STOCK MARKET WATCH, Wednesday October 14

[ozymandius]

Source: du

STOCK MARKET WATCH, Wednesday October 14, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials In Prison = 6

AT THE CLOSING BELL ON October 13, 2009

Dow... 9,871.06 -14.74 (-0.15%)
Nasdaq... 2,139.89 +0.75 (+0.04%)
S&P 500... 1,073.19 -3.00 (-0.28%)
Gold future... 1,065 +7.50 (+0.71%)
10-Yr Bond... 3.35 -0.04 (-1.04%)
30-Year Bond 4.19 -0.03 (-0.66%)

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

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie, Silver and US$

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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

[Po_d Mainiac]

1. first in!!

The dollar going to make the news today
:donut:

http://finance.yahoo.com/news/Greenback-Finds-No-Relief-in-fxcm-3538429151.html?x=0&.v=1
left out link

[Demeter]

5. Dollar hits 14-month low; commodities, stocks climb

http://news.yahoo.com/s/nm/20091014/bs_nm/us_markets_global_9

The U.S. dollar plumbed a 14-month low against the euro on Wednesday, sending gold prices to record highs and pushing up oil for a fifth day to a 2009 high of $75.12 a barrel....

I'M PLEASANTLY SURPRISED THAT THEY EVEN NOTICED, AND THOUGHT TO MENTION IT.
THE FIRST OF MANY SUCH ANNOUNCEMENTS, I FEAR.

[Po_d Mainiac]

16. The next support level is at the historic lows of last spring.

That we can be looking at the price of oil jumping as the winter heating and holiday shopping seasons approach..:nuke: bodes large.

[Demeter]

37. Unless some insane megalomaniac Attacks Somebody

nobody is going to support the dollar--just as a slap at Goldman Sachs. And I don't blame them.

If some of these crooks started going on trial and into prison, I bet we'd see support return.

Edited to add: as long as the IM isn't Bush or Cheney or their assigns.

[DemReadingDU]

42. I don't think the dollar is doomed, yet

At some point, the market will decline and the dollar will rise. There's too many people still happily spending dollars that I don't believe the government would let the dollar become worthless anytime soon. Besides, it would cause too many angry people, maybe shooting their guns. Nah, the gov will delay this as long as it can. Not sure what kind of Halloween magic Bernanke will pull out of his hat, but he will try to save the dollar, for now.

[Demeter]

47. The rumours of the dollar’s death are much exaggerated By Martin Wolf

http://www.ft.com/cms/s/0/9165b8b0-b82a-11de-8ca9-00144feab49a.html

It is the season of dollar panic. These panic-mongers are varied: gold bugs, fiscal hawks and many others agree that the dollar, the dominant currency since the first world war, is on its death bed. Hyperinflationary collapse is in store. Does this make sense? No. All the same, the dollar-based global monetary system is defective. It would be good to start building alternative arrangements.

We should start with what is not happening. In the recent panic, the children ran to their mother even though her mistakes did so much to cause the crisis. The dollar’s value rose. As confidence has returned, this has reversed. The dollar jumped 20 per cent between July 2008 and March of this year. Since then it has lost much of its gains. Thus, the dollar’s fall is a symptom of success, not of failure.

Can we find deeper signs that the world is abandoning the US currency? One beloved indicator is the price of gold, which has risen four-fold since the early 2000s (see chart). But its price is a dubious indicator of inflation risks: its previous peak was in January 1980, just before inflation was crushed.

Higher prices of gold reflect fear, not fact. This fear is not widely shared. The US government can borrow at 4.2 per cent over 30 years and 3.4 per cent over 10 years. During the crisis, the inflation expectations implied by the gap in yields between conventional and inflation-protected securities collapsed. These have since recovered – yet another sign of policy success. But they are still below where they were before the crisis. The immediate danger, given excess capacity, in the US and the world, is deflation, not inflation.

The dollar’s correction is not just natural; it is helpful. It will lower the risk of deflation in the US and facilitate the correction of the global “imbalances” that helped cause the crisis. I agree with a forthcoming article by Fred Bergsten of the Peterson Institute for International Economics that “huge inflows of foreign capital to the US facilitated the over-leveraging and underpricing of risk”.* Even those who are sceptical of this agree that the US needs export-led growth.

Finally, what can replace the dollar? Unless and until China removes exchange controls and develops deep and liquid financial markets – probably a generation away – the euro is the dollar’s only serious competitor. At present, 65 per cent of the world’s reserves are in dollars and 25 per cent in euros. Yes, there could be some shift. But it is likely to be slow. The eurozone also has high fiscal deficits and debts. The dollar will exist 30 years from now; the euro’s fate is less certain.

This view may be too complacent. The danger of a collapse of the dollar is small and of its replacement by another currency still smaller. But a global monetary system that rests on the currency of a single country is problematic, for both issuer and users. The risks are also growing, particularly since the emergence of “Bretton Woods II” – the practice of managing exchange rates against the dollar....

GRAPHS AND MORE AT LINK

[MellowOne]

63. Goldman Sachs about to announce billions in year-end bonuses

http://www.thedailybeast.com/blogs-and-stories/2009-10-14/wall-streets-bonus-hypocrisy/


Firms like Goldman Sachs are about to announce billions in year-end bonuses. Charlie Gasparino on how banks are rewarding themselves while still gambling with America’s money.

Goldman Sachs is trying to downplay how much bonus money it’s scheduled to set aside for its employees this year, a full twelve months after the firm received federal bailout money. But this is also the same firm that amazingly contends it wasn’t rescued by the Feds, that the AIG bailout—despite the fact that it held the firm’s insurance products on its books—would have no effect on its own finances, and that last year when the financial world was imploding, everything was pretty mellow down at Goldman’s headquarters in lower Manhattan.

Firms are making money not because they’re good at what they do, but because they have been given so many subsidies that it’s impossible not to.

I’m struck by this not just because of the utter hypocrisy involved, but also because Goldman isn’t alone in trying to spin the fact that every firm that faced sudden and assured death last year without billions of dollars in government cash, guarantees on bad debt, relaxation of accounting rules that make their bad bets look better than they should, not to mention that monster AIG bailout, is getting ready to hand to its executives major year-end bonuses. Again.

In the coming days, as Wall Street banks report strong earnings and boat loads of money for year-end bonuses, you’ll be hearing a lot about how paying people at the firms is necessary for the banks to retain talent and survive; that the firms made the money fair and square and that a return to profitability is a good thing. It means the firms are stabilizing. The banking crisis is over.

[DemReadingDU]

66. This is insane

Where's my pitchfork!


Thanks for sharing this article, stop by again.
:hi:

[mullard12ax7]

67. It's not insane at all, it's the direct result of criminals manipulating the system

They created frauds so big that the economy would collapse without them and then propagandize the easily duped American populace into believing their "we'll save you" lies.

Study up on the Russian mob, the U.S. operates the exact same way now, twisting the "system" into looking like it's all legal as they rob the people.

[tclambert]

72. I've been tempted to buy 1 share of Goldman just so I could submit a shareholder proposal

to link performance bonuses to PEFORMANCE! If executives make a profit for the company (and for me), I'm willing to share a little with them as a reward. If they lose the company's money (my money), they should have to pay a fine for poor performance of their duties.

Go ahead, tell me how that's unjust!

[Demeter]

80. Trying To Imagine a World Without Goldman, Chase, BofA, Citi, Morgan Stanley

but all these damn butterflies and cherry blossoms keep getting in the way!

[janedum]

91. DOW hits 10,000. Wall Street - $10K, Main Street = $0.

[Festivito]

2. Debt: 10/09/2009 11,895,799,292,208.46 (DOWN 3,153,458,736.07) (Fri, surplus continues.)

(The Obama SURPLUS continues. This surplus is not expected to last because the budget says that it should not last, but it's fun to see it and to say that for the first nine days of Obama's fiscal year 2010 he, that is we, have paid back fourteen billion more than he, thus we, borrowed. I could become giddy if this keeps happening.)

= Held by the Public + Intragovernmental(FICA)
= 7,479,168,824,625.64 + 4,416,630,467,582.82
DOWN 14,303,257.45 + DOWN 3,139,155,478.62

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 308-Million person America.
If every American, man, woman and child puts in $3.25 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.75, ABOUT TEN BUCKS for a 1B$ 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 10 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,665,501 people in America.
http://www.census.gov/population/www/popclockus.html ON 09/27/2009 07:13 -> 307,558,299
Currently, each of these Americans owe $38,664.72.
A family of three owes $115,994.15. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 23 reports in the last 30 days.
The average for the last 23 reports is 4,842,369,919.95.
The average for the last 30 days would be 3,712,483,605.29.

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$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 8 reports in 9 days of FY2010 averaging -1.75B$ per report, -1.56B$/day.
Above line should be okay

PROJECTION:
There are 1,199 days remaining in this Obama 1st term.
By that time the debt could be between 10.0 and 18.1T$.
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)
10/09/2009 11,895,799,292,208.46 BHO (UP 1,268,922,243,295.38 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 -0,014,029,711,303.30 ----------BHO

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
09/21/2009 -000,319,092,626.95 --- Mon
09/22/2009 -000,005,688,069.16 -----
09/23/2009 -000,186,100,874.04 ---
09/24/2009 -043,516,809,626.65 -
09/25/2009 -000,256,514,563.16 ---
09/28/2009 -000,773,265,151.59 --- Mon
09/29/2009 +000,473,982,417.68 ------------********
09/30/2009 +091,724,705,747.96 ------------**********
10/01/2009 -045,967,461,558.95 -
10/02/2009 +000,166,120,250.33 ------------********
10/05/2009 -000,035,707,866.46 ---- Mon
10/06/2009 +000,640,950,413.48 ------------********
10/07/2009 +000,015,260,219.44 ------------*******
10/08/2009 -027,497,592,311.52 -
10/09/2009 -000,014,303,257.45 ----

-25,551,516,857.04 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

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=4099791&mesg_id=4099843

[DemReadingDU]

3. Surplus is good

Thanks for keeping the details!

[tclambert]

77. That is funny. The "Obama surplus."

I'm afraid it will take many years to get back to a real surplus. I don't expect Obama has enough years. I could be wrong. I was sure surprised when Clinton did it.

[Demeter]

81. Clinton's Surplus Was a Gift of Greenspan's Bubble

and not actually having a hot war going at the time.

Obama could have a REAL surplus, if he brought home the troops, but that wouldn't be profitable for Corporate America, would it? Not any more than Universal Health Care.

Actually, both would profit Corporate America as much as the rest of us, they just can't stnad the idea of anybody but themselves geting any piece of the pie...

[Festivito]

86. Debt: 10/13/2009 11,907,608,545,823.24 (UP 11,809,253,614.78) (Tue, yet a '10 surplus.)

(The Obama SURPLUS continues for the long weekend. In 13 days of fiscal year 2010 we have now only paid back two billion more than we borrowed. Can we get one more day out of it. Tune in tomorrow past 3PM. Long past, I've a job across the state tomorrow afternoon and evening. See ya.)

= Held by the Public + Intragovernmental(FICA)
= 7,489,508,528,359.81 + 4,418,100,017,463.43
UP 10,339,703,734.17 + UP 1,469,549,880.61

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 308-Million person America.
If every American, man, woman and child puts in $3.25 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.75, ABOUT TEN BUCKS for a 1B$ 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 10 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,700,061 people in America.
http://www.census.gov/population/www/popclockus.html ON 09/27/2009 07:13 -> 307,558,299
Currently, each of these Americans owe $38,698.75.
A family of three owes $116,096.26. (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 5,132,420,038.25.
The average for the last 30 days would be 3,763,774,694.72.
The average for the last 32 days would be 3,528,538,776.30.
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$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 9 reports in 13 days of FY2010 averaging -0.25B$ per report, -0.17B$/day.
Above line should be okay

PROJECTION:
There are 1,195 days remaining in this Obama 1st term.
By that time the debt could be between 11.7 and 18.1T$.
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)
10/13/2009 11,907,608,545,823.24 BHO (UP 1,280,731,496,910.16 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 -0,002,220,457,688.50 -----------BHO

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
09/22/2009 -000,005,688,069.16 -----
09/23/2009 -000,186,100,874.04 ---
09/24/2009 -043,516,809,626.65 -
09/25/2009 -000,256,514,563.16 ---
09/28/2009 -000,773,265,151.59 --- Mon
09/29/2009 +000,473,982,417.68 ------------********
09/30/2009 +091,724,705,747.96 ------------**********
10/01/2009 -045,967,461,558.95 -
10/02/2009 +000,166,120,250.33 ------------********
10/05/2009 -000,035,707,866.46 ---- Mon
10/06/2009 +000,640,950,413.48 ------------********
10/07/2009 +000,015,260,219.44 ------------*******
10/08/2009 -027,497,592,311.52 -
10/09/2009 -000,014,303,257.45 ----
10/13/2009 +010,339,703,734.17 ------------********** Tue

-14,892,720,495.92 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

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=4102700&mesg_id=4102704

[ozymandius]

4. damn connection issues again

And I have no time for anything else.

Have a nice day folks. :hi:

[Demeter]

6. Eni wins Iraq oil field deal

http://www.ft.com/cms/s/0/9f3214fe-b823-11de-8ca9-00144feab49a.html


Iraq has given a consortium led by Eni, the Italian oil group, the right to develop its giant Zubair field, in a deal that signals the country’s desire to attract more of the world’s biggest oil companies 40 years after nationalising its oil industry.

Tuesday’s breakthrough, which needs cabinet approval, came after Iraq sweetened its terms following the failure of a June auction. It could lead to further foreign investment in a country with the world’s third-largest oil reserves.

As part of the agreement, the Iraqi government told the Eni consortium to drop Sinopec, the Chinese state-owned oil company, as a partner.

Baghdad has vowed to block Sinopec from its oil resources because of its entry into Kurdistan, the oil-rich semi-autonomous region in northern Iraq. In June Sinopec agreed to a C$8.3bn (US$7.2bn) takeover of Addax, which had a stake in the Kurdish Taq Taq field.

Eni and its minority-share partners – Kogas of Korea and Occidental of the US – are only the second group of international oil companies to enter Iraq since it nationalised its industry four decades ago. BP and CNPC were the only companies willing to accept Iraq’s tough fiscal terms in the country’s June auction.

Paolo Scaroni, Eni chief executive, told the Financial Times: “Zubair is one of the most important oil fields in the world. It is one of very few that is capable of producing more than 1m barrels a day. Because we are going to Iraq, it means we will not be doing other things.”

Mr Scaroni said the project to boost the field’s production from 200,000 barrels per day to 1.125m bpd within seven years, as Eni has promised, would require an investment of about $10bn.

Under the agreement, Eni and its partners will receive $2 for each barrel over 1.125m bpd they are able to pump from the field, which holds reserves of 4bn barrels and is Iraq’s fourth-largest. In the first bidding round, Eni – like many of its peers – refused to accept the $2 payment. Eni had asked for more, but agreed on $2 after Baghdad sweetened other terms that raised the overall value of the contract.

Iraq is in talks with other companies that walked away in June. Lukoil of Russia on Tuesday confirmed that it and US partner ConocoPhillips would restart discussions for Iraq’s West Qurna field on Wednesday. Royal Dutch Shell said it was still in talks with Baghdad.

[Demeter]

8. Hybrid Halloween Indicators

http://www.marketwatch.com/story/should-followers-of-halloween-indicator-buy-now-2009-10-14?siteid=yahoomy

You should be completely out of stocks right now, sitting comfortably with 100% cash in your portfolio.

That at least is the current posture of the stock market timing system that arguably has the strongest statistical foundation of any that is in widespread use today.

I'm referring to the so-called Halloween Indicator, which says that we should be invested in the stock market for just six months each year, from Halloween until May Day. During the other six months we are to be in cash -- which is why this Indicator also goes by the name "Sell in May and Go Away."

The statistical pattern on which this indicator is based has been found to exist in the U.S. stock market back to the 1800s, in the United Kingdom stock market back to 1694, and in 35 of 36 foreign countries studied.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=300700

[DemReadingDU]

41. and the goblins will get ya if ya don't watch out!!

Little Orphan Annie by James Whitcomb Riley

Little Orphan Annie's come to my house to stay.
To wash the cups and saucers up and brush the crumbs away.
To shoo the chickens from the porch and dust the hearth and sweep,
and make the fire and bake the bread to earn her board and keep.
While all us other children, when the supper things is done,
we sit around the kitchen fire and has the mostest fun,
a listening to the witch tales that Annie tells about
and the goblins will get ya if ya don't watch out!

rest of poem...
http://www.judyn.trest.com/OrphanAnnie.html

[rfranklin]

7. Intel, J.P. Morgan strength lifts U.S. stock futures

Intel, J.P. Morgan strength lifts U.S. stock futures

by Steve Goldstein, MarketWatch

LONDON (MarketWatch) -- A surprisingly strong profit and outlook from Intel and much stronger-than-forecast results from J.P. Morgan Chase sent U.S. stock futures rallying and put a 10,000 level on the Dow Jones Industrial Average within reach.

S&P 500 futures rose 16 points to 1,084.80 and Nasdaq 100 futures rose 24.5 points to 1,751.20. Futures on the Dow industrials climbed 123 points.

U.S. stocks weakened on Tuesday after lackluster sales from Johnson & Johnson and a downgrade of Goldman Sachs, with the Dow Jones Industrial Average retreating 14 points and the S&P 500 down 3 points, while the Nasdaq Composite made a marginal advance.

But Intel (INTC 21.46, +0.97, +4.73%) late Tuesday reported a 8% decline in third-quarter profit but topped earnings estimates. It also reported gross margins of 57.6% and said they would grow to 62% in the current quarter.

http://www.marketwatch.com/story//intels-strength-lifts-us-stock-futures-2009-10-14

Intel is down 8% but looks into their crystal ball and sees fabulous profits next quarter. J.P. Morgan gets government handout, declares it a profit and pays humongous bonuses. Yep, the economy is just fine!

[Demeter]

9. Kitchen worker received AIG ‘retention bonus’

http://www.ft.com/cms/s/0/8eb601ba-b84d-11de-8ca9-00144feab49a.html



AIG’s “retention bonuses” went to hundreds of employees in the insurer’s troubled financial products unit, including a kitchen assistant who received $7,700 in March, a US government report will reveal on Wednesday.

News that support staff shared $168m-plus worth of retention awards could undermine AIG’s insistence the bonuses were needed to persuade key employees to stay on and unwind the derivatives trades that almost brought down the insurer last year.

The report, by Neil Barofsky, special inspector-general for the US government’s $700bn troubled assets relief programme, could reignite political controversy over pay at the state-controlled insurer. Employees of AIG’s financial products unit were scheduled to receive another $198m in retention awards in March next year.

Mr Barofsky said about 400 employees of AIG’s Financial Products arm shared the more than $168m in retention awards in December 2008 and March 2009, after AIG had been bailed out with hundred of billions of dollars in taxpayer funds.

The recipients included the kitchen assistant, who was handed a cash retention bonus of $7,700, and a “file administrator”, who received $700, as well as more senior executives who were paid bonuses of up to $4m.

AIG declined to comment but corporate governance experts said the decision to share the retention awards among so many employees contradicted their stated purpose.

“It is odd for a kitchen assistant to receive a retention award,” said Charles Elson, a corporate governance professor at the University of Delaware. “If everyone receives a retention bonus, it makes you wonder what the point of the programme is.”

People close to AIG said the awards – established early in 2008 – were partly designed to replace a stock award scheme that had lost its appeal due to a slide in the insurer’s shares.

Mr Barofsky’s findings could strengthen the hand of Kenneth Feinberg, the government’s “pay tsar”, in his efforts to crack down on AIG pay.

Earlier this year, Congress attacked AIG’s then-chief executive Edward Liddy for AIGFP’s retention awards, prompting him to ask recipients to return some of the funds.

[Demeter]

11. US pay tsar gets tough over AIG packages

http://www.ft.com/cms/s/0/51b26b2a-b68e-11de-8a28-00144feab49a.html

Kenneth Feinberg, the “special master” for pay at companies that have received government support, has raised concerns inside and outside AIG by putting pressure on the company to alter some pay plans.

People close to the situation said regulators had expressed fears that a crackdown on AIG could impel executives to leave, further harming the company’s prospects and the chances of taxpayers’ money being repaid.

“It’s counterproductive,” one AIG insider said. “To have their pay curtailed below market levels is going to prompt some of them to leave.”

AIG sparked a storm over executive compensation when it emerged in March that the insurance group planned to pay $165m in bonuses even after receiving $180bn in government funding following the bad bets in derivatives that almost sank the company last year.

But Mr Feinberg decided this month that the proposed pay package for Robert Benmosche, AIG’s new chief executive, including $7m annual salary, should stand as it was in line with directors’ pay at other companies and included a large portion of stock.

Coupled with public comments about his approach to vetting compensation at the bailed-out companies, the approval of Mr Benmosche’s package was seen as a signal that remuneration might not be challenged elsewhere.

However, AIG is still in tough negotiations about remuneration of lower-level executives, with Mr Feinberg adopting a hard line, questioning both the amounts and structure of pay packages. He is due to deliver a final ruling as early as this week....

[Demeter]

45. AIG Pays “Retention” Bonuses to Secretaries and Kitchen Staff; Execs Renege on Promised Repayments

http://www.nakedcapitalism.com/2009/10/aig-execs-pay-retention-bonuses-to-secretaries-and-kitchen-staff-and-renege-on-promised-repayments.html

An interesting contract in reporting today. Reader (Tom C) sent me the Wall Street Journal version of this story, by Michael R. Crittenden and Liam Pleven, titled “AIG Execs Returned Only $19M Of $45M In Pledged Repayments.” I decided to look at Bloomberg as well, as found one on the same subject, “AIG Should Trim $198 Million in Awards, Feinberg Says,” by Hugh Son. But the Journal has now fallen in line with Bloomberg and has a similar finger-shaking-at-government-interference headline, “U.S. Wants AIG Retention Pay Cut.”

Now look at the difference in emphasis via the headlines. The first highlights that AIG did not live up to its promise to return bonuses, while the Bloomberg version puts the focus on the presumed interference of the pay master, Kenneth Feinberg...

[Demeter]

10. BofA urged to seek external chief executive

http://www.ft.com/cms/s/0/a94e10be-b68e-11de-8a28-00144feab49a.html

Pressure from institutional investors is starting to build on Bank of America’s board to name an outsider to replace Ken Lewis, who retires as chief executive at the end of the year.

Three institutional investors have urged BofA to look beyond internal candidates, according to people familiar with the matter. Another institutional shareholder is planning to raise concerns this week.

Two insiders – retail banking chief Brian Moynihan and chief risk officer Greg Curl – have been tipped as the lead candidates among BofA executives.

However, individual board members also have expressed interest in two former BofA chief financial officers, Jim Hance and Al de Molina, people familiar with the matter said.

The concern over the possible selection of a bank insider to replace Mr Lewis follows a plea last week from Finger Interests, a dissident shareholder, calling for other institutional investors to make their voices heard on the matter.

[Demeter]

12. Citi fined amid tax crackdown

http://www.ft.com/cms/s/0/0d96ee5c-b689-11de-8a28-00144feab49a.html

Citigroup is to be fined over derivatives transactions that were partly designed to help foreign clients avoid taxes on dividends in a move that could herald a wider crackdown against Wall Street banks that used similar strategies.

The $600,000 fine by the Financial Industry Regulatory Authority, which oversees broker-dealers, comes after the US authorities hardened their stance on offshore tax operations with a series of actions over the past few months.

As part of their campaign, regulators have targeted the complex derivatives deals used by banks that they allege help offshore bank clients avoid billions of dollars in US taxes.

When dividends on stock in US companies are paid to foreign investors, these may be subject to withholding taxes, depending on the applicable treaty between the US and the foreign investor’s home country.

Finra’s fine against Citigroup Global Markets, expected to be announced on Monday, partly involves the bank’s failure to control trading related to strategies including so-called “total return swaps”.

Such swaps helped Citi’s foreign clients receive the full value of dividends from US securities without paying the withholding tax.

A typical deal involved the sale of stock from a customer to a bank during the period when a dividend is paid. In return, the customer would receive an income from the bank equivalent to the dividend and any appreciation in the share price while the bank held the stock.

Citi declined to comment but people close to the bank said it had discovered the failures and reported them.

As it is customary, Citi is expected to neither admit nor deny the allegations.

Citi voluntarily paid $24m to the Internal Revenue Service, the US tax authority, in 2006 in relation to the withholding of dividend taxes on a limited set of swap transactions from 2003 to 2005.

The IRS on Sunday said it was examining “numerous transactions” but declined to comment on specific taxpayers or cases. The inquiries focus on whether financial institutions failed to withhold tax on payments made to foreign clients who may be liable for US taxes with respect to dividend payments.

Derivatives deals came under scrutiny late last year when the Senate released a report saying that some financial institutions designed, marketed and used transactions to enable foreigners to dodge millions of dollars of taxes on US stock dividends.

[Demeter]

13. Blackstone in listing spree

http://www.ft.com/cms/s/0/a72a11e2-b694-11de-8a28-00144feab49a.html

Blackstone, the world’s largest buy-out firm, is planning to list up to eight companies it owns and sell at least five others, marking a reversal of its pessimistic view of the global economy and financial markets.

Steve Schwarzman, Blackstone’s founder, told investors in a letter sent on Friday: “We see the world changing once again. At least for private equity, the worst is behind the industry.”

Mr Schwarzman’s stance is noteworthy because no other leading buy-out firm anticipated the economic downturn to the extent that Blackstone did, nor turned as bearish as early.

Blackstone was among the most active private equity buyers in 2005 and 2006 but grew cautious after leading the investment group that bought Freescale Semiconductor in September 2006.

As prices and debt levels for buy-out transactions continued to soar, Mr Schwarzman and Tony James, Blackstone’s president, stayed largely on the sidelines the following year, committing money to only one of the 20 biggest deals.

Blackstone also eschewed the diversification strategies of many competitors, such as the ill-fated foray of a Carlyle affiliate into complicated mortgage securities.

As recently as its August earnings call, Blackstone remained cautious, saying it did not expect to list or sell many of the companies in which it had invested.

Because it held back, investors have received almost no cash proceeds from its private equity investments.

In his letter, Mr Schwarzman expressed some qualifications about the recovery, saying it was the product of fiscal stimulus and inventory rebuilding, both one-time events.

He made clear Blackstone was acting to capitalise on improved conditions. “We are seeing the beginning of realisations through strategic sales and public equity offers,” he said.

Mr Schwarzman said Blackstone was in the process of selling five companies it owns – at values twice as high as those estimated at the end of 2008. Investors are likely to receive about $2.8bn (€1.9bn) as their share of the profits, with about $1.2bn coming from the expected sale of Kosmos Energy.

Blackstone is considering listing eight other companies in which it has invested collectively more than $4bn, during the next year, and the “expected valuation compares very favorably to our costs, in some cases significantly”.

In addition, Blackstone is revving up its deal machine. Since May, it has committed almost $2bn to three new transactions, including its acquisition of Busch Entertainment, owner of SeaWorld and other entertainment parks.

Blackstone’s scepticism about this year’s market rally has distinguished it from rivals in much the same way as its caution abut investment opportunities in 2007 did. Kohlberg Kravis Roberts, for example, decided months ago to take advantage of the more positive tone in the credit markets, moving to cut the debt of companies it owns.

[Demeter]

14. IS HE OUT OF HIS MIND? UK in $25bn sale of state assets

OR DOES HE HAVE PAYOFFS TO MAKE?

http://english.aljazeera.net/business/2009/10/20091012114024473246.html

Gordon Brown, the British prime minister, has announced a $25bn sale of state assets, including the Channel Tunnel rail link, in a bid to cut soaring debt caused by the global economic crisis.

Addressing economists in London, Brown said he wanted to halve the UK's deficit in four years after it ballooned amid the country's deep recession.

The planned disposals include a 33 per cent stake in Urenco, a European uranium consortium, a bookmaker and a company that deals with the nation's student loans.

Brown said: "We plan a sale of assets to deal with our debt issues and ... £16bn <$25bn> of assets will be sold within the next two years.

"We have listed a number of assets that we are determined over the next period of time to put into the market place.

"That includes the student loan book, the Channel Tunnel rail link, that includes Urenco - subject to security issues being addressed - and that also includes the Tote , other facilities, and property portfolio."

Bank bailout

Britain's public finances have been under significant pressure following an expensive bailout of its troubled banking sector.

The public deficit is widely forecast to strike $275bn this year as the nation's finances also take the strain of reduced taxation revenues.

The opposition Conservative Party, who are well ahead in opinion polls ahead of a general election due by June, set out their plans last week for tackling Britain's debt problem.

In his speech, Brown, who is bidding to reclaim the economic initiative for his governing Labour Party speech, included a series of attacks on Conservative policies.

The prime minister said: "Our deficit reduction plan is deepening, it is far-ranging, it takes account of the issues.

"The difference between it, and those of other parties ... is that deficit reduction can happen in a way that does not lead to a deterioration in front-line public services, and make sure that we have the investment that is necessary for the long-term growth of the economy."

Opposition response

Reacting to Brown's announcement, David Cameron, the Conservative leader, supported the sale but said the government must get value for money.

Cameron said of the sale 'we must make sure we get good value for money'
"Obviously we do need to do this but we must make sure, as every family knows, if you sell something it can help in the short term but it does not help you live within your spending in the long term.

"We have still got to get to grips with public spending, get to grips with the deficit.

"We must make sure we get good value for money."

In a twin-pronged attack on the UK's recession, the Bank of England (BoE) has slashed British interest rates to a record low of 0.5 per cent and launched a radical quantitative easing (QE) programme to boost lending.

On Monday, an independent economics consultancy forecast that the British central bank woukd keep its key lending rate at 0.5 per cent until at least 2011 as the economy recovers.

The Centre for Economics and Business Research said that borrowing costs would remain below two per cent up until 2014.

The BoE has so far pumped $275bn of new money into the economy under QE, whereby it creates funds by buying bonds from commercial institutions.

[Demeter]

15. A Dollar Rout Or More Bernanke Trickery? By Mike Whitney

http://www.informationclearinghouse.info/article23699.htm

October 12, 2009 "Information Clearing House" --- Consumer credit is falling fast. In July, consumer credit plunged by $19 billion, followed by an August drop of $12 billion, a 5.8 percent annual rate. Credit card spending decreased by nearly $10 billion in August, while non-revolving debt, including auto loans, fell by $2 billion. Credit has shrunk for 7 consecutive months, the longest period of decline since 1991. The banks have shrugged off their commitment under the TARP program to increase lending to consumers and businesses. They've either deposited their excess reserves with the Fed, where they earn interest, or invested them in the equities markets for better returns. The bottom line: Credit is shrinking and the economy is slipping further into deflation.

From MarketWatch:

U.S. banks are reducing their lending at the fastest rate on record ... According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace...

... if the decline is mainly due to weak banks unable or unwilling to lend, then a turnaround in credit creation may have to wait until banks' balance sheets are repaired, a process that could be delayed by further expected defaults in consumer loans, mortgages and commercial real-estate loans. (Rex Nutting, "Banks cutting back on loans to businesses", Marketwatch)

Unemployment is rising and the pool of creditworthy borrowers is declining. When credit contracts in an economy where salaries have stagnated and joblessness is increasing, demand falls and recession deepens. That is, unless government spending takes up the slack in excess capacity.

There is no organic growth in the economy at present. The so-called recovery is a result of fiscal stimulus and the Fed's extraordinary liquidity injections into the financial system. True growth and prosperity do not come via the printing press. The Fed's actions are just putting more and more pressure on the dollar.

From Bloomberg today:

Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades...

Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June...the highest percentage in any quarter with more than an $80 billion increase.

Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,” said Steve Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.” (Bloomberg News)

Congress has no say-so. Neither do the American people. The decision to skewer the dollar was made by the big banks and their allies at the Federal Reserve. Everyone else is just along for the ride. The Fed wants a cheaper dollar to increase exports, provide cheap capital for Wall Street, and to lower the true value of household and financial sector debt. But there are many pitfalls to "inflating one's way out of debt". It is a policy which should have been debated by the representatives of the people and not decided by unelected bank-oligarchs pursuing their own self-interests.

The dollar's share of global reserves is steadily falling. Private industry and central banks are shedding dollars to avoid painful adjustments in the future. Last week, South Korea, Taiwan, Thailand, and the Philippines launched currency market interventions to keep the dollar from plummeting. The situation is grave. The Fed's monetization and liquidity programs have made dollar-holders jittery. The central banks actions are the first sign of a disorderly unwind. The prospect of a dollar crash is now real.

Surprisingly, there is also a good chance that the dollar will strengthen short-term and that the misinformation about the dollar's future is being used to achieve the Fed's objectives. Fed chair Ben Bernanke is already monetizing the debt (via quantitative easing) and has slashed interest rates to zero. What else can he do? The only way to weaken the dollar further is through asymmetrical warfare, a disinformation campaign aimed at triggering a sell-off before the dollar strengthens when the stock market corrects and credit tightens even more. Is that what Bernanke has in mind?

The Fed has its back to the wall. It will do whatever is necessary to micro-manage the dollar's decline and retain its stranglehold on the global system.

[Karenina]

17. It's time (a day late iirc) to celebrate Tansy's BIRTHDAY!!!

HAPPY BIRTHDAY, TANSY!!! :loveya::yourock::loveya:

[Tansy_Gold]

18. Thank you! Thank you!

My mom called, my kids called. Friends sent e-cards.

And someone posted over on HuffPo that the financial sector is ruining the economy. Who'da thunk???



Tansy Gold, one day closer to medicare

[UpInArms]

22. Happy Birthday, Tansy!

:yourock:

:grouphug:

[Demeter]

29. You Mean One YEAR Closer!

Congrats! I'm sure there were days you never thought you'd make it this far...

[Po_d Mainiac]

31. Happy B'day!

I saved the frost shavings off the windshield for you. Simply add them to your favorite cocktail.....:toast:

[DemReadingDU]

34. Let's eat cake. Happy Birthday!

[Dr.Phool]

36. Happy Birthday!

Have a drink on me!

:toast: :party: :beer: :beer: :beer: :beer: :beer: :beer: :beer: :beer: :party: :toast:


Several!

[Dr.Phool]

40. For Tansy. We are getting wealthy as we get older

We are getting wealthy as we get older

Wealth!!


Silver in the Hair

Gold in the Teeth.

Stones in the Kidneys

Sugar in the Blood.

Lead in the Feet.

Iron in the Arteries.

And an inexhaustible supply of Natural Gas.

We never thought we'd accumulate such wealth!!

[AnneD]

55. So I guess ......

I was early yesterday.

[Karenina]

58. No, YOU got it right!!! But there's a NEW RULE!

My cousin and I established it when we hit the big 40 (which was actually quite some time ago...) Das heißt:

ANYONE who perks up 2 weeks before or after one's birthday is considered to have it right. They call you out of the blue just cuz they were thinking about you. 4 decades and you get 4 weeks to celebrate! Works for me!!! :loveya:

[AnneD]

92. When my baby was young....

we never celebrated just that one day-we celebrated the entire month. Even if we did go to the movies every Thursday, when we went in April-it was because it was a birthday present for her. It was the little things that made her happy.

By the way-she is doing great in school. Financing is the bear but she is a stellar student. She is trying to establish residency to get more money next year. She ran and got a Senate seat on the student council. When I asked her why-she said she got paid $75 a week-"Mom, that's gas and grocery money!".

She cracks me up.

[Tansy_Gold]

71. No, you got it right on the dot 10/13/48 -- & a note to all

All of you, you have no idea how your wishes perked up my day! I'm sittin' here at the stupid computer tryin' to get my stupid work done so I can go to a stupid meeting this afternoon -- Tansy prefers the ubiquitous "stupid" to the even more ubiquitous "fuckin'" -- and I'm cryin' 'cause my buds on SMW sent me birthday wishes.


To all of you, and the lurkers, too -- May the anniversaries of your births all be celebrated a day early, a day late, on time, or whatever, with friends and those you love either in person or far away, and may you have many many MANY more.

With you guys and friends like these, what more could a person ask?

[Demeter]

83. Group Song for the Occasion! Most Appropriate for This Thread

http://www.youtube.com/watch?v=RdsZT7WKjW8

and from another fan:

http://www.youtube.com/watch?v=I8_hz4Qq8lA

[Loge23]

56. Happy Birthday to one of the best!

From another Tansy Gold groupie!

[Hugin]

61. Yay! Happy Birthday!

:party:

[tclambert]

65. Happy 29th!

Not sure what base to use for that number, but I'm sure it's 29.

[MARALE]

79. Happy Birthday!

You share your birthday with my son and my cousin. I can not believe my son is now 21. Hope you had a great birthday!

[ozymandius]

88. I salute you on this, your.... ...uh ...mmm .... 39th!! birthday!

Best wishes and blessings, Tansy. I look forward to you giving 'em hell for decades more.

:toast: :yourock:

BTW - my connection's fixed.

[JNelson6563]

43. Happy Brithday!

I enjoy your posts, keep on rockin'! :toast:

Julie

[nc4bo]

62. Happy B-day! nt.

[AnneD]

93. I have been meaning to tell you.....

I laugh every time I see that photo-it is one of my favs.....:evilgrin:

[Tansy_Gold]

19. How the banks killed the economy

http://www.huffingtonpost.com/william-k-black/how-the-servant-became-a_b_318010.html

How the Servant Became a Predator: Finance's Five Fatal Flaws

William K. Black

<snip>
Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State http://books.simonandschuster.com/Predator-State/James-Galbraith/9781416566830, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:

• Corporate stock repurchases and grants of stock to officers have exceeded new capital raised by the U.S. capital markets this decade. That means that the capital markets decapitalize the real economy. Too often, they do so in order to enrich corrupt corporate insiders through accounting fraud or backdated stock options.


<end snip>


Tansy Gold

[Joe Chi Minh]

51. Very significant insights - even to a layman like yours truly... But, unfortunately,

in our crazy societies, significant insights are not at all guaranteed to be accepted. Least of all when the predators' pillage is put at jeopardy. It means so much to own the media and frame the issues. Deceit and lies have become our political and economic staples.

[DemReadingDU]

68. I need another pitchfork!

Thanks for William Black's article.

[UpInArms]

20. dollar watch

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

Last trade 75.600 Change -0.376 (-0.48%)

US Dollar Drops to New Low as Chinese Export Figures Boost Risk Appetite

http://www.dailyfx.com/story/special_report/special_reports/US_Dollar_Drops_to_New_1255498588950.html

The US Dollar set a new yearly low in overnight trading after China’s exports shrank at the slowest pace in eight months, boosting confidence in the global economic recovery and sending stocks higher in Asian trading to weigh on the safety-liked currency. UK unemployment data is on tap ahead.

Key Overnight Developments

• Australian Consumer Confidence Rose to Highest in Two Years, Says Westpac
• Japan: BOJ Keeps Rates, QE Unchanged as Expected; Consumer Confidence Underperforms
• US Dollar Sets New 2009 Low as Chinese Export Figures Boost Asian Stock Exchanges

Critical Levels



The Euro traded higher in the overnight session, adding 0.2% against the US Dollar. The British Pound followed suit, testing as high as 1.5965 against the greenback. A rally on Asian stock exchanges weighed on the safety-correlated US currency, with the MSCI Asia Pacific regional benchmark index hit a 13-month after China’s exports shrank at the slowest pace in eight months in September, boosting confidence in the global economic recovery. We remain short GBPUSD at 1.6617.

...more...

Greenback Finds No Relief in Overnight Trade

http://www.dailyfx.com/story/topheadline/Greenback_Finds_No_Relief_in_1255515907937.html

The big story in the European session has been the better than expected UK employment data. While the data still shows deterioration in the employment sector, the slowdown in the pace of declines can be interpreted as an encouraging sign. Sterling has managed to mount an across the board recovery and now stands out as one of the top gainers on the day. Meanwhile, the Yen is the strongest currency, while the Euro has only posted marginal gains against the buck and lags. In the Eurozone, industrial production has come in slightly weaker, but this has failed to prevent the single currency from putting in fresh 2009 highs against the USD above 1.4900. All said, the buck continues to get slammed to new lows on any form of a rally, with market participants growing increasingly convinced that the once mighty USD has now officially lost its status. There have been articles out from many major newspapers each day discussing the fall of the greenback and this has not helped to bolster any confidence in the buck. Moreover, there has been little to no effort on behalf of US officials to defend the beleaguered currency. This in conjunction with a market holding a healthy risk appetite and looking for more attractive yield continues to weigh on the prospects for the USD. Overnight data from China reinforces, after the economy produced some robust trade figures, which helped to boost the higher yielding currencies to fresh 2009 highs. The USD Index has also managed to plummet to a fresh 14-month low. Australian consumer sentiment impressed to the upside, with Aussie rallying to highs by 0.9150, while Kiwi could also not be stopped, despite concerns from the FinMin over the strength of the NZD. In Japan, as expected, the BoJ kept its call rate unanimously unchanged at 0.10%. However, it was comments from FinMin Minezaki that generated more attention, after the official said that the USD weakness was likely to persist. This has helped the Yen to outperform across the board on the day, up some 0.80% against the USD. Interestingly enough, the broad based USD weakness has not prevented a concurrent weakness in the Yen crosses, which traditionally warns of an elevated risk aversion. Looking ahead, US retail sales (-2.1% expected) and import prices (0.1% expected) are due at 12:30GMT, along with Canada new motor vehicle sales (0.0% expected). Business inventories (-0.9% expected) then follow at 14:00GMT, with the much anticipated FOMC Minutes capping things off at 18:00GMT). US equity futures point to a stronger open, while commodities also remain well bid with gold shining and approaching $1100.

...more...

[UpInArms]

21. 8:30 reports - Sept retail sales fall 1.5% vs -2.3% expected

8:30a U.S. import prices down 12% in the past yr.

8:30a U.S. Sept. nonfuel import prices up 0.6%

8:30a U.S. Sept. import prices rise 0.1% vs 0.3% expecte

8:30a U.S. Sept. auto sales plunge 10.4%

8:30a U.S. Sept. retail sales grow outside of autos

8:30a Drop in retail sales due to payback from clunkers

8:30a U.S. Sept. retail sales ex-auutos up 0.5% vs. 0.3%

8:30a U.S. Sept retail sales fall 1.5% vs -2.3% expected

[MARALE]

54. Yea!!!

It was not as bad as expected! Lets get the dow to 10,000!

[DemReadingDU]

70. Dow 10,023.12 at 3:30

Yippee!


The higher it goes, the lower it falls.

[UpInArms]

23. Major U.S. firms on route to award record pay in '09: report

http://www.reuters.com/article/businessNews/idUSTRE59D0OU20091014?feedType=RSS&feedName=businessNews

(Reuters) - Major U.S. banks and securities firms are on track to pay employees about $140 billion in total compensation and benefits this year, the Wall Street Journal said, citing an analysis of securities filings for the first half of 2009 and revenue estimates through the end of the year.

The paper said employees at 23 top U.S. investment banks, hedge funds, asset managers and stock and commodities exchanges were likely to earn about 20 percent more than they did last year.

The firms paid $117 billion in compensation and benefits last year, down from the $130 billion paid in 2007, the paper said.

...more...

[Demeter]

24. We’re Headed for Hooverville? By Ted Rall

http://www.informationclearinghouse.info/article23713.htm



October 13, 2009 "State Journal-Register" -- NEW YORK — When the economic collapse began a year ago, many Americans took comfort in the historical parallels with the Great Depression. As it had in 1929, the current crisis began under the clueless reign of a Republican, George W. Bush. Universally reviled since his non-response to Hurricane Katrina had exposed him and the men around him as both uncaring and incompetent — either one was forgivable, not both — Bush had reacted in the classic cold-blooded Republican form embodied by the president who gave his name to the Hoovervilles.

But all was not lost. The Democrats were coming in! Barack “Yes We Can” Obama was running well ahead in the polls. Soon our new FDR would clean up Bush’s mess.

In the late fall of 2008 Bush looted the stripped-bare U.S. Treasury one final time. Hundreds of billions of dollars in “bailouts,” this time for the benefit of the banks, insurance companies and automobile manufacturers whose profligate ways had contributed to the crisis, were doled out without pre-conditions. Millions of homeowners who faced foreclosure got no help whatsoever.

The way to stimulate a consumer-based economy is to put money directly into consumers’ pockets. Instead, Bush deployed the standard GOP trickle-down approach. Boosting the banks would encourage them to restore liquidity, allowing individuals and businesses to resume borrowing. But the banks weren’t stupid. They no longer wanted to lend to people who couldn’t repay them. They held on to the cash. Credit markets seized up.

Like his father in 1992, Bush finished his reign as he had begun it: tone-deaf, obliviously floating above the mayhem, utterly unconcerned with the fate of the average American staring at a stack of bills.

We were a nation without leadership. We knew there was no point looking to Bush and his GOP gangsters for help. But we weren’t too worried. Obama was coming. He would be the neo-FDR. He would get things rolling again.

During the 1932 campaign Franklin Delano Roosevelt promised that help was on the way. FDR argued against Herbert Hoover’s trickle-down approach. He spoke on behalf of the “forgotten man at the bottom of the economic pyramid.”

In his lucid biography of FDR, “Traitor to His Class,” historian H.W. Brands described FDR’s sales pitch: “For too long, he said, government had operated for the benefit of the wealthy, consigning the poor to the margins of public life. The Hoover administration had responded to the crisis by furnishing aid to big banks and corporations. This approach was characteristic of the Republicans, Roosevelt said, and characteristically wrong. It treated ordinary men and women as secondary to the powerful firms that had long dominated American life. And it certainly hadn’t done anything to alleviate the Depression, which grew worse with each passing month. Roosevelt advocated ‘building from the bottom up,’ as he put it; supplying aid to those who most needed it.”

Attacking the 2008-09 Great Recession wasn’t rocket science. The causes of the economic collapse were strikingly similar: a real estate bubble feeding a stock market bubble, excessive borrowing and lending. So were the results: By the time Obama became president in January, the real unemployment rate — calculated the way it was calculated in 1933 — was the same 20 percent it was when FDR took office.

Keynesian-influenced economists such as Paul Krugman pushed the incoming Obama administration to repeat FDR’s successful approach. Putting job creation first, FDR’s New Deal programs directly put millions of people to work on government projects. The WPA, which employed eight million Americans during its existence, built bridges and highways. The TVA put up dams and the CCC improved national parks. The federal government even hired artists and authors to paint murals in public buildings and write travel guides to the 48 states.

Long after World War II ended the Depression once and for all, Americans made use of New Deal-era labor: “The WPA built or improved 651,000 miles of roads, 19,700 miles of water mains and 500 water treatment plants. Workers built 24,000 miles of sidewalks; 12,800 playgrounds; 24,000 miles of storm and sewer lines; 1,200 airport buildings; 226 hospitals; more than 5,900 schools,” according to a PBS special about the New Deal. There’s plenty of work to do now: The U.S. needs a national high-speed rail system, not to mention new mass transit systems and school buildings. Pull out of Afghanistan and Iraq and hire Americans to start building!

Nine months into his presidency, however, it is clear that Obama is more Hoover than FDR. There has been virtually no investment in public infrastructure. There will be no public jobs programs. According to The New York Times, “Obama’s economic advisers are sifting options for a new package of tax cuts and other job creation measures to be unveiled in next year’s State of the Union address.”

No one in Congress has proposed a single jobs-creation bill. Instead, they’re working to extend unemployment benefits to 79 weeks.

Is Obama stupid? Or is he crazy? More than one out of five Americans is jobless. Many more are underemployed. There are six job seekers for every job. Inflation is out of control. Yet he thinks we can wait until January 2010? Does he really believe that tax cuts create jobs?

When Bush flew home to Texas, we thought we were getting an FDR to replace a Hoover. Instead, we got another Hoover.

Even if we had a president willing and able to offer the bold and decisive leadership that FDR offered in the 1930s, the challenge posed by the fiscal crisis would be daunting. But we’re not as lucky as our grandparents. We’re stuck with a small-minded schmuck with the vision of a Chicago alderman. Think about it: This is a guy who thinks tinkering with the tax code is going to save American capitalism!

It’s 1933. This time, however, Hoover got re-elected. Can we hold out until 1937 for a president who understands that we need 10 million new jobs, and that we need them yesterday?

Ted Rall is a columnist for Universal Press Syndicate.

[mnhtnbb]

30. Post that in GD-P and you'll need your flame-proof suit!

[Tansy_Gold]

33. As one who has tried, I attest to the truth of your warning!

It's nasty over there. REALLY nasty.




Tansy Gold, who has been called everything from illiterate to batshit crazy and lived to tell about it.

[Demeter]

38. They Made Fun of Goldie Hawn, Too

and lived to regret it.

[mnhtnbb]

52. Goldie's doing something right to look the way she does at 60 something!

[Tansy_Gold]

73. she's doing really good make-up. . . . and more power to her!

[mnhtnbb]

53. As a self-confessed cynic and contrarian, being called "naive"

was the one that made me laugh.

[AnneD]

59. Tansy ....

My come back is that I have been caled worse things by a better class of people-and I have.

I met with my hubby's bud last night. I told him I though it was a bit premature for folks to be talking about giving him a Nobel Peace Prize. It was like saying...we know your economy is in the crapper so here's a Peace prize, please don't shoot us. We got a good laugh out of that. He surprisingly was backing Obama and I came out a more staunch liberal and was tougher on Obama. I feel that Obama will be a one term wonder like Carter (who also won the Peace Prize)if he dosent get rid of his advidors. Folks don't want unemployment benefits extended....THEY WANT JOBS. Unlike folks in 2000, the unemployed will vote and the fact that Obama renominated Bernanke and approved the bailouts will work against him.

WE ARE NOT ASKING TO MAKE OUR LIFE EASIER-JUST STOP SELLING US OUT.

[Zenlitened]

44. "Still on the Job, but at Half the Pay"

By LOUIS UCHITELLE, The New York Times
Published: October 13, 2009

...In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.

(snip)

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau, “is that the amount of money people are paid has taken a big hit**; not just those who have lost their jobs, but those who are still employed.”


More:
http://www.nytimes.com/2009/10/14/business/economy/14income.html?_r=1&hp

**Hmmmm... Do you think that "big hit" will be reflected in the amount of money they spend, here in our consumerism-dependent economy? -- Zenlitened

[Hugin]

60. Y'know, Demeter...

It's a crying shame we can't recommend individual posts. :/

[Demeter]

84. You Can Always Cross Post It Separately

and then let us know and we'll rec it to the sky!

[DemReadingDU]

25. Bloomberg video: Charles Biderman of TrimTabs

10/12/09
Charles Biderman, founder and CEO of TrimTabs Investment Research, appears on Bloomberg TV on October 12, 2009 to discuss tax data, unemployment numbers, and his outlook on the market with Bloomberg's Carol Massar and Matt Miller.

You might recall that TrimTabs also follows insider selling and buying, that they have been seeing more insiders selling than buying.

appx 4 minutes
http://www.youtube.com/watch?v=z0Tu3tsn3QI


more from ZeroHedge

10/13/09 Biderman Discusses Declining Income Collections, Validity Of Economic Data, And The Broader Market

Whetever few voices of sanity remain, as every "expert" merely touts their book into the biggest bear market rally in history, need prominence. TrimTabs' Charles Biderman is among them. In this most recent Bloomberg interview, Biderman takes on what amounts to inaccurate data releases by the BLS and BEA, and tries to make some sense out of them. Biderman's punchline: "Gravity usually works at some point." The only question is when.

http://www.zerohedge.com/article/biderman-discusses-declining-income-collections-validity-economic-data-and-broader-market

[Demeter]

26. Student Loans are the New Indentured Servitude By Mike Konczal

http://business.theatlantic.com/2009/10/student_loans_and_payback_time.php



October 13, 2009 "The Atlantic" -- The Wall Street Journal ran a post over the weekend about a new credit crunch among low income borrowers, noting it is now 'payback time.' What they didn't go into is that their primary interviewee is drowning not on expensive cars loans but student loans. This former student's debt is far from extraordinary. It is, in fact, tragically ordinary, as student loans have become the 21st century version of indentured servitude.

From The Wall Street Journal, The 'Democratization of Credit' Is Over -- Now It's Payback Time. Check out the lead:

NEW YORK -- Karen King owes nearly $36,000, more than she's ever earned in a year.

All day long, bill collectors call. She hunts for a second job, sometimes skips meals, and stays with other family members at a grandfather's crowded apartment, trying to get out of debt and turn her life around.

She largely holds herself at fault. "Years ago, I lived for now. It was so stupid," the 28-year-old says. "It's depressing, but I can't live that life anymore." Now, she says, "I basically want to live for the future."

Now go about halfway through.

Her biggest chunk of debt, $26,000, stems from student loans to pay for her two-year associate's degree from a community college -- loans now in the hands of collectors. The remaining $10,000 or so includes old credit-card balances, debt to a store that rents furniture, utility bills and back taxes. Another obligation is $400 a month she contributes to the rent on her grandfather's two-bedroom apartment, where her mother, uncle and sister also live.

Rolfe Winkler caught this too. In addition to pointing out how the current recession is focused in large part on men, it's also worthwhile to note that the current recession is devastating the young. Here's BusinessWeek on "The Lost Generation."

But let's go back to the person in question here: How should we judge this young person profiled in the Wall Street Journal? Is going into a large debt load to pay for college the post-Risk-Shift American Dream? Or is it a form of Living For Now, and being irresponsible and short-sited? According to FinAid.org, the average cumulative debt among graduating seniors is about $22,500. She's ahead of that ($26K/2 years), but what is an acceptable amount of debt to carry to educate yourself? As as Krugman notes, education is a key to our country's successes. Why should we think of her as irresponsible, instead of someone rationally going into debt peonage, like a 17th century indentured servant, in order to take a small shot at bettering oneself - the new middle class dream?

The New Indentured Servitude

Jeffrey Williams, in Dissent Magazine, wrote Student Debt and The Spirit of Indenture, provocatively referred to student loans as the new form of indentured servitude.

Why is this the new form of indentured servitude? Williams gives some reasons: The prevalence of this debt, especially among the young and the poor/working classes, the transformation from a rounding error amount to a significant burden amount over the past 30 years, the length of term, the idea of mobility and "transport" to a job, debt secured not by property but by personhood, and limited legal recourse. All these characteristics are similar. The limited legal recourse is noteworthy here, since unlike most debt, it isn't dischargeable under bankruptcy, thus it doesn't have a natural protection for the consumer receiving credit (a protection, the original synthetic put option, that our Founders were aware of enough to make sure it was provisioned for in the Constitution).

This is not to soft-peddle indentured servitude. Indentured servitude was a violent contract, with physical torture used to coerce labor. As economist DW Galenson noted, "The Company clearly felt that threatened the continued survival of their enterprise, for they reacted forcefully to this crime. In 1612, the colony's governor dealt firmly with some recaptured laborers: 'Some he apointed to be hanged. Some burned. Some to be broken upon wheles, others to be staked and some to be shott to death.'" But let's put on our Galenson Economic Historian googles and think of it as an economic efficiency problem. Indentured servitude, like student loans, are a form of consumption smoothing. And one thing that is needed for consumptions smoothing is good information about the future.

Learning Your Earning

Here's a graph from University of Minnesota macroeconomist Fatih Guvenen's Learning Your Earnings:



Think of these two lines as a dial between perfect knowledge and no knowledge. In this model, a consumer who knows what he'll make over his or her life will consumption smooth (perfect, or 'full', knowledge, flat consumption line); one who is uncertain about what will happen next will rationally not. So if you know exactly how much you'll be making in the future, large loans aren't really a problem.

Now we are currently asking children, 17, 18 or 19 years old, to try and assess how much of a student loan debt burden they can handle vis-a-vis their future income over their entire lives. But, especially compared to their grandparents, uncertainty is so much greater now. The consumption smoothing line invokes a world where everyone with a college degree will get a stable, solid job with certainty (and your employer will, of course, pick up the health care tab).

The person in the Wall Street Journal article almost certainly had no realistic idea for what would be awaiting her on the other side of the associate's degree, and she misjudged this terribly. And, from an efficiency point of view, it's what makes this more perverse than the indentured servitude contract - people under indentured servitude had the job waiting for them. The clock was ticking for the firms who had set up the contract, and they needed to get their value. With student loans, they can sit there for decades, never dischargeable, always getting paid regardless of recession or job market.

[Demeter]

27. Businesss Week; The Lost Generation

http://www.businessweek.com/print/magazine/content/09_42/b4151032038302.htm

[Tansy_Gold]

32. I didn't read the article so forgive me if I'm duplicating what they wrote

The other end of the student loan quagmire is that if they go into collections, as so many do, the interest and penalties are devastating.

Student loans are NOT discharged in bankruptcy.

Student loans are one of the few items that the IRS will process -- they will take any and all tax refunds, government hand-outs like stimulus checks. they will garnish any wages reported to the government. They will garnish your social security (but not disability) checks.

Repayments can be deferred, and they can be deferred for a long time. But that all ends up on your credit report, and can affect your future in many more ways than merely the burden of repayment.

And the fact that the whole student loan program was redesigned a few years ago to put the "profits" into the hands of a very few -- and they are mega profits -- ought to be a national shame. Unfortunately, it isn't.




Tansy Gold, paying off student loans through social security

[Dr.Phool]

35. Two words that should never be used in the same sentence.

"Student" and Loan".

Is this a great country, or what?

[Demeter]

39. It is a great country under an intolerable burden

of evil from within. The forces of greed, stupidity and sheer meanness have nearly toppled this once-premier nation into Haitian levels of disarray and despair. It is thanks to inertia and the sheer size of the population and the land and the dispersal of basic living resources that we haven't gone under faster.

Can you imagine boatloads of refugees heading TOWARDS Cuba? Give it a few years.

[Tansy_Gold]

50. going towards Cuba. . . . .

Although Spain is my first choice, I wouldn't mind going to Cuba.

and it may come to that.

[Demeter]

28. Take America Back From the Banks By Dean Baker

http://www.guardian.co.uk/commentisfree/cifamerica/2009/oct/12/us-economy-banking-chicago

The elites hate to acknowledge it, but when large numbers of ordinary people are moved to action, it changes the narrow political world where the elites call the shots. Inside accounts reveal the extent to which Lyndon Johnson and Richard Nixon's conduct of the Vietnam war was constrained by the huge anti-war movement. It was the civil rights movement, not compelling arguments, that convinced members of the US Congress to end legal racial discrimination. More recently, the town hall meetings dominated by people opposed to healthcare reform have been a serious roadblock for those pushing reform.

Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago this month. A large coalition of labour, community and consumer organisations are organising a protest at this "Showdown in Chicago".

A big turnout at this event can make a real difference. Just to review the scorecard, most of the country is still suffering the fallout from the bankers' irrational exuberance of the housing bubble era. The Congressional Budget Office (CBO) and other forecasters expect the suffering to endure for years to come.

The US unemployment rate is about to cross 10%, with an additional 9 million workers only able to find part-time work. CBO projects that unemployment will not return to normal levels until 2014. Almost 200,000 people are losing their homes every month through foreclosure. Tens of millions of people who had expected a comfortable retirement just saw most of their wealth disappear with the collapse of the housing bubble. State and local governments are being forced to lay off school teachers and fire fighters under the pressure of enormous budget deficits.

But not everyone is suffering. Thanks to the bailout programmes put in place last fall, most of the country's major banks are back on their feet. In fact, in the most recent quarter, bank profits hit a new record high as a share of all corporate profits.

And the banks are sharing their wealth. Many of their top executives and high performers will be getting bonuses this year worth millions of dollars. In some cases the bonuses will be in the tens of millions.

In the meantime, in elite Washington circles people are busy making plans for a national sales tax so that the government can limit the fiscal damage caused by the bankers' recession. A sales tax is of course very regressive, since low- and moderate-income people typically spend the vast majority of their income, while our banker friends will more likely to be able to save some of their income or spend it in other countries where they will not be paying this new sales tax.

To summarise: the bankers wrecked the economy with their greed, ran off with taxpayer dollars in a massive bailout and now plan to raise taxes for the rest of us. If that picture doesn't sound quite right, then go to Chicago.

This is a case where the divisions are not left-right, but of the elite against everyone else. When Congress was debating the Tarp bank bailout last fall, members of Congress were hearing calls from people across the political spectrum who were outraged that their tax dollars were going to the banks that had wrecked the economy. A higher percentage of Republicans than Democrats ended up voting against this bankers' piñata.

The policies that will rein in the banks: reform of the Federal Reserve Board to make it democratically accountable, a tax on financial speculation to pay for the bankers' mess and restrictions on the bank abuses of consumers that caused the carnage have support from people on both the left and right.

A bill that would require the Fed to disclose what it did with more than $2tn in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.

This is exactly the sort of alliance that gets the elite worried. Reining in the power of the financial industry will be a long, hard-fought war, but it is one that must be fought. President and Nobel peace prize winner Barack Obama may not have been able to bring the Olympics to Chicago, but everyone who wants to retake our country from the banks can bring their backside there on 25 October.

[Demeter]

46. Here Be Chickens (And They're Roosting!) Karl Denninger

http://market-ticker.org/archives/1508-Here-Be-Chickens-And-Theyre-Roosting!.html

We got a little problem here.....

A progress report released last week by the Treasury Department showed that only 11 percent (about 95,000) of Bank of America's delinquent borrowers who were potentially eligible for the program had been given a loan modification. That compares with 27 percent, or 117,000, for J.P. Morgan Chase, and 33 percent, or 68,000, at Citigroup, the Treasury reported. The figure for Saxon Mortgage Services, which is owned by Morgan Stanley, is 41 percent, or 32,000.

There are too many conflicting currents here, which is what will ultimately doom this program, as has doomed all the previous ones.

First among them is the simple question: How many of these people who allegedly "qualify" for a modification will wind up with a sustainable mortgage if they get one?

This is a key question, yet one that hasn't been asked in public, nor have there been public answers tendered. The truth is pretty ugly - without significant principal forgiveness (not "forbearance") a huge, perhaps even majority percentage of these loans are not sustainable even if modified.

The problem is simply that on any reasonable set of assumptions the income of the household does not support the principal balance. "HAMP" calls for modifications to reduce principal and interest for all outstanding mortgage liens (firsts and seconds, if any) to 31%.

Here's the "waterfall" process, as shown by MGIC (one of the mortgage insurers who has been hammered severely by this mess)



The problem here is that several of these steps don't do much. If you "capitalize" arrears all you're doing is adding them to the principal balance of the loan. This "cures" the instant default but does nothing to solve the underlying problem that caused it in the first place (unaffordable payments.)

Reducing the interest rate helps only if the owner started with a "reasonable" rate up front. If their original loan was an "OptionARM" with a teaser, and they qualified on that teaser, they're unlikely to get to sustainable payments even with a reduced interest rate.

The third step, extending terms, does little as well. A $200,000 loan @ 5% over 30 years has a P&I of $1,069.19. The same loan over 40 years (the maximum extension) has a P&I of $960.39. $100 matters (it's about a 10% payment reduction) but if the difference of $100 makes it possible for you to pay then you're still one unscheduled calamity (e.g. your car needs a new alternator) away from being delinquent again.

The fourth step, "forbearing" principal, is not principal forgiveness. It is simply deferment, turning your note into what amounts to a balloon. This last step is particularly nasty for homeowners in that it will preclude you from being able to move for a decade or more, making it impossible for the workforce to follow job opportunities, as you would have to pay off the balloon in order to sell the house.

Then you have attitude:

Even as the administration urges lenders to do more to help homeowners, some Bank of America employees continue to express skepticism about whether all of those seeking assistance really need it. "There's a difference between hardship and entitlement," said Jerry Durham, Bank of America's vice president of home retention.

Oh really? Let us remember that Bank of America "acquired" Countrywide Financial, the king of making unsustainable and outrageously risky loans that were pushed like a drug junkie shoves his smack under the nose of debt addicts. Never mind that Bank of America seemed to think it was "entitled" to tens of billions of taxpayer dollars. Now the bank suddenly thinks that other people being "entitled" is such a bad thing? Who set the example?

The article also cites a disturbing trend:

On a recent morning, Tiffany Palmer was on the line with a frustrated borrower looking for help with his mortgage. He was $6,000 behind in his payments.

"Do you have a 401(k) or savings -- liquid assets that can be quickly converted into cash?" she asked him. He was going to have to come up with money for the mortgage. Because his monthly mortgage payments represented less than 31 percent of his income, he made too much to qualify for a modified mortgage under the federal initiative. "You will not be eligible for the program," she said.

This sort of "advice" should be barred under Federal Law and result in criminal sanction, especially for banks that have received taxpayer funds (of which BAC is particularly exposed.) Why? Because 401k and IRA money is protected in the event of a bankruptcy, with few exceptions. As such it is outrageously irresponsible to suggest that a debtor in trouble liquidate retirement accounts to come current, especially when nothing is being done to make the loan sustainable in the long term. Better to file bankruptcy and shove that loan up the bank's behind!

Never mind this sort of advice:

Could she skip her credit card payments, about $400 a month?

Oh, so that's nice - screw someone else so we get ours? Uh huh.

The conflicts of interest here are huge:

*
The banks have "Servicing Rights" (or MSRs) that require them as servicers to advance principal and interest payments to the noteholders. There are several risks involved in such an enterprise, of course, including the risk that the debtor won't pay at all, but in addition there is "prepayment" risk - that is, anything that causes the loan to terminate early (short sale, refinance, etc) decreases the value of that loan to the bank holding the servicing rights. These "MSRs" were "written up" in a major way in the first and second quarters. Was that a fantasy? Probably.

*
Forbearance, interest rate reductions and similar games sound good but they decrease cash flow. Remember that the ultimate holders of these notes through securitization have to agree. When this is Fannie or Freddie this simply forces their heads further underwater, but when it is someone else they have no mandate to agree to take less than they contracted for. In most cases securitization documents permit some small percentage of modifications without investor approval (e.g. 5% of the loans in the pool) but once that threshold is crossed the story changes.

*
In addition, and perhaps most importantly, a loan that is modified but which re-defaults is one where the investor made a good faith change (reducing his or her cash flow) believing that it was cheaper than prosecuting a foreclosure, but then wound up with both the lower cash flow and the foreclosure! This is perhaps the most serious problem and unlike the others it is not really a conflict of interest, it is simply the expression of the fact that in nearly all cases the first loss you can take and clear your board is the best loss; the more screwing around you do the worse things are.

The bottom line is that there is no evidence that HAMP is working or can, and the Congressional Oversight Panel has seen through the ruse:

The Panel found, "The result for many homeowners could be that foreclosure is delayed, not avoided." HAMP modifications are often not permanent: For many homeowners, payments will rise after five years, and although the program is still in its early stages, only a very small proportion of trial modifications have converted into longer term modifications. The Panel is also concerned about homeowners who face negative equity or are "underwater" - that is, the value of the loan exceeds the value of their home. For many borrowers, HAMP modifications increase negative equity, a factor that appears to be associated with increased rates of re-default.

Yep.

At the time I said that these efforts would fail as there is no actual solution other than forcing those who made bad loans to eat them. HAMP, and all other programs like it, are inherently just another gimmick promulgated upon the public by our government - another form of "extend and pretend", that when boiled down to its essence is legally-sanctioned accounting fraud.

The solution to unaffordable mortgages, as I have repeatedly noted, is foreclosure and a forcing downward of housing prices whether Congress and The Administration want to admit it or not. Affordable housing requires not gimmicks but houses that are inexpensive enough for people to be able to purchase and afford on an ongoing basis. We're not there, despite the crooning of The National Association of Realtors and other associated pressure groups.

This is directly contrary to the stated policy of Congress as expressed by Barney Frank, who has said that making bad loans on purpose is A POLICY to prevent home prices from contracting to long-term sustainable values.

In other words the bankers and Realtors have effectively bought Congress and goaded them into keeping home prices unaffordable for the average American. Refusing to reverse course on this policy will guarantee that sustainable economic growth will not return to America.

We will not and cannot, mathematically, exit this crisis until the bad debt is flushed from the system. This same sort of gimmickry and game-playing was attempted in the 1930s and was directly responsible for The Depression extending for a decade, ending only when World War II began.

You would think that we would have learned from this history lesson that all the game-playing in the world will not solve a debt problem, nor will shifting debt from one hand to another (e.g. to the federal government) lead to a sustainable economic recovery.

Those institutions that made bad, unsustainable loans must be forced to recognize their losses, even if it results in business failure. Only through contraction of these asset prices to sustainable levels where people can afford to purchase them on an ongoing basis given the actual employment prospects that exist (including the consequence of offshoring all our call centers and most of our manufacturing!) will we exit this crisis.

Housing prices must come down significantly - very significantly - from here. This will bankrupt many lenders who made unsustainable loans and that must be not only allowed to occur but encouraged so as to result in truly sustainable home ownership.

An environment of excessive debt, fostered by the improper and ridiculously negligent and intentional acts of both Congress and The Federal Reserve, cannot be resolved with more debt, any more than you can solve a drunk's problems by handing him another bottle of whiskey.

[Demeter]

48. Does Banking Contribute to the Good of Society?”

http://www.nakedcapitalism.com/2009/10/does-banking-contribute-to-the-good-of-society.html

Quelle horreur, some smart people are starting to question whether banking serves a redeeming social function.

Of course, in the abstract, it does. Banking (or more accurately, extending credit) is essential for commerce. But any essential support function, if it overpriced in relationship to its true value, becomes a drag on the productive economy. And our modern system is extracting a very large toll relative to its actual worth.

One argument against banking comes from Roger Bootle at the Telegraph (hat tip Swedish Lex); the other from Bill Black. Bootie makes a broader, philosophical argument, starting by distinguishing activities as creative (making something out of nothing and increasing net enjoyment) versus distributive (something that merely shifts benefits from one party or group to another). Activities fall along a spectrum, and Bootle asserts:

Successful societies maximise the creative and minimise the distributive. Societies where everyone can only achieve gains at the expense of others are by definition impoverished. They are also usually intensely violent.

He assesses modern finance against this standard and not surprisingly, finds it sorely wanting:

A leading British journalist recently decried the widespread condemnation of bankers’ and hedge fund executives’ high remuneration on the grounds that these people, it said, were “the wealth creators”…This completely misses the point….the question is, what has the process that generated this money contributed to the common weal?

Much of what goes on in financial markets belongs right at the purely distributive end. The gains to one party reflect the losses to another, and the vast fees and charges racked up in the process end up being paid by Joe Public…

Even what the great investors do belongs at the distributive end of the spectrum. The genius of the great speculative investors is to see what others do not, or to see it earlier. That’s all. This is a skill…I am not convinced, though, of the social worth of such a skill, still less of the wisdom of encouraging society’s brightest and the best to try to perfect it.

This distinction between creative and distributive goes some way to explaining why the financial sector has become so large in relation to GDP – and why those working in it get paid so much. Even when a certain sort of financial activity is purely distributive, the returns to the winning parties are so enormous that the activity is immensely seductive – and the professionals who appear to be responsible for securing these gains are highly sought after and highly rewarded….

And we need to consider the identity of the investors who are making a lower return to make it possible for hedge funds and their like to make a higher return. They are the investors in slow-moving and restricted institutions such as pension funds and insurance companies, or central banks whose market activities are dictated by some objective of public policy, rather than private gain.

Yet there are reasons why we should want such institutions to be this way. Pensioners do not want their pension funds to be run like hedge funds – or their insurance companies, or their central banks. So we have allowed, and even encouraged, a system to develop in which clever people make huge amounts of money out of institutions that, for reasons of public policy, we constrain in a way that allows scope for such profits to be made. Is that clever or what?

Perhaps the greatest problems are caused by the interaction between financial markets and the real economy. There, time horizons are longer, price adjustments are more sluggish, and motivations less single-mindedly selfish. And so much the better – for them and for us. But how are they able to withstand the onrush of supercharged greed that floods out at them from the financial markets? If we think that it is right and proper – and economically advantageous – that some parts of the economic system should not be organised like investment banks, then we should make sure that they are protected from those parts of the system that are organised like investment banks.

Bill Black, in “How the Servant Became a Predator: Finance’s Five Fatal Flaws,” at New Deal 2.0 is far more casutic. He starts by taking a position near and dear to the Japanese, that financial firms should not be very profitable, because high profits mean they were operating at the expense of the “real” economy (of course, the Japanese bank managed to wreck the economy anyhow, but that was partly if not largely the result of rapidly deregulating a very primitive banking sector. And I am not exaggerating in my characterization; recall I consulted to them in the mid-1980s. They had NO concept of cash flow based lending, for instance).

Black’s key arguments:

….the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy…:

• Corporate stock repurchases and grants of stock to officers have exceeded new capital raised by the U.S. capital markets this decade. That means that the capital markets decapitalize the real economy….

• The U.S. real economy suffers from critical shortages of employees with strong mathematical, engineering, and scientific backgrounds. Graduates in these three fields all too frequently choose careers in finance rather than the real economy because the financial sector provides far greater executive compensation….

• The financial sector’s fixation on accounting earnings leads it to pressure U.S manufacturing and service firms to export jobs abroad, to deny capital to firms that are unionized, and to encourage firms to use foreign tax havens to evade paying U.S. taxes.

• It misallocates capital by creating recurrent financial bubbles. Instead of flowing to the places where it will be most useful to the real economy, capital gets directed to the investments that create the greatest fraudulent accounting gains…. Unless there is effective regulation and prosecution, this misallocation creates an epidemic of accounting control fraud that hyper-inflates financial bubbles….

• Because the financial sector cares almost exclusively about high accounting yields and “profits”, it misallocates capital away from firms and entrepreneurs that could best improve the real economy (e.g., by reducing short-term profits through funding the expensive research & development that can produce innovative goods and superior sustainability) and could best reduce poverty and inequality (e.g., through microcredit finance that would put the “Payday lenders” and predatory mortgage lenders out of business).

• It misallocates capital by securing enormous governmental subsidies for financial firms, particularly those that have the greatest political power and would otherwise fail due to incompetence and fraud.

The remarkable thing is that despite the ample evidence of the damage wrought by the financial sector, it has managed to secure even greater rewards for its predation and incompetence. But that is largely a function of media coverage, which has presented a picture flattering to the Obama Administration and and the perps. A Pew Research Center study on the coverage of the crisis concluded:

The gravest economic crisis since the Great Depression has been covered in the media largely from the top down, told primarily from the perspective of the Obama Administration and big business, and reflected the voices and ideas of people in institutions more than those of everyday Americans…

Citizens may be the primary victims of the downturn, but they have not been not the primary actors in the media depiction of it.

A PEJ content analysis of media coverage of the economy during the first half of 2009 also found that the mainstream press focused on a relatively small number of major story lines, mostly generating from two cities, the country’s political and financial capitals.

A companion analysis of a broader array of media using new “meme tracker” technology developed at Cornell University finds that phrases and ideas that reverberated most in the coverage came early on, mostly from government, particularly from the president and the chairman of the Federal Reserve, and that few Republicans in Congress articulated any memes that got much traction.

As the story moved away from Washington—and the news about the economy seemed to improve—the amount of coverage of the economy also dropped off substantially.

So with vested interests firmly in control of spin, is it any wonder that most people have been lulled into complacency, or at worst, sullen resignation?

[Joe Chi Minh]

87. "Wealth creation" was the mantra of Thatcher's mob. Fittingly enough,

she re-wrote Genesis long before she re-wrote the parable of the Good Samaritan. Her guru was Keith Joseph usually referred to as the Mad Monk. Little did the British public know the full extent of the Thatcherites' hydrophobia.

Andrew Rawnsely wrote a hilarious obituary of him in the Guardian. You began scanning it when you saw the usual mealy-mouthed tributes, then right bang in the middle, he wrote something like, "He was a tortured soul. When faced with a unpleasant situation, he would repeatedly bang his head against the nearest solid object."

The Guardian does have some "star" columnists.

[AlphaCentauri]

49. U.S. business inventories fall 1.5 pct in August

http://www.reuters.com/article/companyNewsAndPR/idUSN1312132020091014

[MarketJunkie]

57. More Fun

Something else fun to watch:

http://www.usdebtclock.org/

[DemReadingDU]

74. Yeh, that's a good link

I've got it in my sigline

Welcome!
:hi:

[mullard12ax7]

64. Flatlining market charts = flatlining brainwaves of duped populace

so dumb and minimized they feel helpless to do anything so they pretend they're proud to be stupid. Of course, a full 30% of people really are stupid, NASCAR watching, drunk and gambling fools, regardless of political affiliation but don't mention that or you'll hear the exact same town hall screaming you saw on TV.

Let's send more kids to die in Afghanistan, that'll make it all better! Plus, if we keep giving the criminal firms billions to keep manipulating our used-to-be-free markets the facade of Americanism will be maintained.

Anyone notice the huge number of people who, in the normal course of life, are pissed off, I mean really mad all the time? They are the people who know how criminal everything is. I'm not talking about the duped repukes who buy every lie that comes along, I'm talking about the serious professionals who know that whatever good they are trying to accomplish is being thwarted everywhere they go by greedy, criminal-accepting, brainwashed corporo-bots and sycophants who will gladly stab them in the back to get ahead -- and it works.

America either addresses our criminal culture, firstly by arresting war criminals, or we only get worse. It's a fact that nobody wants to even hear.

[MsLeopard]

85. +1

I completely agree with starting "by arresting war criminals," a long overdue action. :toast: :hi:

Edit: wrong smilie code...

[tclambert]

69. Looks like it's too late to have that Dow 10,000 contest.

At 3:03 EDT it crossed the line. Now will it hang on to close above 10K? Of course, that's only 5,954 in base twelve. It's got to more than double to reach 10,000 base twelve. In other words, yes, I know it is crazy to get excited over a number just because it has a lot of zeroes. But somehow I can't help myself. Brains work funny.

[Tansy_Gold]

75. . . . . . . . . .

And funny brains work. . . . .

:hi:

[CatholicEdHead]

82. Maybe Dow 11,000?

Or how high we think it will go before the bubble pops?

[Dr.Phool]

76. Where was Michael Steele when I was running a locomotive?

http://tpmlivewire.talkingpointsmemo.com/2009/10/steele-on-bipartisanship-can-we-have-a-rodney-king-moment.php?ref=fpblg

Later in the interview, Steele said he is indeed obstructing health care reform, calling himself the "cow on the tracks." The Fox anchor had noted that Democrats are saying the health care reform train has "already left the station" and "Republicans better jump on board."

"Well, I'm the cow on the tracks. You're gonna have to stop that train to get this cow off the track to move forward," Steele said. "They told us in June that there would be a health care bill on the president's desk on Aug. 1. I think our efforts helped change that dynamic, and our efforts this fall will continue to change that dynamic.
-------------------------------------------

It ain't pretty Mike!
http://www.videosift.com/video/TRAIN-versus-COW

[Dr.Phool]

78. This one's even better!

http://www.dailykos.com/story/2009/10/14/793177/-Michael-Steele:-Im-the-cow-on-the-tracks

[ozymandius]

90. OMG! Mercifully removed from the gene pool.

I feel so guilty laughing about "that dumb fucker."

[ozymandius]

89. cow-on-the-tracks = steak

n/t