http://money.cnn.com/2008/04/02/news/economy/jobs_outlook/index.htm?postversion=2008040208

Don't be fooled by the relatively low 4.8% unemployment rate. Other measures, such as the number of people only working part-time, are a sign of recession. An unemployment rate at 5% used to be called full employment. Today it's considered the sign of a recession. When the Labor Department gives its March employment report this Friday, it's important to keep in mind that the relatively low unemployment rate isn't telling the whole story about the weakness of the U.S. labor market.

Economists surveyed by Briefing.com are forecasting a loss of 50,000 jobs from the nation's payrolls in the month. That would mark the third straight month of job declines. The unemployment rate is expected to jump to 5.0% from 4.8% in February. But some economists point to other readings, which show that the market is much weaker than the unemployment rate would suggest...For one, there has been an increasing number of people who want to work full time who are only able to find part-time jobs. There is also a rise in the number of those who have stopped looking for jobs because they've become discouraged by the weak market. Finally, there has been a decline in the number of employees working as independent contractors.

"You do see indicators of a softer market than just the raw numbers," said Bill DeMario, chief operating officer of Ajilon Professional Staffing, a unit of staffing giant Adecco. "To some degree, we've already experienced some of the impact of a slowing economy."

According to the February jobs report, there were 565,000 more part-time workers who wanted full-time jobs than a year ago. That's a 21.1% jump in the number of those who are under-employed. In addition, a rapidly increasing number of people are being forced to take more than one job. There were 161,000 more workers in February who held more than one part-time job than there were in January. One economist said this is a further indication of how bad the market is.

"Basically, this is a sign that we're in a recession," said David Wyss, chief economist for Standard & Poor's. Wyss said another sign of the weakened market is the steady decrease in the past year in the number of temporary employees in the business and professional services sectors. There has been a loss of more than 100,000 jobs in this category in the past 12 months. "This is a leading indicator, since these are very often the first employees cut," said Wyss.

Jobs market worse than it seems: if you look at the number of people out of work in addition to part-time workers who want full-time jobs as well as people not searching for a job at the moment, a far more alarming picture emerges. Keith Hall, the commissioner of the Bureau of Labor Statistics, which prepares the monthly jobs reports, said in Congressional testimony last month that this broader measure stood at 8.9% in February, up from 8.1% a year ago.

[Roland99]

29. I wonder what LFPR is sitting at.

Bet it's been steadily going up lately. Haven't had any time to read/research much the last few days and no sign of work letting up for a while. wheee!

[Demeter]

35. What Is That When It's at Home, Roland?

[Birthmark]

75. Labor Force Participation Rate

Unadjusted Feb = 65.5%

Adjusted Feb = 65.9%

[Demeter]

10. Good Morning All!

Slim pickings today--not much news and all of it bad. At least the crocus are up.

[Hugin]

25. Morning Demeter

Well, nothing they'd care to share with us anyway. ;)

[fasttense]

26. Good Morning to you Demeter

and the daffodils are up too. Just saying the signs of spring are a bit early for our area this year. :shrug:

[AnneD]

27. Morning Marketeers....

:donut: and lurkers. The crocus are up and the mosquitoes are down. Gas here in the 'refining' center are $3.19-$3.34 and have been at that rate since before Easter. You would think that since we risk increased cancer in the region related to this biz-we would get a break.

My on the ground report-the gas prices are taking their toll on folks and business here. I was out running a few errands last night and there was notably less traffic during peak drive times and most places were very quite. I stopped at a neighborhood Sonic for a drink and there was one other car-during the dinner hour.

The Metro has been carrying more passengers. I've considered riding Metro but I am so close to work and I think if I ride Metro, I have a transfer and that really increases the time to get to work. I will test drive it this summer. The advantage to driving is that I pass several shopping centers and get all my shopping done on the way home-no extra trips.

I am seeing an increase in out of state tags on my way to work-Michigan, Ohio, and Florida vie with Louisiana tags. So I know things are bad in those states. Funny how 5% unemployment is the new 10-12% unemployment. The government is only fooling themselves with that shell game.

Happy hunting and watch out for the bears.

[DemocratInSoCal]

45. People Here Have Plenty Of $$$$ To Waste On Gas

Here in repub central, Orange County, CA, there are still plenty of SUV's, Giant Trucks, Hummers, Etc., that enjoy racing down the street at 60 mph, just so they can get to the next red light.

I usually wave to them as they swerve around my Volvo, as it coasts towards the red light up ahead, and then 5 seconds later, when I end up sitting beside them at the light, I stare, and wonder how nice it must be to have the luxury of driving a vehicle that not only sucks up gas like water, but having the added ability to suck even more fuel, just so they can slam on the brakes when they discover that the cars in front of them at the red light, are unwilling to move from their path as they approach.

[54anickel]

49. Mornin' Demeter and all. There are a few interesting headlines at the following site....

http://www.depression2.tv/d2/

[donkeyotay]

67. This depression has got its own website! Thanks, 54anickel. nt

[Demeter]

11. World Bank Calls on Sovereign Funds to Invest in Africa By STEVEN R. WEISMAN/ The New York Times

http://www.nytimes.com/2008/04/03/world/africa/03worldbank.html?_r=1&ref=world&oref=slogin



WASHINGTON — The president of the World Bank, Robert B. Zoellick, called Wednesday for the major government-owned sovereign wealth funds of Asia and the Middle East to join with the bank in investing in Africa. In a speech aimed at the world’s finance ministers and central bankers, who will be meeting in Washington this month, Mr. Zoellick said the West’s mistrust of sovereign wealth funds could be assuaged if the funds set aside 1 percent of their assets to help private enterprise spread on the world’s poorest continent.

Sovereign wealth funds, including those controlled by the governments of China, the United Arab Emirates and Singapore, among others, are believed to have amassed nearly $3 trillion in assets, making them a larger player on the world’s investment scene than hedge funds. Their wealth is expected to grow exponentially in the next five years. A 1 percent diversion of their assets could add up to $30 billion a year in private investment for Africa...Tens of billions of dollars have been invested by Asian and Middle Eastern funds in an array of American banks and investment banks. Many in Congress say they are wary of government-controlled foreign investments in private American businesses as a threat to the nation’s economic security and independence.

Led by Treasury Secretary Henry M. Paulson Jr., the Bush administration has called for the International Monetary Fund, the World Bank and other international agencies to help the funds adopt a code of practices disavowing political motives in their investments and adopting greater disclosure of their activities and portfolios.

Mr. Zoellick, who took office last year after the ouster of Paul D. Wolfowitz in the wake of an ethics scandal, has not generally been a part of the chorus of financial experts calling for adoption of changes by sovereign wealth funds. He gave his speech at the Center for Global Development, a policy institute in Washington...Mr. Zoellick said that although much of Africa was in poverty and a global food shortage may make matters worse, Africa was also an investment opportunity much as China, India, Brazil and other once-impoverished nations were two decades ago.

[54anickel]

42. U.S. may already have the tools to monitor sovereign wealth funds

http://www.iht.com/articles/2008/04/02/business/sovereign.php

snip>

The issue has taken on increased urgency because of several recent, high-profile investments by sovereign wealth funds. Last year at this time, most of the general public had never heard of these funds. Now they are everywhere, investing in marquee American companies like Blackstone Group, Citigroup, Merrill Lynch, Morgan Stanley and the Nasdaq.

Global sovereign wealth fund investments totaled $48.5 billion in 2007, according to Dealogic. This was a 165 percent increase over the prior year, when $19.2 billion was invested. In 2008 through March 17, sovereign wealth funds have already announced global investments of $24.4 billion.

The United States is a prime target for these funds. From the beginning of 2007 through March 17 this year, Dealogic reported that sovereign wealth funds announced $43.1 billion worth of investment in the United States.

This trend will only increase as the United States continues to force-feed dollars abroad to purchase oil and cheap sandals. Sovereign wealth funds currently have an estimated $2 trillion in assets. Merrill Lynch and Morgan Stanley are projecting that these funds will have more than $10 trillion in assets by 2015.

The concern is really about the source of these investments. Algeria, China, Kuwait, Libya, Qatar, Saudi Arabia and the United Arab Emirates have seven of the 10 largest funds. None of these countries are true democracies. One is becoming the fiercest economic competitor of the United States.

Many worry that these countries, through their funds, are not making investments for economic purposes. Rather, there is concern that these deals are being made based upon political considerations.

Or these investments may be made for very good economic purposes - but those that happen to be contrary to the competitiveness of the West. In the United States, the anxiety is that sovereign wealth funds would use their ownership interests in United States and European companies to direct capital or valued technology to their own countries in order to better compete.

Popular alarm typically accompanies high-profile foreign investment in the United States. Remember back in the 1980s, when it was the Japanese who were going to take over the United States? That turned out to be an overinflated worry.

more...

Uhmmm, didn't we have a lot to do with that Asian currency crisis thangy that socked Japan?

[54anickel]

47. Sovereign Wealth Funds: The Rise Of Corporatism

http://www.bitsofnews.com/content/view/7859/

Last week Treasury Secretary Paulson had a meeting with representatives from Abu Dhabi and Singapore. The meeting involved setting up "rules" for future investments in America from their Sovereign Wealth Funds.

"SWF investment decisions should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals of the controlling government," the agreement stated. No one noted the obvious irony.

A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments.
The first ironic twist of this agreement is the fact that America has spent more than half a century pushing third world nations to open their markets to unrestricted foreign investment. Refusal to comply with America's wishes all too often meant a CIA-sponsored coup. Now we are trying to put restrictions on how former third-world nation can invest in America.



The second, and more important, ironic twist is the obvious weakness this displays. If America had a strong economy would we really care what the motivations of the SWF's were? If we weren't desperate for the money, would there even be opportunities for the SWF's to buy significant amounts of American assets? And lastly, do these "rules" have any real world meaning? Not likely.

First, there is no way to make the funds conform to their statements. Second, even if the funds are completely sincere when they make these representations, a change in leadership can lead them to repudiate their former policies, after they have acquired substantial positions.

The fact is that these two funds rank among the worst in governance and transparency. In other words, the entire event was theater for the American public designed to ease the public's fears.

“A year ago this would have been unthinkable. The perception then was that we’re the U.S. and we’re infallible. But then everyone realized the emperor wasn’t wearing any clothes.” - Axel Merk, manager of the Merk Hard Currency Fund

more...


Oh my, but haven't they been busy since December...(select the financial deals tab on the following)

http://online.wsj.com/public/resources/documents/info-foreignSWF08.html

[formercia]

13. Gresham's Law

Although the US has not been using precious metals to settle debt for a long time, I would like you to consider this concept as it relates to securities, since they have value as far as those who hold them believe them to have. Currency in itself has only the value we grant it, thus the application of Gresham's law to non-currency financial instruments.


http://en.wikipedia.org/wiki/Gresham's_Law

Gresham's law is commonly stated: "Bad money drives out good." Or, more precisely: "When there is a legal-tender currency, bad money drives good money out of circulation." Or, more accurately: "Money overvalued by the State will drive money undervalued by the State out of circulation."

Gresham's law applies specifically when there are two forms of commodity money in circulation which are forced, by the application of legal-tender laws, to be respected as having the same face value in the marketplace.

Gresham's law is named after Sir Thomas Gresham (1519 – 1579), an English financier in Tudor times.

[DemReadingDU]

14. Columbus trial - Four National Century executives arrested, Quartet planned to flee to Aruba

4/2/08 Four National Century executives arrested
Quartet allegedly planned to flee to Aruba

Four National Century executives who were convicted of fraud last month but were free pending sentencing have been arrested.

The executives had a plan to flee to the Caribbean island of Aruba if convicted, new filings in U.S. District Court in Columbus show.

Donald Ayers, James E. Dierker Jr., Roger S. Faulkenberry and Randolph H. Speer were picked up this morning, Deputy U.S. Marshal Brian Babtist said.

Federal Judge Algenon L. Marbley ordered the arrests. A court hearing is likely to officially revoke their bonds.

Ayers was arrested at his Florida home. Speer was arrested at his Georgia home. Faulkenberry and Dierker were arrested locally.

Other details of what prompted the arrests were not available.

An arrest warrant was filed last week for Rebecca S. Parrett, who also was convicted last month.

Like the others, Marbley had allowed Parrett to remain free until her sentencing this summer. She was to report to federal officials for house arrest in Carefree, Ariz., where she lives, but never showed.

She remains at large today.

All five were executives of National Century Financial Enterprises, a Dublin-based company that purchased accounts receivable from health-care providers. Investors lost more than $1.9 billion when National Century filed for bankruptcy in November 2002.

In a six-week trial in U.S. District Court in Columbus, federal prosecutors showed how the company’s collapse was due in part to the company giving millions in unsecured loans.

http://www.columbusdispatch.com/live/content/local_news/stories/2008/04/02/natcent.html?sid=101


4/2/08 Convicted National Century execs arrested following alleged plot to flee country

FBI agents learned of the executives' alleged escape plan Tuesday from a confidential source, according to the filing.

"The (FBI) developed information from a confidential source, who reported to FBI that (former National Century CEO Lance Poulsen) told the confidential source that the NCFE defendants had a plan to flee to Aruba if they were convicted," the document said.

The document also said the government discovered Parrett allegedly attempted to secure false identification papers prior to her trial.

Poulsen is scheduled to be tried on similar fraud charges this summer. He and a friend, Karl Demmler, were convicted last Wednesday on witness tampering charges stemming from claims they tried to bribe a key government witness scheduled to testify in Poulsen's trial. The two men are in custody awaiting sentencing.

more...
http://www.bizjournals.com/columbus/stories/2008/03/31/daily22.html?b=1207108800%5E1614221


4/3/08 Defense attorneys were outraged at the allegation.

"This guy has done everything by the book," said Faulkenberry's attorney, Javier Armengau.

He said Faulkenberry calls his office every day and even checked with the court to make sure he could leave his house to drive his daughter to school.

James Ervin Jr., an attorney for Speer, said his client "vehemently maintains his innocence." Ervin said they were shocked by the allegations.

"I don't know anything about it. But I don't believe it," added Leonard Yelsky, attorney for Dierker, a vice president at Victoria's Secret.

more...
http://www.columbusdispatch.com/live/content/local_news/stories/2008/04/03/NatCenarrest.ART_ART_04-03-08_A1_B69QMOQ.html?sid=101


link to previous articles...
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3249877&mesg_id=3249941

[Demeter]

30. Amateurs!

They should have bought some "services" from Rove, Cheney, et al.

[donkeyotay]

69. Just wow. I bet they have enough set aside to live quite nicely in Aruba.

:wow:
I hope they catch up to the Mrs., Mrs. Ayers, IIRC.

[DemReadingDU]

70. The 5th person, Rebecca Parrett, is still 'at large'

Since no one can find her in the U.S., it wouldn't surprise me that she already is in Aruba waiting for the 4 that just got arrested.

[Demeter]

72. She's Probably The Brains of the Operation

Jumped the gun to leave the rest behind to be caught, and made off with all the loot. Doubt she's in Aruba still, if ever.

[DemReadingDU]

73. ah Ah!

That's probably why she is still 'at large'

:crazy:

[bronxiteforever]

15. Excellent Cartoon!

[Demeter]

31. It's Recycled

There wasn't anything I could appropriate that was suitable to the thread.

[Hugin]

33. How very environmentally conscious of you...

Why, if I had a Nobel Prize, I'd give it to you.

Congrats! :)

[UpInArms]

17. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 72.782 Change +0.568 (+0.79%)

Fears of a Recession Drives Renewed Dollar Weakness

http://www.dailyfx.com/story/bio1/Fears_of_a_Recession_Drives_1207173732004.html

The US dollar has resumed its slide as traders give in to the Fed’s cautiousness. With Wall Street and Main Street both feeling the pain of slower growth and a depressed housing market, Bernanke warned that there could be a contraction in the US economy in the first half of the year. Although the Fed Chairman stopped short of admitting that the US economy is already recession most Americans are already acting like it. The NY Times for example has a story today about making the most out of your microwave. Interestingly enough, according to Fed Fund futures, expectations for a 25bp rate cut at the end of the month has increased to 90 percent. This is partially due to the rebound in the ADP employment report, which is signaling a stronger non-farm payrolls number for Friday. We are skeptical of the accuracy of this report given the fact that ADP has overestimated private sector payrolls growth for the last 6 months by an average of 72k jobs. Unless we see an improvement in the employment component of service sector ISM tomorrow, we continue to believe that the pace of job growth will worsen in the coming months. Challenger Gray and Christmas reported a 9.4 percent increase in layoffs last month compared to a year ago. This is in line with the recent layoffs that have been announced by Wall Street banks. On inflation, Bernanke said that even though it is a concern, inflation should moderate, which means that for the time being boosting growth is their top priority. Looking ahead, non-farm payrolls will be critical in determining how many more rate cuts we will see from the Federal Reserve. In the beginning of the year, the majority of the market believed that the central bank would stop cutting interest rates at 2.00 percent. Now that we are 25bp away from that level, figuring out how much further the Federal Reserve could ease interest rates should be the market’s main focus.

...more...

Dollar Strengthens as European Data Disappoints - Will ISM Continue the Trend?

http://www.dailyfx.com/story/bio2/Dollar_Strengthens_as_European_Data_1207217154031.html

After a one day correction dollar bulls got their groove back as data from EZ and UK continued to show further weakness, indicating that monetary policy officials in Frankfurt and London will have to consider easing in the very near future. The EURUSD was dragged down by another bad print in retail sales which posted a reading of –0.5% vs. 0.2% expected. The massive decline in German retail sales earlier in the week weighed on the overall number.

Meanwhile, in UK the PMI Services report printed at 52.1 versus 53.3 forecast and far lower than the 54 reading in February. While still above the 50 boom/bust level, the sharp deceleration in UK PMI Services data bodes poorly for future UK demand. Indeed a report on credit conditions in UK today, indicated that lenders have tightened their criteria and borrowers who rely in unsecured credit will have a progressively more difficult time expanding their borrowings in the future.

All in all conditions in UK suggest that the BoE will have no choice but lower rates to 5.00% at next week’s MPC meeting. BoE Governor Mervyn King has been criticized by some market observers for being too slow to ease given the slowdown in global demand. With UK data now corroborating pound bear’s arguments it will be surprising to see if UK monetary officials continue to focus on controlling price pressures rather than stimulating growth.

In US today, the markets will get a glance ISM Services and weekly jobless claims, as unemployment will take center stage for the next 24 hours. Yesterday’s surprisingly strong ADP report provided a short term boost for the greenback, but as we’ve noted many times before the ADP number has been woefully wrong to the upside and markets chose to give it little credence in the end. Today employment component of ISM will be taken more seriously and should the data show an uptick over even only a slight decline, the dollar rebound could continue into the North American session.

...more...

[DemReadingDU]

20. Bonddad: Translating "Fedspeak" or, Everything You Wanted to Know About the Economy

4/3/08 Translating "Fedspeak" or, Everything You Wanted to Know About the Economy But Were Afraid to Ask

Yesterday, Bernanke testified on capital hill. His testimony, which is available on the Federal Reserve's website, offers a good overview of how the Fed views the economy.

It's also important to remember the Fed is as much a political player as it is an economic player. While a completely honest Fed would be great it is not going to happen. The Fed has to help manage the public's economic expectations. As such, it has to ease the public into a certain economic frame of reference. This is why yesterday was the first time we heard the Fed use the word "recession". The Fed has been aware of the economic situation for some time. But if they had come out and said "we're in a recession and it's really going to suck" they would have induced panic.

lots more, and graphs and charts too
http://bonddad.blogspot.com/2008/04/translating-fedspeak-or-everything-you.html


link on Huffington
http://www.huffingtonpost.com/hale-stewart/it-sure-looks-like-were-i_b_94805.html

link on DailyKos
http://www.dailykos.com/story/2008/4/3/73230/87733/817/489371

[Demeter]

38. Stunning and Thorough Analysis! Thanks for Posting!

Boy, are we screwed every which way but good.

[DemReadingDU]

21. Rogue trader Jerome Kerviel to sue SocGen over sacking

4/3/08 Jerome Kerviel to sue SocGen over sacking

Jérôme Kerviel, the rogue trader accused of losing his bank €5 billion (£3.9 billion) in one of the financial world's biggest scandals, has hit upon a new money-making scheme — he is to sue his former employer for unfair dismissal.

In the latest twist to the scandal, which won Mr Kerviel a legion of fans in France, the rogue trader has launched court proceedings against Société Générale to contest his sacking for gross misconduct, The Times has learnt.

The 31-year-old operator was released on bail last month after 37 days in prison on charges of breach of trust, fabricating documents and illegally accessing computers. In a sign that he intends to fight the allegations made by SocGen, Mr Kerviel claims his dismissal is unlawful because the bank has failed to prove he did anything wrong.

Mr Kerviel and his lawyers are basing their case on two points. The first is that Mr Kerviel’s massive gambles on markets were actually in the black when his bosses stepped in. The losses only occurred when SocGen sought to unwind his gambles. The second relates to a legal technicality. French labour laws force employers to hold face-to-face meetings with employees to outline the case for terminating their work contract. But, as Mr Kerviel’s lawyers point out, the meeting is impossible because Mr Kerviel’s bail conditions forbid him from entering into contact with SocGen staff.

more...
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3671089.ece

[Tansy_Gold]

22. "There can't be $516tr in derivatives. That's more than the whole world is worth."

That's what BF said last night as we were discussing this issue. He told me to find some supporting evidence for that claim, and the evidence had to come from "a reliable source, not some liberal blog or discussion board."

I found two sources that I thought would satisfy his requirements: one from bloomberg.com, the other from nasdaq.com. The URLs didn't copy very well, or more probably I screwed 'em up, but here's the info I found. Questions to follow. (BF read the articles but did not comment. He may have decided to pass them along to his weird friend who has a PhD in economics. . . . kind of the way I reach out to DUers on SMW.)

All emphasis is mine.

from 22 November 2007

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a58EF32GpHeg#

<snips>
Global Derivatives Market Expands to $516 Trillion (Update1)
By Kabir Chibber

Nov. 22 (Bloomberg) -- The market for derivatives grew at the fastest pace in at least nine years to $516 trillion in the first half of 2007, the Bank for International Settlements said.

. . .

The money at risk through credit-default swaps increased 145 percent from last year to $721 billion, the report said. The amount at stake in the entire derivatives market is $11.1 trillion, according to the BIS, which was formed in 1930 to monitor financial markets and regulate banks.

. . .

Interest-rate derivatives remained the largest part of the market, gaining 19 percent to $347 trillion outstanding by June, the report said. Single currency interest-rate swaps made up 79 percent of the market.
<end snips>



from 11 March 2008

http://www.nasdaq.com/aspxcontent/newsStory.aspx?cpath=20080311%5cACQDJON200803110040DOWJONESDJONLINE000022.htm

Derivatives Are The New Ticking Time Bomb
By Paul B. Farrell

<snips>
. . .
Wall Street didn't listen to Buffett. Derivatives grew into a massive bubble, from about $100 trillion to $516 trillion by 2007.

. . .

To grasp how significant this five-fold bubble increase is, let's put that $ 516 trillion in the context of some other domestic and international monetary data:
* U.S. annual gross domestic product is about $15 trillion
* U.S. money supply is also about $15 trillion
* Current proposed U.S. federal budget is $3 trillion
* U.S. government's maximum legal debt is $9 trillion
* U.S. mutual fund companies manage about $12 trillion
* World's GDPs for all nations is approximately $50 trillion
* Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
* Total value of the world's real estate is estimated at about $75 trillion
* Total value of world's stock and bond markets is more than $100 trillion
* BIS valuation of world's derivatives back in 2002 was about $100 trillion
* BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

. . .

Also, keep in mind that while the $516 trillion "notional" value (maximum in case of a meltdown) of the deals is a good measure of the market's size, the 2007 BIS study notes that the $11 trillion "gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets."

. . .

Because central banks require reserves like stock brokers require margins, something backing up the transaction. Derivatives don't. They're not "real money." They're paper promises closer to "Monopoly" money than real U.S. dollars.

<end snips>

So, Tansy's stupid question for Thursday is -- what's the accurate value that should be placed on "the derivatives market" for purposes of discussing risk, potential bail-out level, etc?

Is the $516tr the quantity of cash that gets traded, or the value of the derivatives themselves (at some given point in time)? If I sell you a pencil for 5 cents and you sell it to Jenny for 8 cents and she suckers Ron into giving her a quarter for it, but then he needs cash so he lets it go to Laura for a dime, would we say the market is worth 48 cents, even though the pencil last sold for only 10 cents? Is the derivatives "market" the same?

Another snip from the Farrell articles says ". . .that derivatives are now a new way of creating money outside the normal central bank liquidity rules." That phrase "creating money" jumped out at me, prompting me to wonder, "Are 'derivatives' an instrument for transfering real wealth -- the kind earned by creating real goods and services -- into the hands of the plutoligarchs, consolidating wealth and thereby power? They make Monopoly money and trade it in for the real thing??" (I'm sorry, folks, but "betting on the weather" does not strike me as a contribution to the real economy of real people in the real world.)

The follow-up questions, of course, are can this be stopped, and if so, how do we do it?


Tansy Gold, who will shut up now before she gets herself any deeper

[formercia]

28. Why I posted this:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3253766&mesg_id=3253808

[Tansy_Gold]

40. I'm pretty sure I agree with Gresham, though again I confess. . .

. . . to being woefully ignorant.

And I'm presuming that the flip side of this is that when gold or silver or other "standards" of exchange are (forcibly) removed from the economy, the only that can keep things going is whatever currency the authorities allow.

Interestingly, I've heard many conversations over the past year or so that lament the disappearance of "cash" in the marketplace, as if "cash" had significantly more value than, say, checks or plastic. There is an acknowledgement of the additional costs of doing business with non-cash instruments -- service fees, higher prices due to merchants having to cover their fees, etc. -- and yet there is also a rationalization using the "ease" of using plastic, the security of not carrying cash, and so on. Of course, many of these same people worry about "identity theft" risks involved in using plastic.

I can't really say I've been a "proponent" of what was often referred to back in the 70s as "the underground economy," though I've certainly participated in it often enough. As a socialist, I understand (or at least think I understand) the functioning of community and taxes and so on. But I also understand that when the social fabric starts to come apart at the seams, something else has to pull it back together. In the face of a collapsing economic structure, what else is there but the "underground"? (Pun intended, DUers!)

How far any of us, individually or collectively, could sustain such an underground economy in the face of catastrophic (1930s-scale or worse) collapse, I don't know. I think we have sufficient resources -- locally as well as globally -- to recover, absent a nuclear option such as Demeter references. Would it take time, certainly. Would there be damage, of course. The factories are still there, the know-how is still there. Would there be a dramatic change in the global consumer culture? Without a doubt.

But eventually, even under Gresham's law, the weight of the bad money has to collapse the system eventually, doesn't it? And isn't that what we're either trying to prevent (as opposed to merely delaying) or preparing to survive?

Tansy Gold, thinking far too much this early on a gorgeous April morning in Arizona

[formercia]

51. Cash has become the 'Underground Economy.'

The profiteers like plastic because it offers them profit at the expense of the buyer and seller and provides valuable information on market trends because the sales data can be mined.
The 'Goverment' likes plastic because it allows the tracing of money and developing profiles of individuals based on their buying habits. The computer rules all.

Just as paper currency replaced Gold and Silver, plastic is replacing paper currency as the blessed medium of exchange.

Going from bad money to worse money.

Wall Street is going from instruments that have real value to paper which has a value based on the whimsy of the Market in a given moment in time.

[Demeter]

59. Barter and notes of hand

we'll be reduced to precolonial times. Using other people's currencies and private contracts for the simplest transactions.

[Hugin]

62. Very interesting insights, Tansy Gold...

I've often pondered 'Underground economies' or as they've been historically known... 'Black markets'.

There is a natural progression to them as 'cash' becomes harder to come by due to the fact it has been hoarded
by the greedy it loses it's value to the common people. They begin to barter to obtain necessities. Governments
have traditionally hated 'barter' for this very reason. It takes those in power out of the loop and renders what
they've so ruthlessly plundered and the power it once represented worthless. When a barter system emerges, one day
the so-called have mores wake up to find what they value most has become so much paper.

[Tansy_Gold]

90. Funny thing about that term "black market"

It's been used frequently to describe the derivatives trade, and I append no sarcasm or smiley face. Merely a somewhat ironic observation.

But I'd also add that I don't *quite* equate an underground economy with a black market. Maybe it's just a matter of degree, and maybe there are areas in each of convergence. The distinction I see, however, is that an underground economy either replicates or replaces the visible/legal economy. It can be as simple as a yard sale -- no retail license obtained, no sales taxes collected/paid, no income reported -- or private child care, or as complex as, well, a restaurant not reporting all its cash sales, not reporting all tips, etc.

Black market, on the other hand, suggests transactions that would not be legal: drug running, human trafficking, and so on. Which is why I find it so amusing, if that's the right word, for the application of the term to the derivatives market. It suggests that even those who are far more knowledgeable about it than I, and who are working within the financial markets' system, are at best unsure about the fundamental legality of the instruments.

Am I personally questioning their legality? No, because I don't know enough about them. OTOH, if some guy sitting at a computer is taking millions of dollars from a public employees' retirement fund, telling them it's being invested securely, and then using it to bet on the weather and fatten his own wallet, then I would probably have to say I don't think that should be legal. Maybe it is, but I don't think it should be. Just MHO.

Tansy Gold, who surprised herself by successfully replacing the electric motor in a small appliance and is therefore patting herself on the back rather enthusiastically

[formercia]

92. Replacing motors

One of my former co workers was an Engineer for GM. He described the millions they saved with windshield wiper motors by simply replacing screws with cheap rivets. Basically, they force the mechanic to buy new parts because of the labor required, let alone being able to purchase replacement parts.

Learning how to fix things as simple as small appliances will be taught soon in vocational-ed. Things we used to throw away will be recycled and people will buy items that can be repaired and are built to last.

It's a good skill to have.

[Demeter]

34. Tansy, You May Have Outed the Bastards

Congratulations on your detective work. I'd have to say the value of all that stuff is exactly zero, as there is nothing backing it up. It is the global Ponzi scheme of all time, never before attempted.

The plan no doubt was to accumulate all the real wealth in the world into a small number of hands.

However, that trick never works, because either one spends all that wealth defending it, or the empty hands resort to violence to get theirs back.

Short of a nuclear holocaust to wipe out the impoverished, there is no way one can win that game--and if you wipe out the poor, who are you going to gloat over and be superior to? Who will you boss around?

Moderation in all things is not just a proverb.

[Tansy_Gold]

46. I'd much rather have "outed" them as hypocritical anti-gay gays

because if I'd done that, they'd quit in a flash. Unfortunately, outing them as merely greedy, selfish, lying, thieving, tax-devouring assholes is like a compliment to them. :grr:

And I really can't take credit for this. All I did was google 516 trillion derivatives and these were among the first articles that came up. Since the sources were bloomberg and nasdaq, I figured they'd be "reliable" by BF's criteria.

The enfuriating thing is, of course, that the information was posted at those "reliable" sources! Are these assholes sitting back and laughing at us while they scoop all the chips off the table? I mean, aren't they just as much as telling us, "Hey, folks, hi out there! We're taking all your money and we're scooting off to Aruba or Dubai or whatever glorious port of call calls us, and we're going to leave you stuck there in Flint or Akron or Fort Wayne with $5 a gallon gas prices and $10 a loaf bread prices. Bye, now!"

And we're just taking it????? (Olbermann, our one voice in the MSM, seems as fixated on the Obama/Clinton circus as everyone else, and gives little attention to ISSUES. ugh.)

I saw on a website yesterday a quote that went something like "Evolution is change, Revolution is accelerated change." Maybe I need a new sig line. . . .


Tansy Gold

[TalkingDog]

54. Well, if you look at PNAC, bombing the poor isn't the plan

Viruses to attack certain genome sequences is more what they have in mind.

So if you've got a certain heritable trait, say: deeply pigmented skin, epicanthic folds in your eyelids.....

But an engineered bird flu would work too, you just have to have the means to avoid people for 2 or 3 months.

Not being paranoid....well, not much anyway.

[Hugin]

36. "betting on the weather"

No doubt! :rofl:

[Tansy_Gold]

43. Well, that's what the guy said!

from Chibber's bloomberg article:

"Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates or the weather."

:shrug:

[Hugin]

65. I know and that's exactly what it is...

Pardon my escape to hysteria.

I'm way past outrage, in fact I can't even understand outrage anymore... I've been at a whole new sphere... level...
plane... of emotion for the last 8 million years or so. Seems like it anyway.

[Demeter]

71. Disassociative something or other

I forget.

[Ghost Dog]

48. What

do you think should happen to gamblers
who can't pay their debts?

[Tansy_Gold]

58. What Tansy Gold thinks -- ha ha ha ha ha

I have a good friend who is a recovering gambling addict.

The fact that these "people" have been gambling with someone else's money and gambling amongst themselves -- as opposed to at a casino or other legal/quasi-legal operation -- I'd say, let 'em go bust. Period. End of discussion.

The first and only "investors" they should pay off are those whom they suckered in/defrauded, i.e. pension plans, institutional investors, etc. More than likely there are various layers between the actual investors and the derivative players -- so go after the ratings agencies, etc.

There are a lot of people involved, and some of them -- just like the Enron employees who got screwed out of their (essentially worthless) retirement funds -- are innocent. Those are the only ones who should be bailed out.

One of the problems, of course, is finding a source of funds to bail the innocent out. So, let's go back to the higher taxes on the super-wealthy. Let's tax the current untaxed income -- most of it coming from this "shadow economy" that isn't using real money anyway.

There is still substantial wealth in this economy. There are still factories and raw materials and farms and schools and roads and bridges and people who need houses. I'm tired of hearing people talk about "we need to take our country back from the illegals who have stolen our jobs and quit outsourcing" and then insist they're going to keep shopping at Wal-Mart and keep voting for republicans -- and keep buying cheap crap that they don't need, driving their gas-guzzling full-size pick-ups when they could walk two blocks, etc., etc., etc. These are the same people who have bugged the crap out of me for 40 years.

But at the bottom, I don't give a shit if the corporations, the investment banks, the ratings agencies, all of them go bust. They should. They've essentially bankrupted this country, this planet, and they desreve to die. NOT the individuals involved, mind you. I do not advocate that anything physically harmful come to the people. But the businesses, they should be decapitalated -- and their operators should be held personally liable. Yes, I know that violates the spirit of the incorporation function, but I don't care. That's what I think. And if that means a certain favored class of people suddenly end up poor as the workers they've defrauded, boo fucking hoo.

Tansy Gold, thinking of "The Last Emperor."

[slipslidingaway]

89. 1993 and 2000 Derivatives articles...Who could have known???

How To Bring The Cancerous Derivatives Market Under Control
by Christopher White

Printed in the American Almanac, September 6, 1993

"...In futures trading, the ``notional principal amount'' refers to the value of the underlying assets in a futures contract. For example, in a corn futures contract to take future delivery of 5,000 bushels three months hence, the notional principal amount of the contract would be the price of a bushel of corn times 5,000. If the price of corn were, for example, $2.00, the notional principal value of the corn futures contract would be $10,000. But the actual price of the contract, however, is the margin set by the exchange; the CBOT, for example, requires $270 be paid to purchase a futures contract that on May 15 had a notional value of $11,637.50..."


UPDATE: BANK DERIVATIVES EXPOSURE

February 2000


Links here...
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3098855&mesg_id=3099613

[Tansy_Gold]

94. EVERYONE SHOULD READ THESE (caution added)

edited just to add caution:

I posted this before I actually went to the websites linked from the other post. I'm not sure if a reference in one of them to Lyndon LaRouche disqualifies them as being sane :shrug: but wanted to add that warning to my own post.

hope this edit isn't too late!




THANKYOUTHANKYOUTHANKYOU!

I am saving these to my files and maybe printing them out for BF to read later.

Excellent!


:yourock:

[slipslidingaway]

95. You're welcome... glad you found them helpful :)) n/t

[Tansy_Gold]

98. I did indeed find them useful and informative

Now, to add some more blather and maybe help myself and others to a better understanding of all this --

Back in spring of 1968, I worked for a small commodities brokerage in Chicago. I was 19 years old, knew nothing, was completely out of my element. I survived there a couple months, then found something more sane. But I do remember some of what went on there, and one incident in particular.

One of the firm's clients, I'll call him Harry, had visions of making a killing in eggs. Or egg futures, that is. I think eggs were traded on the Chicago Mercantile Exchange, not BOT, but the firm had traders on both floors. Anyway, Harry was calling in and ordering buys of egg futures like crazy. Unfortunately, his orders were so wacky, no one could keep track of what he was buying and what he was selling, and one day he got a notice in the mail that he was going to have to take delivery on a freight car load of eggs. Harry went ballistic. Eventually, someone managed to sell his actual car of eggs, but Harry lost a lot of money on the deal as I recall. And he was livid that he had actually bought "something." All he wanted was to make money.

Now, I bring this incident up because as I try to make sense of the whoel derivatives thing -- and as I try to figure out how much impact it is having on the greater economic picture -- I can understand the trading in commodities futures because there is, after all, an actual commodity to be purchased in the end. Those egg futures represented real eggs, and when Harry couldn't/didn't unload his futures contract on time, he was stuck with the eggs.

Furthermore, I understand how the machinations of the various commodities markets -- CBOT and others -- can affect the real price of real commodities going to real producers.

So with that triangle in mind -- producer, consumer, speculator -- I'm wondering where the third leg is in the derivatives market? (No snickering, please!) Isn't there ultimately going to be a final buyer who gets stuck with whatever it is that's being sold? And if not, is it because, well, because there isn't anything? The traders are just shifting numbers on a computer screen, transferring amounts from one account to another, but THERE'S NO THERE THERE????

Buffet says derivatives are financial WMDs. Others are calling them a black market, a Ponzi scheme, Monopoly money. Billions upon billions upon billions of our dollars are going to be handed on a silver platter to people who already have billions - if we don't stop them.

Keith Olbermann got Wal-Mart to back down on the Debbie Shank case. He just slammed them and said he was going to continue to slam them until they withdrew their demands. I'm sure hers isn't the only case of its kind, and I'm sure even Keith Olbermann, whose producers seem to think American Idol is worth more attention than America Idled, isn't going to get worked up about derivatives.

Am I wrong? Am I crazy? Is it possible that indeed this unregulated, untaxes, highly leveraged shadow bank of derivatives is what's destroying the world economy, not by existing as a bunch of imaginary numbers, but by transferring real wealth out of the economy???

If we were to stop that, stop the bailouts, let the investment banks and the investment billionaires fail, could we save the economy?

Tansy Gold, rhetorically speaking

[slipslidingaway]

101. Well I wish I could answer your questions, I'm just trying to make

my way through this mess as well, so there will be no snickering from me.

:)

What happens when the music stops???

Intuitively, I would say that we need to try and slow the music before bringing it to a complete stop, but nobody with any real power seems willing to try.

:shrug:



I'm trying to keep a focus on the shorter term market patterns while keeping the big picture in mind.

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

"...Believe us, we're dragging you through this line of reasoning because we believe in the current environment it is nothing short of critical to understand and keep in mind these very important intra market relationships. We need to understand how what we see in one sector of the financial market can have meaningful implications for asset price movement in many other parts of the very same broader financial market. What we see in the headlines on TV is shallow, and what we "hear" on CNBC is almost meaningless. It is the actions and unintended consequences underneath the headlines that are crucial to "see" and understand. Can the CDS and other derivative markets influence equity market outcomes? The derivatives tail is indeed wagging the greater financial market dog. And it is understanding this that we believe is the key to both risk management and successful investment outcomes as the process of credit cycle deleveraging and reconciliation is sure to continue to play out ahead. Be surprised at nothing. Do not let short term financial asset price movements that appear illogical throw you off emotionally from remaining focused on the greater credit cycle reconciliation and deleveraging environment that now reigns the day...

...So as we move forward in the conventional US equity and debt markets, we need to remember that THE BIG INVESTMENT THEME we are going to be living with for some time to come will be deleveraging. The wild west, devil may care credit cycle the US has grown to know, love and embrace over the last few decades is over. We are now embarking upon and in the midst of important secular credit cycle change. Change which will bring with it important consequences and opportunities very different than what we have come to know and expect over the past. Will the short-term influence of now in place systemic deleveraging affect short term financial market pricing outcomes as we have already seen in recent months and as we tried to describe in this discussion? You bet. Please keep this in mind as you watch the blinking lights on the screen day-to-day. We suggest that continually remembering the big and now primary investment theme of deleveraging will serve us very well in the months, quarters, and yes even years ahead. What we are living through now is unlike any cycle of the past few decades where credit cycle reacceleration was key to forward outcomes. Stand that on it’s head. That’s in the past. Deleveraging is the future. The world is not about to come to an end, just the type of thinking and actions of the last few decades in response to the greater credit cycle that has peaked..."

[slipslidingaway]

99. While I understand your caution, the reference to a proposal he

made back in early 1993 sounded sane to me. The article also had a good description of notional vs. cash values, which is how I found the article. The other article from 2000 should be fine and I hope that people can read the articles and take whatever information they can from them, regardless of a reference to a certain person's proposal.

The idea that someone saw the potential problem and suggested a way to try and rein in the speculation in 1993 was interesting to me. Instead these pieces of paper have risen to astronomical levels and we now had to bail out Bear Sterns because of the chain of events that could take place if we did not. What has been done to try and regulate the increased speculation since that time??? Absolutely nothing, it has been encouraged.

The little people always pay.

:shrug:

:hi:

"On March 9, Lyndon LaRouche intervened in the economic crisis to propose a plan that is as simple and direct, as it is potentially effective in its execution: a sales or transaction tax on the turnover of ``financial derivative'' securities or financial instruments. Each time such a security or instrument is traded, he said, it should be taxed at 0.1 percent of its face value, or, as it is called in the derivatives trade, its notional principal amount.

LaRouche's tax would have two purposes. First, it would help to bring under back under control markets which have careened off into outer space, by identifying the kinds of practices which have been swept under the regulators' rug for all too long. Second, the tax might raise between $60 and $80 billion in federal tax revenues in its first year of application. That would be a very handsome sum for the U.S. government, even if it is going to be a self-liquidating kind of tax.


...What the LaRouche tax proposal would do, if enacted, is knock the usurious speculation out cold. That means his tax proposal would permit the properly constituted authorities, under Section 1, Article 8 of the Constitution, to recapture control of the issuance of money and the creation of credit. That is the precondition for any kind of job-creation program, or economic recovery and reconstruction program.

Here's how it would work.

Currently, the derivatives markets, and other financial markets, pay zero percent sales tax on trades. Most states apply a general sales tax of between 4.5 and 9.0 percent on the dollar; that is, a tax is assessed equal in value to between 4.5 and 9 percent of the value of the purchase (transaction) made at the store. Under the LaRouche tax proposal, each trade of a financial derivatives market instrument will be assessed a ``sales'' tax equaling just 0.1 percent of the value of the purchase, far less than the rate ordinary citizens pay every day. It is absurd and dangerous to continuously raise the tax on Social Security and to apply an energy tax, which will devastate every sector of the economy, while the transactions--as opposed to the realization of profit--of the financial derivatives market, which are harmful to the economy, go untaxed..."

[Tansy_Gold]

103. And now, having read the article, I agree with you.

:hi:

I'm not paranoid about much, but sometimes I do err on the side of (what my deranged little mind considers) caution. I guess what raised the red flag was the idea that LaRouche "intervened" in the "crisis." Did he actually DO anything, or just make a proposal somewhere?? :shrug:

But the explanation of notional and cash values was, as you said, excellent, and very much needed to further the education of this particular DUer.

The other two articles are excellent also. All three together, along with the ones I uncovered, indicate that there HAVE been voices of warning on this issue for a very long time.

My :yourock: stands.

[slipslidingaway]

104. Not sure what the reporter meant by intervened...I just took it

as a proposal since he was not in a position of authority to actually do anything, at least not to my knowledge.

Many of us are trying to get a handle on what this could mean for us in the future.

Thank you!

;)

[54anickel]

105. We were watching derivatives for quite a while - they were the number 1

blow-up prediction for 2004 that's been waiting to happen since. Never did managed to track that article back down....

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=1388097#1388334

[Tansy_Gold]

106. Thanks for jogging my memory, 54anickel

Derivatives were a big topic, too, when Enron collapsed, since many of the off-balance sheet partnerships were built around derivatives. That was in 2000, right? So if derivatives had something/anything to do with the collapse of what was then the seventh largest company in the country, why wasn't there more investigation? Lay and Fastow and Skilling and the others used the derivatives to drive up the net worth, which in turn drove up the stock price, then the sale of the stock transformed the imaginary derivatives into real money.

What ought to be interesting relative to the current spate of write-downs and threats of collapse is that no one called for a bail-out of Enron. It collapsed, it went bankrupt, its fall implicated Arthur Andersen, people lost their jobs and their savings, BUT THE U.S. ECONOMY HARDLY BLINKED.

Businesses fail, even big ones like Enron and Montgomery Ward, but the economy -- which is really people working at jobs making and doing things that other people buy and use -- goes on.

Or so believes the probably irrationally naive


Tansy Gold

[UpInArms]

23. Dell says company 'will go past' target of 8,800 layoffs in first quarter

http://www.marketwatch.com/quotes/dell

8 minutes ago Dell says company 'will go past' target of 8,800 layoffs' - MarketWatch

9 minutes ago Michael Dell says more layoffs coming in first quarter - MarketWatch

[AnneD]

39. Nurses union has plans for Texas

It's only been a few days since the California Nurses Association won its first victory in Texas by organizing 275 registered nurses at Cypress Fairbanks Medical Center Hospital, but it's already setting its sights on the future.

While the union's initial order of business is to move toward getting a contract for its newest members, it's also using the momentum to sign up other nurses who work for health care facilities in Houston and around Texas.

"It's simply big," said Ed Bruno, organizing coordinator for the union's National Nurses Organizing Committee in Tampa, Fla. "Texas warrants attention on its own."

And, he said, the union is finding that many nurses are interested in its message of improving nurse-patient ratios, adding whistle-blower protections and providing a voice at work.

<snip>
http://www.chron.com/disp/story.mpl/business/5670280.html

Do take some time to read this. We are working very hard here in Texas to improve patient care and Nurses work environment. It's not always about the money-something the CEO's will never understand. Tenet has a very bad reputation among Nurses so the fact that CNA was successful is not surprising. Go CNA-:yourock: :headbang:

[AnneD]

41. From Paulie, with love

In case you're wondering, Henry Paulson didn't put little X's and O's after his signature when he signed his plan to revamp financial regulation. I checked.

It's such a loving gift to his friends on Wall Street, I thought maybe he'd sealed it with a kiss.

Out of the 218-page doorstop Paulson dropped on the public Monday, only one proposal seems pertinent to the financial turmoil roiling the markets.

Federal oversight of mortgage lenders is long overdue.
<snip>

http://www.chron.com/disp/story.mpl/business/steffy/5667050.html

An entertaining read. This guy is good.:rofl:

[Demeter]

44. Ron Paul; Getting Smarter Every Day: By Mike Folkerth

http://www.opednews.com/articles/opedne_mike_fol_080402_ron_paul_3b_getting_sm.htm





Good Morning Middle America, your King of Simple News is on the job.

U.S. NEWS: Financial news yesterday displayed the joke of the day with the following headlines:

* Celent: 200,000 US Banking Jobs at Risk- AP
* Manufacturing, Construction Weaken- AP
* Ford, Toyota US Sales Down in March- AP
* Goldman Analyst Expects More Write-Downs- AP
* UBS Will Write Down $19 Billion- AP
* Wall Street Castles Made of Sand- Tech Ticker

Just above these headlines, the main header title was, Stocks Surge to Start Q2!

As Larry the Cable Guy says, "Now that there's funny, I don't care who you are."

And, stocks really did surge, with the DOW rising nearly 400 points. Imagine how high the markets may have gone if for instance, Celent (a research firm) would have had some good news such as "Only 100,000 U.S. Banking Jobs at Risk." There's no telling how far these markets could soar if the bank had only written off $10 Billion.

So why are the markets up with all of this bad news? Several reasons, one is that many people were expecting the headlines to read, "America is broke and everyone is going to die." What we have here is comparable good news.

Interpretation is the key. What the news really said is that "America is broke and half of the people are going to die." Most people just assume that they are in the half that isn't going to die and therefore, "Mary, I just read where the neighbors on both sides of us are going to kick the bucket."

Since we are already in la-la land, let's talk about Hillary Clinton. The good Senator is promising the people in the industrial mid west that she will bring back the jobs. Now, those people in the mid west surely know that Mr. Clinton ushered in both NAFTA and the WTO, which allowed their jobs to migrate to other countries. So why would they back Mrs. Clinton?

They do so because Mrs. Clinton is lying and the other candidates aren't lying as much. That's how we chose presidents in the U.S. Those who promise the most and demand the least...win.

The U.S. is passing into the most difficult economic times that I can recall, including the lead up the Great Depression. We often talk about 1929 and the Great Depression, but dismiss the possibility of such and event occuring again. How many times have you heard someone say, "We have checks and balances now to prevent a reoccurrence of 1929."

And we do; it's being played out for all it worth right before your eyes. In 1929, we would have been well into a depression at this point. But not now, the Fed is rescuing investment banks that took near criminal liberties with their investors' money. They had loaned out some 30-1 of their deposits on shaky collateralized debt instruments. In other words for every dollar that they actually held, they loaned thirty.

While they were doing so, the CEO's were literally making millions in bonuses as were the employee's. And now, King George and the Congressional Jesters are suggesting that the Fed have more oversight and power, the same Fed that brought us this entire mess.

Wake up Middle America, more government is not the answer and Ron Paul is getting smarter every day.




Authors Website: www.kingofsimple.com

Authors Bio: Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, restaurateur, U.S. Navy veteran, heavy equipment operator, taxi cab driver, fishing guide, horse packer and few jobs too embarrassing to mention, writes from experience and plain common sense. Mike’s humorous systems of “Mikeronomics” and “Mikemathics” drastically simplify the economic and mathematic formulas commonly used by very smart, but terribly sheltered individuals.

Back

[Demeter]

50. Opposition To Treasury's Blueprint Gains Steam By David Cho, Jeffrey H. Birnbaum, WaPo

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/31/AR2008033100223.html


...Interest groups took particular issue with the proposal to create a single regulator to replace the many agencies that now oversee various types of financial firms. Banks could lose their latitude to pick and choose among state and federal regulators. Thrifts could be forced to become banks, which are more regulated. "Dismantling the thrift charter and crippling state banking charters will weaken banking in America," said Edward Yingling, president of the American Bankers Association. "We must be careful not to let regulatory boxes substitute for real improvement."...Credit union lobbyists also oppose the plan because it could eliminate their unique niche in the banking system and impose new regulations. Dan Mica, chief executive of the Credit Union National Association, said his group was "astonished and angered" by the proposal to phase out the National Credit Union Administration. The Treasury's proposal makes "no sense" for consumers, who would "pay more and get less in return," he said.

Many top federal officials, including some who are normally allies of Paulson, said they were disturbed to learn that the Treasury was proposing to strip their agencies of power. Several of them said they did not see any of the 218-page document until the executive summary was published by the media Friday night....Sheila Bair, chairman of the Federal Deposit Insurance Corp., expressed concern about the Treasury's idea to take away her agency's oversight of state-run chartered banks, which would be folded into a new banking regulator. "The FDIC has been a highly successful model for 75 years," she said in a statement. "During this time, no one has lost a single penny of insured deposits and public confidence in our banking system has remained high. Any long-term structural changes to the financial regulatory framework must be carefully weighed against the FDIC's strong record and the fact that it serves as a model for developing countries around the world."

While many agencies would lose their oversight of the markets, the Treasury would enhance its status as the financial market's top regulatory general. Paulson said he would immediately push to include all financial regulators in the President's Working Group on Financial Markets, a committee that he chairs...Another one of the blueprint's immediate goals is to ease how the Securities and Exchange Commission approves securities, such as mortgage-backed bonds, so financial firms do not try to elude the agency's oversight. Treasury officials said this change would make it simpler for the SEC to eventually merge with its rival, the Commodity Futures Trading Commission.

Before the plan takes hold, however, lawmakers would have to sign off. This would be a challenge given that the CFTC and the SEC report to two different congressional committees, setting up the prospect of a turf battle on Capitol Hill.

Lawyers and analysts familiar with the oversight of securities said Paulson's plan had elements long proposed by the financial industry, which has often chafed under SEC regulation. The blueprint could greatly weaken the SEC's role and shift its authority to the Federal Reserve. Under the plan, the SEC's inspections team would cede its examinations to the Fed. The unit has been criticized by industry and Republican commissioners.

Duke University law professor James D. Cox, a Democrat, said it remains to be seen whether the SEC's traditional emphasis on policing improper stock trades and accounting practices would emerge unscathed in the regulatory shake-up. He said the CFTC has favored an open-ended, free market approach, while the SEC a more prescriptive, tougher hand. "I don't see the SEC regulatory culture being the one that emerges out of this ," Cox said. "It will be diluted by being matched up with the CFTC, and the political winds are going the other way."

Irving M. Pollack, a prominent former SEC staff member, said he would be concerned if the SEC lost some of its power, especially in light of recent abuses in mortgage lending. The virtue of any change will depend on the details, he said. "I don't know whether this is an attempt to rein in the regulatory and enforcement functions of the SEC," he said. "That would be not bright."

But some critics said the Treasury had erred in trying to make U.S. markets more competitive by easing the regulation of securities. "This blueprint will not serve as a substitute for the need to do something about the current crisis. We have homeowners and neighborhoods that are drastically impacted," said Gail Hillebrand, an attorney at Consumers Union. "The proposals so far haven't made a dent in that."

Staff writers Carrie Johnson and Steven Mufson contributed to this report.

[Ghost Dog]

52. Rice Jumps to Record, Corn Near High as Demand Outpaces Supply

April 3 (Bloomberg) -- Rice climbed to a record and corn traded near its highest ever on speculation a 3 percent annual increase in global demand for cereals will outstrip supply as governments curb exports to prevent protests.

Rice, the staple food for about 3 billion people, rose 2.4 percent in Chicago trading today after doubling in the past year. Soybeans advanced for the third day and wheat gained as investors bought agricultural commodities on concern dry weather in the Great Plains and heavy rain in the eastern Midwest may curtail U.S. production and push down global inventories.

The World Bank estimates ``that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices,'' Robert Zoellick, the bank's president, said on the organization's Web site. For these countries ``there is no margin for survival,'' he said.

China, India and Vietnam have cut rice exports, and Indonesia has reduced import tariffs to protect food supplies and cool inflation. Rice in Chicago climbed 42 percent in the first quarter, the biggest such increase in at least 14 years. Record grain prices contributed to strikes in Argentina, riots in Ivory Coast and a crackdown on illicit exports in Pakistan.

Rough rice for May delivery advanced to $20.26 per 100 pounds on the Chicago Board of Trade today as the United Nations' Food and Agriculture Organization said global exports will drop 3.5 percent this year as nations curb sales.

``The international rice market is currently facing a particularly difficult situation with demand outstripping supply and substantial price increases,'' said Concepcion Calpe, a senior economist at the Rome-based FAO, an agency that seeks to achieve global food security.

Commodity Gains

Commodity prices are posting their seventh year of gains. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials more than tripled in the past six years as global demand led by China outpaced supplies of metals and crops. The Standard & Poor's 500 Index of stocks gained about 20 percent.

``As financial markets have tumbled, food prices have soared,'' Zoellick said in a speech dated yesterday. Since 2005 ``the prices of staples have jumped 80 percent,'' he said.

Corn for May delivery gained as much as 0.5 percent to $5.9875 a bushel. The commodity rose to a record $5.9925 a bushel yesterday on concern that rains in the U.S., the world's largest producer and exporter of the crop, will delay planting.

``We're looking at very strong fundamentals for corn,'' Kazuhiko Saito, a strategist at Interes Capital Management, said in a telephone interview from Tokyo today. ``The possibility of delayed planting in the U.S. is adding to the bullishness.''

Food Shortages

Indonesia, the world's third-largest rice producer, may join China, India, Vietnam and Egypt in curbing exports to secure domestic supplies, Agriculture Minister Anton Apriyantono said yesterday in a text message to Bloomberg News.

The world's poor ``are living very close to the edge as it is,'' said Robert Zeigler, director-general of the International Rice Research Institute in the Philippines. ``If they are pushed further, they are typically the first who will spark unrest.''

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=aBPFBEmOgnh8&refer=asia

[Demeter]

61. I'm Sure There's a Lot of Speculation in That

[Ghost Dog]

84. Indeed...

...The world food shortage cannot be understood as a temporary phenomenon or a simple supply and demand dilemma. Rather, a number of complex and interrelated forces are behind the development, all of which underscore the inability of capitalist markets and institutions to rationally plan and provide for human needs.

Following the collapse of the housing market and subsequent crisis in the financial sector, much speculation shifted from those areas into commodities, which are considered to be more stable and, in US trading houses in particular, less vulnerable to the unfolding recession. Agricultural commodities are seen as a “safe bet” for investors; people need to eat, no matter how inflated the price of food.

It is precisely this attitude that makes agricultural markets extremely vulnerable to crises, and increases the hunger threat posed to the world’s population. The prices of crops are negotiated not when they are harvested, but well in advance, in anticipation of future yields, production needs, and so on. Agricultural producers sell so-called “futures contracts” on crops several months before harvest, thereby guaranteeing certain prices. Grain distributors and processors buy these futures contracts, guaranteeing they will not pay more upon harvest.

However, futures contracts cannot guarantee that crops will survive, or that they will meet demand when harvested. Shortages or blights, which can be ruinous to farmers and consumers, are often celebrated by speculators, who buy up futures contracts and turn profits on unmet demand.

Speculation generates volatility, in turn triggering yet more speculation. Since the eruption of the credit crisis, the grain market has assumed an increasingly volatile character, forcing up retail inflation and worsening the effects of economic downturn for the working class population.

Agricultural production is vulnerable to shocks because it is intimately connected to climate trends, declining water tables, and weather-related disasters.

Agriculture is also affected by fluctuations in the energy market. The distribution of grain is directly impacted by transportation costs, tying grain prices to oil prices. This drives prices up especially in countries dependent upon sea-shipped imports.

Further, farming and processing operations are more expensive when oil rises, not only because of fuel costs, but also because the cost of fertilizer, the nitrogen of which is made from natural gas, is bound up with energy market trends. USDA figures show that fertilizer prices have risen enormously in recent years. In the past year, diammonium phosphate, commonly used as a corn fertilizer, rose from under $300 last year to $792 per ton February 15.

Moreover, as fuel prices rise, demand for biofuel also rises. As a result, more corn, soybeans, and other feedstock crops are diverted into biofuel production. This exacerbates shortfalls in the human food system and increases the cost of feeding livestock and poultry, pushing up meat, egg, and dairy consumer prices.

...

None of these problems can find resolution in capitalist market policies or management on a merely national basis.

/... http://www.wsws.org/articles/2008/feb2008/food-f25.shtml

[Ghost Dog]

86. (The Hindu) Food insecurity: a form of violence

India’s agricultural condition poses fundamental challenges to its credibility as a democracy. A number of related themes have been articulated recently in these pages, and this article is a shortened version of a paper presented at a recent national seminar on food diversity, part of a series on diversity hosted by the Indian Institute of Advanced Study in Shimla.

The facts are terrifying. Between 1980 and 1997, agricultural growth averaged 3.2 per cent, but since 1997 has averaged 1.5 per cent. Among Indian farmers, 40 per cent want to quit. Agriculture fell from 56 per cent of GDP in 1950-51 to 18.6 per cent in 2006-07. Two-thirds of India’s population depend on agriculture. Agricultural holdings declined steadily in size in the four decades before 2003 — but from 1991 to 2001, the number of agricultural labourers increased from 86 million to 106 million. The concentration of land ownership is intensifying, and rural opportunities in non-agricultural work are severely limited.

Policymakers seem to think farming will be rescued by high-tech, high-value floriculture and horticulture for export. That may be why, between 1990 and 2005, the respective cropped areas under cereals and pulses fell from 103.3 mha and 24.7 mha to 97.7 mha and 22.5 mha; the daily per capita availability of food grains fell from 510 grams to 438 grams. But the Agriculture and Commerce Ministries have both said their hope of fair international trade has been nugatory; 36 industrialised countries retain the right to block agricultural imports lest these ‘distort’ their domestic markets. Indian farming, however, has been damaged by the importation of subsidised United States cotton, price-fixing by Indian corporates has been documented, and phytosanitary regulations have restricted Indian agricultural exports.

...

The cycle of entrapment is intensified because farmers increasingly have to buy hybrid seeds rather than use home-grown ones. Secondly, increasing fertilizer and pesticide use damages soil quality and generates resistant pests. So technology makes the farmer’s knowledge redundant, and creates supplier-promoted, not user-induced, demand. Thirdly, some commercially acquired seeds have produced plants but no produce — which may indicate that genetically-modified terminator seeds are being sold, almost literally sub rosa.

...

Certain policies defy explanation; under a policy intended to facilitate private corporations’ entry into foodgrains, surplus grain was exported between 2001 and 2004 at prices below the Public Distribution System prices for families defined as above the poverty line. With the state permitting foodgrain speculation, agribusinesses can hedge stocks and make windfall profits; the Futures Exchanges are documentedly more interested in volumes of trading than in the effects of price fluctuations on marginal farmers or landless labourers. The Indian state is now a food speculator itself; after failing to meet its own reduced procurement targets, the government now imports wheat at higher prices than it would pay Indian producers. With world foodgrain stocks already depleted, inter alia by shifts from food production to biofuel crops, the advent of another international buyer will raise prices.

One major international image of India for half-a-century after independence was that of starving children. Now India is once again a food importer and its hungry are getting hungrier. Among the poorest 30 per cent, average daily consumption fell from 1830 Kcal per person in 1980 to 1600 in 1998; this group spends 70 per cent of its income on food. In 1999-2000, almost 77 per cent of the rural population ate less than the international daily minimum of 2100 Kcal; cereal intake among the poorest is also declining. Among the poorest classes, Dalits, members of the Scheduled Castes and the Scheduled Tribes, and — above all — women and children consistently suffer more than others. Malnourished children number 57 million of the world’s 146 million such, and 47 per cent of Indian children are underweight.

Within the Targeted Public Distribution System, theft and corruption continue; the vulnerable have not gained food security under the TPDS, and cash handouts are useless when prices are rising. In addition, the current discourse around food-price subsidies is seriously misleading. In 2000, OECD countries paid agricultural subsidies totalling $363 billion — before the Bush administration awarded a further $180 billion in subsidies, mainly to agribusiness corporations. India, in contrast, provided about $1 billion in subsidies to 550 million farmers in 2001, and is obliged by the World Bank and the IMF to eliminate even this. Meanwhile, subsidised cotton produced by the United States, in particular, causes international cotton prices to fall, so Indian cotton imports rise, thereby causing rises in indebtedness and suicide among Indian farmers.

The many calls for better state management, though understandable, are in an important sense technical, as they omit justifications for public intervention. Successive governments’ strategies have been largely technical, and are put in terms of raising productivity, connecting producers with markets, and so on. These conceal the ideological commitments behind technical policies. For example, the Ford Foundation, now known for having been a CIA front, established technical, not institutional, change as the keynote for Indian agriculture as early as 1959. Land redistribution and the punishment of usury were ignored in favour of seed-technology, chemical fertilizers, and pesticides; rich farmers in irrigated areas received subsidies, generous credit terms, and price incentives — with World Bank approval. The phenomenon of ‘cherry-picking’, or selecting initial recipients who are likely to succeed anyway, is widely documented. But the initial growth rates slowed, and average agricultural production has risen more slowly than it did before the Green Revolution.

...

Some of the responses since then have been nothing less than an insult to the poor. The price-based poverty line maintained since 1973-74, on the basis of a daily adult intake of 2400 Kcal, now corresponds to a daily intake of 1800 Kcal. The U.N. says the cost of a minimum food basket in India does not reflect the actual cost of food. India’s poor are not fed but only redefined. Even the dead have been insulted, with certain State governments initially not defining farmers’ suicides as suicides if, say, the land was owned in some other person’s name or if the dead person was landless.

Significant philosophic issues arise here. Indian agricultural policymakers seem to assume that economic incentives will generate the desired actions and results. There is some evidence for this, like the Union government’s protection of Green Revolution farmers against market fluctuations. Similar assumptions may underlie the idea that high-profit cash crops and the corporatisation of agriculture will benefit all Indian agriculture.

The idea, however, of the human actor as a rational economic being involves the assumption that the rational being is capable of decisions. As Raymond Plant and others have shown, the idea of rational agency is unintelligible if the preconditions for agency are absent. If people are starving or severely indebted, or if they simply die when they fall sick, it is hardly intelligible to see them as rational autonomous actors.

This goes beyond a right to food or a basic income. It is central to reasoning by citizens — a concept central to democracy. At worst, anyone so hungry and desperate that he or she cannot intelligibly make reasoning decisions is on the margins of humanity, not just the margins of democracy. Policies and conditions which prevent the establishment of the preconditions for agency and reasoned decision by all citizens both exclude India’s poor — 500 or 600 million people — from substantive citizenship and treat them as less than human. That is violence on a colossal scale.

/Readable Article... http://www.thehindu.com/2008/03/19/stories/2008031953011000.htm

[NMDemDist2]

53. Down 41 so far

Dow 12,564.47 -41.36 -0.33%
Chart for Dow
Nasdaq 2,348.51 -12.89 -0.55%
Chart for Nasdaq
S&P 500 1,363.50 -4.03 -0.29%
Chart for S&P 500
10 Yr Bond(%) 3.5620% -0.0210

[54anickel]

55. Not sure if this video's been posted or not - on the LA tent city by BBC

http://www.youtube.com/watch?v=CnnOOo6tRs8

[Wednesdays]

68. Wow...today's version of the Hoovervilles

Shall we now call them "Bushvilles"? :(

[54anickel]

82. Did you catch the related one on Death of the Dollar?

http://www.youtube.com/watch?v=I7Oh_eVz4Do&feature=related

The most relevant quote for me these days is this little dittie from J.P. Morgan:

"...By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd."

Makes me think of all the bones they toss out for the left and right to fight over.

[AnneD]

87. I call them Bushvilles....

Let's give credit where credit is due.

[antigop]

56. David Sirota asks, "What kind of financial economic emergency happens at 3 a.m.?"

http://action.credomobile.com/sirota/2008/04/doesnt_the_market_open_at_9am.html

I don't understand this latest Clinton ad. I understood the last 3am ad about terrorism - terrorist attacks can happen at any time. But in this, the phone is ringing at 3am for an economic emergency. Doesn't the market open at 9am? What kind of financial economic emergency happens at 3am?

[AnneD]

66. It was 1:30 am when they found...

Seth Tobias' body-I don't know what happens at 3am unless it is the overseas markets cratering.

[TalkingDog]

57. Being in a Zen-ly mood today....

I'm offering a song that some may not consider to be about attachment, non-attachment and the emptiness of being.

But somehow, it always seems to remind me that things simply are what they are and wanting something different does not change circumstances, it only manages to change me....

Once in a Lifetime by the Talking Heads

And you may find yourself living in a shotgun shack
And you may find yourself in another part of the world
And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful Wife
And you may ask yourself- Well...how did I get here?

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the moneys gone
Once in a lifetime/water flowing underground.

And you may ask yourself
How do I work this?
And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful Wife!

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the moneys gone
Once in a lifetime/water flowing underground.

Same as it ever was...same as it ever was...same as it ever was...
Same as it ever was...same as it ever was...same as it ever was...
Same as it ever was...same as it ever was...

Water dissolving...and water removing
There is water at the bottom of the ocean
Carry the water at the bottom of the ocean
Remove the water at the bottom of the ocean!

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/in the silent water
Under the rocks and stones/there is water underground.

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the moneys gone
Once in a lifetime/water flowing underground.

And you may ask yourself
What is that beautiful house?
And you may ask yourself
Where does that highway go?
And you may ask yourself
Am I right? ...am I wrong?
And you may tell yourself
My god!...what have I done?

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/in the silent water
Under the rocks and stones/there is water underground.

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the moneys gone
Once in a lifetime/water flowing underground.

Same as it ever was...same as it ever was...same as it ever was...
Same as it ever was...same as it ever was...same as it ever was...
Same as it ever was...same as it ever was...

[Hugin]

63. Select selection, Talking Dog.

:)

[Karenina]

80. Perfect. Just. Perfect!

:rofl::loveya::rofl:

[AnneD]

85. I love it....

heard it recently on Family Man with Nicolas Cage. Loved it but didn't didn't see who wrote it....Thanks. Oh, BTW-family man was pretty decent.

[Ghost Dog]

60. Europe shares reverse winning streak; banks weigh

FRANKFURT, April 3 (Reuters) - European stocks fell on Thursday, reversing a two-day winning streak, as worries of further writedowns weighed on banks such as UBS (UBSN.VX: Quote, Profile, Research) and data showed a slowdown in euro zone economic growth.

The FTSEurofirst 300 index of top European shares closed unofficially 0.5 percent lower at 1,310.84 points, having gained more than 4 percent over the past two sessions on hopes that the worst of the asset writedowns in the banking sector may be over.

The DJ Stoxx European banks index fell 2 percent as UBS and Britain's Lloyds TSB (LLOY.L: Quote, Profile, Research) fell 4.7 percent each.

"Fears returned to the volatile banking sector," Barclays Wealth said in a note.

Among notable gainers, Syngenta shares (SYNN.VX: Quote, Profile, Research) rose 5.9 percent after the Swiss agrochemicals group raised its earnings outlook, cashing in on roaring demand for farm goods.

/. http://www.reuters.com/article/marketsNews/idCAWEB069720080403?rpc=44

[Demeter]

91. Two Day Winning Streak, Eh?

Talk about straining at gnats. It would take at least 5 consecutive days to make a streak, I'm thinking.

That's dry-drunk, gambling addict talk.

[DemReadingDU]

64. NPR Fresh Air: Our Confusing Economy, Explained

4/3/08 Perplexed by the U.S. economy? You're not alone. Law professor Michael Greenberger joins Fresh Air to explain the sub-prime mortgage crisis, credit defaults, the shaky future of other types of loans and what we can expect from the U.S. financial markets.

Greenberger is a professor at the University of Maryland School of Law and the director of the University's Center for Health and Homeland Security.

http://www.npr.org/templates/story/story.php?storyId=89338743


Audio to be posted appx 3pm ET, so check back later. Mr Greenberger is on for most of the hour.

[Demeter]

74. Feds lie about link between software piracy and terrorism

http://blogs.computerworld.com/feds_lie_about_link_between_software_piracy_and_terrorism


The U.S. Justice Department seems to believe that if you tell a big enough lie, people will listen. Here's the latest: Attorney General Michael Mukasey claims that terrorists sell pirated software as a way to finance their operations, without presenting a shred of evidence for his case. He's doing it to push through a controversial piece of legislation that's bad for you.

In a talk last week before at the Tech Museum of Innovation, Mukasey used his best fearmongering tactics to link software piracy to terrorists. In his speech, which you can read in its entirety here, he told the group:

Criminal syndicates, and in some cases even terrorist groups, view IP crime as a lucrative business, and see it as a low-risk way to fund other activities.

Mukasey went on to cite numerous cases in which the Justice Department has arrested those who pirate software, and in which the department has cooperated with other countries in investigations. He mentioned arrests in Florida, investigations in China, and warned about the Russian mob being involved in selling pirated software.

In not a single instance did Mukasey include a link to terrorism. Not one. You can be sure that if there were any links, Mukasey would make sure to get them on the nightly news.

So why is Mukasey trying to convince people there's a link between software piracy and terrorism, even though one doesn't exist? To force Congress to pass controversial intellectual property (IP) legislation that would increase IP penalties, increase police power, set up a new agency to investigate IP theft, and more.

Industry lobbyists have been pushing for it. And now Mukasey is trying to convince the country that the bill needs to be passed as a way to fight terrorism.

Hmmm....let's see. Our federal government tells us a lie about a terrorist link that doesn't exist, then tries to convince Congress and the country to take controversial action based on that lie. That has a familiar ring to it, doesn't it? We're still paying for believing that last lie --- let's not repeat the mistake.

[Demeter]

76. Manhattan Apartment Sales Drop Furthest in 18 Years

http://www.nakedcapitalism.com/2008/04/manhattan-apartment-sales-drop-furthest.html

The 1990-1991 recession hit New York City particularly hard, with deep cuts in Wall Street jobs. The city has become even more dependent on financial services, so a similar or deeper contraction in percentage terms would have an even greater impact. We're getting a first whiff via the fall-off in apartment closings.

One assumption have been that foreign buyers would hold up the market. However, as non-residents, they would add much less to the tax base, and if government services are cut back, Manhattan may not look like such a desirable place to live.

From Bloomberg:

Manhattan apartment sales plunged the most in 18 years in the first quarter as buyers faced the prospect of a recession and job cuts at Wall Street securities firms.

Sales fell 34 percent from a year earlier and inventory rose 4.6 percent to 6,194 units, New York-based real estate appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. The median price of a Manhattan co-operative apartment or condominium increased 13.2 percent to a record $945,000...Financial companies have cut at least 34,000 jobs in the past nine months as losses and writedowns related to mortgage- backed securities climbed to at least $230 billion. Wall Street drives Manhattan real estate, with the median apartment price roughly tracking bonuses paid by investment banks since 1997, Miller said.

``There are a lot of buyers out there,'' said Prudential Douglas Elliman Chief Executive Officer Dottie Herman. ``It's not that they're not looking, but there is no sense of urgency,'' she said. ``If you continue to see inventory rise, that would be a sign that you are going to see a price dip.''

Until now, Manhattan has avoided the national housing slump. Last year, the U.S. saw the first drop in existing home prices since the Great Depression, while Manhattan apartment prices rose 3.6 percent, according to Miller Samuel.


The average price per square foot of a Manhattan co-op rose 16 percent to $1,128 for the quarter, Miller said. For condos, the price per square foot gained 21 percent to $1,416. Co-ops make up more than two-thirds of Manhattan apartments. Residents of them buy shares in a corporation that owns the building, rather than having a deed to the property itself.

[Demeter]

78. Quelle Surprise! Home Ownership Restricts Mobility, Particularly If You Can't Sell

http://www.nakedcapitalism.com/2008/04/quelle-surprise-home-ownership.html

Louis Uchitelle, in "Unsold Homes Tie Down Would-Be Transplants," points out that being unable to sell a house can keep people from taking jobs that require them to move. That problem is obviously now more acute given the moribund state of the housing market in many parts of the county. However, Uchitelle implies that the negative-labor-market impact of home ownership is strictly the result of a lousy real estate market.

That isn't accurate. As we pointed a year ago in "Is Owning Your House Bad for You?" we took as a point of departure an article by Tim Harford in Slate:

Even when we look only at internal migration, the barriers are formidable. Wherever people seem particularly keen to own their own homes—as in the United Kingdom, Spain, and some U.S. states—employment suffers as a result. English economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment. More conventional factors such as generous welfare benefits or high levels of unionization don't explain unemployment nearly as well as the tendency to own houses. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do.

Recent research in the Economic Journal suggests that people who own their own homes form denser local networks, which help unearth local jobs. Still, the jobs tend to be less well-matched and commuting distances are longer. So, professor Oswald is right to argue that we should do everything possible to free up impediments to renting or to selling a house and buying a new one. It would be handy if we were allowed to build houses near Manhattan, too.

Even if we did all this, economists Ed Glaeser and Joe Gyourko argue that one serious barrier remains: Houses do not walk. No matter how bad things get in Detroit or Treorchy, the houses will still be there, and if they are cheap enough, people will want to live in them. The likely result is a gloomy sort of segregation: Those who feel that they can find a good job in the boom cities will move there and pay the higher rents. Those who are less confident of that would rather have no job in a cheap house than no job in an expensive house. Detroit will have residents for a long time to come.


My comments:

It's an interesting thesis, and likely some truth in it too, but there is one huge hole: the data isn't adjusted for age. Older people are more likely to own homes. And unemployed people over 40 (in some fields, over 35) find it much harder to find a job. It's age discrimination, in part, but also the reality that most organizations are pyramid shaped. There are more jobs at the bottom and the middle. Employers don't like hiring people who are overqualified (the subordinate might know more than the boss, or might get bored and quit). And for corporate and professional roles, employers also vastly prefer poaching someone from another company to hiring someone who is out of work, even if through no fault of their own.

But the demands of the workplace are at odds with home ownership and rootedness. I know of someone over 40 who did lose his job. His old employer was in Boston. His new employer is in exurban Philadelphia. He doesn't want to take his kids out of school, so he has a brutal commute. How many people are willing to do that?

The demands of labor mobility are increasingly in conflict with community life of any form. A McKinsey partner requisitioned a study by Yankelovich about 8 years ago, which reported (among other things) that college graduates would work for 11 employers before they retired. More recently, the Bureau of Labor Statistics predicts that current college graduates will have 13 jobs by the time they are 38 (note it is not clear whether this includes promotions). That kind of instability makes home ownership a risky move. It's not just the possible need to relocate, but the uncertainty over income that would get in the way.
.


Yet Uchitelle fails to acknowledge that home ownership has been discussed in the economic literature and found to inhibit labor mobility even in good times. Guess we can't question that American dream.

From the New York Times:

The rapid decline in housing prices is distorting the normal workings of the American labor market. Mobility opens up job opportunities, allowing workers to go where they are most needed. When housing is not an obstacle, more than five million men and women, nearly 4 percent of the nation’s work force, move annually from one place to another — to a new job after a layoff, or to higher-paying work, or to the next rung in a career, often the goal of a corporate transfer. Or people seek, as in Dr. Morgan’s case, an escape from harsh northern winters.

Now that mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people ... are making the labor force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring....

With homes changing hands easily in a booming market, interstate migration reached 2.2 million people in 2006, excluding the effects of Hurricane Katrina. As the economy and home prices began to unravel in 2007, however, interstate migration plunged to 1.6 million people....Worker mobility — or rather immobility — is making a big contribution to this decline....

Corporate transfers contribute significantly to worker mobility, and employers often cover at least some of the cost of selling a home in the old location and buying one in the new. That practice can backfire, says Richard Shaw, a vice president of Applied Industrial Technologies....

Out of 3,500 employees in the United States, Applied normally transfers 25 to 30 each year from one center to another... Despite the opportunity, transfers have fallen by half, Mr. Shaw said. That is mainly because transferred employees too often find themselves owning two homes — one in the old location and one in the new — and paying two mortgages.

Applied tries to minimize the problem by paying one of the two mortgages for up to six months, the expectation being that the old home will sell by then. Increasingly, that does not happen...

He tells of one transferred executive “who ended up owning two homes for more than six months and, finding himself paying two mortgages, opted to move back to his original city, surrendering his new house to the bank.”

[Demeter]

77. Bond Prices Imply Corporate Defaults at 2X Rate Forecast by Agencies

http://www.nakedcapitalism.com/2008/04/bond-prices-imply-corporate-defaults-at.html

In an amusing bit of irony, Standard & Poors chief, in an interview, acknowledged that the bond markets are anticipating that corporate defaults will run at twice the rate foreseen by the rating agencies. Recall that roughly half the big business debt outstanding is junk, and nearly all of that was issued in connection with LBOs. The credit markets for some time have operated on the assumption that the financial system is under severe stress (which is confirmed almost daily in the press) and recession, likely a deep one, is in the offing. Even if that view seems a bit dour, would you side with the rating agencies given their track record?

From Bloomberg:

Investors are pricing in defaults on corporate bonds twice as high as projected by rating companies, said Deven Sharma, Standard & Poor's president. The rating assessor said on March 31 the default rate for non-investment grade U.S. corporate bonds may rise to as much as 5.7 percent and at least 3.4 percent by February next year, as companies are hurt by rising funding costs and a slowing economy. The rate was 1.09 percent in January.

``The markets are pricing in a default rate of nine or 10 percent for high-yield corporate debt, which is a lot higher than we're forecasting,'' Sharma said in an interview with Bloomberg TV. ``There is a recession and the recovery will be somewhat slower than we anticipated.''

The number of companies at risk of having their credit ratings downgraded rose by three to a record 703 in March amid a slowdown in housing and consumer spending that has pushed the economy closer to recession, S&P said on April 1. The number of potential downgrades is 90 more than reported a year ago and 68 more than the 2007 average. Almost 76 percent of negative ratings changes have been among high-yield, high-risk companies, the rating assessor said...

``There is a fundamental change of behavior by consumers,'' he said. ``For many years, going back to the Great Depression, consumers always first paid their mortgage and if they default, they would default on their credit cards. For the first time, in 2005, we started to see the line being crossed, where consumers are willing to walk away from their mortgages.''

New home foreclosures in the U.S. rose to a record high in the fourth quarter as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said in a March 6 report. Late payments, or delinquencies, were the highest in 23 years, the bankers' group said.


Um, doesn't it occur to her that the change in consumer behavior might have been triggered by the new bankruptcy law? If you are above median income in your state (meaning ineligible for Chapter 7), it is easier to walk from your mortgage than your credit card debt. Another example of unintended consequences...

[Demeter]

79. New Wall Street Gimmick: "Ring Fencing" Dead Assets

http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html

Several alert readers caught the Financial Times story, "Wall St banks seek to ring-fence bad assets," and I held off from posting on the assumption it would merit coverage in the Wall Street Journal or the New York Times. Not so.

The Financial Times article says that investment banks are seeking to put dodgy assets in a separate subsidiary, with the hopes of offloading it to over-eager bottom-fishing chumps investors. Or if that doesn't work, to taxpayers:

According to people familiar with the matter, banks are discussing a joint proposal to regulators to set up a fund, which would absorb US subprime assets and other troubled securities, as a way of restoring confidence in the banking system and ending the pressure to recognise mark-to-market losses.


I don't give this proposal any hope of seeing the light of day, at least in this form, although a huge number of permutations later, something that might have germinated with this idea could come to life.

The biggest obstacle is the idea that this facility would be organized by the industry and all would participate on the same terms. As we found with the stillborn SIV rescue plan and the "bail out the monolines" firedrill, getting consensus among a large number of disparate players is well-nigh impossible.

This effort is likely to founder over the same issue that killed the MLEC, the hoped-for SIV garbage dump, which is how to value the assets going into the new vehicle. Prices need to be set for the instruments that will be moved out of a bank; this stuff by definition doesn't trade so how to price it is legitimately subject to debate. But that's assuming it even got that far. For participants to have a down-and-dirty discussion, they'd wind up shedding light, if in a general way, on their exposures and how much they had marked them down. I doubt that the involved parties would risk revealing that much.


Um, this works only if the price to which you have marked the assets is lower than a third party is willing to pay. Otherwise, you wind up worse off. Simple example: you've written this garbage barge down to 25 cents on the dollar, convinced that that it extraordinarily cheap. But then you try getting bids, and all you get is 20 cents on the dollar, You'd have to take another 5 cents on the dollar loss to sell it, which is another hit to equity, which is precisely what you were trying to avoid.

Or just as bad, word gets out that you shopped your little nuclear waste subsidiary, but didn't like the offers. Now guess what that will do to your stock price, your counterparties' confidence, and CDS prices on your debt. You were better off having everyone believe, or pretend they believed, that your write-offs put all your problems behind you.

So this does not appear a bona fide notion to unload this stuff onto third parties, despite chatter of hedge funds and distressed investors out buying MBS and mortgages (that stuff is a walk in the park compared the complexity of some of these structures). And the volume that would be on offer is certain to swamp demand.

This effort, then, despite the brave talk (and perhaps a bit of self-delusion), is preparation to somehow dump these toxic assets on the laps of the Powers That Be. But the Resolution Trust Corporation created good banks and bad banks out of failed banks. It's an amazing bit if hubris if the industry thinks it can shove these assets onto taxpayers and carry on unimpeded.

There is also a lack of historical memory. The RTC was extremely controversial; Congress was not happy about funding its sizeable working capital requirements. And in contrast with 1990-1991, there are calls for relief from a lot more quarters. Wall Street may find it tougher than it thought to get its hoped-for rescue operation.

THIS IS EXACTLY WHAT CARLYLE DID--AND THE SUCKERS TOOK A BATH.

[Demeter]

81. Soros Lambasts Paulson, Call for Intervention

http://www.nakedcapitalism.com/2008/04/soros-lambasts-paulson-call-for.html



From the Financial Times:


Instead of reshuffling regulatory agencies, the authorities ought to prepare for the next shoes to drop. I shall mention only two. There is an esoteric financial instrument called credit default swaps. The notional amount of CDS contracts outstanding is roughly $45,000bn. To put it into perspective, that is about equal to half the total US household wealth and about five times the national debt. The market is totally unregulated and those who hold the contracts do not know whether their counterparties have adequately protected themselves. If and when defaults occur, some of the counterparties are likely to prove unable to fulfil their obligations. This prospect hangs over the financial markets like a sword of Damocles that is bound to fall, but only after some defaults have occurred. That must have played a role in the Fed’s decision not to allow Bear Stearns to fail. One possible solution is to establish a clearing house or exchange with a sound capital structure and strict margin requirements to which all existing and future contracts would have to be submitted. That would do more good in clearing the air than a grand regulatory reorganisation.

The other issue is rising foreclosures. About 40 per cent of the 6m subprime loans outstanding will default in the next two years. The defaults of option-adjustable-rate mortgages and other mortgages subject to rate reset will be of the same order of magnitude but occur over a longer period. With single family home sales running at an annual rate of 600,000, foreclosures will overwhelm the market and cause prices to overshoot on the downside. This will swell the number of homeowners with negative equity who may be tempted to turn in their keys. The fall in house prices will become practically bottomless until the government intervenes. Cutting foreclosures should be a priority but the measures so far are public relations exercises.

The Bush administration has resisted using taxpayers’ money because of its market fundamentalist ideology. Apart from a bipartisan fiscal stimulus, it has left the conduct of policy largely to the Fed. Yet taxpayers’ money will be needed to reduce foreclosures. Two proposals by Democrats in Congress strike a balance between the right to foreclosure and discouraging the exercise of that right. One would modify the bankruptcy laws allowing judges to modify the terms of mortgages on principal residences. Another would provide Federal Housing Administration guarantees that would enable mortgage holders to be paid off at 85 per cent of the current appraised value. These proposals will not solve the housing crisis, but go to the heart of the issue. They should be given serious consideration.

[Demeter]

83. Somebody's Working Awfully Hard To Squeeze Out Some Gain in This Session

Who knows where they post the goose report? Was that Ozy's specialty?

[Hugin]

96. "Fed adds temporary bank reserves via 7-day repos"

Thu Apr 3, 2008 9:39am EDT
NEW YORK, April 3 (Reuters) - The Federal Reserve is adding temporary reserves into the U.S. banking system via 7-day repurchase agreements, the New York Fed said on Thursday.

The latest repo move followed $5 billion in 14-day repos earlier.

Fed funds last traded at 2.50 percent, above the Fed's current 2.25 percent target rate. (Reporting by Richard Leong; Editing by James Dalgleish)

http://www.reuters.com/article/bondsNews/idUSNYG00100720080403

______________________________________________________________________________________________

There's your goose.

[UpInArms]

93. TABLE-U.S. M-2 money supply up $32.2 bln March 24 week

http://www.reuters.com/article/bondsNews/idUSN0330809120080403

pre] NEW YORK, April 3 (Reuters) - U.S. M-2 money supply rose by
$32.2 billion in the March 24 week to $7,720.8 billion, the
Federal Reserve said on Thursday.
The Fed said the four-week moving average of M-2 was
$7,676.2 billion vs. $7,653.8 billion in the previous week.
Following are the details of the money supply report, and
the Fed's H.3 and H.4 reports:
One week ended March 24 (billions dlrs)
Latest Change Prev week Rvsd from
M-1....1,370.3 up.....11.8 vs 1,358.5.....1,358.7
M-2....7,720.8 up.....32.2 vs 7,688.6.....7,688.8
M-2 Avg 4 wks (Vs Wk ago)..7,676.2 vs ...7,653.8
Monthly aggregates (Adjusted avgs in billions)
M-1 (Feb vs Jan)..........1,367.7 vs.....1,364.6
M-2 (Feb vs Jan)..........7,602.2 vs.....7,498.5
Federal Reserve's H.3 and H.4 report:
Two Weeks Ended March 26 daily avgs-mlns (H.3)
Free Reserves....rvsd.....-21,645* vs.rvsd.... 1,140
Bank Borrowings.324 vs............230
Seasonal Loans....7 vs..............3
Excess Reserves..............4,622 vs..........1,370
Required Reserves (Adj).....39,856 vs.........41,701
Required Reserves...........39,912 vs.........39,131
Total Reserves..............44,534 vs.........40,501
Non-Borrowed Reserves......-61,731 vs........-19,729
Monetary Base (Unadj)......835,013 vs........829,290
*Includes Primary Dealer Credit Facility and other
credit facility extensions amounts, not Term auction facility
amounts
Two Weeks Ended March 26 daily avgs-mlns
Total Vault Cash.....rvsd...51,783 vs.........49,273
Inc Cash Equal to Req Res...33,606 vs.........32,074
One week ended April 2 (H4.1)
Bank Borrowings............45,138** up......11,157**
Primary Credit.7,013 up.........6,463
Secondary Credit...0 down...........2
Seasonal Credit....7 up.............1
Float.........-1,071 up...........278
Balances/Adjustments..........7,048 up...........294
Currency.....815,629 down.......1,269
Treasury Deposits.............5,158 down.........571
**Includes Primary Dealer Credit Facility and other
credit facility extensions amounts
One week ended April 2 - daily avgs-mlns
Fed bank credit.............875,577 up.........6,141
Treasuries held outright....589,085 down......39,892
Agencies held outright..........nil vs..........unch
Repos.........77,500 down.......7,321
Other Fed assets.............69,924 up........21,418
Other Fed liabilities........44,905 up...........370
Other deposits with Fed.........268 up............14
Foreign deposits..98 down..........20
Gold stock....11,041 vs..........unch
Custody holdings..........2,206,091 up........21,836
Factors on April 2
Bank borrowings..............44,796 vs...........585
Float..........1,473 vs........-1,872

[Joe Chi Minh]

97. Do you think Bear Stearns was smarter than the average bear? The CEO and directors

need to be made to sit the Yogi Bear Quotient Test, in order to establish their YB Quotient.

[UpInArms]

100. end of the day - nothing to see - move along

Dow 12,626.03 20.20 (0.16%)
Nasdaq 2,363.30 1.90 (0.08%)
S&P 500 1,369.31 1.78 (0.13%)
10-Yr Bond 3.591% 0.008

NYSE Volume 3,920,364,250
Nasdaq Volume 2,005,535,250

4:20 pm : After choppy action on Thursday, the market eventually finished the day with a slight gain. A better than expected ISM services report, and reassuring comments by a major financial firm’s CEO helped offset disappointment over a worse than expected unemployment claims reading. Testimony from several officials regarding the collapse and bailout of Bear Stearns (BSC 10.72, -0.14) dominated headlines, however, the stock market had a limited reaction.

Initial jobless claims for the week ended March 29 jumped to 407,000 from 369,000. Economists expected 366,000 claims. This is the highest level of claims since September 2005. However, the data falls outside of March’s jobs report, so it will not have an impact on tomorrow’s reading.

The market was lifted out of negative territory on a Nikkei.net report that Merrill Lynch (MER 45.89, +0.55) CEO John Thain said the company has no need to raise fresh capital. Financials (+0.4%) had been underperforming the broader market, but managed to outperform after the comments.

Also helping stocks was a better than expected ISM services survey. The March ISM non-manufacturing index rose to 49.6 from 49.3. This topped the expected reading of 48.5. However, the number still reflects a contraction in non-manufacturing activities as it remains below 50.

Fed Chairman Bernanke, New York Fed President Geithner, SEC Chairman Cox, and the CEOs of Bear Stearns and JPMorgan Chase (JPM 46.28, +0.04) testified before the Senate Banking Committee with regard to the rescue of Bear Stearns. The participants confirmed earlier assumptions regarding the deal, but did not give the market any significant revelations.

Six of the ten sectors posted a gain.

Tech (+0.1%) performed on par with the broader-market as strength in Apple (AAPL 151.61, +4.12) helped offset weakness in Cisco (CSCO 24.23, -0.73). Shares of Cisco fell after being downgraded to Neutral from Buy at UBS. Also helping the sector was better than expected earnings from Research In Motion (RIMM 122.58, +6.79).

The best performing sector was materials. It gained 1.8% this session, making it the only sector in positive territory for the year. The gains were fueled by strength in Alcoa (AA 38.54, +2.11) and Monsanto (MON 117.79, +5.79).

Schering-Plough (SGP 15.38, +1.52) was one of the best-performing S&P 500 stocks on Thursday. Traders were pleased with the company’s cost cutting measures. However, the stock is still down 55% from its 52-week high, after getting hammered on news that its popular cholesterol drug Vytorin may not be effective.

In commodity trading, oil shed 0.5% to $104.35 per barrel, and gold gained 1.1% to $905.20 per ounce.
DJ30 +20.20 NASDAQ +1.90 NQ100 +0.4% R2K +0.2% SP400 +0.4% SP500 +1.78 NASDAQ Dec/Adv/Vol 1499/1361/1.97 bln NYSE Dec/Adv/Vol 1296/1816/1.25 bln

3:30 pm : The major indices dip a bit as they trade slightly above the unchanged mark. The market spent the first half of the session in negative territory, and the second half in positive territory.

Looking to tomorrow, market participants will turn their attention to the March jobs report. Economists expect nonfarm payrolls to decline by 50,000, following February's decline of 63,000. The unemployment rate is expected to tick higher to 5.0% from 4.8%.DJ30 +26.14 NASDAQ +4.06 SP500 +2.40 NASDAQ Dec/Adv/Vol 1528/1324/1.62 bln NYSE Dec/Adv/Vol 1363/1731/982 mln

3:00 pm : The stock market is trading with a slight gain. The Senate Banking Committee hearing has come to a conclusion.

The Fed lent out $25 billion for 28 days in its second Term Securities Lending Facility auction. The auctions were implemented to increase liquidity by lending financial firms highly liquid Treasury securities for less liquid assets as collateral. The auction had a bid-to-cover ratio 1.88, as $46.9 billion in bids were submitted. The stop out rate--which is the minimum rate the Fed accepted--was 0.16%. At least week's auction, the stop out rate was 0.33%. The low stop out rate demonstrates the Fed is aggressively attempting to increase liquidity.DJ30 +46.25 NASDAQ +7.87 SP500 +5.21 NASDAQ Dec/Adv/Vol 1470/1362/1.48 bln NYSE Dec/Adv/Vol 1294/1796/892 mln

[slipslidingaway]

102. Stock Market Technical Analysis 4/3/08

http://www.youtube.com/watch?v=RducV5PiSVA

Just started looking at these nightly updates...support, resistance and patterns.