STOCK MARKET WATCH, Monday June 15

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday June 15, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 2

AT THE CLOSING BELL ON June 12, 2009

Dow... 8,799.26 +28.34 (+0.32%)
Nasdaq... 1,858.80 -3.57 (-0.19%)
S&P 500... 946.21 +1.32 (+0.14%)
Gold future... 940.70 -21.30 (-2.21%)
10-Yr Bond... 3.79 -0.06 (-1.66%)
30-Year Bond 4.64 -0.05 (-1.11%)

---

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

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie and Silver

---

Handy Links - Market Data and News:
Economic Calendar    Marketwatch Data    Bloomberg Economic News    Yahoo! Finance
    Google Finance    LayoffDaily

Handy Links - Economic Blogs:
The Big Picture    Financial Sense    Calculated Risk    Naked Capitalism    Credit Writedowns
    Brad DeLong    Bonddad    Atrios    goldmansachs666

Handy Links - Government Issues:
LegitGov    Open Government    Earmark Database

---

This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

[ozymandius]

1. Market Observation

Pension Tension
BY BRIAN PRETTI

In the midst of the current economic cycle, corporations have been meaningfully pulling back on their financial engineering activities (stock buybacks) that have positively influenced both reported earnings per share as well as acted as a demand support for equity prices in relatively cyclical fashion over time. The fact is that the S&P has experienced its best performance periods really over the last thirty years whenever corporate retirement of equities has been the strongest at any point in time. Not surprising. But as we look over the truly long term, another meaningful secular support for equity prices has been demand from pension funds, with very much special emphasis on the public pension funds of this world. What have been massive demographic tailwinds for US financial assets of really all types over the prior three-plus decades are set to become modest headwinds as we move forward. It’s already starting. This is not some huge negative that these rhythmic headwinds are now starting to blow. What this set of circumstances suggests is that investment selection, asset allocation and individual investment decision making need to be thoughtful and focused. After all, one need only look at the ten year performance of the S&P to know change is already upon us and broad exposure to equities as an asset class being an investment strategy, with little sector or geographic focus, may not be the key to the magic kingdom.

....

Of course what you see above has been brought to us by the miracles of modern health care, better diets, more awareness of wellness, etc. But it also represents a lot of mouths to feed in terms of currently unfunded SSI and Medicare liabilities. As we add up the numbers, about 12 months back the US had national debt of roughly $12 trillion. The current stimulus/bailout spending will add near another $13 trillion to the money printing/debt accumulation hole if enacted fully. Add in maybe $50 trillion in unfunded NPV of SSI and Medicare promises and the US is looking at something like $75 trillion in forward liabilities to be covered over the decades ahead. There are only two ways this will be accomplished as is clear – default or with “cheaper” dollars. And you already know which choice politicians will make, so we can frame our investment decision making with this constantly in mind.

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

[Demeter]

12. SSI And Medicare WERE TOO Funded

The funds were stolen to buy illegal wars.

[ozymandius]

14. Right you are.

Our government, operating as a criminal enterprise, does its work again. Monetization of debt got the ball rolling.

[AnneD]

47. Well that explains why the government was so hot after the Mafia......

the Cosa Nostra was cutting in on their profits. Reminds me of the ST episode, "A piece of the Action", but without the humour.

If given my choice of taking a loan out from a loan shark mob or the credit card companies-the mob would offer better terms. If you can't pay they break your arm but at least they don't suck the life out of you.

The mobs quarreled among themselves but they never fought a foreign war and their wars were very limited in scope. Boy, when I start thinking the mob looks good-this country is in a sorry state.

[Demeter]

49. It Wsn't Just Wars, There Were Also Those Tax Cuts to the Rich

Well, they're just going to have to put those taxes back on, with interest.

La Belle Dame Sans Merci

[ozymandius]

2. Today's Reports

08:30 NY Empire Manufacturing Index Jun
Briefing.com NA
Consensus -5.10
Prior -4.55

09:00 Net Long-Term TIC Flows Apr
Briefing.com NA
Consensus $52.9B
Prior $55.8B

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[Hugin]

3. I see only two pending "less bad than expected" reports in the queue.

"Consensus -5.10 Prior -4.55"; Will probably come in at around -4.75.
"Consensus $52.9B Prior $55.8B"; Around the $55B number.

and who knows what the numbers really are... :shrug:

My cynicism is derived from the chart showing unemployment with/without the stimulus that had the top blown out of it last week.

[ozymandius]

5. Calculated Risk and Naked Capitalism will probably have the answer.

Mike Shedlock probably has something to say about it too, with vitriol no less.

Cynicism is healthy.

[UpInArms]

32. Much Worse than Expected: .S. June Empire State index falls to -9.4 vs -4.6

U.S. June Empire State index falls to -9.4 vs -4.6
8:31am Today

[ozymandius]

35. Another stat that firmly resides in "oh shit" territory.

Empire State Manufacturing "Conditions continued to deteriorate"

From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in June, at a moderately faster pace than in May. The general business conditions index fell 5 points, to -9.4. The new orders index remained negative and near last month’s level, while the shipments index fell 6 points to -4.8.
...
In a series of supplementary questions, manufacturers were asked about their capital spending plans for 2009 relative to their actual spending for 2008, both overall and for a few broad categories of capital (see Supplemental Report tab). Similar questions had been asked in June 2008 and June 2007. In the current survey, 56 percent of respondents reported reductions in overall capital spending in 2009, while just 20 percent reported increases. These results contrast fairly markedly with those of the June 2008 survey, which showed nearly as many respondents reporting increases (32 percent) as decreases (36 percent).

Here is the general business conditions index. Note that the data only goes back to July 2001 (chart to Jan 2002). Any reading below zero is contraction, so this index shows manufacturing is contracting in June.

[Dr.Phool]

36. Ooops!

Somebody didn't get the message.

[Hugin]

43. Aw, it's just manufacturing.

All We (the royal one) care about is the Banksters. Y'know the 'wealth generators'.

:eyes:

(Eeep! :o But, if it's still a massaged number... :gulp: That's okay! We're all going back to school! To get smartenified! Like the people in Asia! :bounce: )

[ozymandius]

4. Oil falls to near $71 as US dollar strengthens

Oil prices fell to near $71 a barrel Monday, halting a three-month rally, as the dollar, which typically trades inversely to crude, was boosted by comments by Russia's finance minister.

Benchmark crude for July delivery fell 94 cents to $71.10 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, it traded as low as $70.71. On Friday, it fell 64 cents to settle at $72.04.

....

Traders are also wary that the recent price run-up isn't supported by improving supply and demand fundamentals.

....

In other Nymex trading, gasoline for July delivery fell 1.6 cents to $2.0271 a gallon and heating oil dropped 0.79 cent to $1.8296. Natural gas for July delivery slid 3.1 cents to $3.826 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[Festivito]

6. Debt: 06/11/2009 11,375,626,420,309.63 (DOWN 8,361,184,829.38) (Small rise in debt, FICA down.)

(Debt moves up about half a billion. That's not so much. I had posting troubles on DU. Hopefully its working and will continue.)

= Held by the Public + Intragovernmental(FICA)
= 7,110,580,992,583.70 + 4,265,045,427,725.93
UP 484,710,305.16 + DOWN 8,845,895,134.54

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.78, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 306,631,142 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $37,098.73.
A family of three owes $111,296.19. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 5,484,369,913.26.
The average for the last 30 days would be 3,839,058,939.28.
The average for the last 31 days would be 3,715,218,328.34.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 97 reports in 142 days of Obama's part of FY2009 averaging -0.18B$ per report, -0.06B$/day so far.
There were 172 reports in 254 days of FY2009 averaging 7.85B$ per report, 5.32B$/day.

PROJECTION:
There are 1,319 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.4T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
06/11/2009 11,375,626,420,309.63 BHO (UP 748,749,371,396.55 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,350,901,523,397.20 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
05/20/2009 +000,422,183,214.17 ------------********
05/21/2009 +016,742,591,292.36 ------------**********
05/22/2009 +000,007,301,981.46 ------------******
05/26/2009 +000,178,213,075.69 ------------******** Tue
05/27/2009 +000,332,821,919.42 ------------********
05/29/2009 +019,434,324,960.50 ------------**********
06/01/2009 +078,540,152,146.76 ------------********** Mon
06/02/2009 +000,543,288,286.72 ------------********
06/03/2009 -000,003,266,733.82 -----
06/04/2009 +011,755,789,483.75 ------------**********
06/05/2009 -000,226,149,345.97 ---
06/08/2009 +000,015,040,049.19 ------------******* Mon
06/09/2009 +000,025,670,087.48 ------------*******
06/10/2009 +000,124,232,779.18 ------------********
06/11/2009 +000,484,710,305.16 ------------********

128,376,903,502.05 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,710,994,617,050.56 in last 266 days.
That's 1,711B$ in 266 days.
More than any year ever, including last year, and it's 168% of that highest year ever only in 266 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 266 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3918916&mesg_id=3923364

[Festivito]

67. Debt: 06/12/2009 11,374,952,729,568.32 (DOWN 673,690,741.31) (Small rise, FICA down.)

(Debt moves up about a third of a billion. FICA drops. Boring.)

= Held by the Public + Intragovernmental(FICA)
= 7,110,923,807,097.73 + 4,264,028,922,470.59
UP 342,814,514.03 + DOWN 1,016,505,255.34

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.78, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 306,638,342 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $37,095.66.
A family of three owes $111,286.99. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 32 days.
The average for the last 22 reports is 5,204,458,065.32.
The average for the last 30 days would be 3,816,602,581.24.
The average for the last 32 days would be 3,578,064,919.91.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 98 reports in 143 days of Obama's part of FY2009 averaging -0.23B$ per report, -0.08B$/day so far.
There were 173 reports in 255 days of FY2009 averaging 7.80B$ per report, 5.30B$/day.

PROJECTION:
There are 1,318 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.4T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
06/12/2009 11,374,952,729,568.32 BHO (UP 748,075,680,655.24 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,350,227,832,655.90 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
05/21/2009 +016,742,591,292.36 ------------**********
05/22/2009 +000,007,301,981.46 ------------******
05/26/2009 +000,178,213,075.69 ------------******** Tue
05/27/2009 +000,332,821,919.42 ------------********
05/29/2009 +019,434,324,960.50 ------------**********
06/01/2009 +078,540,152,146.76 ------------********** Mon
06/02/2009 +000,543,288,286.72 ------------********
06/03/2009 -000,003,266,733.82 -----
06/04/2009 +011,755,789,483.75 ------------**********
06/05/2009 -000,226,149,345.97 ---
06/08/2009 +000,015,040,049.19 ------------******* Mon
06/09/2009 +000,025,670,087.48 ------------*******
06/10/2009 +000,124,232,779.18 ------------********
06/11/2009 +000,484,710,305.16 ------------********
06/12/2009 +000,342,814,514.03 ------------********

128,297,534,801.91 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,710,320,926,309.25 in last 267 days.
That's 1,710B$ in 267 days.
More than any year ever, including last year, and it's 168% of that highest year ever only in 267 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 267 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3923349&mesg_id=3923375

[ozymandius]

7. Inflation alarm after oil surge

LONDON (Reuters) - Inflation will be back at center-stage for financial markets next week with oil's surge past $70 a barrel and rising bond yields rekindling worries about long-term borrowing costs and the fragile housing sector.

A series of inflation readings for May in the United States, Britain and the euro zone will focus investors' minds after oil prices jumped over 20 percent last month and bond markets were spooked enough to lift 10-year U.S. Treasury yields to 4 percent -- an eight-month high.

....

This is thanks to governments' stimulus measures and unprecedented quantitative easing programs by central banks which have led to rock-bottom interest --and mortgage -- rates.

But the rise in longer-dated Treasury yields, linked to huge issuance volumes and some doubts about demand for U.S. assets, is causing fears for the fragile recovery as it heralds higher borrowing costs down the line.

And the healthy data together with super-loose monetary policy has also served to bring inflation -- on the backburner for months -- back on the agenda.

http://www.reuters.com/article/hotStocksNews/idUSTRE55B3GK20090615

[mbperrin]

42. Gosh, who could have predicted that when you need to borrow massively

more money from massively fewer folks with money to lend, that interest rates might have to rise to attract the survivors and to account for the increased risk?

Who coulda?

[ozymandius]

8. Obama seeks remake of Fed's powers: WSJ

LOS ANGELES (MarketWatch) -- President Barack Obama is expected Wednesday to propose a sweeping reorganization of financial-market supervision, including remaking the powers of the Federal Reserve, The Wall Street Journal said in a report on their Web site dated Monday.

The report, which cited people involved in the process, said Obama would call for allowing the Fed to oversee the biggest financial players and to give the government the power to unwind and break up systemically important companies.

http://www.marketwatch.com/story/obama-seeks-remake-of-feds-powers-wsj

[ozymandius]

15. FDIC vs. the Banksters: “Regulators Feud as Banking System Overhauled”

The article in the Sunday NYT about tension between the FDIC and the OCC was a pretty sad version of reality, IMHO. What’s with Labaton and Andrews?

The piece, “Regulators Feud as Banking System Overhauled,” purports to describe the rift between the OCC and Treasury, who side with the big banks, and the FDIC led by Sheila Bair, who attempt to follow the law and enforce some degree of discipline over the banking industry.

Unfortunately, the article gives far too much credence to Controller John Dugan and Treasury Secretary Tim Geithner, without adequately disclosing to readers of the Times just who works for whom in the political equation. Let’s go through the article and translate some of the TimesSpeak into vernacular.

....

You see, the little banks, while looking really nasty at the end of Q1 2009, are still in far better shape than the zombies. Only with hundreds of billions in subsidies could the Sell Side hawk the new equity needed to help GS, JPM et al escape the TARP long enough to pay year-end bonuses. Meanwhile, the smaller banks have been paying as much as 3x per $1 of assets to support the FDIC deposit insurance fund vs the money center banks. Click here to see the results from our Q1 2009 Stress Index survey: “Q1 2009 Bank Ratings Update and GM, GMAC Bank Join the Zombie Dance Party.”

http://www.ritholtz.com/blog/2009/06/the-fdic-vs-the-banksters-regulators-feud-as-banking-system-overhauled-nyt/

[Tansy_Gold]

51. Banking system doesn't need to be overhauled

It needs to be keelhauled.

[Demeter]

56. Amen!

[Tansy_Gold]

68. FRSP

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3924176

check out post #9. . . . .

[Demeter]

69. I had read that thread, and not realized what the picture represented

It was too artsy and abstract. Thanks for pointing it out.

[dixiegrrrrl]

66. Ozy..good article. TY for posting it.

:hi:

[ozymandius]

16. Sheila Bair vs. John Dugan (FDIC vs. OCC)

This post is worth a full reading. - Ozy
....

The spat in question is between Sheila Bair, the exemplary FDIC chairwoman, and the asshat being the speaker of the above WTF quote, John C. Dugan, the comptroller of the currency. I don’t know much about Dugan, other than some of the odd and indefendable statements he keeps making. He often misstates facts about the credit collapse, blames the wrong organizations for the subprime debacle, and otherwise seems to be a mouthpiece for the largest, most inept banking istitutions.

Some Dugan comments:

• “The overwhelming share of increased actual and projected costs for the fund have been caused by actual and projected failures of smaller banks, not larger ones.”

• The financial crisis stemmed in part from problems at small banks;

• Stiff new insurance fees on banks as unfair to the largest banks

• The responsibility for validating risk management models lies first and foremost with the institution itself. (OCC)

Bizarre.

Part of the problem lies with the OCC itself. Its an agency that has been committed to radical deregulation. When the NY Attorney General was looking into “discriminatory mortgage lending practices,” OCC filed suit to stop the NYAG from inspecting the lending records of national banks using state laws.

The OCC decision to allow banks to become commercial real estate developers failed to recognize the inherent risk involved. Even the NAR complained. A 2002 ruling by the regulatory agency prevented Credit Card insurance from being regulated by the appropriate state agencies. And why anyone at the OCC thought allowing national banks to underwrite insurance was a good idea is hard to fathom.

At just about every turn, the OCC has ruled in favor of radical deregulation, and against consumers. Why the Obama administration has retained Dugan (he’s been at the OCC since 2005) is beyond my comprehension. He is a classic Bush appointee — a regulator who is against regulating — who should have been dismissed at the earliest opportunity.

http://www.ritholtz.com/blog/2009/06/sheila-bair-vs-john-dugan/

[UpInArms]

29. Why the Obama administration has retained Dugan?

so we could have some change we can't believe in!

[ozymandius]

31. Just another thing this administration has done that makes no damned sense.

This is the OCC that prevented states from curtailing predatory lending practices.

[ozymandius]

9. Stocks, Commodities Retreat; Dollar, Treasuries Rise on Kudrin

June 15 (Bloomberg) -- Stocks fell, sending the MSCI World Index lower for a second day, and commodities dropped after the Group of Eight finance ministers signaled they may start to withdraw stimulus spending. The dollar rose as Finance Minister Alexei Kudrin said Russia has confidence in the U.S. currency.

The MSCI index of 23 developed nations slid 1 percent at 11:17 a.m. in London, led by raw-materials producers. Futures on the Standard & Poor’s 500 Index decreased 1.1 percent and Russia’s Micex Index slumped 4.1 percent. Oil declined as much as 1.9 percent in New York, while copper tumbled 3.2 percent in London. The dollar strengthened 1 percent against the euro and Treasuries climbed for a third day.

Group of Eight finance ministers meeting in Lecce, Italy, this weekend began planning to reduce budget deficits after signs of economic recovery sent the MSCI to a three-month, 43 percent gain and spurred concern that inflation will accelerate. Kudrin’s support for the dollar echoed that of Japanese Finance Minister Kaoru Yosano, who said last week that his government is confident in Treasuries.

.....

Kudrin’s comments underscore the dependence of Brazil, China, Russia, and India on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. The four nations increased foreign reserves by more than $60 billion in May to limit their currencies’ gains and support their exports. They now have combined reserves of $2.8 trillion and are among the largest holders of Treasuries.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHmda8EEJK50

[Demeter]

10. Good Morning Ozy and All!

As might be expected for any event dedicated to the 3 Stooges, we had a zany Weekend Economist thread. But I think this week the economy will be eclipsed by the rapidly unraveling torture/war crime/Justice Dept. scandal ball of yarn. It's getting really ugly all of a sudden.

If you really want to catch up, the thread is here:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x455876

I had so much weekend, the Weekend suffered, and the inbox is still rather full...

[ozymandius]

13. Good morning, Demeter, and everyone.

:donut: :donut: :donut:

I enjoyed the WE thread - always happy to offer a recommendation and my two cents postage.

:hi:

[DemReadingDU]

23. ah, still lots of good reading at the weekend thread!

:)

[Demeter]

25. If You Like That Kind of Thing

I wouldn't call it "good", myself. Nightmarish, perhaps.

[AnneD]

55. I'd rather hear the bad news from friends....

than from uncaring strangers.

[ozymandius]

11. Delta, AMR See Revenue Vanish as New York Business Fares Tumble

June 15 (Bloomberg) -- U.S. airlines faced with losses in the recession are slashing business-class fares from New York to London, Zurich and other finance centers by more than 50 percent to try to fill planes.

A business-class ticket from New York’s Kennedy Airport to UBS AG’s hometown of Zurich costs $1,838 for June, 51 percent cheaper than last year, according to travel Web site Bestfares.com. Flights to London Heathrow are down 56 percent to $1,994 as banks’ job losses erode demand.

....

Worldwide industry losses may total $9 billion this year, twice as deep as a previous forecast, IATA said. First-quarter revenue from international first- and business-class tickets fell as much as 40 percent, the Montreal-based trade group said.

Demand for premium-class service is wilting after financial companies across the globe shed almost 188,000 jobs since the end of September, according to data compiled by Bloomberg.

http://www.bloomberg.com/apps/news?pid=20601109&sid=athn1c8K0PUA

[Demeter]

17. Obama’s IMF boost exacts heavy toll By Sarah O’Connor in Washington

http://www.ft.com/cms/s/0/e310540a-590b-11de-80b3-00144feabdc0.html

Congress is this week expected to approve Barack Obama’s request for an extra $108bn for the International Monetary Fund, but it will come at a political price after weeks of grandstanding, messy compromise and horse-trading.

The request, tacked on to a $100bn (€71bn, £60bn) war funding bill, provoked a backlash in Congress as Republicans and some Democrats balked at what they called another bail-out, this time for foreign countries and banks. The administration had thought putting it in the war funding bill would speed its passage: which Republican would vote against money for US troops? But the move backfired and the administration spent last week scrambling for votes.

To win over a crucial group of liberal Democrats, it killed off an amendment that would ban the release of photos showing US military personnel abusing detainees. This brought the votes it needed but upset moderates and conservatives, who agree with Mr Obama that their release could spark retaliation against US troops.

There was also a compromise on Guantánamo inmates, who will be allowed to enter the US for trial – with Congress permission – but not to stay.

Critics say the administration played fast and loose with the legislative process over the IMF money and deserved to get burned.

....

So why has the president spent so much political capital trying to protect the IMF amendment, when he needs all he can get to enact his ambitious domestic agenda? In part, it is about his international standing. Mr Obama has called for the IMF’s members to triple its firepower to help it combat the global downturn, and promised at April’s Group of 20 meeting the US would contribute an extra $108bn, $100bn in the form of a credit line. He would face humiliation if he did not deliver.

But from the start, it looked a tough sell at home. “The most plausible explanation for the request – and the lack of proper debate and Congressional process – is that the funding would be used to bail out private European banks with US taxpayer money,” wrote Dennis Kucinich and Bob Filner, two Democratic congressmen, in a letter to their colleagues.

The administration first tried to win the intellectual argument. The Treasury put out a “fact sheet” explaining why the IMF needed the money. It also released a letter in support from a bipartisan group of big guns including Hank Paulson, Henry Kissinger and Condoleezza Rice, former secretaries of Treasury and state.

However, the Republicans would not budge. They painted the war bill strategy as a cynical attempt to use US troops as leverage. They said the IMF money could end up going to countries associated with terrorism, such as Syria and Iran.

Without the Republicans, the bill was heading for defeat in the House. The only chance to get it through was to win the support of a score of the 50 antiwar Democrats. That cost the administration the photograph amendment.

The Senate was so upset that Mr Obama rushed over a letter promising to take “every legal and administrative remedy available to me to ensure the ... photographs are not released”.

Senior Democratic aides say the bill will probably be passed this week. But the manner of its passing has highlighted the limits to the administration’s power as it gears up for its biggest battle: the overhaul of the US healthcare system.

SO IT COSTS $108 BILLION TO GET A LITTLE TRUTH AROUND HERE...IT MAY BE THE BARGAIN OF THE CENTURY, IF BUSH AND CHENEY AND ALL HANG FOR WAR CRIMES!

[Demeter]

18. Six Flags files for bankruptcy protection By Jonathan Birchall in New York

http://www.ft.com/cms/s/0/fbb4c038-592c-11de-80b3-00144feabdc0.html

Six Flags, operator of 20 amusement parks that are a holiday destination for tens of thousands of Americans, has become the latest highly leveraged leisure company to fall foul of the global credit crisis.

The company filed for bankruptcy protection on Saturday with what it said was the unanimous support of its leading creditors, which have agreed to a pre-arranged restructuring plan for more than $2.3bn in debt. The group’s parks will remain open.

Unlike gaming companies, which have suffered from the slump in spending, Six Flags parks have proved comparatively resilient to the recession. Last summer its US parks benefited from Americans opting for “staycations” close to home.

But $400m of its debt burden was coming due in the next 12 months, which it said it would not be able to refinance in current markets.

Mark Shapiro, chief executive, characterised the bankruptcy filing as “cleaning up the past” by restructuring the debt load built up by the company’s former management, which was ejected in late 2005 after a shareholder revolt led by Daniel Snyder, owner of the Washington Redskins, and backed by Bill Gates’ Cascade Investments.

In a letter to employees, Mr Shapiro said Six Flags had successfully improved operations during the past three years, making $275m last year.

But he said that with about $175m in annual interest payments and $100m needed for park improvements “that’s a balancing act you just can’t risk year in and year out”.

In 2008, the company increased its number of visitors by 2 per cent, and raised revenue by 5 per cent, in spite of the slump in the US economy.

However, its results over the Easter holiday showed weaker spending on food and merchandise at its parks, while its Mexican operations were closed for eight days because of swine flu fears.

It has more than 2,000 full-time employees and hires 28,000 temporary staff in its summer peak months.

Besides the US, it operates a park in Mexico City and Montreal, Canada, and has plans to open sites in Dubai and Qatar in the Arab Gulf.

[ozymandius]

26. I have not visited the Six Flags in Atlanta since 1983.

Some friends went there three years ago. The one-day cost for a family of five (two adults and three kids) was almost $260. Long waits on the more popular rides were normal. But for an extra fifty bucks, Six Flags would sell you a paging device that will notify you when your turn on the ride is up, with a "reserve queue" for pager customers convenience. These friends did not opt for the pager yet still managed to spend hundreds of dollars.

A soft drink was $3 in 1983. Food, as I recall, was so expensive that it made more sense to hunt and cook your own.

Best of luck to Six Flags. Maybe they could branch into the light rail business.

[tclambert]

61. Subways with loop-de-loops!

Streetcars with sudden vertical drops (onto a cushion of air)! Bullet trains with 3G turns! And everybody loses their glasses on the corkscrew!

[Demeter]

19. Buy-out investors at risk of default By Martin Arnold in London

http://www.ft.com/cms/s/0/d00ad1e6-590b-11de-80b3-00144feabdc0.html

One in 10 investors in private equity are likely to default on commitments to invest funds in the next two years, research has suggested.

The findings underline the scale of challenges facing the sector as it scrambles to adapt to a harsh new environment of falling returns, cash-strapped investors and a backlash from regulators and politicians.

The research, which covered 120 big investors in private equity, or limited partners, was carried out by Coller Capital, the specialist investor in second-hand private equity assets. Three-quarters of investors polled expect distributions of cash back from private equity investments to decline this year.

Slightly more than half the investors said the drop in distributions would constrain their ability to find and manage new private equity investments.

Many of the world’s biggest investors in private equity, including US pension funds and endowments, have already been forced to cut back on money they commit to new funds, in response to losses.

“Generally investors seem to think things are going to get worse before they get better,” said Jeremy Coller, chief investment officer at Coller Capital.

Lawyers say there have so far been very few defaults by limited partners, as the penalties for failing to meet a capital call are so severe that most prefer to sell their holding at a discount.

“For the most part, limited partner defaults haven’t really been seen before, except for some high net worth individuals in venture capital funds after the dotcom bubble,” said Geoffrey Kittredge, a partner at law firm Debevoise & Plimpton. However, he added: “There is more talk about defaults than actual defaulting going on . . . Suing your investors may be a difficult process.”


SIC TRANSIT LBO

[ozymandius]

20. Is 2009 tracking a 1930 Great Depression scenario?

With more and more major economists predicting recovery sometime later this year, many have forgotten that downside risks remain. Berner, Roubini, Volcker, Krugman and Bernanke have all come out essentially saying they would not be surprised to see a ‘technical’ recovery at some point later this year. Robert Gordon has gone as far as to suggest we could be in recovery already – at least in the United States. I too have called for a Q4 or Q1 recovery. So, is it off to the races?

Hardly. I don’t have to convince many readers at Credit Writedowns or Naked Capitalism that there is a darker scenario which threatens recovery. Many of you see this according to preliminary results from a recent poll I conducted. Nevertheless, let me use this post as a reminder of that downside scenario with some commentary from economists. David Rosenberg is not the only major bearish economist that sees a very troubling economic outlook.

First, a post by Wolfgang Munchau in the FT reveals that much of the economic data of late has actually been disappointing despite the rally in shares and corporate bonds.

Last week, the green shoots shrivelled. In South Korea, China and Germany, exports were declining once again. In the US, the Federal Reserve’s Beige Book said “economic conditions remained weak or deteriorated further during the period from mid-April through May”.

The March signs of revival turned out to be little more than a technical inventory correction, with no change in the underlying trend. The world economy is still contracting, though perhaps not quite as fast as at the start of the year.

As an analysis by economists Barry Eichengreen and Kevin O’Rourke* shows, global industrial output is still on the same trajectory as it was during 1930. The only question is whether we can avoid 1931 and 1932.

Munchau argues we can avoid a 1931 and 1932 scenario only if we see a marked change in the present policy response in major economies. But, Munchau’s analysis begs the question as to why he finds the situation so dire for the global economy. Why does Wolfgang Munchau think 2009 is tracking 1930? The answer comes in the Eichengreen – O’Rourke data he references. It is truly stunning: when one looks at statistics like industrial production, this downturn is looking as bad as the Great Depression.

http://www.creditwritedowns.com/2009/06/is-2009-tracking-a-1930-great-depression-scenario.html

---

There's more here and well worth your time.

[Demeter]

22. Frankly, we'll Be Lucky If All We Get Is The Great Depression, Remake

It could and probably will be a whole lot worse.

[Demeter]

21. Greenberg to face AIG over $4.3bn lawsuit By Francesco Guerrera and Joanna Chung

http://www.ft.com/cms/s/0/64c1d70a-5900-11de-80b3-00144feabdc0.html

AIG will this week come face to face with Hank Greenberg, its dominant chief executive for more than four decades, in a trial starting on Monday over a $4.3bn lawsuit that promises to shed new light on the rise and dramatic fall of one of the world’s largest insurers.

Mr Greenberg, who left AIG in 2005 amid an accounting investigation, is not a defendant in the case but is likely to be its star witness and could take the stand as early as on Tuesday.

The four-year-old case centres on a batch of AIG shares held by Starr International Company (Sico), a firm controlled by Mr Greenberg and other former AIG executives.

The shares were used to compensate AIG executives until 2005, and the insurer, which is now 80 per cent owned by the US government, claims it should be given the stock and the $4.3bn Sico made when it sold some of its stake in the company.

Sico has said the lawsuit is baseless because the shares belong to the firm, which received them in 1970 when it sold insurance businesses to AIG.

The Greenberg camp adds that there was never a legal agreement that the shares should be used to compensate AIG executives even if Sico separated itself from AIG, as it did upon Mr Greenberg’s departure in 2005.

The AIG shares held by Sico were once worth more than $20bn, but the insurer’s collapse and subsequent government bail-outs have slashed their value to just $400-$500m.

The legal wrangling is a stark illustration of the immensely complex structure of AIG, whose roots date back to 1919.

Almost unique among large US multinationals, AIG was created from “the outside in”, with its international operation, namely its Chinese businesses, starting before its domestic activities.

From its inception, the company was run as a loose collection of largely independent businesses unified by the commanding figure of its chief executive, first its founder Cornelius Vander Starr, and then Mr Greenberg.

Sico, which was founded in 1943 by Mr Starr and came to be controlled by Mr Greenberg and 12 other former executives, whom he has called “a band of brothers”, is an example of AIG’s unusual modus operandi.

AIG argues that Sico existed – and still exists – for only two purposes: protection against takeover threats to AIG and compensation for current and future generations of AIG employees. The Greenberg camp retorts that Sico’s compensation function was never entrusted in a written agreement.

Mr Greenberg’s supporters say the use of AIG shares for that purpose was because Sico’s shareholders wanted to enhance the value of their stake in AIG by attracting top talent.

To support its case, AIG has chronicled statements, speeches and videos of Mr Greenberg speaking about Sico – to executives, employees, reporters, lawyers and government agencies – over 35 years.

Mr Greenberg allegedly admitted in a deposition that he may have said the disputed AIG stock was in “trust” for AIG employees as many as 100 times.

Mr Greenberg’s lawyers say he did not mean the word in its legal sense and there is no written evidence of such a trust.

BAND OF BROTHERS--HOW IRONIC. THE CARIBBEAN PIRATES CALLED THEMSELVES THE BROTHERHOOD, TOO!

[Demeter]

24. Novartis Puts the Swine in Swine Flu: Novartis rejects call for vaccine donations

http://www.ft.com/cms/s/0/875066ae-5902-11de-80b3-00144feabdc0.html

By Andrew Jack in London

Novartis, the Swiss pharmaceuticals group, defied the World Health Organisation and some of its corporate peers by ruling out a donation to the poor of vaccines to counter the latest flu pandemic, and saying developing nations or donor nations should cover the costs.

Daniel Vasella, Novartis chief executive, told the Financial Times that he would consider offering discounted pricing to low-income nations, but unlike other drug companies, including GlaxoSmithKline, would not offer vaccines for free. He said: “If you want to make production sustainable, you have to create financial incentives.”

His comments were a rebuff to Margaret Chan, WHO director-general, who last week said the H1N1 swine flu outbreak had become a pandemic. She has called on vaccine makers to show “solidarity” in offering vaccines to the poor.

The remarks highlight divisions in the industry. GSK has pledged 50m doses of its flu vaccine to the poor, and some smaller producers in developing countries say they will earmark 10 per cent of their production for free distribution.

Mr Vasella said a “significant” proportion of Novartis’s H1N1 stock had been reserved by governments, raising the prospect of shortages even among richer nations that can afford to purchase vaccines he estimated would cost $10-$15 (£6-£9) a dose, and more for smaller orders and those placed later.

Meanwhile, the US government has already purchased $289m of H1N1 vaccines from Novartis, although it has yet formally to approve the product.

Novartis owns Chiron, the US vaccine company that on Friday claimed it was the first producer to complete trial H1N1 vaccine batches using an accelerated cell-based technique rather than conventional production in eggs.

[Demeter]

27. On The Cutting Edge of finance: M Stanley and Citi venture keeps brokers waiting

http://www.ft.com/cms/s/0/6d0e1efe-590b-11de-80b3-00144feabdc0.html

By Francesco Guerrera in New York

Morgan Stanley and Citigroup will have to wait up to two years to gain the full benefit of their $14bn-a-year brokerage joint venture as the complexity of merging information technology systems delays integration.

The IT issues are frustrating some of the new business’ 18,500 financial advisers, who had expected to be able to sell a full suite of products from both Morgan Stanley and Citi to their wealthy clients, people close to the situation say.

Some bankers have also been disappointed as they had hoped to tap the army of brokers – the largest in the US – to distribute bond and equity issues to high-end retail investors.

Morgan Stanley, which paid $2.75bn for a 51 per cent stake in the venture with Citi’s Smith Barney unit, has said the deal will transform the bank by adding valuable retail deposits and creating a huge channel to distribute investment banking and asset management products.

When the deal was completed on June 1, the two companies stressed the benefits of the combined salesforce and said the venture would have revenues of about $14bn a year. “Both Morgan Stanley and Citi will access the joint venture for retail distribution and each firm’s institutional businesses will continue to execute order flow from the joint venture,” they said.

But the difficulties of integrating IT systems will mean that Morgan Stanley’s financial advisers will not be able to access products from Citi’s capital markets business, and vice-versa, for months. People close to the venture – which is called Morgan Stanley Smith Barney – said the internal timetable was to provide brokers with a large number of capital markets products from both firms by the end of the year, with a full integration within two years.

Until then, when Citi’s bankers arrange a bond issue, they will only be able to sell it through the 10,500 Smith Barney brokers. The same applies to Morgan Stanley, which has 8,000 financial advisers.

“People are working extremely hard to put all the components in place, but it is going to take some time,” Morgan Stanley Smith Barney said.

Executives argue that the integration is ahead of schedule because the deal, originally projected to close in the third quarter, was completed early.

They say brokers have access to more than 100 products from both companies, including research, hedge funds of funds, mutual funds and other asset management services.

Under the terms of the deal, which was announced in January, Morgan Stanley has the right to increase its stake in the venture after three years, although Citi will continue to own a significant stake until at least year five.

CITI AND MORGAN, ALWAYS LOOKING FOR NEW WAYS TO GET YOUR MONEY FOR THEMSELVES

[ozymandius]

28. Idle Railroad Cars, Where Do They Go? (for Tansy Gold)

Those looking for green shoots will not find it in rail traffic statistics.

-see charts-

....

Given the plunge in rail traffic inquiring minds just might be asking "Where are they putting all those idle rail cars"?

....

Idle rail cars are going to be sitting somewhere for quite some time. The same holds true for automobiles. Inquiring minds might also be interested in a January collection of Unsold Car Images From Around The World.

http://globaleconomicanalysis.blogspot.com/2009/06/idle-railroad-cars-where-do-they-go.html

[Hugin]

48. Here's some comparison views of those lots from wikimapia.

I'm not sure how old these are, but, I would assume at least a year.

It's good for a comparison, then to now.

Warning for dialup DUers... Wikimapia tends to be bandwidth intensive.

Nissan Test Track
Newark
Toyota Long Beach
Corby

[UpInArms]

30. dollar watch

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

Last trade 80.922 Change +0.709 (+0.91%)

Euro Continues To Be Weighed By Confirmation Of Dollar's Reserve Status, Record Drop In Employment.

http://www.dailyfx.com/story/bio1/Euro_Continues_To_Be_Weighed_1245059539289.html

The Euro was sunk overnight by over 150 pips after Russian Finance minister Alexei Kudrin confirmed that the dollar had no rival as the world reserve at the moment. The comments came in the midst of the G-8 meeting and calmed fears that this week’s BRIC summit would see calls for finding an alternative to the dollar. The summit of global leaders also saw questions raised regarding the European banking system which is also helping weigh on the euro. The unwillingness of governments to provide bank stress test similar to the U.S. has left many wondering if they have enough capital to meet the challenges ahead. Meanwhile, Euro-zone 1Q unemployment fell by 0.8% which was the biggest quarterly drop on record and may add to the single currency’s weakness.

Markets started to hedge their bets that the Euro would be seen as a substitute for the dollar as a reserve currency which helped spur some of the recent greenback weakness. Russia has been the biggest proponent of removing the dollar of its world reserve status and now that it has confirmed its dominance we could see more reversal of flows as we head into the U.S. session. As I said on Friday, “Despite rhetoric from countries such as Russia calling for the end of the dollar as the world reserve, the safety and liquidity of U.S. Treasuries will make it difficult for them to find an adequate substitute at this time. It will take a conscious global effort to achieve this and given the rate that initiatives of that magnitude take, it could be sometime before we see a suitable alternative developed.” Nevertheless, despite the Financial Minister’s comments the country is actively seeking alternatives and should be a longer-term concern for dollar bulls. We have seen the EURUSD break below the 20-Day SMA at 1.3982 which as I warned last week has led to extended gains as it is fulfilling a head & shoulder’s formation. Support lies below at 1.3785 the 38.2% Fibo of 1.2884-1.4340, where a break there could see a test of the 50-Day SMA at 1.3576.

After being caught up in the Euro weakness and reaching an intra-day low of 1.6311, the pound has started to regain its footing. We may continue to see sterling weakness as equity markets are trading lower across the globe and the risk aversion could be a weighing factor throughout the day. There weren’t any fundamental release to influence price action which will leave it at the mercy of the broader themes. However, this won’t be the case for the remainder of the week as CPI, BoE minutes and retail sales line the economic docket. The G-8 meeting showed that policy makers are starting to become concerned with the longer –term effects of the amount of liquidity that is being pumped into financial systems, as they discussed exit strategies to avoid rising inflation. The sterling could find support as the BoE was one of the first to take aggressive steps to infuse markets with needed funds and may lead the charge to undo its effects. However, the Confederation of British Industry said that the central bank may need to print more money in order to ensure a recovery as they see growth flattening after a brief recovery.

The dollar was well bid overnight after the supportive comments from Russian finance minister, but we are starting to see gains become harder to come by in recent activity. Manufacturing in the New York area is expected to have weakened to -4.80 from -4.55 after consecutive months of significant improvement which could add to current risk aversion and dollar support. U.S. Dow futures are lower by triple digits which is a strong sign that we may see equities trade lower which could add to bullish dollar sentiment. Meanwhile, turmoil in Iran has raised geopolitical concerns which could also send traders looking for the safe-haven of the greenback.

...more...

US Dollar Will Falter if Risk Appetite is Revived and Deficits Discussed

http://www.dailyfx.com/story/currency/eur_fundamentals/US_Dollar_Will_Falter_if_1244851815414.html

Scheduled event risk will moderate even further over the coming week – a precarious position considering the dollar and most of its major pairings are on the verge of a breakout. So, what will win out? Will a lack of tangible, fundamental fodder prevent the market from finding direction; or can the market find its catalyst from other sources like risk trends, relative growth forecasts or policy projections? Recent history has shown that it isn’t indicators like NFPs or Fed rate decisions that define revive or reverse trends; but speculation surrounding the financial health of the US economy (compared to its global counterparts) and broad risk sentiment.

The most immediate threat to stability is G8 meeting that is taking place this weekend. Finance Ministers from the US, UK, France, Germany, Italy, Japan, Canada and Russia have already met on Friday in Lecce, Italy; but the commentary so far has been relatively guarded. Some officials have come out and have pointed to early signs of economic recovery; yet the market is reserving its true consensus on the event for the official communiqué. Already, those familiar with the proceedings say the assessment of growth is little changed from the April gathering and that government exit strategies will indeed be discussed. The latter consideration is the imperative as the recent rebound in optimism (among investors, policy makers and consumers) has led many to wonder if government presence will stifle the recovery or even its prematurely exit would spark another crisis. Officials have said that the unwinding of this temporary support will be discussed; but no time tables will be given. Details will be imperative here; and the more cohesive and pragmatic the plans, the more likely they are to work.

Outside of the summit for the world’s financial leaders, the fuel for risk appetite will largely have to defer to the unknown. Taking the lead of equities and other traditional, speculative instruments; currency traders will have to keep tapped into speculation that the broader economy is recovering and global credit markets are stabilizing. For the dollar, the timing of this turn is critical. If the Treasury and Federal Reserve move too soon to withdrawal their support, another bank implosion could set off another crippling seizure through the credit market. Alternatively, move too slow and expansion across the rest of the globe will devalue US assets that are connected to a massive budget deficit. Not only would this divert capital flows away from the world’s largest economy; but it would also be reason to revive talks for replacing the greenback as the world’s reserve currency. These are long-term concerns; but each speech and event will change the bearings on speculation. Along these lines, not worthy speeches next week include: the Fed’s Duke on the response to the financial crisis; Warsh covering economic policy; Chairman Bernanke on financial literacy; Treasury Secretary Geithner testifying before the House Financial Services Panel after his time at the G8 summit.

For regular event risk, the listing are broad; but their potential impact on long-term growth forecasts is relatively modest. The housing starts and industrial production numbers for May will offer key measurements for their respective sectors. To support speculation of an economic recovery, improvements will be expected. The TIC flows and CPI data will be a little more complicated in its fundamental influence. Capital flows into the US have become a hot topic as the US Treasury continues with record sales and central banks question the country’s financial stability while floating such a tremendous deficit. Price growth has once again become an issue as some suggest loose monetary policy will spark hyperinflation that will stifle the burgeoning recovery.



...more...

[ozymandius]

39. Record Drop In Employment

This article does not say anything about a "record drop in employment". It is startlingly honest to see this being mentioned, however, when we are cajoled by some to ignore the obviously hideous employment/unemployment numbers. The meme "less bad equals new good" has become institutionalized in today's economic conditions reports.

[UpInArms]

33. From the "Masters of the Universe" Carlyle Group's Rubenstein:

http://www.businessweek.com/technology/content/jun2009/tc20090614_582196.htm?chan=technology_technology+index+page_top+stories

The once-triumphant "masters of the universe"have been brought down several pegs by the global economic crisis, and a chastened David Rubenstein, general manager of investment giant the Carlyle Group, gave a frank assessment of the state of the private equity industry and the economy at an exclusive retreat in Aspen, Colo., on June 13.

Rubenstein, the 59-year-old founder of the firm, which has $90 billion under management, predicted that the U.S. economy will emerge from what he called "the great recession" at the end of this year or early next year. However, he warned that growth of gross domestic product will be slow for the foreseeable future because of the federal debt and deficits. He also forecast significant problems ahead, including high inflation, high interest rates, and a wave of tax hikes. "The U.S. is still the biggest economy in the world, and it will be a great place to invest, but we'll have problems," he told a crowd of about 200 people at an Aspen Global Leadership Network conference in the Rocky Mountain resort town.

Rubenstein sees the post-recession U.S. economy evolving along the following lines:

• Inflation will be high—from 4% to 6%—for a number of years. "We'll have to learn to live with it," he said.

• The value of the dollar will decline sharply. "People reacted to the crisis by buying dollars. As the global economy improves, they'll sell them," he said. "This will have a big impact our out ability to buy goods and services." He believes that in 20 years the dollar won't be the world's sole reserve currency.

• We'll have "much higher taxes" across the board—from personal income taxes to corporate taxes to Social Security taxes—to pay for the national debt and health care.

He said a mea culpa for the mistakes of the private equity industry. It invested $500 billion in buyouts worldwide even after troubling economic signs began to appear. Firms paid too much for companies they acquired and overleveraged them. As a result, a wave of bankruptcies is coming. He noted that private equity performed better than the hedge funds but said the industry has been chastened. "You won't see massive birthday parties anymore," referring to a $3 million birthday bash that Blackstone Group Chairman Steve Schwartzman threw for himself at the peak of the market in February 2007.

...more with very unfunny jokes...

[ozymandius]

38. This talk is all fine and good but the most pressing question in my mind

is: When do we get to see video of Rubenstein eating from a dumpster?


He has profited so much from the work and suffering of others. I am a tad impatient for karma to do its work.

[Demeter]

50. Go To Hell, Cerberus! Stay!

Good dog.

[Dr.Phool]

34. Good 'toon, Oz.

Reminds me of Dr. Strangelove. "Mein Fuhrer! I can walk!"

[ozymandius]

37. Thanks.

It reminded me of the televised "faith healers" from the '70s. We are asked to have so much faith today, based on nothing, in efforts to convince ourselves that everything's okay. I think Phil Gramm had something to say about this.

[ozymandius]

40. 10:08 cliff diving

Dow 8,661.26 Down 138.00 (1.57%)
Nasdaq 1,821.96 Down 36.84 (1.98%)
S&P 500 930.19 Down 16.02 (1.69%)
10-Yr Bond 3.715% Down 0.073
NYSE Volume 872,212,750
Nasdaq Volume 369,480,156.25

09:45 am : Stocks are trading markedly lower in the first few minutes of action. The downturn has been broad-based with all 10 major sectors in the S&P 500 showing losses; tech (-0.7%) and telecom (-0.6%) make up the only two sectors that aren't down by at least 1%.

Weakness is most intense among materials stocks. The sector is currently down 2.5% as steel stocks (-3.2%) and diversified metals stocks (-3.3%) go on the defensive.DJ30 -117.98 NASDAQ -22.33 SP500 -13.91 NASDAQ Adv/Vol/Dec 848/172 mln/1753 NYSE Adv/Vol/Dec 332/88 mln/2325

[ozymandius]

41. updating blather

10:00 am : Weakness is considerable in the early going. Approximately 96% of the stocks listed in the S&P 500 are trading with losses.

Amid the broad-based downturn shares of Huntington Bancshares (HBAN 4.74, +0.59) are surging and seeing a spike in trading volume, however. The company hasn't been the topic of any grand headline, but its shares were mentioned positively last week by former hedge fund manager Jim Cramer. Shares of other regional banks are down 0.7%.

Early movers: Trading up -- JAZZ +36%, CAV +20.6%, BDSI +12.4%, MAPP +12%, KV.A +12%; Trading down -- DEP -10.2%, HOKU -9.8%, FEED -9.6%, ICO -9.6%, FSYS -9.4%, SOLR -9.4%, ABMD -9.3%, ABAT -9.2%, HMA -9.1%DJ30 -136.72 NASDAQ -34.11 SP500 -15.60 NASDAQ Adv/Vol/Dec 403/333 mln/1949 NYSE Adv/Vol/Dec 309/148 mln/2440

[Hugin]

44. "its shares were mentioned positively ... by former hedge fund manager Jim Cramer. "

We're doomed. :eyes:

[ozymandius]

45. He must be getting kickbacks.

Lou Dobbs was chastised at CNN when he was discovered promoting companies in which he held substantial investments. Stuart Varney was so shameless that he was fired (and subsequently hired by Fox News) after he was doing the same thing on a much grander scale. I wonder if Cramer has a rider in his contract that allows him to shill with impunity.

[DemReadingDU]

46. Weiss: New, Hard Evidence of Continuing Debt Collapse!

6/15/09 New, Hard Evidence of Continuing Debt Collapse! by Martin Weiss

While most pundits are still grasping at anecdotal “green shoots” to celebrate the beginning of a “recovery,” the hard data just released by the Federal Reserve reveals a continuing collapse of unprecedented dimensions.

It’s all in the Fed’s Flow of Funds Report for the first quarter of 2009, which I’ve posted on our website with the key numbers in a red box for all those who would like to see the evidence.

Here are the highlights:

Credit disaster (page 11). First and foremost, the Fed’s numbers demonstrate, beyond a shadow of a doubt, that the credit market meltdown, which struck with full force after the Lehman Brothers failure last September, actually got a lot worse in the first quarter of this year.

This directly contradicts Washington’s thesis that the government’s TARP program and the Fed’s massive rescue efforts began to have an impact early in the year.

In reality, the credit market shutdown actually gained tremendous momentum in the first quarter. And although it’s natural to expect some temporary stabilization from the government’s massive interventions, the first quarter was SO bad, it’s impossible for me to imagine any scenario in which the crisis could be declared “over.”

Here are the facts:

* We witnessed one of the biggest collapses of all time in “open market paper” — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion. (See line 2.)

* Banks lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time (line 7).

* Meanwhile, nonbank lenders (line 8) pulled out at the annual rate of $468 billion, also the worst on record.

* Mortgage lenders (line 9) pulled out for a third straight month. (Their worst on record was in the prior quarter.)

* And consumers (line 10) were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record.

* The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1,442.8 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.

Bottom line: The first quarter brought the greatest credit collapse of all time.
.
.
And I repeat:

With ALL of these figures, we’re not talking about a decline in new credit being provided, which would be bad enough. We’re talking about a collapse that’s so deep and pervasive, it actually wipes out 100 percent of the new credit and brings about a net reduction in the credit outstanding — a veritable dismantling of America’s once-immutable debt pyramid!


more...
http://www.moneyandmarkets.com/new-hard-evidence-of-continuing-debt-collapse-3-34207

[Demeter]

52. He Talks Like That's a Bad Thing

I think that the world needs a permanent reduction in credit and more of the "profit" returned to the workers, in order that the economy become sustainable and equitable.

[rfranklin]

53. The big boys are making a killing...after pumping the market....

up last week on the wispiest of "good news." Now, they have their positions established to make most of the options expire worthless, they are into the "dump" mode where every bit of news will be bad until profitable lows are reached.

[AnneD]

54. Morning Marketeers....

:donut: and lurkers.....
As Dickens once penned it-"It was the best of times, it was the worst of times....". The biz is doing well but things are not so good around the country. Think I'll go down to the library and rent a copy of Tale of Two Cities for my summer reading. Not exactly light fare, but some how I think it is timely. I am making out my summer reading list and welcome any suggestions.

The biz is doing well and we are having 2 people come in 2 buy sitars later this month. I guess there was a lost of pent up demand in this niche. I think that because we had no expectations to begin with-to us the results are spectacular. We are banking all that we make and turning it back into the business. We may have even found a scholarship for one of our students.

Selling another sitar means we can pay our daughter for setting up our website and helping Hubby type his lesson plans and write his instruction book. We are aiming to make a teaching CD too. Of course, she will do that too. We try to keep the money in the family as much as possible. She is still planning to go to Cal Arts again this next year. She is nervous because she is having to take out a huge amount in loans (government). She has a short fuse as of late.

It seems as if kids have the inalienable right to make you want to pull out your hair. She is mad because I am not shelling out as much as her dad is toward her education. The man has lived at home with his mom for all his adult life. He pocketed the almost $800 a month cash child support I paid for the last 4 years of her childhood-contributing nothing to his mother for the household expenses. I have said that, in no uncertain terms that I feel that he SHOULD step up to the plate and shoulder some of her expenses-he dodged everything for the first 5 years of her life and paid hardly anything when the courts ordered him to shell out something (it barely covered insurance). This is his karmic debt.

I told her in no uncertain terms that while she could get a loan for an education, I could not get a loan for retirement. Of course she did not fully grasp that and left fairly angry at me. Some days you are the pigeon, some days the statue. She quickly forgot that we took out a loan to pay for her spinal treatment last year and are still paying. We also pay for her health care, eye and dental. Again, she fully doesn't grasp what that means. Of course, she is still a kid, not quit a full grown adult. I bide my time knowing that one day she will come to an understanding-I just hope it happens before I die.

Well, I am not one to sit on a pity potty for long. I'm burning up daylight here and have to get back to work. The press did a nice piece about the opening of the school. I'll try to find the link for you guys. Funny, we opened the school and are off for two weeks. Lessons start in earnest next week.

Happy hunting and watch out for the bears.

[Demeter]

57. It Does Get Better

Baby is turning 22 next month, and has matured greatly. Has a much better understanding about money and people and the family now. When she was 12, I thought for sure she'd never live to be 22, I'd kill her first if somebody else didn't beat me to it. (She was always precocious).

Hang in there. There is real light at the end of this tunnel.

[AnneD]

60. I pray for patience....

I realize she snaps at me because I tell her the truth. Sometimes-as we all have learned...it is not easy to speak the truth any more than it is for people to hear the truth. If that were so, Diogenes would only have to go as far as DC to find what her sought.

[Robbien]

58. Clevelands Plain Dealer's story on National City's final days

http://www.cleveland.com/plaindealer/index.ssf/2009/06/national_city_3.html

<snip>

Everyone knows how the story ends: with National City's sale to Midwest rival PNC Financial Services Group. What has never been told publicly is what really happened in the bank's final agonizing weeks.

Some 3,000 pages of court documents, part of shareholders' lawsuits over the sale, show that National City executives were terrified the bank could actually run out of money and fail.

Federal regulators pressured National City to sell quickly or be labeled a risky bank, but potential buyers rejected deals again and again. Executives almost couldn't give the bank away.

This story looks at what happened from then until National City's final sale to PNC, of Pittsburgh.

The events are outlined in court documents that a judge in Delaware released over the past two weeks after The Plain Dealer and the Associated Press joined the Columbus Dispatch in arguing that the information should be public.

This story is based on those documents - including court depositions, minutes of board meetings and internal bank reports - as well as Plain Dealer interviews.

<the article then lays out the day by day wheeling and dealing by National City to stave off threats by the Feds to out National as a failed bank, a fascinating read. Then closes with

The Treasury Department never did make its big announcement Oct. 24 of which banks would get TARP money. There was no longer any need. National City was gone.

[Robbien]

59. Investor disquiet over health of Saudi family firms

When the share price of Britain’s biggest home builder, Berkeley Group Holdings, started falling last Tuesday, stock watchers may have guessed it was yet another round of bad housing news moving the market.

But by the end of the day it emerged the real cause for the slide lay thousands of kilometres away in Saudi Arabia, where Saad Group, a huge conglomerate run by the Saudi billionaire Maan al Sanea, had just instructed Citigroup to sell 16.1 million of Berkeley’s shares.

The Saad Group has suddenly found itself in the international spotlight as it sells assets overseas to help raise capital at home. At the same time, it is seeking to restructure its debt after having its accounts frozen last month by the Saudi central bank.

Ahmad Hamad Al Gosaibi and Brothers (AHAB), another Saudi family conglomerate investigating “irregularities” in its financial arm, is also in discussions with creditors about restructuring its debt after Standard & Poor’s (S&P) downgraded the credit rating on its banking unit last month.

As a result, bankers say international creditors are re-evaluating the soundness of existing loans to both Saudi groups.

Analyst fear the problems could mark the start of defaults among other family groups across the Gulf, a region often noted for its relative isolation from the turmoil affecting western credit markets.

http://www.thenational.ae/article/20090614/BUSINESS/906149981/1005


There were many articles on this subject the last couple of days. A good summation of the situation is this one:

Bankers Spooked by Gulf Family Woes
http://online.wsj.com/article/SB124507873464215311.html

What's in a name? Not so much these days, so far as wealthy families in the Gulf States are concerned. Following the emergence of financial difficulties at two of Saudi Arabia's largest family-run business empires, banks are changing their policies for lending to the Gulf's merchant class. The region's dynasties will have to become much more transparent and some may be forced to change the way they do business.

Traditionally, the Gulf's biggest families have operated on the basis that "my name is my bond" when it comes to dealing with banks. But last week, the United Arab Emirates central bank ordered local banks to freeze loans to the Al Sanea and Gosaibi families. The Sanea family, which owns a stake in HSBC, faces cashflow problems at its Saad Group subsidiary and is being forced to restructure. The Gosaibi family, which controls stakes in Saudi American Bank as well as other interests in shipping and industry in the Kingdom, has confessed to possible losses at their Bahraini banking unit.

Meanwhile international bankers have responded to this shock by demanding family businesses open their books before they extend credit previously available on a discretionary basis. This demand for transparency could upset many of the region's prominent trading families who are renowned for keeping details of their business interests within their secretive inner circle.

Bankers fear the problems facing the Sanea and Gosaibi clans aren't isolated. In Dubai, an emirate that depends more than any other on the relationship between the ruling Al Maktoum family and a clutch of powerful merchant dynasties, the risks are greatest. The Abu Dhabi-based central bank is providing $10 billion to bail out local businesses, but this will only help Dubai government-controlled companies that are more or less wholly-owned by the emirate's ruler Sheikh Mohammed bin Rashid al Maktoum.

That's bad news for Dubai's others business families, left to fend for themselves. With international banks now skittish about lending to these previously "golden" clients, some may be forced to abandon their historic family business models, whether by selling shares to outside investors or restructuring to survive.

[mullard12ax7]

62. Watching the markets flat-line whether it's up or down

Pure manipulation in both directions.

[AnneD]

63. When pensions take flight

Was it greed or fear?

Continental Airlines claims nine pilots used sham divorces as part of a scheme to collect their pensions early.

In a recent lawsuit, the Houston-based airline claims the pilots filed divorce papers, yet continued to live with their spouses and didn’t tell anyone — not friends, not even their children — about the splits. Once the divorces were final, the former spouses received rights to the pilots’ pensions and applied for lump-sum distributions, which Continental said were worth as much as $900,000 apiece. After they got the money, the couples remarried, the airline alleges in its lawsuit.

In a recent lawsuit, the Houston-based airline claims the pilots filed divorce papers, yet continued to live with their spouses and didn’t tell anyone — not friends, not even their children — about the splits. Once the divorces were final, the former spouses received rights to the pilots’ pensions and applied for lump-sum distributions, which Continental said were worth as much as $900,000 apiece. After they got the money, the couples remarried, the airline alleges in its lawsuit.

The airline claims the tactic is prohibited by federal law, and all but one of the pilots either resigned or was fired. One admitted what he’d done and agreed to repay the money, though hasn’t so far, Continental said.

more......

http://www.chron.com/disp/story.mpl/business/steffy/6460448.html

considering the way some of these 'bankrupted' air lines used their bankruptcy to due away with their obligation to the very people that built up the company-I consider these guys shrewed not criminals.

[AnneD]

64. State your case

Q. I work as a financial adviser at a major insurance company. The manager in our office periodically threatens employees with punitive measures as a way to increase their production. This month he made good on one of those threats by withholding $500 from my commission-only compensation for “rent” for the cubicle I occupy. There was no prior agreement for this deduction to be made. Was this legal?

A. Probably not. Under the Texas Payday Law, all deductions (other than payroll taxes, court-ordered garnishments, and other legally authorized deductions) must be both lawful and specifically authorized in writing by the employee. If you did not authorize the rent deduction, your employer may have acted improperly.

Another related issue is whether you are owed overtime for any hours worked over 40 per week. There have been a number of cases against major brokerage firms, particularly where the financial advisers receive no salary — just straight commission.

You should meet with an employment law attorney to discuss your situation. You might also consider filing a wage claim with the Texas Workforce Commission to recover the unpaid compensation.

NOTE TO READERS: Two weeks ago, I answered a question from a reader whose employer tracks its employees by using the GPS service on their mobile phones. The employees are required to keep their phones with them at all times, even when they are not on duty. Another reader e-mailed a good solution to this employee’s problem. The suggestion was to leave the work phone at home when privacy is desired, and have all calls to that phone forwarded to a separate personal cell phone. That way, the employer could always reach the employee, and the employee’s whereabouts could remain private.

http://www.chron.com/disp/story.mpl/business/lipman/6463842.html

Ah the advantages of living in a right to work state...:sarcasm:

[CatholicEdHead]

70. That's going a bit too far

tracking where employees go when not at the office after hours. I guess any little thing to fire the employees. :puke:

[AnneD]

71. This proves the point that we can't be fired....

slaves have to be sold. I'd be doing some heavy duty sabotaging if they wanted to know after hours-or maybe just collect enough evidence to build a case. Being a medical person-I have been on call and it is a real damper. They don't pay you enough to do it.

[AnneD]

65. Demand for office space drops

A continued lack of financing and uncertainty in the economy caused demand for Houston-area office buildings to plunge in the first quarter.

Sales volume fell 88 percent, with $42 million worth of properties trading hands, compared with $347 million a year ago.

Prices fell almost as much.

The average price per square foot paid for office space in the quarter fell to $56, according to a report from LoopNet, an online commercial real estate listing service, in conjunction with Real Capital Analytics.

But because volume in the quarter was so low — there were just five office transactions — it’s hard to rely on any statistical pricing information, said Thomas Fish, vice chairman of CBRE/Melody Capital Markets.

more.....

http://www.chron.com/disp/story.mpl/business/sarnoff/6448650.html


The Chamber of Commerce can do all the happy talk they want, but this confirms my observations and belief that this depression has a long way to go. Housing will continue to contract, new office space will not be funded or built and contraction will continue, here in Houston, one of the better economies in the US. The last time we were in this spiral, it took at least 5 years for things to pick up-and the country was no where near the sad shape it is in now. In fact, it was the rest of the nation that pulled Texas up. Hope we have the where with all to return the favour.