STOCK MARKET WATCH, Thursday May 1

[ozymandius]

Source: du

STOCK MARKET WATCH, Thursday May 1, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 265
DAYS SINCE DEMOCRACY DIED (12/12/00) 2657 DAYS
WHERE'S OSAMA BIN-LADEN? 2382 DAYS
DAYS SINCE ENRON COLLAPSE = 2673
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

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

---

AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON April 30, 2008

Dow... 12,820.13 -11.81 (-0.09%)
Nasdaq... 2,412.80 -13.30 (-0.55%)
S&P 500... 1,385.59 -5.35 (-0.38%)
Gold future... 865.00 -11.80 (-1.36%)
30-Year Bond 4.50% -0.06 (-1.36%)
10-Yr Bond... 3.76% -0.07 (-1.73%)






GOLD,EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

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

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

[ozymandius]

1. Market WrapUp: An Inconvenient Adjustment:

The Unofficial Official Recession
BY CHRIS PUPLAVA

The advanced estimate from the Bureau of Economic Analysis showed Q1 real GDP coming in at a 0.60% annualized rate, slightly higher than the 0.58% annualized rate seen in Q4 2007. With real GDP still in expansionary territory, the U.S. economy has not entered an “official” recession, which is defined as two consecutive quarters of negative real GDP growth.

Not so fast! Nominal GDP is adjusted by the GDP deflator to measure real GDP growth with the inflation component removed to measure the increase in economic output and not an increase in the level of prices. However, one must take a metric ton, not a grain of salt, when looking at the GDP deflator. The GDP deflator has been consistently below the stated inflation rate as measured by the headline CPI numbers, with a lower GDP deflator leading to a higher real GDP number.

Call my a cynic but I can’t help but notice the CONVENIENT deviation between the headline CPI inflation rate and the GDP deflator during periods of economic weakness. Remember, a lower GDP deflator leads to a higher real GDP number. Well, it just so happens that the deviation between headline CPI and the GDP deflator often peaks during economic recessions so that the reported real GDP numbers are higher than what they would be if nominal GDP were to be deflated by the headline CPI.

.....

Harper’s Magazine had an excellent article written by Kevin Phillips highlighting all the governmental changes made to how the CPI is calculated in an article entitled, “Hard numbers: The economy is worse than you know.”

…Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3-4 percent range).

Let me stipulate: The deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms.

The political blame for the slow, piecemeal distortion is bipartisan — both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt and a casino-like financial sector. To see how, we must revisit 40 years of economic and statistical dissembling.

.....

Clearly the economic picture has deteriorated for the average American Consumer. Anyone claiming that the U.S. is currently not in a recession is in pure denial as we are already unofficially in an official recession. The announcement of an official recession is irrelevant at this point as the deteriorating economy will make it abundantly clear to all, regardless of what inflation measure is used to deflate nominal GDP. The consumer is under severe stress and a plummeting labor market will only weigh further on consumption as retail sales are strongly correlated with changes in employment.

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

[Demeter]

8. DailyReckoning.com from April 24th

There is so much ‘noise’ in the financial system, it is hard to think. The papers are full of distractions and absurdities. You can find almost any point-of-view you want. Some argue that central banks are winning...that the stock market hasn’t gone down because it is getting ready to go up...and soon, the housing market will bottom out too.

“Fears of bank failures recede,” says a headline in the Financial Times today.

Others argue that the worst is still ahead...that the stock market will melt down...that housing prices will fall another 20%...and that the whole world will go into a monumental downturn.

“Housing slump may exceed Depression,” says a San Diego paper.

We take a middle view – that financial assets (including paper money), the financial industry, the credit cycle, the dollar-standard monetary system and the U.S.A. itself are in an historic decline...while emerging markets, gold and commodities are in a once-in-a-lifetime upswing.

We’ve heard about the panic that the doubling of wheat and rice prices is causing in China, India and other Asian countries. But now, reports the Washington Times , this panic is beginning to spill over to Americans. The article goes on to point out that bulk grocery stores, such as Costco, are having to put a limit on how much rice customers in certain states can buy. Americans have gotten a whiff of the high prices and fear that the shortages will spread from overseas, and have begun hoarding necessities such as oil, rice and flour.

“Commodity prices across the board are at levels not experienced in many of our lifetimes,” said CFTC Chairman Walter Lukken. “These price levels, along with record energy costs, have put a strain on consumers as well as many producers and commercial participants that utilize the futures markets to manage risks.”

Resource Trader Alert ’s Kevin Kerr assets that “this profit parade isn’t going to end anytime soon.” But let’s take a look at the headlines and then we’ll come back to our analysis.

Is the housing market getting worse?... in Nevada, the local press tells us that many erstwhile homeowners are not being very considerate to the new owners. They’re wrecking the houses before they leave, says the paper, even putting cement down the plumbing. Of course, they’re upset, continues the report, because they feel they’ve been roughly handled by the mortgage industry...Meanwhile, in Chicago, Jesse Jackson is in the news; he thinks borrowers have been roughly handled by the mortgage industry too. He’s called for a moratorium on foreclosures. And over the on East Coast, the Washington Post says lenders are “being swamped” by delinquent loans. Partly because of the risk of bad payers, mortgage approvals have fallen to a 10-year low. But not all the delinquents are homeowners. Many former students, who took out loans to get through college, are finding it hard to pay the money back. Lenders are tightening up on the scholars too. And the Bush Administration is so alarmed at the thought of all the college keg parties that might be canceled; it has proposed to buy student loans from the lenders.

Where will it get the money, you ask? From taxpayers, of course. Who are the taxpayers? The parents of the students, obviously. Then, why not let the parents keep their money and pay for their own children’s education? Oh, stop being a silly old fuddy duddy...

[Demeter]

10. DailyReckoning.com from April 30

As near as we can figure, most investors think the worst is over. After a correction, stocks are going back up. The dollar too. Gold, meanwhile, is going down. Bernanke, Bush and the whole company of angels and archangels who watch over our economy and our money are winning, they believe.

But the more they win...the more you lose, dear reader. Because there are mistakes that need to be corrected. There are errors that need to be punished. Truth needs to be discovered.

And the longer the correction is delayed...the more we live in darkness and error, and the more it costs to fix things. You don’t have to be an economist to figure this out. It’s just the way the world works.

... reminding ourselves what money really is... When a bank makes an electronic transfer, electrons are the only thing that crosses a street. But those electrons represent pieces of green paper...which, in turn, represent wealth. And what is wealth? It is limited resources...the potential to take up some of the world’s coal, iron, plastic...anything from a ton of wheat to a brand new Mercedes...to some working man’s time. The problem, fundamentally, is that the credit expansion of the last 25 years gave too many people too many claims against those limited resources. Then, when they went to exercise those claims – against stock market earnings in the ’90s...then against houses in the early ’00s...and now against oil, rice and gold – prices rose. The rising prices sent a phony signal. They convinced investors that there was more demand for dotcom stocks and houses than there really was. And today, they’re signaling an outsize demand for commodities and gold. As money pours into the bubble sector...more and more resources – time, capital, things – are misdirected away from things people really want and need and into the bubble. Eventually, the bubble pops...losses are taken...and rebuilding can begin a firmer foundation.

‘But wait,’ we anticipate your question, ‘are you saying that commodities are going to crash too?’

Yes...of course. Every farmer in the world is working hard to make it happen. Lured by high prices, they are bound to overproduce. They always do. Over-production is, by definition, a mistake. It will need to be corrected, eventually...just as overbuilding of new houses is being corrected...and just as overinvestment in NASDAQ dotcoms needed to be corrected.

[TalkingDog]

33. A conspiracy of individuals

If a series of unrelated and unconnected people know something is, at the very least, questionable behaviour and each one chooses to put self-interests above what is held as the common good, it becomes a conspiracy of individuals.

No back room discussions, no wink and a nod. Just a failure of society to teach about the social contract that must be maintained if we want to avoid this accumulation of error. Entropy, as someone here is fond of suggesting.


That said, I offer a reprise to yesterday's Cowboy theme that might underscore this idea very nicely:

The Amazing Rhythm Aces: King of the Cowboys


I used to watch you,
when I was little.
The games I played
I learned from you.
I kept dreaming,
you kept playing.
When I woke, you were 62

Say goodbye to the
King of the Cowboys.
First and last of a
dying breed.
Say goodbye to the
King of the Cowboys
chained to a life
he doesn't lead.

You told the truth.
You were always ready.
Whether with your gun
or with your hand.
It was lies
but I never knew it.
You taught me how to
act like a man.

Say goodbye to the
King of the Cowboys.
First and last of a
dying breed.
Say goodbye to the
King of the Cowboys
chained to a life
he doesn't lead.

Say goodbye to the
King of the Cowboys.
First and last of a
dying breed.
Say goodbye to the
King of the Cowboys
chained to a life
he doesn't lead.

[Demeter]

50. More Cowboy / Country Music? You KNOW What the Answer to THAT Is, Don't You?

Desperado, why don't you come to your senses?
You been out ridin' fences for so long now
Oh, you're a hard one
I know that you got your reasons
These things that are pleasin' you
Can hurt you somehow

Don' you draw the queen of diamonds, boy
Shell beat you if she's able
You know the queen of hearts is always your best bet

Now it seems to me, some fine things
Have been laid upon your table
But you only want the ones that you can't get

Desperado, oh, you ain't gettin' no younger
Your pain and your hunger, they're drivin' you home
And freedom, oh freedom well, that's just some people talkin'
Your prison is walking through this world all alone

Don't your feet get cold in the winter time?
The sky won't snow and the sun won't shine
It's hard to tell the night time from the day
You're losin' all your highs and lows
Ain't it funny how the feeling goes away?

Desperado, why don't you come to your senses?
Come down from your fences, open the gate
It may be rainin', but there's a rainbow above you
You better let somebody love you, before its too late!

http://www.geocities.com/Heartland/Prairie/4751/desperado.mid

[TalkingDog]

65. Other than this...I got nothin'

:evilgrin:

Kid Rock : "Cowboy" (made family friendly as per SMW suggestions)

Cowboy...Cowboy

Well I'm packing up my game and I'm a head out west
Where real women come equipped with scripts and fake breasts
Find a nest in the hills, chill like Flynt
Buy an old drop top, find a spot to pimp
And I'll Kid Rock it up and down your block
With a bottle of scotch and watch lots of (something that rhymes with watch)
Buy a yacht with a flag sayin' "Chilling the Most"
Then rock that b(oat) up and down the coast
Give a toast to the sun, drink with the stars
Get thrown in the mix and tossed out of bars
Then to Tijuana... I wanna roam
Find Motown and tell the fools to come back home
Start an escort service, for all the right reasons
And set up shop at the top of four seasons
Kid Rock and I'm the real McCoy
And I'm headin' out west sucker...because I wanna be a

Cowboy baby

With the top let back and the sunshine shining

Cowboy baby

West coast chilling with the Boone's Wine

I wanna be a Cowboy baby

Riding at night cause I sleep all day

Cowboy baby

I can smell a pig from a mile away

I bet you'll hear my whistle blowing when my train rolls in
It goes (whistle) like dust in the wind
Stoned pimp, stoned freak, stoned out of my mind
I once was lost, but now I'm just blind
Palm trees and weeds, scabbed knees and rice
Get a map to the stars, find Heidi Fleiss
And if the price is right I'm gonna make my bid boy
And let Cali-for-ny-aye know why they call me

Cowboy baby

With the top let back and the sunshine shining

Cowboy baby

West coast chilling with the Boone's Wine

I wanna be a Cowboy baby

Riding at night cause I sleep all day

Cowboy baby

I can smell a pig from a mile away

Yeah...Kid Rock...you can call me Tex
Rollin sunset woman with a bottle of Becks
Seen a slimy in a vette, rolled down my glass
And said, Yeah this (we'll just delete that) fits right in your (volkswagon beetle)
No kidding, gun slinging, spurs hitting the floor
Call me Hoss, I'm the Boss, with the sauce in the horse
No remorse for the sheriff, in his eye I ain't right
I'm gonna paint his town red, and paint his wife white HUH
Cause chaos, rock like Amadeus
Find West Coast (friends) for my Detroit players
Mack like mayors, ball like Lakers
They told us to leave, but bet they can't make us
Why they wanna pick on me...lock me up and snort away my key
I ain't no G, I'm just a regular failure
I ain't straight outta Compton, I'm straight out the trailer
Cuss like a sailor...drink like a Mick
My only words of wisdom are just, Radio Edit
I'm flicking my Bic up and down that coast and
Keep on trucking until it falls in the ocean

Cowboy

With the top let back and the sunshine shining

Cowboy

Spend all my time at Hollywood and Vine

Cowboy

Riding at night cause I sleep all day

Cowboy

I can smell a pig from a mile away

Cowboy

With the top let back and the sunshine shining

Cowboy

With the top let back and the sunshine shining

Cowboy

Hollywood and Vine

[Hugin]

67. Ahh, music to my ears, Demeter...

I've been listening to that song off and on since I dug through my cassette tapes and broke out the Linda Ronstadt
a couple of weeks ago.

Of course, the Eagles' version is excellent, too.

:)

[AnneD]

69. Good Themes Today...

Looking at and reading the theme for the day is a bit like getting an email postcard. Thanks-I'll be mentally humming the Willie Nelson version of Desperado.

[kineneb]

77. had to listen to it

have the Eagles Live CD....yup.

[ozymandius]

2. Today's Reports (and it's a doozy of a handful)

Auto Sales Apr
Briefing.com 5.1M
Consensus NA
Prior 4.9M

00:00 Truck Sales Apr
Briefing.com 6.3M
Consensus NA
Prior 6.2M

08:30 Initial Claims 04/26
Briefing.com 358k
Consensus 360K
Prior 342K

08:30 Personal Income Mar
Briefing.com 0.4%
Consensus 0.4%
Prior 0.5%

08:30 Personal Spending Mar
Briefing.com 0.3%
Consensus 0.2%
Prior 0.1%

08:30 PCE Core Inflation Mar
Briefing.com 0.2%
Consensus 0.1%
Prior 0.1%

10:00 Construction Spending Mar
Briefing.com -1.0%
Consensus -0.7%
Prior -0.3%

10:00 ISM Index Apr
Briefing.com 49.0
Consensus 48.0
Prior 48.6

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

[UpInArms]

29. Initial Claims in at 380,000 - last wk rev'd up 3k

01. U.S. 4-wk. avg continuing claims up 16,750 to 2.98 mln
8:30 AM ET, May 01, 2008

02. U.S. continuing jobless claims up 74,000 to 3.02 million
8:30 AM ET, May 01, 2008

03. U.S. 4-wk. avg. initial jobless claims down 6,500 to 363,750
8:30 AM ET, May 01, 2008

04. U.S. weekly initial jobless claims rise 35,000 to 380,000
8:30 AM ET, May 01, 2008

05. U.S. March consumer prices rise 0.3%
8:30 AM ET, May 01, 2008

06. U.S. March personal savings rate falls to 0.2%
8:30 AM ET, May 01, 2008

07. U.S. March real disposable incomes flat
8:30 AM ET, May 01, 2008

08. U.S. March nominal incomes up 0.3% as expected
8:30 AM ET, May 01, 2008

09. U.S. March core consumer inflation rises 0.2%
8:30 AM ET, May 01, 2008

10. U.S. March real consumer spending rises 0.1%
8:30 AM ET, May 01, 2008

[UpInArms]

38. Income gains eroded by inflation in March

http://www.marketwatch.com/news/story/income-gains-eroded-inflation-march/story.aspx?guid=%7B2A365B33%2D49FD%2D42DD%2D88EC%2DC18349BC09FB%7D

WASHINGTON (MarketWatch) -- Higher prices took away all the income gains U.S. households received in March, the Commerce Department estimated Thursday.

Consumer prices rose 0.3% during the month, matching the 0.3% rise in incomes that was expected by economists surveyed by MarketWatch. See Economic Calendar.

Real disposable incomes were unchanged in March after accounting for taxes and inflation. Real disposable incomes are up 0.9% in the past year. Read the full report.

Consumer spending increased 0.4%, or just 0.1% after adjusting for rising prices. Economists expected a 0.3% rise in spending.

The report on personal incomes fleshes out monthly details contained in the quarterly report on gross domestic product released on Wednesday. That report showed consumer spending rose at the slowest pace in seven years during the first three months of the year. See full story.

Inflation accelerated during March, pushed by higher prices for services and nondurable goods, such as food and energy. Core prices -- which exclude food and energy -- rose 0.2%, a tick higher than expected.

For the past year, consumer prices have risen 3.2%, the slowest year-over-year gain since October. Core prices are up 2.1%, just ahead of the Federal Reserve's target zone.

...more...

[UpInArms]

46. Construction spending falls 1.1% - April ISM @ 48.6%

01. U.S. March construction spending falls 1.1%
10:02 AM ET, May 01, 2008

03. U.S. April ISM 48.6% vs. 48.0% expected
10:01 AM ET, May 01, 2008

[UpInArms]

80. GM U.S. sales down 22.7 pct

http://www.reuters.com/article/businessNews/idUSWNAS128120080501?feedType=RSS&feedName=businessNews

DETROIT (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research) on Thursday reported a 22.7 percent fall in April U.S. auto sales on an adjusted basis, led by a 32 percent decline in truck sales.

GM's overall sales fell to 260,922 vehicles in April from 311,687 in the same month a year earlier. The percentage fall was adjusted to reflect two more selling days last month compared with April 2007.

Inventory fell to about 824,000 vehicles at the end of April, down about 206,000 vehicles from a year earlier to the lowest level since September 2005.

...more...

[UpInArms]

83. April auto sales slump as truck sales plunge

http://news.yahoo.com/s/nm/20080501/bs_nm/usa_autosales_dc

DETROIT (Reuters) - U.S. auto sales fell to their lowest annual rate in more than 15 years in April as weak consumer confidence and rising gas prices hit the industry's most profitable vehicles hardest.

Sales at Detroit's Big 3 of General Motors Corp (GM.N), Ford Motor Co (F.N) and Chrysler LLC (CBS.UL) -- with their truck-heavy lineups -- were worse than expected, according to data released on Thursday. GM sales fell 23 percent, Ford 19 percent, and Chrysler nearly 30 percent.

Asian competitors also struggled, with Toyota Motor Corp (7203.T)(TM.N) posting a 5 percent sales decline, and Nissan Motor Co (7201.T)(NSANY.O) sales dropping almost 2 percent.

"No one is immune to the weakness," said Jesse Toprak, analyst at Edmunds.com, an auto industry tracking firm.

Auto sales represent one of the first monthly snapshots of U.S. consumer demand, and investors have looked to the reports for evidence of whether the U.S. economy has slipped further toward recession since the start of the year.

The leading automakers said preliminary data suggested industrywide sales fell to about 14.7 million units on an annualized basis in April, which would mark the weakest result since the early 1990s.

...more...

[UpInArms]

81. Consumer spending up mainly because of sharp price increases

http://news.yahoo.com/s/ap/20080501/ap_on_bi_go_ec_fi/economy;_ylt=AuDpQdc2T05rBgaZEU9jaWab.HQA

WASHINGTON - Don't be fooled by a larger-than-expected increase in consumer spending. People aren't buying more — they're just paying more for what they buy.

That is raising doubts about whether the 130 million stimulus payments the government began sending out this week will be enough to lift consumers' sagging spirits.

The Commerce Department reported Thursday that consumer spending was up 0.4 percent, double the increase economists had forecast. However, once inflation was removed, spending edged up a much slower 0.1 percent.

The March reading was the fourth straight lackluster performance and did nothing to alleviate worries that consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, reflecting an economy beset by multiple problems.

Rising food costs, soaring energy prices and falling employment have pushed consumer confidence to its lowest levels in five years. Incomes in March rose a weak 0.3, but after removing inflation, after-tax incomes were flat.

...more...

[ozymandius]

3. Oil rises as dollar drops after Fed interest rate cut (Econ101 lesson review in ten words)

SINGAPORE - Oil prices rose in Asian trading Thursday as the dollar weakened after the U.S. central bank cut its key interest rate.

The U.S. Federal Reserve said Wednesday it would cut the federal funds rate by a quarter percentage point to 2 percent. Early in Asia, the dollar lost ground against both the euro and yen, although it began to stabilize and strengthen later in the day.

"The U.S. (Federal Open Market Committee) meeting and the softer U.S. dollar helped the oil price recover some ground," said David Moore, commodity strategist with the Commonwealth Bank of Australia in Sydney.

Light, sweet crude for June delivery added 79 cents to $114.25 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon Thursday in Singapore.

The contract fell $2.17 Wednesday to settle at $113.46 a barrel after the U.S. government reported that crude inventories rose more than expected last week.

.....

In its weekly inventory report, the Energy Department's Energy Information Administration said crude oil inventories rose 3.8 million barrels, more than double the increase analysts surveyed by energy research firm Platts had expected.

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

[UpInArms]

26. EXXON MOBIL'S QUARTERLY NET NEARS $11 BILLION ON HEFTIER EARNINGS FROM OIL AND GAS

http://www.marketwatch.com/news/story/exxon-mobil-tap-30-earnings/story.aspx?guid=%7B47568015%2D8652%2D402A%2DABC0%2DE87FC27C5763%7D

NEW YORK (MarketWatch) -- Exxon Mobil's profit is expected to jump as much as 30% when it reports its first-quarter earnings on Thursday as the oil giant joins the crowded stage of $120 oil, U.S. retail gasoline prices approaching $4 a gallon and flare-ups in the geopolitical scene from Nigeria to the Persian Gulf.

Wrapping up the first three months in world history with oil at $100 a barrel and rising fast, Wall Street expects Exxon Mobil (XOM) to boost net income handily to $2.12 a share from $1.62 a share posted in the year-ago quarter.

Analysts' most bullish first-quarter profit predictions come in near $12 billion for Exxon Mobil, which remains the largest corporation in the world by market cap and yearly profit. In the year-ago period, Exxon reported net income of $9.3 billion.

Meanwhile, No. 2 U.S. integrated oil giant Chevron (CVX: 96.15, +1.41, +1.5%) is on tap to deliver earnings of $2.39 share, compared with $2.18 a share in the year-ago period.

The two oil majors will reign over a flurry of energy sector profit updates in recent days, with ConocoPhillips (COP: 86.15, +0.70, +0.8%) and Occidental Petroleum (OXY 83.21, -0.04, 0.0%) powering past Wall Street estimates.

With oil prices spiking and gasoline prices up but lagging, conditions continued to favor the exploration and production side of the business in the three months ended March 31.

...more...

[Demeter]

60. Gouged Out: The Consumer and the Gas Station Operator

ONE PICTURE IS WORTH A THOUSAND WORDS!
http://discuss.epluribusmedia.net/gouged_out

[ozymandius]

4. Costs, weaker economy drive Las Vegas Sands to 1Q net loss

LAS VEGAS - Las Vegas Sands Corp. plans to win back gamblers in Macau and is banking on strong growth from its new resort in Las Vegas after intense competition abroad and dwindling tourism at home led the casino giant to an $11.2 million loss in the first quarter.

The casino company run by billionaire Sheldon Adelson saw its shares fall nearly 9 percent in after-hours trading Wednesday on word of the quarterly loss, which equaled 3 cents per share, compared with a profit of $90.9 million, or 26 cents per share, a year earlier.

Excluding items such as losses on sold assets and expenses related to opening new casinos, adjusted earnings totaled $23.6 million, or 7 cents a share for the period ended March 31. That was down from $114.6 million, or 32 cents per share, a year earlier.

.....

On a conference call with analysts, Weidner said the company "paid the price" in the first quarter for an earlier decision to increase inventory for Las Vegas tourists rather than conventioneers in 2008.

Tourism traffic in Las Vegas has suffered in a weakening economy, and the company saw "lower occupancy than we planned," Weidner said.

http://news.yahoo.com/s/ap/20080501/ap_on_bi_ge/earns_las_vegas_sands

[ozymandius]

5. Consumer may get benefits from a Fed rate pause

WASHINGTON - While the Federal Reserve's aggressive drive to lower interest rates appears to be over, there could be benefits for consumers in other places — like some relief from soaring gasoline and food costs.

"With the Fed on hold and the dollar firming, oil and gasoline and food prices may all top out some time in the next few months," said Mark Zandi, chief economist at Moody's Economy.com.

On Wednesday, the Fed cut interest rates for a seventh straight time. But the reduction was a much smaller quarter-point move — not the half-point and three-fourths-point moves of earlier this year. It pushed the federal funds rate down to 2 percent.

.....

As the dollar falls, that tends to drive the cost of oil higher because oil is priced in dollars and producers start demanding higher prices to compensate for a weaker dollar. Those forces are also at work in terms of driving up other globally trade commodities such as metals and food including wheat and other grains.

With the Fed lowering the prospects for further rate cuts, the dollar can be expected to stabilize and perhaps rebound from the record lows it had hit in recent weeks against the euro and other currencies. That should help various commodities including oil and food to backtrack from their recent record highs, a process that may have already started.

http://news.yahoo.com/s/ap/20080501/ap_on_bi_ge/fed_interest_rates

[AnneD]

34. Morning Marketeers......

:donut: and lurkers. Happy Mayday-the International Workers holiday. And speaking of May Day, I don't think the consumer can take any more of these 'helpful' FED rate cuts. Finally, they are signaling something good for a change. That's probably why the markets reacted the way they did. The FED's have been acting like Doc administering chemo to a cancer patient. The chemo killed the patient in the end but by God the patient died cancer free. That may sound crazy but if I had a nickle for every patient that died cancer free-I wouldn't have to wear scrubs ever again.

The 'Recession' and yes it is a recession is widening and deepening. Businesses that aren't housing or finance related are taking hits now and the only folks doing well are the debt collectors. I heard that the auto leases will reset in June and July so that should be another event. A Nursing instructor once told me that a human can only stand so many shocks to the system and that once you start getting a cascade downward-it's impossible to reverse the course. The death certificate may read cause of death-respiratory infection (cold), but the immune system weakened by chemo, diabetes, and heart disease assisted.

We've had increased unemployment and underemployment for years now (chemo) but we were getting B12 shots (easy credit) so we looked healthy enough. We caught a cold (inflation) and it's about to put us in the ground (depression).

I hope those of you on the SWT had enough leeway to prepare as best you can in your circumstances. I sleep better each night knowing that I have done what I could to prepare. Hubby and I may not have much by some folks standards but we are relatively healthy, have food clothing and shelter, and a tad set aside for a rainy day. We have a great support network of friends and family and are able to help our friends in need. I figure that makes us very rich indeed. I hope this holiday finds you well and counting your REAL wealth,

Happy hunting and watch out for the bears.

[TalkingDog]

42. Or as in my mother's case.

The official cause of death was a "massive stroke". Of course the lung cancer from years of smoking and working in a fiberglass textile mill had metastasized and traveled to her brain. Over 50% of lung cancers spread and develop into brain cancers which is why the John Hopkins protocol suggests prophylactic radiation to the head.

Of course, my mother wasn't being treated at John Hopkins.....

Still, the official cause of death wasn't lung cancer, brain cancer or outmoded protocols.

Chalk one up for the cigarette industry. (Got nothing against tobacco, it's a perfectly fine medicinal and insecticidal plant)

When you get to avoid harsh and practical realities allowed by the wiggle room of parsing terminology and technicalities it can help create a massive denial.

I might be flat-footed and stubborn. And reality might choose to beat the hell out of me on a daily basis. But I see that snake in the grass. And I know a hungry wolf is chasing it.

Pity the people who have chosen only to look at the Sun and become blind.

[AnneD]

43. Amen Sister

Amen...

[Demeter]

51. My Mother, Too

And she still wanted to smoke until the very end.

[AnneD]

68. And speaking of health.....

I saw Elizabeth Edwards. It was on the computer so not really good quality, but to my Nurse eye-she didn't look good. I think she might be turning a corner sooner than we might wish.

[Tansy_Gold]

78. My husband, too

Official cause of death, pneumonia. But the lung cancer that had spread to spine and liver, the chemo, the radiation, the paralysis -- it all led to pneumonia.

Now I'm really depressed, as if the horrible job interview yesterday hadn't done enough to lower my spirits.


peace to you all


Tansy Gold

[TalkingDog]

48. May celebrations.

The heathens I know have a more....earthy way to greet the Merry Month of May.

The rhyme reads:

First of May
First of May
Outdoor .......
Starts today!


Today the young gentlemen will plant the May Pole into the warm, moist fertile soil in honor of the Spring Rites.

The young ladies will adorn it with flowers, tie ribbons at the top and in a tradition that is as old as time, the young couples will circle the Pole. Man and woman facing each other in turn and each taking a ribbon, they dance. Twining in and out, each fair sex moving against the smiling circle of the other.

Historical documents suggest (including notations by Catholic clergy) that May was a month celebrating fertility in all it's forms. Clergy would grumble and scowl about young couples out "furrowing the fields" and no censure was brought on them by the villagers who were probably having fond May Day reminisces themselves.

Now interestingly, this seems to lead to a lot of good luck being attached to June weddings. I'm not sure what causes that. Probably something in the water.

[AnneD]

52. And if you look at the May Pole

and the way the ribbons are woven when the dance is complete-it looks remarkably like DNA-but that's just the scientist in me. Many a June wedding had a May beginning-no doubt about that. And probably an early spring birth-the chance for greatest survival of the infant. Rural life gives on a more pragmatic, less prudish outlook on these things. Thanks for the chuckle.

[Dr.Phool]

57. Beautiful ouside day.

I'm gonna fire up the hawg, ride over to State Farm and give them their extortion payments, make the mortgage payment, and come back and lay in the pool. The water's 88 degrees (solar panel heated).

I'll spend some quality time with my dog. We had to have his big sister put down last night.:cry:

[Demeter]

64. Condolences to You and Dog, Doc.

Been there, done that, don't ever want to do it again.

[TalkingDog]

66. So sorry. Love your boy for me. They grieve too. n/t

[AnneD]

70. So sorry to hear it.....

It's painful losing a companion and playmate. They know and have a sense of these things. I wonder how much undersanding there is-but they have a sense.:grouphug:

[Mojorabbit]

76. Yes

this is my hubby's favorite pagan holiday. :) I am preparing the feast for tonight.

[antigop]

53. "the only folks doing well are the debt collectors."....and locksmiths

A friend said that NPR interviewed a locksmith (I think it was Florida) --- said business was booming, but he felt sorry for those who have lost their homes.

[ozymandius]

6. Starbucks to slash U.S. store openings

LOS ANGELES (Reuters) - Starbucks Corp said on Wednesday it would slash U.S. coffee store openings through 2011 to cut costs in the face of weak U.S. sales and to focus more on growth abroad.

The company, which warned last week of the worst economic environment in its history, said U.S. customer visits had slowed but estimated growth in international business profit margins over the next few years.

Investors and analysts have been pushing for Starbucks to cut plans for U.S. expansion.

.....

On Wednesday, the coffee shop chain posted fiscal second-quarter net income of $108.7 million, or 15 cents per share, compared with $150.8 million, or 19 cents per share, a year earlier.

http://news.yahoo.com/s/nm/20080430/bs_nm/starbucks_dc

[UpInArms]

21. Fewer latte runs sends Starbucks 2Q profit down 28 percent

http://news.yahoo.com/s/ap/20080501/ap_on_bi_ge/earns_starbucks

SEATTLE - Starbucks Corp. is dialing back expectations for its U.S. stores in light of economic uncertainty but has a three-year plan for snazzy new drinks and future profit growth fueled by aggressive international expansion.

As expected, the company said Wednesday its fiscal second-quarter profit sank 28 percent as U.S. consumers responded to rising food and gas prices by making fewer latte runs.

The coffee purveyor slashed 30 additional store openings from its already-scaled-back plan for 2008 and said it will open fewer than 400 stores per year in 2009 through 2011.

International openings will increase at a far faster clip, though, with 975 this year and a projected 1,300 in 2011. Starbucks expects to have 21,500 stores worldwide by the end of fiscal 2011.

Starbucks' financial goals for the coming years reflect worries about a protracted U.S. economic downturn and rely on international stores — particularly ones run by licensed partners rather than Starbucks itself — to drive profit.

...more...

[Tansy_Gold]

31. Handwriting on the wall?

If Starbucks is "focus(ing) more on growth abroad," doesn't that suggest that the economies "abroad" are healthier and, indeed, growing, while ours is not?

Just a thought.



Tansy Gold

[TalkingDog]

35. Not a better economy, just a bigger untapped market.

Even in a bad economy new businesses start and thrive.

There might still be enough cache to the name overseas or enough ex-pats willing to shell out for a taste of home (as I did once in England and a happened upon KFC) to expand into new territory, however slowly that happens.

The current marketing paradigm is grow or die.

Any farmer or any forest can tell you that won't work. There is a natural cycle to land and growth. It's more along the lines of: fertile and fallow. Produce, then rest, retrench and produce again. Not as profitable in the short term, but done with consideration it is, at the very least, sustainable.

My prediction is that the Marine Corps motto might come into vogue soon: Adapt and Overcome.

[ozymandius]

7. Fed needs tough chief in Paul Volcker mould (editorial)

BTW - This is an editorial that I can really embrace.

What got us into our financial pickle? Most academics are prisoners of the Efficient Market Hypothesis that assumes man acts rationally and efficiently in economic matters in ways that can be caught in elegant mathematical models. Ben Bernanke, chairman of the Federal Reserve, shares this view completely, and Alan Greenspan, his predecessor, when it suits him. In such a convenient world, there can be no bubbles and no crashes. A related belief is that sensible, disciplined control of money supply will drive away all ills, including the madness of crowds, and, therefore, a sensible central banker is all powerful.

Unfortunately, both concepts are complete illusions. First, we live in a behavioural jungle where markets can crash 23 per cent in a day without any defining event, price/earnings ratios in Japan can rise to 65 times and the value of land under the Emperor's palace really can equal California's. Second, central bankers do not always do the right thing, often because that would involve great career risk. Being slapped by a Senate subcommittee for saying "irrational exuberance" is bad enough. Taking away punch bowls and risking being seen as holding the pin when the bubble pops is even more dangerous stuff.

.....

Both Mr Bernanke and Mr Greenspan have trouble seeing bubbles. When Mr Bernanke describes an 80-year US housing bubble as "merely reflecting a strong US economy", we might wonder about his statisticians or his competence. But, really, it is about belief. He is not looking for bubbles to exist in his theoretical world.

.....

Finally, when shall we stop appointing as Fed chairmen either academic economists - out of touch with the messy real world? - or lightweight commercial economists and find someone with solid banking experience? Would a banker with even a hint of John Pierpont Morgan in him have allowed such a sad deterioration of credit and banking standards? Where was Mr Volcker when we needed him? Fired for doing unpleasant but necessary things. So perhaps we get the Fed we deserve. Let me end with Mr Greenspan's full and contrite repentance: "I have no regrets on any of the Federal Reserve's policies that we initiated back then."

http://news.yahoo.com/s/ft/20080429/bs_ft/fto042920081601541458

[Ghost Dog]

9. Major financial marketplaces open on International Workers' Day

can be found in USA, UK, Japan, Australia.

Also, Canada, NZ.

(All quite flat, except the Nikkei down 0.6%.)

Currency markets, of course, in effect, never close...

That's all, folks. :hi:

http://flag.blackened.net/daver/anarchism/mayday.html
http://en.wikipedia.org/wiki/International_Workers%27_Day

[AnneD]

71. Ghost Dog...

Happy May Day...I think it is a bigger holiday in Europe than here.:hi:

[Demeter]

11. Investors Retreat From Mutual Funds

http://www.nakedcapitalism.com/2008/04/investors-retreat-from-mutual-funds.html


The Financial Times reports that mutual funds got off to a very bad start this year, with 24 of the 25 biggest managers seeing a decline in funds. Note first that the article is not discussing individual funds (e.g. Magellean) but fund families (e.g. Fidelity).

Note second that the fall isn't simply the result of declines in market values, but actual withdrawal of funds, but this apperas to be largely the result of investors moving heavily into cash. The article suggests that this is due to a loss of investor confidence. Another factor that may have contributed around the margin is a rise in withdrawals from 401 (k) plans (and presumably also IRA rollovers), a sign of rising consumer stress. But it does not yet appear that raiding capital to support consumption is a significant component of this decline....

...Retail and institutional investors pulled $100bn from US, European and Japanese equity funds during the quarter, according to Strategic Insight.

The trend is accelerating a shift in the money management industry, as investors move away from equity funds, which have been the industry’s profit mainstay, towards either low-margin options such as short-term cash and indexed funds, or high- margin alternative investments such as hedge funds, private equity and hard assets.

Long-term assets do not include money market funds, which have seen big inflows. Several money managers, such as Fidelity, have large money market funds which are offsetting their outflows, although money market funds are low-margin products and do not provide long-term investor loyalty. Fidelity had a drop of long-term assets of close to 10 per cent for the quarter, as investors continued to pull funds from the former market leader despite a lift in performance in its funds.

[DemReadingDU]

12. National Century trial Columbus Ohio - convicted executive wants new trial

4/30/08 New evidence should lead to new trial, convicted National Century exec says

A Columbus-area executive convicted of involvement in an alleged $3 billion fraud is asking he get set free or at least be given a new trial based on evidence he says federal prosecutors withheld.

James Dierker, a former marketing executive found guilty of wire fraud in March, filed a motion Tuesday for acquittal and new trial based on what he says is newly discovered evidence.

The 40-year-old Dierker and four others were found guilty in March on charges of conspiracy, fraud and money laundering for their roles in a fraud that plunged Dublin-based National Century Financial Enterprises Inc. into bankruptcy, resulting in as much as $3 billion in missing investor funds.

Dierker denied the charges and testified in trial that he knew nothing of any fraud. He is currently under house arrest and faces up to 65 years in prison.

In his latest court filing, Dierker alleges the U.S. government withheld Securities and Exchange Commission documents from his attorneys that would have bolstered his defense.

The motion alleges the SEC discovered that National Century's auditing firm PriceWaterhouseCoopers LLP, and its predecessor Coopers & Lybrand LLP, failed to conduct a 1998 audit of National Century's books according to Generally Accepted Accounting Principles and Generally Accepted Auditing Standards.

The filing goes on to allege the SEC found that auditing firm Deloitte & Touche, the successor to PriceWaterhouseCoopers, failed to properly evaluate financial red flags in National Century's 1999 books.

Believing the opinions of outside auditors, Dierker thought National Century operated above board, the motion says.

Assistant U.S. Attorney Douglas Squires declined to comment on the motion. The government has 20 days from the date of Dierker's motion to file a response.

National Century was once the nation's largest financier of health-care providers. It specialized in buying their receivables at a discount for quick cash, then packaging the receivables as asset-backed bonds to sell to investors.

National Century collapsed into bankruptcy in 2002, forcing other medical businesses to fail and prompting the U.S. Department of Justice to begin looking into the company's failure.

http://www.bizjournals.com/columbus/stories/2008/04/28/daily23.html


link backwards to previous articles...
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3281287&mesg_id=3281326

[Demeter]

13. Planning and Investing in an Uncertain Economy

http://www.nakedcapitalism.com/2008/04/planning-and-investing-in-uncertain.html


Reader Benjamin sent me this query, and I thought I'd be so bold as to hazard an answer, and anticipate that others will have valuable perspective to contribute:

I... would like to see some macro advice for your younger readers, like myself. If I'm parsing commentary correctly, I may be graduating (2011, 2012) at the tail end of a big depression. Could you spare a few paragraphs of prediction or caution for younger readers at some point this week? Most of your commentary tends to favor an older and more savvy investing body but I venture that a look at a bigger picture targeted at my demographic would be fun to write (and hey, at least I'd read it avidly). Topics to consider: buying in at the housing market's bottom; alternate routes to building equity ('cause now I'm leery of the housing market as a vehicle); and traps that unsavvy investors like recent college grads might fall into.


You didn't ask for advice on the career front, but unless you have a trust or are likely to inherit a substantial amount, your ability to support an investment strategy will depend on the level and stability of your income. I think the biggest change your cohort faces, and one mine is confronting with considerable pain, is lack of not merely job security but of obvious career paths. There are some exceptions; white collar careers such as medicine, law, and accounting that have managed to restrict entry via professionalization (education, licensing, ongoing requirements to maintain one's standing) are ones where you have a good shot at using the same fundamental skill set for your entire career. But for many in those fields, the earnings potential is not what it used to be.

McKinsey requisitioned a study from Yankelovitch around 2000. It said that the average college graduate would have 13 jobs before he retired. A more recent study (can't recall the source) claimed it would be 11 jobs by age 38. The latter doesn't sound credible, but it's may be reasonable to assume the level might have risen from the 2000 estimate.

So the cliche about developing a portfolio of skills, sadly, is good advice. One thing I now recognize in retrospect is high flier career paths are a double edged sword. While they offer a certain level of credibility ("oh you did/worked for so and so?"),The problem is that people early in their careers look at the upside, and often fail to consider what their options are if they are not as successful as they hope to be or discover they really don't like the work all that much.

if you continue on these tracks beyond a certain level, you often wind up with very narrow skills (for instance, what happens to people who structured CDOs? The dot com bust similarly saw a lot of people having to find work in fields new to them). Some who go this route nevertheless are able to move from one "track' to another (some investment bankers have become CFOs at large companies, for instance; law firm partners can be hired by their clients as general counsel), but moves like that include an element of luck and good personal chemistry.

That is a long winded way of saying most people underestimate employment risk. So most people (yours truly included when I was young) do not put away enough money to carry them between jobs. For someone in their twenties, six months of expenses; that amount has to go up as you get old, both because it takes longer for more seasoned people to find work and older people tend to develop higher fixed cost levels, This disaster money should be invested VERY conservatively.

The above probably doesn't strike you as novel, but I'd be remiss in not saying it.

In planning, it is also important to know yourself, both in terms of possible career choices and investing, You are less likely to do well at something if you don't have an affinity for it. Again, that no doubt seems pedestrian, but people can do an amazing job of talking themselves into career and investment choices that don't suit them because they are swayed by what people around them are doing. For instance, I had convinced myself at the start of my career that making money was what motivated me, but that was because it was the right answer in interviews for the sort of job I had set my sights on. After gong down other paths based on acting out of surface motives, I got a better understanding of what really did and didn't work for me, and it was very different than what I had believed.

The more you can do to get an understanding of your own MO – can you tolerate frequent, intense intraday pressure? How much autonomy do you need? How good at and tolerant of politics are you? Are you good at functioning in chaotic environments or do you like structure? Most people spent a lot of time thinking about their skills and strengths, when understanding what sort of environment they prefer is often given short shritf.

To your immediate question: it is well nigh impossible to give advice on how to think about investing in 2010 or 2011, beyond some generalizations. By then, it should be clearer what the trajectory for the US and world economy is. That will make it easier to think about who winners and losers might be.

By then, the idea of "house as investment" might have been wrung out of the American psyche. Your home is first and foremost where you live. Real estate is always local, You may see opportunities that are attractive, but be very strict on looking at the after tax cost of ownership versus rental, Robert Shiller determined that the real returns to residential real estate were 0.4%. The first apartment I bought was cheaper after taxes than renting, and that was in Manhattan.

The other question is how much do you like investing? You can be a reader of this blog and actually not like investing, I write this blog and I hate investing (despite doing well via a risk-avoidant strategy, which BTW in this case does not mean a high allocation to cash, although that is tempting). The markets are too irrational and volatile for my taste (and Benoit Mandelbrot, the French mathematician, has shown that markets are far riskier than standard theories lead us to believe. His and similar work is acknowledged in theory and ignored in practice). And how much risk can you take, really? Standard recommendations are for young people to invest heavily in stocks, and reduce their allocation as they get older, But in a bad bear market, stocks can fall 50% (if memory serves me right, the S&P fell 47% peak to trough in the dot com bust). Can you take that?

Diversification by asset class is important, but a lot of things are touted as asset classes by clever fund managers, In a crisis all correlations move to one. Commodities are considered to be a good addition to a model portfolio because they have positive skewness (although they are also hugely volatile, and those markets are far smaller than securities markets, so new cash inflows can have a big impact), Income averaging is a good idea. Vanguard funds are a very good idea. Fees will eat away at what seem to be promising investment returns.

The big argument for holding stocks as opposed to investment funds is if you are investing in a taxable account. Mutual funds trade with sufficient frequency that they are tax inefficient. If you hold stocks, you can do better after tax, but you have to be prepared to leave them alone for years.

Ben Grahman's little book, The Intelligent Investor, is very much worth reading. It gives some commonsensical guidelines (you'd need to update them for the existence of index funds) but the most important is either spend very little time on investing, do a few simple things with your money or make it your second job. Anything in the middle is worse, for you will overtrade and reduce your returns.


IMO IT IS EXTREMELY UNLIKELY THAT 2012 WILL MARK THE END OF THIS CRASH AND BURN--IT MIGHT BE THE END OF THE BEGINNING, BUT NO MORE THAN THAT. REALITY MIGHT START TO PENETRATE THE THICKHEADS AT THAT DATE, AFTER KNOCKING FOR DECADES....BUT WHETHER ANYONE IN AUTHORITY WILL GRASP THE NETTLE FIRMLY IS DOUBTFUL AT BEST. MY NATIVE OPTIMISM HAS FINALLY DIED A LONG BRUTAL AND PAINFUL DEATH.

[Demeter]

14. Jeremy Grantham: "Immoral Hazard" and the Loss of Standards

http://www.nakedcapitalism.com/2008/04/jeremy-grantham-immoral-hazard-and-loss.html


It’s not that the former Fed boss Greenspan was incompetent that is remarkable. Incompetence is common enough after all, even in important jobs. What’s remarkable is that so many people don’t seem, even now, to get it. Do people just believe high-quality self-justifying blarney? Or is it just that they apparently want to believe that critical jobs in a great country attract great talent by divine right. Sometimes, of course, they do, but sometimes the most important jobs – even that of a presidency or a Fed boss – end up with mediocrities....

Paul Volcker inherited about as big a mess as we have today. He worked out what he had to do and did it with unusual lack of concern about what Congress thought of the necessary pain involved and the number of enemies he might make. He paid the price for forthright behavior by being replaced, despite a record for correct and tough behavior that makes for the most invidious comparison today. When Volcker was replaced, by the way, he did not moan and groan but like an old soldier quietly disappeared. There were no high-profi le announcements about the economy or any $300,000-an-evening appearances paid for by financial firms.

Greenspan came onto my radar screen in the late sixties as a seller of economic and financial advice to the investment industry. To be brutally honest, he was considered run of the mill by anyone I knew then or have met later who knew his service then. His high point in most memories, certainly mine, was a famous call in January 1973 that, “it can,” a few days before a market decline of over 60% in real terms, second only to the Great Crash in a century, accompanied also by a bitter recession. This was one of the first of a long line of terrible prognostications for which he has remarkably not been remembered, except by a handful of us amateur historians. Then in the mid-seventies he disappeared into some government job, of which I was barely aware, until he re-emerged with a bang in 1987, without as far as I can find having done anything documentably very well. And we can agree that at least occasionally people can indeed prove their effectiveness beyond doubt.....We can all wonder at the incredible vision, drive, organizational skill, and willingness to sacrifice resources that were required by the Manhattan Project and compare it to the rudderless or even deliberate avoidance of leadership of the greatest issues today: climate change and energy security. We can only wonder what a Manhattan Project aimed at alternative energy might have accomplished by now, had it been started 15 years ago.

What we have had in lieu of vision, leadership, and backbone is a series of easy paths taken. At the time that Paul Volcker broke the back of inflation in the early 1980s, the recognition that risk and leverage had consequences was baked into the pie: if you were to take excessive risk you had better win the bet. If you missed the target, the expected result would be more or less total failure, and that seemed then and for decades earlier a reasonable law of nature. Now in contrast we get ready to celebrate the 20th anniversary of the era of the Great Moral Hazard. Slowly at first, but with steadily growing traction, the idea was planted that asset bubbles would be tolerated, but consequences of their bursting would be moderated or avoided entirely by increasingly vigorous actions sometimes, like now, bordering on the hysterical. This is to say that if all went well, enormous profits could be made by speculators – largely the great financial firms, including some formerly conservative blue chip banks – by riding and leveraging the bubbles. If all went badly, then the costs would be passed on to others.

The idea that occasional economic setbacks might benefit the system in the long run was one of the early ideas to disappear. Yet if you prop up weak sisters who would otherwise fail and in failing present their more efficient competitors with extra growth, you must surely weaken the system. Desperation pricing from weak firms who simply should not exist can weaken the profitability of a whole industry, as it has for the airlines. The average efficiency of most industries is reduced with at least some effects on our global competitiveness. With a slightly lower average return on equity, the ability to reinvest drops so that, in this world of moral hazard where recessions are few and mild, GDP growth is a little less than it might have been....

The defense of bailouts is that the alternative is ugly.But surely the penalties for excessive risk taking, issuing flaky paper, passing it on – often in its entirety – to others, and not even understanding the consequences of the low grade paper that you yourself issue should be ugly. “Yes, of course, we would like to punish the excessive risk takers” goes the line, but we can’t do it without hurting the innocent economy. But we will never know what can be absorbed if the penalties are always removed by a bailout. In more traditional times, say, from 1945 to 1985, the economy could absorb substantial punishment from recessions and still grow faster than it has done in the last 10 years.

The real incompetence here goes back over 20 years: the refusal to deal with investment bubbles as they form, combined with willingness, even eagerness, to rush to the rescue as they break. It’s almost as if neither Greenspan nor Bernanke allows himself to see the bubbles. Greenspan was always conflicted and contradictory about whether bubbles could even exist or not. Bernanke, in contrast, has more of the typical academic’s certainty that the established belief in market efficiency is correct and therefore investment bubbles must be merely the product of investors’ overheated imaginations. It would be convenient to have such an important role as Fed Chairman filled by someone who actually deals with the real world, messy or not, that is given to inconvenient bursts of euphoria and riddled by considerations of career and business risk, which modify behavior far away from economic efficiency....

As discussed many times in the investment business, pessimism or realism in the face of probable trouble is just plain bad for business and bad for careers. What I am only slowly realizing, though, is how similar the career risk appears to be for the Fed. It doesn’t want to move against bubbles because Congress and business do not like it and show their dislike in unmistakable terms. Even Fed chairmen get bullied and have their faces slapped if they stick to their guns, which will, not surprisingly, be rare since everyone values his career or does not want to be replaced à la Volcker. So, be as optimistic as possible, be nice to everyone, bail everyone out, and hope for the best. If all goes well after all, you will have a lot of grateful bailees who will happily hire you for $300,000 a pop. By the way, that such payments to prior Fed officials are in themselves a moral hazard and an obvious conflict of interest that could moderate their prior behavior, is apparently too crude an accusation even to have surfaced yet. Well it should surface. Selling services to financial interests whose fates have been in your hands should simply not be tolerated as acceptable or ethical behavior by a former Fed Chairman.

[Demeter]

15. Did Robert Rubin Jeopardize Financial Stability to Protect Goldman Sachs?

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=04&year=2008&base_name=did_robert_rubin_jeopardize_fi

That is what he claims, according to the NYT. The NYT reports that Rubin claims that he was considering imposing stricter margin requirements on futures trading when he was leaving Goldman Sachs to take a top position in the Clinton administration. According to the article, Rubin claims he abandoned the plans when the Chicago Board of Trade told him “we will make sure Goldman Sachs never trades another future on the C.B.O.T. if this went ahead.”

A spokesperson for the company that now owns the C.B.O.T. denies that any such threat was ever made, but this is an incredibly important news story. The implication is that a top official in the Clinton administration, who subsequently became Treasury Secretary, altered regulatory policy based on a threat made against his former firm.

If such a threat was actually made, then it should have been reported to the F.B.I. and some people connected with the C.B.O.T. should be sitting in jail right now. If Mr. Rubin was actually prepared to alter regulatory policy to serve his former firm, then he clearly had conflicts of interest that made him unqualified to hold a top government position.

This issue merits investigation not only to determine whether Robert Rubin acted improperly, but also to determine whether it is common practice for government officials to alter policy to serve the interests of their former employers. The fact that Robert Rubin would have no qualms claiming to the NYT that he dropped a regulatory proposal to protect Goldman Sachs, suggests that such behavior is common.

--Dean Baker

[Demeter]

16. Tin Cups and Ponzi Boyz

http://wallstreetexaminer.com/blogs/winter/?p=1593


On the question of foreign central banks, I spotted this item showing that of late it has been Russia who has been engaging USD buying interventions to stem the appreciation of the Rouble, (another defacto pegged currency). This operation in effect buys more overpriced USD securities and puts even more Roubles into the Russian economy to do so.

MOSCOW, April 25 (Reuters) - Russia’s central bank has bought about $20 billion on the forex market this month to prevent the rouble from appreciating against the dual currency basket, First Deputy Chairman Alexei Ulyukayev said on Friday. Dealers said Friday’s trade volumes at Moscow’s MICEX exchange reached $10.3 billion, with the central bank purchasing about $6 billion.

Next we see the familiar pattern of these countries trying to control their Mad Max inflations with monetary rather than currency policy. These countries tighten, the US eases, and the cheapened USDs come rushing in for exchange. Note however the discussion about allowing the Rouble to appreciate. By how much is the question. Increasing bank capital set asides is a rouble sterilization operation.

On Thursday, Ulyukayev said the central bank was ready to tighten monetary policy because foreign capital inflows have picked up again and inflation accelerated to 14 percent in April. Ulyukayev, who chairs the Bank of Russia’s monetary policy committee, said the bank may soon raise interest rates but did not rule out the use of rouble appreciation or an increase in the amount of capital banks have to set aside... These Dollar recycling and intervention operations are entirely a function of the needs and timing of the enabling country (Russia in this instance) and not the US. If Russia decides, say on a Friday, to engage in this conduct, it has little if anything to do with US Treasury or GSEs finance needs of the moment. It is entirely a function of the internal policy decisions of the FCB. I think that is why the indirect participations at the auctions have been so erratic.

So if the the US Treasury or Fannie Mae were to show up next week with a big tin cup, it may be tough shit Ponzi Boyz. Or if Ponzi Boyz were lucky, it may be that the FCBs generically had the “need” that day. However, with the kind of “storm the palace” inflations these countries are now experiencing, their real and proper need is currency appreciation, and halting USD recycling and by extension local currency printing. That way, some of the inflation can be transmitted off on the US, and other USD holders. It’s hard to see why Russia in particular would even care about those consequences for Americans. Buying USD securities at puny interest rates then becomes a hot potato right as US financings are gathering steam. The fact that FCB demand for US securities is so artificial and self directed will make these financings extremely difficult to conduct.

Also discussed in the backside of the podcast was the prospect for the Fed to start aggressively monetizing the Treasury’s finance onslaught. I have little doubt that some of this will be attempted, especially when the Ponzi Boyz can’t time these new debt offerings with foreigner’s needs. Also the broker-dealer network is too strained to hold the bag on tens of billions of routed marked down US Treasury notes. But the effect of monetizations will be limited and in my thinking very overrated. The amounts required are just too large. It is like going into battle against tanks and artillery with a 22 caliber. There are big problems with it as well, and one are traders (Berserkers). Once these Berserkers spot a few serious coupon passes, watch the swift and immediate reaction. And you thought $120 oil, and $5 milk was bad? The other problem is that FCBs hold $2.254 trillion (just custodial holdings) in US securities already. They will have to be kept sedated. Rattle even a few of those holders at the margin and rates could get hiked a couple percent over night.

The Ponzi Boyz do have a few tried and true short term Godfather protection racket tricks that could also be employed, especially with “incidents” in the Middle East. The idea is to get the USD holders there into a tizzy and panic them into “the safety” of US Treasuries and agencies. A version of this was produced last week, but had little effect. Perhaps something much bigger is in store? Don’t be too surprised if we get a “whodathunk” in that score.

[Demeter]

17. Real House Prices / The changing housing cycle and its implications for monetary policy

http://www.voxeu.org/index.php?q=node/1089

[Demeter]

19. Why Haven't Existing Home Sales Fallen Further?

http://calculatedrisk.blogspot.com/2008/04/why-havent-existing-home-sales-fallen.html

The first graph compares New Home sales vs. Existing Home sales since January 1994.





Clearly new home sales have fallen faster than existing home sales.

Based on various reports, it appears new home builders cut their prices quicker than most existing home sellers. So why have new home sales fallen faster than existing home sales?

There could be a number of possible explanations:

Perhaps new homes were more overpriced than existing homes, so the larger price cuts haven't been enough to motivate buyers.

Or maybe there was more speculative buying in the new home market. During the boom, many buyers could put down 1% or less and hold a house for 6 to 9 months; essentially a call option on the house. But if that was the reason, wouldn't new home sales have increased quicker than existing home sales during the boom? It appears the ratio of sales tracked pretty closely from '94 through '05.

Or maybe all the REO sales (bank Real Estate Owned) are boosting the number of existing home transactions. Note: It is my understanding that banks taking possession of foreclosed properties are not counted in the NAR's existing home sales report, but the resale of REOs are counted.

Whatever the reason - and I'm always a little skeptical of the NAR's numbers - existing home sales are still above the normal range.

.....more at link....
This suggests that sales of existing homes could fall significantly more in 2008.

[Demeter]

30. From RGE Monitor Newsletter

It is quite an eventful week in terms of data releases in the U.S. It kicked off yesterday with the S&P Case-Shiller home-price index and the consumer confidence index by the Conference Board showing rapidly falling home prices and rising consumer worries about jobs and incomes. Today we will all follow with attention the advance estimate of Q1 real GDP growth and the FOMC decision. Thursday the ISM Manufacturing index – among other reports – will grab the attention of markets and analysts. The important employment report will then close the week on Friday.

We are in the third year of the U.S. housing recession and the bottom does not seem to be in sight yet. Housing starts (and completions) are falling but not yet fast enough to offset the sharper fall in demand (home sales) and therefore to insure a fast absorption of the rising home inventories that keep putting downward pressure on prices. In fact, more dismal news came yesterday from the S&P Case-Shiller home price index – now down almost 15% from its peak – according to which not only do house prices across the nation's biggest cities continue to fall but they are actually accelerating on their way down. Take a look at: “How Much Will U.S. Housing Prices Fall and How Long Will the Downturn Last?”, “Is the Worst Over Or Is the U.S. Housing Recession Getting Worse?” and “Are U.S. Homes Empty? A Look at the Homeowner Vacancy Rate”

While the end of the housing recession is nowhere in sight, Q1 might officially mark the first quarter of negative real GDP growth since 2001, or will it? Estimates for real economic growth for Q1 range from a negative -1.3% all the way to a positive 1.5%. Optimists argue that improved net exports and the strong rebound in inventories in Q1 – after large declines in Q4 – will sustain growth; but such excessive inventory build-up would bode poorly for Q2 growth. On the other hand, housing woes, the retrenchment in consumption and slowdown in business investment call for weak or possibly negative growth. The consensus foresees weak but positive GDP growth of 0.3%. Stay tuned for the Q1 real GDP numbers and the market reaction today!


While spikes in jobless claims and higher long-term unemployment show a sharp slowdown in hiring, lay-offs especially in the financial sector have also intensified in the recent weeks. Unemployment has also increased in states hard hit by housing, financial and auto woes. As the effects of the financial crisis are spreading to other sectors of the economy, the labor market is only expected to deteriorate further in the coming months, after a three-month consecutive payroll decline in Q1 2008. Given that labor market is a lagging indicator and subject to slow recovery, stronger job losses ahead, especially in high-paying sectors will weigh down heavily on the liquidity-constrained consumers.

[kickysnana]

54. I heard of two people this week who are in a "take almost any offer" situation here in MN.

At this point they are hoping to "break even." One has left the country, the other had to move to assisted living because of health problems. Their homes have been on the market since last year. NO offers. People are looking at the foreclosures, thinking bargains.

[Demeter]

18. Distance Tariffs On Fossil Fuel Trade Impacts By Kent Welton

http://www.opednews.com/articles/opedne_kent_wel_060326_distance_tariffs.htm



"If the environmental costs of increased transport were properly internalized much of world trade would be revealed as uneconomic, and we would return to a more localized, less environmentally destructive, trading system."
Edward Goldsmith

"Man has lost a capacity to foresee and forestall. He will end by destroying the earth."
Albert Einstein

Given a GATT/NAFTA treaty written by and for capital alone, we are now subjected to an amoral, environmentally irresponsible, and uncompensated "free” trade across borders. In any case, with the internet and communications further driving global commerce, the amount of "goods" being shipped over great distances today – all in fossil fuel conveyances - is expanding at a rapid rate.

As a result of this fossil-fuel driven trade, serious new pollution, environmental decay, and climate change costs are emerging. For this reason, when all external costs are internalized and properly accounted for, much of this “free” trade (arising largely due to a lack of tariff freedom and compensating tariffs between disparate nations) not only rewards the greater slave and destroys First World standards but it is also fast polluting our world and pushing us to a global tragedy of the Commons.

Today, we are literally watching our world collapse while, at the same time, doing little or nothing to prevent or ameliorate such a catastrophe. A major problem is that “our” current trade policies are both highly irresponsible and uneconomic in the truest sense, not to mention undemocratic and oligarchic in nature. In fact, the ruling elite GATT/WTO setup currently prohibits the rational purchase and local preference, and thus, without revision, may well prevent distance tariffs acting to minimize fossil-fuel driven trade. Clearly, if uniformly applied, however, this should not be the case

As things stand, and the transport of goods requires fossil fuels, we are forced to equate a product which travels 50 miles to market with one which travels 10,000 miles. Currently, there are no offsets or incentivizing tariff adjustments for the increased fossil-fuel pollution and climate-change costs of one product versus another.

As a result, what we have in fossil-fuel transported global trade is universal loss - big time.
Until we transport goods without fossil-fuel impacts some form of distance tariffs are surely necessary, as well as easily calculated and applied in our containerized world. The greater the distance from producer to market, the greater the fossil-fuel tariff.

Without such truly economic measures in place we not only give the greater-slave-rewarding “free trade” regime un-due legitimacy but also allow it to crush our environment in the process. A rational trade regime will surely include a polluter pays principle, serve to foster greater localization of production and consumption, and not reward and give comparative advantage to, the greater polluter while punishing the more environmentally safe product.

Not many realize today how highly polluting are the diesel driven, ocean-going freighters, with their serious impacts upon both air and water. In the air, one Boeing 747 alone needs 53,000 gallons of climate-destroying fuel to fill its tanks and carry its cargo of over-packaged, forest-destroying, goods around the earth. This oft-unmentioned reality is another good reason to minimize and further tax jet travel and encourage video-conferencing.

As things stand, we are locked into feeding a growing global oligarchy and oligopoly hastening the decline and destruction of the very world we inhabit. A sick and undemocratic “free trade” (we don’t even elect our representative to the WTO) process is now set to benefit mega-corporations securing a global oligopoly, destroy local production capacity, and give the increasingly dependent and choiceless "sovereign" consumer the benefit of "cheaper" goods – all while we collectively act to destroy the very earth we inhabit. Xenophon, the ancient greek writer of the oldest text on economics must be rolling in his atmospheric carbon-covered grave.
Until we are able to transport goods without fossil-fuel emissions and environmental costs then distance taxes/tariffs are both necessary and responsible. Indeed, we must implement distance tariffs to not only give local sources a small break, and not default production to one country or company, but make global shippers pay the real costs of their activity, and give consumer’s pause about the real price of their purchase.

At the same time we can invest the fossil-fuel tariff proceeds in environmental remedies made so necessary in a fossil-fuel world.

Given the declining state of our planet, to embrace and foster a fossil-fuel trade regime and continue without more rational, incentivizing, and democratizing offsets of any kind, is to proceed to generate increasingly lethal impacts in the long-distance transshipment and attendant over-packaging of goods. This is simply criminal.


Kent Welton,
TheCenterForBalance.org



Authors Website: TheCenterForBalance.org

Authors Bio: Author, Exec. Dir. The Center For Balance. Websites: PanditPress.com, OligarchyUSA.com, PublicCentralBank.com, EditorFreedom.com, FascismUSA.COM & more

[UpInArms]

20. dollar watch

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

Last trade 72.880 Change +0.292 (+0.40%)

Euro Tumbles as Markets Reassess Post -FOMC Reaction

http://www.dailyfx.com/story/bio2/Euro_Tumbles_as_Markets_Reassess_1209635060887.html

As most of the world celebrates Labor day the global economic calendar remains barren until the North American session. The euro however, was weak throughout the night as traders reconsidered the initial post FOMC reaction which took the pair for a 100 point upward ride. Although US monetary officials did not explicitly state that they were going to end the easing cycle, the FOMC statement did hint that the committee may be changing its bias from dovish to neutral.

The long term implication of such a shift in policy should favor the dollar, as markets begin to appreciate the fact that most of the monetary adjustment by the Fed has already been made. With most of the rate cuts behind us, the greenback, which has been battered relentlessly due to unfavorable interest rate differentials, may now find some reason to rally.

The euro was also pushed lower by a relatively upbeat Financial Stability Report from BoE that stated that the worst of the credit crisis may be over. Taken together with yesterday’s better than expected US GDP data, this analysis suggests that the US economy may be simply in the midst of a slowdown rather than the full blown recession and if that were the case the dollar may see further strength as traders reassess their doomsday assumptions.

Meanwhile in the UK Manufacturing PMI rose to 51 from 50.8 expected remaining above the 50 boom/bust line for the time being. Growth did slow from the month prior as new orders declined, but businesses continued expand overall. Cable did very little against the dollar, but gained significantly against the euro with EURGBP coming to within 5 points of the 7800 figure during London trade. Part of the strength in the cross was attributed to M&A flows as EDF readies 9 Billion pound acquisition of British energy.

In the US all eyes will turn to tomorrow’s NFP report, but ahead of it, the markets will scrutinize the ISM Manufacturing data due at 14:00 GMT today. Consensus calls for a slightly lower figure, but given the positive read from the Chicago PMI data yesterday, an upside surprise is possible. If the ISM report prints better than 49.0 the 1.5500 level in EURUSD is likely to give way as dollar bulls continue to press the theme that the US economy is in a mere slowdown rather than a full scale recession.

...more...

For Dollar Bulls, the Federal Reserve Fails to Deliver

http://www.dailyfx.com/story/bio1/For_Dollar_Bulls__the_Federal_1209592796322.html

The Federal Reserve cut interest rates by 25bp to 2 percent, which was right in line with the market’s expectations. However the US dollar sold off because the market was disappointed that the central bank did not give them more. This appears to be a classic buy the rumor sell the news type of reaction in the greenback since the statement was undoubtedly more hawkish than the one released in March. We noticed 3 major changes in the statement; First, two members voted to keep interest rates unchanged. Although Plosser and Fisher dissented last month as well by favoring a smaller rate cut than the 75bp of easing delivered on March 18th, they could soon convince some of their peers to follow suit. Secondly, the Fed took out their promise to act in a “timely manner” and instead, they simply said that they will act as needed. The statement about the downside risks to growth is also gone and even though we do not believe that the downside risks to growth have really disappeared, taking these words out of the statement is symbolic. Finally, the Fed reminded the markets that they have eased interest rates substantially (325bp since August) and over time, their efforts should have an impact on the US economy. For all intents and purposes, the Federal Reserve is telling the markets that the economy needs time to absorb their rate cuts and their toned down statement suggests that they will not be cutting interest rates again in June. The futures market is currently pricing in a 78 percent chance that interest rates will remain unchanged at the next Fed meeting and a 73 percent chance that interest rates will also remain at 2 percent in August. Yet the US dollar sold off because the market is not confident in the Fed’s judgment. This morning’s Chicago PMI report and GDP reports were better than expected, but non-farm payrolls on Friday should be weak. So far, the central bank’s rate cuts have only had a limited impact on the US economy. It takes time before the monetary stimulus can be felt, but if it does not come through soon, an accelerated deterioration in the US economy could force the Federal Reserve to pick up where they left off. The FOMC statements have become longer and longer in recent months and the central bank’s increasing need to explain themselves can be worrisome for dollar bulls. A number of US economic data are due for release tomorrow. Manufacturing numbers should be dollar positive.

...more...

[skoalyman]

47. Wonder who's inflating the dollar its sure rising fast if it keep this up

it'll be over the 1.00 mark before the end of may.

[Demeter]

22. The cost of a lifeline: Humbled financial groups brace for more regulation

http://www.ft.com/cms/s/0/a7a843ba-115d-11dd-a93b-0000779fd2ac.html

By Gillian Tett and Krishna Guha



A decade ago, Paul Calello of Credit Suisse was grappling with the horrors at Long Term Capital Management, the hedge fund that was destined for collapse. Mr Calello, now head of investment banking at Credit Suisse, was his bank’s main representative back then in a consortium that took over the fund. But this job became horrendous because LTCM was at the heart of a complex web of trades with other entities that were fiendishly hard to unravel...These days, Mr Calello says, Wall Street is confronting “the same set of issues” – but on a potentially far more deadly scale. “After LTCM it took us almost 10 years to sort out what happened there in relation to trades,” says Mr Callelo.“But we don’t have another 10 years to fix our problems ... The time for action is now.”

But while (it) has calmed the markets for now, the Fed’s action (bailout of Bear Stearns) has raised much bigger, longer-term questions about the future direction of the financial world. LTCM posed a threat because of the sheer size of its trades in the government bond market and the bank credit lines that funded it. But this time Bear was entwined in tens of thousands of positions across the whole spectrum of financial markets... what the Bear saga shows with brutal clarity is that modern financial markets are even more tightly interwoven than before – leaving regulated, lightly regulated and unregulated institutions increasingly exposed to each other’s risks. Thus the crucial question now is whether regulators and bankers can find ways to offset the dangers posed by this ultra-interconnected world.

Above all, policymakers are anxious to avoid the “moral hazard” problems that occur when a lightly monitored institution takes big bets knowing that it is so systemically important that it cannot be allowed to fail. Not least, that is because such recklessness could cause the next financial crisis.
“We have to think about the bigger policy implications of this,” says Nouriel Roubini, a prominent American economist, who maintains that the rescue of Bear Stearns has in effect extended the Fed safety net to a swath of other institutions. As Mr Calello puts it: “This new phenomenon of ‘too interconnected to fail’ is now a permanent part of the financial system ... and there needs to be a wider debate about the consequences of this.

...The past eight months have blown apart any cosy assumptions that it is possible to draw a simple dividing line between institutions that need to be regulated and those that do not. It has become painfully clear to regulators that loosely regulated entities such as SIVs have remained so tightly entwined with their originating banks that their problems tend to migrate back to those regulated banks...It has also become clear that these so-called “shadow banks” cannot be viewed merely as a minor appendage of the mainstream financial world. JPMorgan, for example, recently calculated that activity in so-called parallel – or unregulated – US banking was worth $5,900bn last year, compared with $9,400bn for regulated banking...Most pernicious of all, the explosion of derivatives and other complex financial arrangements has left institutions so closely intermeshed in their market dealings that it is increasingly difficult to ring-fence regulated entities from problems emanating from less regulated institutions. Take Bear Stearns. A couple of decades ago, regulators would probably have presumed that this broker was not in the category of “too big to fail”, since it did not serve retail clients on a large scale and was not a commercial bank. The Fed last month tacitly recognised, however, that Bear was now in effect “too interconnected to fail”. That is partly because Bear was a crucial participant in the $62,200bn credit derivatives market...Bear was also a central participant in the so-called tri-party repo market, the sector where banks and brokers lend securities to each other overnight in exchange for cash. This sector is crucial to banks’ funding. Contracts in this little-watched corner of finance also tend to be tightly entwined. When Bear started to face problems funding itself through repurchase transactions, Fed officials feared this would cause the broker to default on its related contracts, sparking a daisy chain of defaults across the banking sector. “It was the repo thing that really scared people – there was the potential for a huge panic,” says one senior American financial official.

A second view is that the regulatory net needs to be cast much wider. Sheila Bair, head of the US Federal Deposit Insurance Corporation, is among those in Washington who argue that if brokers are to receive public support in a crisis, there needs to be a level playing field with commercial banks – an argument that implies brokers should face capital requirements...Don Kohn, vice-chairman of the Fed, last week suggested that supervisors should require investment banks to use less in the way of cheap overnight funding and more, relatively expensive, long-term funding – reducing the incentive to gear up...Some go further and argue that the division between regulated and unregulated institutions should be much stronger – and that entities outside the regulated sphere should not be able to engage in activities that could cause wide harm. Gary Stern, president of the Minneapolis Fed, has suggested that supervisors should be given the authority to stop institutions outside the safety net from building up positions that create systemic risk...Privately, some senior officials at the International Monetary Fund also suggest authorities should limit the ability of unregulated institutions to sell credit default swaps to regulated banks and brokers.

But a third view is that regulators should abandon the attempt to divide financial institutions into different categories – and regulate them all. Prof Roubini says financial history suggests that whenever regulators try to devise clear boundaries, bankers find ways to bypass these controls – implying that any attempt to stop unregulated institutions from generating systemic risk is doomed to fail. Instead, he argues that higher standards should be imposed across the markets, including for SIVs, investment banks and hedge funds that operate as shadow banks....There are now five federal banking regulators, including the Federal Reserve. There is one federal regulator for the securities market, along with state supervision, and a separate regulator for futures. Fifty regulators oversee insurance, which is supervised almost entirely at the state level...There is growing recognition that such a Balkanised system – parts of which date back to the Civil War – is untenable in a world where the boundaries between financial products and institutions have blurred. An increasingly interconnected marketplace, in other words, should have a more joined-up regulatory structure...

[UpInArms]

23. Layoffs rise 68 percent in April vs March: survey

http://news.yahoo.com/s/nm/20080501/bs_nm/usa_economy_jobs_challenger_embargo5_1_dc?_ylt=AoJ89eCu5IJcvaj9AUHthvnv5rEF

NEW YORK (Reuters) - U.S. companies' planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday.

Planned job cuts in U.S. companies totaled 90,015 last month, up from 53,579 in March and up 27 percent from a year earlier, employment consulting firm Challenger, Gray & Christmas Inc. reported.

The April layoffs were the steepest since the 100,315 cuts announced in September 2006.

Most of the announced job cuts came from the financial sector, due to the housing slump and about $300 billion in write-downs on bad mortgages and investments, the firm said.

The financial services industry announced 23,106 cuts in April with almost half of them occurring in a two-day period that saw hefty planned layoffs from Citigroup (C.N) and Merrill Lynch (MER.N), it said.

The telecommunications sector was second in announced layoffs in April with 8,007, followed closely by 7,954 planned cuts in the transportation industry.

Employers have announced 290,671 jobs to be eliminated in the first four months of 2008, up 9 percent from the 266,658 cuts recorded during the same span in 2007, the firm said.

...more...

[Doctor_J]

56. "The fundamentals are sound"

- First MBA President

[Demeter]

59. He Meant To Say: "The Fundies Are Sound"

which still doesn't make sense.

[Doctor_J]

61. or "The Mental Fundies Are Sound"

maybe his earpiece had some static that day.

[Demeter]

63. I Like Your Version Even Better!

[Demeter]

24. Could IMF Have Prevented This Crisis? By Hector R. Torres

http://www.koreatimes.co.kr/www/news/nation/2008/04/123_23113.html


Hector R. Torres
Alternate executive director
at the IMF

Project Syndicate

WASHINGTON D.C. ― Until recently, the International Monetary Fund's main job was lending to countries with balance-of-payment problems. Today, however, emerging countries increasingly prefer to "self-insure" by accumulating reserves (and sharing them through regional pooling arrangements).

As a result, the fund must change, reinforcing its supervisory role and its capacity to oversee members' compliance with their obligation to contribute to financial stability. So its failure to press the United States to redress the mortgage-market vulnerabilities that precipitated the current financial crisis indicates that much remains to be done.

Indeed, in its 2006 annual review of the U.S. economy, the IMF was extraordinarily benign in its assessment of the risks posed by the relaxation of lending standards in the U.S. mortgage market. It noted that "borrowers at risk of significant mortgage payment increases remained a small minority, concentrated mostly among higher-income households that were aware of the attendant risks," and concluded that "indications are that credit and risk allocation mechanisms in the U.S. housing market have remained relatively efficient." This, it added, "should provide comfort."

Likewise, the problem was not mentioned in one of the IMF's flagship publications, the Global Financial Stability Report (GFSR), in September 2006, just 10 months before the subprime mortgage crisis became apparent to all. In the IMF's view, "Major financial institutions in mature ... markets ... healthy, having remained profitable and well capitalized," and "the financial sectors in many countries are in a strong position to cope with any cyclical challenges and further market corrections to come."

The IMF began to take notice only in April 2007, when the problem was already erupting, but there was still no sense of urgency. On the contrary, according to the IMF, "Weakness has been contained to certain portions of the subprime market (and, to a lesser extent, the Alt-A market), and is not likely to pose a serious systemic threat."

Moreover, "The U.S. housing market appears to be stabilizing ... Overall, the U.S. mortgage market has remained resilient, although the subprime segment has deteriorated a bit more rapidly than had been expected."

The GFSR confidently noted that ``stress tests conducted by investment banks show that, even under scenarios of nationwide house price declines that are historically unprecedented, most investors with exposure to subprime mortgages through securitized structures will not face losses."

Why has the fund's surveillance of the U.S. economy been so ineffective?

Suppose that the vulnerabilities piling up in the U.S. mortgage market ― right under the IMF's Washington-headquartered nose ― had taken place in a developing country. It is, frankly, inconceivable that the fund would have failed so miserably in detecting them. The IMF has been criticized for burdening borrowers with unnecessary and sometimes perverse lending conditions, but its highly qualified staff has not been shy in blowing the whistle when it perceived domestic vulnerabilities in other countries. So why didn't they scrutinize the U.S. economy with equal zeal?

The answer may be found in the IMF's governance structure. Currently, the distribution of power within the IMF follows the logic of its lending role. The more money a country puts in, the more influence it has. This may be prompting the fund to turn a blind eye to the economic vulnerabilities of its most influential members ― precisely those whose domestic policies have large, systemic implications.

This ``money-for-influence" model of governance indirectly impairs the IMF's capacity to criticize the economies of its most important members (let alone police compliance with their obligations). In any event, if its staff's criticism ever becomes too candid, these countries can always use their leverage to water down the public communiques issued by the IMF's board.

The fund can help to prevent future crisis of this kind, but only if it first prevents undue influence on its capacity to scrutinize, and if necessary, criticizes influential countries' policies and regulations. This requires a different governance structure in which power is more evenly distributed, so that the IMF can effectively exercise surveillance where it should, not just where it can.

Hector R. Torres is alternate executive director at the IMF and former chair of the G-24 Bureau in Washington, D.C. For more stories visit Project Syndicate (www.project-syndicate.org).

[Demeter]

25. The Credit Crunch is Dead! Long Live the Credit Crunch!

http://www.nakedcapitalism.com/2008/04/credit-crunch-is-dead-long-live-credit.html

What a difference five weeks makes.

Around the ides of March, we had the mind-focusing spectacle of the possible implosion of Bear Stearns, which was feared to take down a lot of the financial system. But Fed and JP Morgan to the rescue, Lehman presents earnings that depend entirely on accounting rather than business activity, namely, widening credit spreads that made its own outstanding debt worth less, and everything is hunky dory. Oh, yes, UBS announces losses equal to 5% of Swiss GDP, but that too is rationalized as a sign that the Swiss giant has gotten past its bad patch. And while the earnings reports from Bank of America and National City were less than stellar, the Bank of England has thrown in the towel, and following the Fed, will accept £50 billion of mortgage debt as collateral (actually, they are on-upping the Fed; the BoE's loans have an one-year term). And while critics in the UK say this program won't revive the housing market, that may not be the point of this exercise.

Most observers have deemed the credit crisis to be over, and are now focusing on such pressing questions as how fast the recovery will be and how bad inflation might get.

Perhaps I am inflexible and unable to adapt to new information, but I don't see what has been accomplished beyond kicking the can down the road three to nine months. As reader Scott noted:

Basically what's happened is that we've moved bad paper from the banks, where it needed to get marked to market, at least at some point, to the Fed, where that doesn't have to happen. It's a sort of out of sight out of mind phenomenon. But all those CDOs and MBS and CLOs are made up of individual mortgages, and of hung LBO loans. They will either be paid off in the end, or they'll go into default. Assuming, as I think seems right, that some of them default, the Fed will have another line item on its balance sheet, REO. So as I see it, it's absurd to say the credit risk has been "disappeared"; it's just been moved from the banks to the public.


Let's consider just a few unpleasant realities. The Journal today points out that banks are increasing reserves, which means they need more capital (um, guess regulators are riding them to provide for likely losses ex ante rather than when they can no longer avoid taking them). The US consumer at some point is going to have to reduce spending as a percent of GDP; the open question is whether that happens in time to avert a dollar crisis (given the Fed determination to reflate assets and preserve demand, we seem to have an answer as far as the intent of policy is concerned). But then again, as reader Steve pointed out, Fed governor Frederic Mishkin testified before Congress last week that small businesses, the big engine of job growth, are starting to have trouble getting credit (they are heavily dependent on loans collaeralized by real estate and credit card borrowing, both of which are scarce and costly now).

And our old litany of woes has merely retreated from the fore rather than gone away: we still have the monolines almost destined to come apart at some point, the fact (as John Dizard pointed out) bigger GSEs are systemically destabilizing due to their pro-cyclical hedging, the not trivial problem that the housing market won't bottom till 2010 at the earliest, with more writedowns resulting, and my pet worry, CDS. As I understand it (and better informed readers can chide me if I am wrong), the CDS market basically has to keep growing to stand still. Again, perhaps I am too old school, but with inadequate margining/equity provisions, it seems guaranteed to go into crisis. You don't get happy endings with ever mushrooming bets on underlying equity that fails to show corresponding growth.

Today, we had the biggest bank fundraising announced to date, RBS's hugely dilutive £12 billion equity sale (and that's in addition to £4 billion of asset sales). Reader Steve pointed us to a key item from the press release: the Scottish bank's writedowns are markedly deeper than those taken by US banks to date, suggesting that the worst is not over on this side of the Atlantic. They have marked their US Alt-As at 50% of face, subprime at 38%, and CMBS at 83%.

Eeek. Steve's remarks:

{The] RBS summary is damn sobering and is likely the first example of the greater transparency that BOE/Treasury are demanding from UK banks in exchange for the new borrowing facility. RBS may have exaggerated the marks to give themselves wiggle room, since they really can't go back to the cap markets for a while. But still, the difference from marks at US banks (particularly commercial banks) is sobering and a sign that the crisis is going to drag on `in full opacity' in the US for quite some time.




When the Fed and Washington radically altered the rules of US finance last month, they placed in jeopardy huge positions that had been put in place to hedge against and profit from systemic crisis. With the end of stage one arises a major short squeeze in the credit, equities, and derivatives markets. And when it comes to contemplating the scope and ramifications of today’s hedging activities, we’re clearly in uncharted waters. It is not beyond reason that a disorderly unwind of bearish credit market positions could incite a mini bout of liquidity, speculation, and credit excess that exacerbates global monetary instability while setting the backdrop for stage two of the crisis.

[Nickster]

45. Because the IMF has been so far off of it's original charter that it can't possibly live up to its

original mission. Plus the IMF is so stacked with Friedman-ites that they feel the only way to help an economy is to turn it into a free-market paradise, like Iraq, for example.

[54anickel]

79. A KING’S RANSOM?

http://www.cnbceb.com/Articles/2008/May/42/sovereign-wealth-funds.aspx

Oil money is flooding the west via Sovereign Wealth Funds (SWFs), bringing suspicion as well as muchneeded liquidity in its wake, and the conditions for a sea change in global capital markets. SWFs are capable of disrupting markets, yet they have little accountability to regulators, shareholders or voters. At a time when western economic growth forecasts have gone limp, the arrival of inscrutable strangers at the door is unlikely to reignite the party.

Indeed, SWFs have become the focus of notoriety and suspicion, labelled as “aggressive” and “mischievous” by the French and German presidents respectively. According to research by Stephen Jen, chief currency economist at Morgan Stanley, petrodollars are getting bigger. At $100 a barrel, the total proven reserves of the oil exporting countries is around $104 trillion – equivalent to the total value of publicly traded equities and bonds in the world.

About $48 trillion of this belongs to the Gulf Cooperation Council member countries – Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Oman and Qatar. The rest of the Organisation of the Petroleum Exporting Countries (OPEC) – Algeria, Angola, Indonesia, Iran, Iraq, Libya, Nigeria, Venezuela and Ecuador – own another $44 trillion, while non-OPEC countries – Russia, Canada, Norway and Mexico – own $12 trillion worth of oil reserves.

The flows are massive too. At the current pace of production and exports, and at $100 a barrel, collectively, oil exporters are projected to earn a total of $2.1 trillion in oil export receipts per year. Given the modest size of their GDPs, the bulk of the petrodollar windfalls must therefore be saved and deployed in the global financial markets.

“There are two key implications,” says Stephen Jen. “First, the deployment of petrodollars is likely to favour equities over bonds. Second, they should favour emerging market currencies.”

“These two themes are identical to the financial market implications of the emergence of SWFs, because about half of the petrodollar receipts may be invested through SWFs, and close to three-quarters of all assets under management by SWFs are derived from petrodollars.”

A recent report by McKinsey Global Institute, entitled The New Power Brokers, identifies four key actors in the world’s financial markets – petrodollar investors, Asian central banks, hedge funds and private equity. Their rapid growth since 2000 has given them unprecedented muscle, and their size – currently $8.4 trillion or 5% of world financial assets – is likely to double over the next five years.

more...

[Demeter]

27. Debasing the Dollar Will Accelerate America's Decline

http://www.nakedcapitalism.com/2008/04/debasing-dollar-will-accelerate.html

We've said before that the US is in the same position as Thailand and Indonesia circa 1996, except we have the reserve currency and nukes. Some prominent commentators are making more polite observations along these lines.

An article, "A rising euro threatens US dominance" in the Financial Times, by Benn Steil, director of international economics at the Council on Foreign Relations, covers old and new ground in a discussion of the implications of a further decline in the dollar. His well reasoned analysis contains some pointed observations, for instance, that the dollar's standing heretofore permitted it to have loose monetary policy without paying the usual consequences of capital flight and inflation, but no longer. Like a developing economy (ahem, banana republic), the more the Fed eases, the higher long term rates go. Steil enumerates the implications of what happens when the US falls into banana republic category, and they aren't pretty. The "lender of the last resort" function breaks down in developing economies because investors withdraw funds from domestic accounts. Similarly, he raises the possibility that the US will have to issue foreign-currency-denominated debt. That is even more likely an outcome; the US briefly was forced to issue Deutchemark denominated bonds under Carter. Large scale non-dollar issuance would considerably constrain our formerly free-wheeling ways. He also notes a less widely noted cost: if the euro becomes more important, the US threat of sanctions as a tool of policy is neutered...Note that these troubling scenarios are presented in an anodyne tone, and the author reminds us the US does not need to go down this path. But all indicators say that it will.

From the Financial Times:

As the dollar continues its relentless six-year slide against the euro and other main currencies, the question is being asked more and more: what would it mean if the dollar ceded its global dominance to the euro? The question is a serious one because the US Federal Reserve is pumping new dollars into the global economy at an astounding pace. A broad measure of US money supply growth is increasing at a rate not seen since 1971 when President Richard Nixon imposed price controls and ended the dollar’s convertibility into gold, which recently roared above $1,000 an ounce. With consumer prices having climbed 4 per cent from a year ago, and wholesale prices having soared 6.9 per cent, presaging higher consumer price inflation around the corner, we are living witnesses to Milton Friedman’s famous dictum that “inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output”.

The Fed is acting with the best of intentions to head off a recession. But in a rapidly globalising financial marketplace it is in fact accelerating the demise of its own unique powers. Virtually all national economies show a positive link between currency depreciation and inflation and between depreciation and interest rates, meaning that their central banks cannot use loose monetary policy to stimulate their economies – it only fuels capital outflows and a rise in market interest rates to attract it back. Not so the US, whose currency has commanded a unique premium as the global store of value and the transaction vehicle for international trade. But this may be changing. The dollar is looking more and more like a typical developing country’s currency, with long-term market interest rates, crucial to determining borrowing and investment behaviour, climbing as the Fed pushes hard in the other direction.

If international use of the euro were to continue to rise, the Fed would lose other important powers. In a financial crisis, central banks are supposed to act as “lenders of last resort”, printing money to prop up banks and reassure their depositors. This does not work in developing countries. People withdraw money anyway, not because they fear the governments will let the banks collapse but because they fear the inflation and depreciation that printing money brings. So they exchange it for dollars, undermining the putative powers of their central banks. But what if Americans were to do the same, selling dollars for euros in a crisis? The Fed would become impotent. This is not science fiction. American investors have lately been pouring money into foreign bond funds at a record rate.
...What about currency crises, the bane of developing countries? These happen when investors, local as well as foreign, fear that the country may face a shortage of foreign money, necessary to pay off its debts. If America were to become obliged to trade and borrow in euros, rather than dollars, it would face the very same risks.

What about America’s political power in the world? A continuing fall in the dollar means a fall in the global purchasing power of all its foreign assistance, whether for humanitarian, economic or military purposes. But it means much more than that. The US has exploited the unique role of the dollar in international trade and investment to disrupt the financial flows of its adversaries, such as North Korea and Iran. If such transactions switched to euros and were funnelled through institutions not doing business in the US, this power would be neutered. The US would likewise lose influence over both friends and enemies facing financial problems, as they would be looking increasingly to Europe for euros, rather than to America for dollars.

None of this is inevitable. America is blessed to be the master of the dollar’s fate, in the sense that the world has no incentive to move to another monetary standard as long as the dollar’s long-term value appears secure. But it means that the US government needs to address the country’s economic problems deriving from the housing market collapse and the credit crunch “on-balance-sheet”, through direct, targeted, explicitly funded interventions, rather than “off-balance-sheet”, with the Fed undermining global confidence in the dollar by continuing to flood the market with new dollars. This can only lead to greater damage to America’s prosperity and global influence.

[Demeter]

28. Bondholders "Lucky" to Recover 10% in Defaults

http://www.nakedcapitalism.com/2008/04/bondholders-lucky-to-recover-10-in.html

Bloomberg reports that the rating agency Fitch predicts that recoveries on corporate bonds that default will be far lower than in previous downturns, due to the deterioration in lending standards. The estimate is grim;

Rather than receiving the historical average recovery of 42 cents on the dollar in a default, owners of a third of high- yield, high-risk bonds rated B+ or lower may get no more than 10 cents, according to New York-based Fitch Ratings. About 22 percent are likely to get 11 cents to 30 cents.


Note that there are, understandably, forecasts as to how bad the defaults will get:

Moody's anticipates defaults will quadruple to 5.9 percent in 12 months. That assumes a ``mild'' recession. Judging by the amount of distressed debt, investors expect an 8 percent default rate, said Martin Fridson, head of high-yield research firm FridsonVision LLC in New York.

[lib2DaBone]

32. Crude jolt for US as Iran scraps oil trade in dollar

No mention of this in American Media? Is this not fairly significant to the economy?

With Iran, the world’s fourth-largest oil producer, shifting its crude trading to the euro and the yen, instead of the US dollar, treasury managers feel that this could well be the first challenge to the US dollar’s dominance as currency of global trade.
http://economictimes.indiatimes.com/articleshow/3000162.cms :shrug:

[AnneD]

36. NY Times reporter details pharmaceutical company marketing methods

Next time you hear a story about how a major medical journal is reporting a treatment breakthrough, you might stop and think for a moment about what lies behind the report.

Was the research done independently, and if not, was it paid for by a drug company?

And if the results are favourable about a particular drug, can you be sure that other less favourable results have not been censored or suppressed?

If those questions seem too dramatic or conspiratorial, there is plenty of evidence to back them up in a new book by New York Times reporter, Melody Petersen.

more....

http://www.abc.net.au/news/stories/2008/04/30/2232048.htm

This is old new to some folks.(I notice that most of my pens are from drug companies:blush: )

[AnneD]

37. Are Your Medical Records at Risk?

When it comes to protecting the privacy of patients' computerized information, the main threat the health-care industry faces isn't from hackers, but from itself.

In a spate of recent security lapses at hospitals, health insurers and the federal government, private information on hundreds of thousands of patients, ranging from Social Security numbers to fertility-treatment and cancer records, has been compromised. The incidents have included the theft of an unencrypted laptop from an employee of the National Institutes of Health and the inadvertent posting of personal data unsecured on the Web from insurers WellCare Health Plans Inc. and WellPoint Inc. At the UCLA Hospital System, several employees were fired or disciplined recently for sneaking peeks at Britney Spears' computerized medical files.


Breaches of consumers' confidential data are widespread in the health-care industry.
• At hospitals, a broad range of employees, from nurses to lab technicians, can access patients' information.
• Some hospitals limit by job function the types of data that staff can see. But other institutions fear tight controls could compromise emergency care.
• So far, there is little evidence that privacy-data lapses have led to identity thefts.In another recent incident, a former patient-admissions employee at NewYork-Presbyterian Hospital/Weill Cornell Medical Center was arrested this month for allegedly selling at least 2,000 patient identification records, according to the U.S. Attorney for the Southern District of New York. The employee improperly accessed nearly 50,000 patient records in a computer system storing names, Social Security numbers and addresses, court documents allege. Hospital spokeswoman Myrna Manners says some patients have told the hospital they suspect their information had been "used," though it wasn't clear for what purpose or whether identity theft had occurred.

Health care isn't the only industry whose slip-ups can upset consumers or expose them to identity theft. But hospitals are notable for the sheer number and types of employees -- including billing staff, nurses, doctors, researchers and lab technicians -- who have quick access to individuals' private information. A number of hospitals have been installing controls that limit by job function the types of data that employees can see. But institutions also are reluctant to control access to patients' private data too tightly, for fear that doing so could get in the way of patient care, especially in emergencies.

more.....

http://online.wsj.com/article/SB120941048217350433.html?mod=hps_us_editors_picks

This is such a thorny issue. We are drilled in the HIPPA laws and I can't tell you how many times I have been cussed out for not giving out info-but it's not the Docs and Nurses that I worry about so much as the Insurance Co and other folks that purchase this info.

[UpInArms]

39. Home Depot Slows Store Expansion, Plans To Shutter 15 Locations

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

5 minutes ago Home Depot no longer plans to open about 50 U.S. stores - MarketWatch

5 minutes ago Home Depot no longer plans to open about 50 U.S. stores - MarketWatch

5 minutes ago Home Depot to close 15 U.S. stores - MarketWatch

5 minutes ago Home Depot records Q1 charge of about $547 mln - MarketWatch

6 minutes ago Home Depot then plans to grow square footage by 1.5% a year - MarketWatch

7 minutes ago Home Depot plans to open 55 stores in current fiscal year - MarketWatch

[AnneD]

40. Don't Fall Victim To a Stimulus Check Scam

The government is ahead of schedule and sending out tax rebate checks early. However, scam artists are never off the clock, and with some 111 million homes eligible for a cash infusion, some crooks are seeking to profit on the impatience of American taxpayers this spring.

The Internal Revenue Service (IRS) began mailing economic stimulus payments April 28 but not everyone will get their money at the same time. A person's social security number, and whether they chose to get their check through direct deposit or the mail, will determine when they actually receive the funds. However, the IRS is also warning taxpayers of a number of scams taking place in which con artists looking to steal money are urging people to reveal personal information.

Some of the scams involve email messages while others take place over the phone. However, the IRS generally communicates with people via letters in the mail. So, an email or phone call should be a red flag.

One phone scam reportedly works like this: Taxpayers receive a call from someone who claims to work for the IRS, then the con artist prompts the victim to reveal bank account information and Social Security numbers by insisting that it will speed processing of their stimulus payment. Jay Foley, founder of ID Theft Resource Center, says that this information request should also raise your suspicions. According to Foley, "no legitimate business will ever ask for personal information over the phone or in an email."

more.....

http://mainstreet.com/dont-fall-victim-stimulus-check-scam

I thought think the whole stimulus package is a scam...but that's another story.:evilgrin:

[AnneD]

41. Shortages Threaten Farmers’ Key Tool: Fertilizer

<snip>


Then the widespread use of inexpensive chemical fertilizer, coupled with market reforms, helped power an agricultural explosion here that had already occurred in other parts of the world. Yields of rice and corn rose, and diets grew richer.

Now those gains are threatened in many countries by spot shortages and soaring prices for fertilizer, the most essential ingredient of modern agriculture.

Some kinds of fertilizer have nearly tripled in price in the last year, keeping farmers from buying all they need. That is one of many factors contributing to a rise in food prices that, according to the United Nations’ World Food Program, threatens to push tens of millions of poor people into malnutrition.

Protests over high food prices have erupted across the developing world, and the stability of governments from Senegal to the Philippines is threatened.

In the United States, farmers in Iowa eager to replenish nutrients in the soil have increased the age-old practice of spreading hog manure on fields. In India, the cost of subsidizing fertilizer for farmers has soared, leading to political dispute. And in Africa, plans to stave off hunger by increasing crop yields are suddenly in jeopardy.

more....

http://www.nytimes.com/2008/04/30/business/worldbusiness/30fertilizer.html?_r=1&hp&oref=slogin

an interesting read...:think: And I am resisting the urge to make Congress, President and press conference jokes... must...bite...tongue....

[AnneD]

44. Mexicans abroad sending less money home

MEXICO CITY — Mexican remittances have fallen 2.9 percent this year due to the U.S. economic downturn, the central bank said Wednesday.

Mexicans living abroad sent home $5.3 billion from January to March, compared with $5.5 billion during the first three months of 2007.

Remittances are vital to Mexico's economy, the country's second-largest source of foreign income after oil exports. But the bank said it expects little or no growth in remittances by year's end.

In addition to the slowing U.S. economy, migration experts blame the drop in remittances on the U.S. crackdown on illegal immigration.



http://www.chron.com/disp/story.mpl/business/5744413.html

Again. this has the potential to have drastic political impact in Mexico and those of us living close to Mexico.

[Demeter]

49. Bear Stearns Buy-Out... 100% Fraud

http://www.optionsforemployees.com/articles/idx/0/130/article/Bear_Stearns_BuyOut_100_Fraud.html

TINFOIL OR TICKING TIME BOMB? YOU DECIDE!--DEMETER


This article is about how Bear Stearns stock was artificially collapsed so that illegal insider traders would make billions and J.P. Morgan would be paid $55 billion of US tax payer money to shore up themselves and buy Bear Stearns at bankruptsy prices.


Massive buying of puts and shorting stock in Bear Stearns


On March 10, 2008, the closing price of Bear Stearns was 70. The stock had traded at 70 eight weeks earlier. On or prior to March 10, 2008 requests were made to the options exchanges to open new April series of puts with exercise prices of 20, and 22.5, and a new March series with an exercise price of 25.

Their requests were accommodated and new series were opened for trading March 11, 2008. Since there was very little subsequent trading in the calls with exercise prices of 20, 22.5 or 25, it is certain that the requests were made with the intentions of buying substantial amounts of the puts.mThere was, in fact, massive volumes of puts purchased in those series which opened on March 11, 2008. For example: between March 11-14 inclusive, there were 20,000 contracts traded in the April 20s, 3700
contracts traded in the April 22.5s, and 8000 contracts traded in the April 25s. In the March 25s, there were 79,000 contracts traded between March 11-14, 2008.


Question: Why did the options exchanges not open the far out of the money puts for trading the first time that Bear Stearns stock hit 70, when the April and March options had far more time to expiration? Certainly if the requesters were legitimate hedgers or speculators, their buying the March and April puts with 2 and 3 months to expiration was more reasonable.


Answer: The insiders were not ready to collapse the stock and did not request the exchanges to open the new series when Bear Stearns first hit 70..


Second Request and Accommodation

On or prior to March 13, 2008, an additional request was made of the options exchanges to open more
March and April put series with very low exercise prices. These new March put options would have just
five days of trading to expiration. The exchanges accommodated their requests, knowing that the intentions of the requesters were to buy puts. They indeed bought massive amounts of puts. For example the March 20 puts traded nearly 50,000 contracts (i.e. contracts to sell 5 million shares at 20). The March 15s traded 9600, the March 10s traded 13,000 and the March 5s traded 6300 all on March 14 (the first day of trading of the new March series).

The introduction of those far-out-of-the-money put series in the April and March months immediately before the crash provided a vehicle whereby extreme leverage was available to the insiders. In other words if an insider had $100,000 and he knew that Morgan would buy Bear Stearns at 2, he could make 5-10 times more on the $100,000 by buying the newly introduced March puts. This is so because the soon to expire far out-of-the-money puts were far cheaper than the July or October out-of-the-money puts. And that is why the illegal inside traders requested the exchanges to introduce the far out-of-the-
moneys just days before the crash. But this scenario has serious implications. This means that the deal was already arranged on March 10 or before.

That contradicts the scenario that is promoted by SEC Chairman Cox, Fed Boss Bernanke, Bear CEO Schwartz, Jamie Dimon of J.P. Morgan (who sits on the board of directors for the New York Federal Reserve Bank) and others that false rumors undermined the confidence in Bear Stearns making the company crash, notwithstanding their adequate liquidity days before.

I would say that the deal was arranged months before but the final terms and times were not determined until maybe March 7-8, 2008. On March 14, 2008, the April 17.5s, the 15s, the 12.5s and the 10s traded 15,000 contracts combined. Each put gives the right to sell 100 shares. So for example, these 15,000 April puts gave the purchaser(s) the right to sell 1.5 million shares at prices between 10 and 17.5. Those purchasers expected to make profits on 1.5 million shares because they knew the deal was coming at $2.00.

That is the only plausible explanation for anyone to buy puts with five days of life remaining with strike prices far below the market price. So there were requests, during the period of March 10-13, to the exchanges to open the March and April series for buying massive amounts of extremely out-of-the-
money puts, which were accommodated by the options exchanges. Did the Exchanges aid and abet the insider trading scheme? We are not able to form a strong opinion on that idea.


Media statements of adequate liquidity.

However, Reuters, on March 10, 2008 was citing Bear Stearns sources that there was no liquidity crisis and that there was no truth to the speculation of liquidity problems. And none other than the Chairman of the Securities and Exchange Commission on March 11, 2008 was stating that "we have a good deal of comfort with the capital cushion that these firms have". We even had the "mad" Jim Cramer proclaiming on March 11, 2008 that all is well with Bear Stearns and that the viewers should hold on to their Bear Stearns. And on March 12, 2008, Alan Schwartz CEO of Bear Stearns was telling David Faber of CNBC that there was no problem with liquidity and that "We don't see any pressure on our liquidity, let alone a liquidity crisis".

The fact that the requests were made on March 10 or earlier that those new series be opened and those
requests were accommodated together with the subsequent massive open positions in those newly opened series is conclusive proof that there were some who knew about the collapse in advance, while Reuters, Cox, Schwartz and Cramer were telling the public that there was no liquidity problem.

This was no case of a sudden development on the 13 or 14th, where things changed dramatically making
it such that they needed a bail-out immediately. The collapse was anticipated and prepared for, even
while the CEO of Bear Stearns and the Chairman of the SEC were making claims of stability.

What was the reason that Cramer, Cox and Schwartz were all promoting Bear Stearns immediately before
its collapse? That will be speculated upon for years to come. Cramer has admitted that "truth" was not his friend and that he manipulated stocks to influence investors behavior. Was this one of his acts?
But no apologies from Cramer as he claims now that he was referring to keeping money in Bear Stearns Bank not in Bear Stearns stock.

Proof of Insider Trading:

To prove the case of illegal insider trading, all the Feds have to do is ask a few questions of the persons who bought puts on Bear Stearns or shorted stock during the week before March 17, 2008 and before. All the records are easily available. If they bought puts or shorted stock, just ask them why.
What information did they have access to which the CEO and the SEC did not have? Where did they get the info? Why aren't Cramer and Cox, Dimon, Bernanke, Geithner, Paulson, Faber and Schwartz subject to a bit of prosecutorial pressure to get to the bottom of this?

Maybe the buyers of puts and short sellers of stock just didn't believe Reuters, Cox, Schwartz, Cramer and Faber and went massively short anyway, buying puts that required a 70% drop in a week. Maybe they had better information than Schwartz or Cox. If they did, then that's a felony, with the profits made subject to forfeiture.


April 4, 2008 Congressional Hearings on the Bear Stearns Bail-out.

I watched both sessions and drew the following conclusions:

In the first session there were the following witnesses: Bernanke of the Federal Reserve Board, Cox from the SEC, Geithner representing the New York Reserve Bank and an incidental player Mr. Steel from the Treasury.

The only Senators that seem to be willing to attack these bankers were Bunning, Tester, Menedez and
Reed. All the rest were useless and very respectful.


Absurdities

All witnesses did their best to keep their stories consistent but they did slip up a bit. They all agree that the bail-out was necessary without any proof that it was. They all agreed that what caused the cash liquidity to dry up within one day was the rumormongers. Apparently it is claimed that some people have the ability to start false rumors about Bear Stearns's and other banks' liquidity, which then starts a "run on the bank" . These rumormongers allegedly were able to influence companies like Goldman Sachs to terminate doing business with Bear Stearns, notwithstanding that Goldman et al.
believed that Bear Stearns balance sheet was in good shape. (Goldman between March 11-14 warned their
average customers that Bear Stearns stock was "hard to borrow" for shorting due to the fact that other
customers had used up all of the stock available for borrowing for short sales) .

That idea that rumors caused a "run on the bank" at Bear Stearns is 100% ridiculous. Perhaps that's the reason why every witness were so guarded and hesitant and looked so strained in answering questions.


Loans to J.P. Morgan total $55 billion from FED


The Private New York FED lent $25 billion to Bear Stearns (described as the primary facility by James Dimon) and another $30 billion to J.P. Morgan (described as the secondary facility by James Dimon). So the bail-out cost was $55 billion not the $30 billion that is promoted. This was revealed at the second session of the Senate hearings in a James Dimon responce to a question from Senator Reed.

Who gets the $55 billion? J.P. Morgan received the money on a loan pledging Bear Stearns assets valued at $55 billion. $29 billion is non-recourse to Morgan. Effectively the FED received collateral appraised by Bear Stearns at $55 billion for a loan to J.P. Morgan of $55 billion. That's a loan to value of 100%.


If the value of the secondary facility of $30 billion ($29 billion of which is non recourse) is worth only $15 billion when all is said and done, then J.P. Morgan has to pay back only $1 billion of the $30 billion received and keeps the $14 billion the the Fed loses. If the $25 billion primary facility is worth only $15 billion when all is said and done, J.P. Morgan has to pay $10 billion of the $25 billion received. If J.P Morgan can not pay, then the Fed loses the $10 billion. If after all is said and done, the $25 billion primary assets or the $30 billion secondary assets are sold for more than $25 billion or the $30 billion respectively, the difference goes to J.P. No matter how you cut it,
J.P. Morgan wins...If the $55 billion assets turn out to be worth only $20 billion when all is said and done, J.P. Morgan owes $1 billion on the $30 billion and the difference between $25 billion and the value received on the primary facility. The best the FED can do is get their money back with
interest and the worst they can do is lose about $25 -$40 billion. The FED would have been far better to just buy the assets at Bear's and J.P.Morgan's valuation.

-----------------------------------------------------------

The question arises: Why didn't the FED just make the $55 billiom loan to Bear Stearns directly? The FED received Bear Stearns assets valued by Bear Stearns as its only collateral for the 100% loan. I am sure that Bear Stearns would have guaranteed the full $55 billion and would have advanced more collateral and accepted a 90% loan to value. Everything would have been just fine for Bear Stearns and the FED would have had a better deal. But the Bear Stearns stock would have gone up and all short stock sellers and all put buyers would have massive losses instead of massive gains.

The bail-out is a great deal for J.P. Morgan, the illegal insider short sellers got a great deal. Bear Stearns stock holders and employees got a very bad deal and the sellers of puts sustained large losses..

This shows, in my view, that J.P. Morgan and the FED were in collusion with the short sellers and put buyers.


John Olagues

[Ghost Dog]

82. Why March 10 & March 13? Spitzer was outed March 9 or 10 & resigned March 12?

- the lines from the above reminded me: "But this scenario has serious implications. This means that the deal was already arranged on March 10 or before. ... I would say that the deal was arranged months before but the final terms and times were not determined until maybe March 7-8, 2008."

[Demeter]

55. Islamic Finance By Loretta Napoleoni

http://www.informationclearinghouse.info/article19818.htm

26/04/08 "ICH" -- -- Islamic finance has become the fastest-growing, most dynamic sector of global finance. Every Western-style financial product has its sharia, i.e. Islamic law, compliant instrument: microfinance, mortgages, oil and gas exploration, bridge building, even sponsorship of sporting events. Islamic finance is innovative, flexible, and potentially very profitable. “Operating in 70 countries with about $500bn in assets, it is poised to expand geometrically.” With more than one billion Muslims eager to support it, analysts project that this system will soon manage approximately 4 percent of the world economy, equivalent to $1 trillion in assets. Such figures explain the eagerness of Western banks to tap into sharia financial services. Citigroup, along with many other Western banking retailers, have opened Islamic branches in Muslim countries.

At the end of 2004, the Islamic Bank of Britain, the first bank catering to a European Muslim client base, floated its shares on the London Stock Exchange. Ironically, Western capitalism’s three major global economic crises - the 1970s oil shocks, the late 1990s Asian crisis, and 9/11 - paved the way to the ascent of Islamic finance. Unlike market economics, Islamic finance centers on the religious tenets of Islam and operates in a way to keep Muslims compliant with sharia, the religious law that comes directly from the Koran. Islamic activists, intellectuals, writers, and religious leaders have always upheld the prohibition of riba, the interest charged by moneylenders, and denounced gharar, which refers to any type of speculation. Under this belief, money must not become a commodity in itself to create more money. Islamic finance thus shuns hedge funds and private equities, because they simply multiply cash by stripping assets. Money serves as a means or instrument of productivity as originally envisioned by Adam Smith and David Ricardo. This principle is embodied in the sukuks, Islamic bonds. Sukuks always link to real investments - for example, to pay for the construction of a toll highway - and never for speculative purposes. This principle springs from the sharia’s ban on gambling as well as on the prohibition of any forms of debt and activities that trade risk.

At the end of the nineteenth century, supporters and promoters of Islamic finance repeatedly expressed discontent with the Western-style banks that had penetrated Muslim countries.
Several fatwas, or religious decrees, were issued to reiterate the tenet that the interest-based activities of the colonizers’ banks proved incompatible with the sharia. Yet, because Western financial institutions were the only banks active in the Muslim world, the faithful had to use them even if they performed poisonous practices based on prohibited activities.

From the mid-1950s to the mid-1970s, economists, financiers, sharia scholars, and intellectuals studied the possibility of scrapping interest rates and of creating financial institutions centered on a sharia-compatible alternative to the riba. In their mind the Islamic economic system would incorporate the zakat - obligatory almsgiving to help the poor - and other fundamental elements of the Muslim religion, such as the funding of the haj, i.e. the pilgrimage to Mecca. The first projects of applied Islamic economics came into existence concurrently in the 1950s in the countryside of Lower Egypt and in Kuala Lumpur, Malaysia. The Egyptian project, located in Meet Ghamr, Egypt, supported a housing plan for the less wealthy. The Malaysian government-sponsored experiment was promoted by the Pilgrims’ Administration and Fund of Malaysia. It supervised financial institutions that collected savings and invested them in accordance with the sharia. It aimed to finance the haj, which, together with the zakat, is one of the five pillars of Islam.

Until the early 1970s, Islamic economics was essentially embryonic and regarded with deep skepticism. “Back then, no one really thought Islamic banking would ever become big,” recalls Sheik Hussein Hamid Hassan, an Egyptian scholar involved in the creation of one of the first Islamic banks. “People thought it was a strange idea - as strange as talking about Islamic whiskey!” Western skepticism compounded daily because of the Muslim countries’ chronic lack of capital. They had no money to start an alternative banking system, many thought they never would, therefore people dismissed the idea of Islamic finance as merely utopian. This scenario changed with the 1973–1974 oil shock, which generated a massive capital inflow into Arab oil-producing countries from Western importers. The quadrupled price of oil generated the capital needed to put into practice what had remained only an idea debated for decades. That idea materialized with the establishment of an international developmental bank for the Islamic region. Such a bank would enhance the Organization of the Islamic Conference, considered a potential power base for some of the newly enriched countries, especially Saudi Arabia and Algeria. At the same time, the bank would serve as the instrument for distributing financial help from oil-rich Muslim countries to their brethren in Africa and Asia. The first call for the establishment of the Islamic Development Bank (IDB) came from the heads of state of Saudi Arabia, Algeria, and Somalia. In 1974, when the articles of agreement of the IDB were drafted, it formally stated that the bank’s activities had to be conducted in accordance with the sharia.

At the core of sharia-compliant economics there is an exceptional joint venture. Indeed, this alliance emerged in the 1970s when richMuslims and sharia scholars began working together. This unusual partnership is a phenomenon unique in modern economics, but one that cemented the foundation of a new economic system. A few visionary personalities, like PrinceMohammad al Faisal (son of the late Saudi King Faisal bin Abdul-Aziz), Saleh Kamel of Saudi Arabia, Ahmed al Yaseen of Kuwait, and Sami Hamoud of Jordan, channeled some of the new wealth produced by the first oil shock into the formation of a new breed of Islamic banks. Sharia scholars and clerics drew up the monetary structure of the new banks.

Partnership between leaders and clerics, therefore, serves as the root of Islamic finance. This concept springs from the essence of the Umma, the body or community of believers, central to the spirit of Islam. For Muslims, the Umma represents a single and unified entity; it breathes, thinks, and prays in unison. It exudes the soul of Islam. Individualism within
Islam does not make sense because Islam, based on tribal culture, does not recognize it. Traditional tribal values, such as the strong sense of belonging, the obligation to help friends in need, and the acceptance of religious leaders’ authority are the pillars of Muslim culture. Sharia scholars transplanted these values into Islamic economics; these same principles allowed Arab Bedouins to withstand the harshness of the desert for centuries. Cooperation was essential in such a hostile environment and is still a must in modern times.

Partnership is the heartbeat of Islamic economics. “Underlying the system is the philosophy of risk sharing: the lender must share the borrower’s risk, making the two in effect partners, injecting a strong social component into the financial system. This concept separates Islamic Finance from Western Finance, which seeks to maximize profits and minimize loss through diversification and risk transfer.” Also, money must be put to work. Because Islamic finance prohibits interest, it seeks revenues from rents, royalties, business profits, or commodity trading; a mortgage, for example, represents a “rent to buy” arrangement. Thus, conceptually, Islamic economics is the opposite of Western finance, which revolves around the individual’s self-interest.

Above all, Islamic finance represents the sole global economic force that conceptually challenges rogue economics. It does not allow investment in pornography, prostitution, narcotics, tobacco, or gambling. As discussed above, since the fall of the Berlin Wall, all these areas have blossomed thanks to globalization outlaws under the indifferent eyes of the market-state.

Loretta Napoleoni: An expert on financing of terrorism, Loretta advises several governments on counter-terrorism. She is senior partner of G Risk, a London based risk agency. - She is a Fulbright scholar at Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies in Washington DC. and a Rotary Scholar at the London School of Economics..

To review further articles and listen to podcasts by Loretta Napoleoni, you are invited to visit her website: http://www.lorettanapoleoni.org

[Demeter]

58. Global Famine? Blame the Fed By Mike Whitney

http://www.informationclearinghouse.info/article19809.htm





25/04/08 "ICH" -- - The stakes couldn't be higher for Ben Bernanke. If the Fed chief decides to lower rates at the end of April, he could be condemning millions of people to an agonizing death by starvation. The situation is that serious; there's no room for error. Food riots have broken out across the globe destabilizing large parts of the developing world. China is experiencing double-digit inflation. Indonesia, Vietnam and India have imposed controls over rice exports. Wheat, corn and soya are at record highs and threatening to go higher still. Commodities are up across the board. The World Food Program is warning of widespread famine if the West doesn't provide emergency humanitarian relief. The situation is dire. Venezuelan President Hugo Chavez summed it up like this, "It is a massacre of the world's poor. The problem is not the production of food. It is the economic, social and political model of the world. The capitalist model is in crisis."

Right on, Hugo. There is no shortage of food; it's just the prices that are making food unaffordable. Bernanke's "weak dollar" policy has ignited a wave of speculation in commodities which is pushing prices into the stratosphere. The UN is calling the global food crisis it a "silent tsunami", but its more like a flood; the world is awash in increasingly worthless dollars that are making food and raw materials more expensive. Foreign central banks and investors presently hold $6 trillion in dollars and dollar-backed assets, so when the dollar starts to slide, the pain radiates through entire economies. This is especially true in countries where the currency is pegged to the dollar. That's why most of the Gulf States are experiencing runaway inflation. This doesn't mean that oil depletion, biofuel production, over-population, and giant agribusinesses don't add to the problem. They do. But the catalyst is the Fed's monetary policies; that's the domino that puts the others in motion. Here's Otto Spengler's summary in his recent article in Asia Times, "Rice, Death and the Dollar": "The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe....The link between the declining parity of the US unit and the rising price of commodities, including oil as well as rice and other wares, is indisputable.

Never before in history has hunger become a global threat in a period of plentiful harvests. Global rice production will hit a record of 423 million tons in the 2007-2008 crop year, enough to satisfy global demand. The trouble is that only 7% of the world's rice supply is exported, because local demand is met by local production. Any significant increase in rice stockpiles cuts deeply into available supply for export, leading to a spike in prices. Because such a small proportion of the global rice supply trades, the monetary shock from the weak dollar was sufficient to more than double its price." ("Rice, death and the dollar", By Otto Spengler, Asia Times)...The US is exporting its inflation by cheapening its currency. Now a field worker in Haiti who earns $2 a day, and spends all of that to feed his family, has to earn twice that amount or eat half as much. That's not a choice a parent wants to make. Its no wonder that six people were killed Port au Prince in the recent food riots. People go crazy when they can't feed their kids. Food and energy prices are sucking the life out of the global economy. Foreign banks and pension funds are trying to protect their investments by diverting dollars into things that will retain their value. That's why oil is nudging $120 per barrel when it should be in the $70 to $80 range.

According to Tim Evans, energy analyst at Citigroup in New York, “There’s no supply-demand deficit". None. In fact suppliers are expecting an oil surplus by the end of this year. "The case for lower oil prices is straightforward: The prospect of a deep U.S. recession or even a marked period of slower economic growth in the world’s top energy consumer making a dent in energy consumption. Year to date, oil demand in the U.S. is down 1.9% compared with the same period in 2007, and high prices and a weak economy should knock down U.S. oil consumption by 90,000 barrels a day this year, according to the federal Energy Information Administration." ("Bears Baffled by Oil Highs" gregory Meyer, Wall Street Journal)...There's no oil shortage; that's another ruse. Speculators are simply driving up the price of oil to hedge their bets on the falling dollar. What else can they do; put them in the frozen bond market, or the sinking stock market, or the collapsing housing market? The Fed has gummed up the entire financial system with its low-interest credit scam; now it's on to commodities where the real pain is just beginning to be felt. What a mess!

This is what happens when there's too many dollars sloshing around the system; they all need a place to rest, and when they do, they create equity bubbles. Sound familiar? Indeed. This is Greenspan's legacy in a nutshell; the dark specter of Maestro will continue to haunt the world until all the hyper-inflated asset-classes (real estate, bonds, stocks, commodities) return to earth and all the red ink is mopped up. That'll take time, but Bernanke could make things a lot easier if he accepted some responsibility for the current turmoil and raised rates by 25 basis points. That would show speculators that the Fed was serious about defending the currency which would send the commodities bubble crashing to earth. Prices would go down overnight; guaranteed. But Bernanke won't raise rates because he doesn't really give a hoot about the people in Cameroon who have to scavenge through garbage-dumps for a few morsels to keep their families alive. Nor does he care about the average American working-stiff who gets cardiac-arrest every time he pulls up to the gas pump. What matters to Bernanke is making sure that his fat-cat buddies in the banking establishment get a steady stream of low interest loot so they can paper-over their bad investments and ward off bankruptcy for another day or two. Its a joke; it was the investment banks that started this downward spiral with their rotten mortgage-backed securities and other debt-exotica. Still, in Bernanke's mind, they are the only ones who really count.

And don't expect Bush to step in and save the day either. The "Decider" still believes in the unrestricted activity of the free market; especially when his crooked friends can make a buck on the deal...The Bush administration knows there's hanky-panky going on, but they just look the other way. It's Enron redux, where Ken Lay Inc. scalped the public with utter impunity while regulators sat on the sidelines applauding. Great. Now its the Commodity Futures Trading Commission (CFTC) turn; they're taking a hands-off approach so Wall Street sharpies make a fortune jacking up the price of everything from soda crackers to toilet bowl...Prices have doubled, people are starving, and the Bush troop is still parroting the same worn party-mantra. Its maddening.

The US has been gaming the system for decades; sucking up two-thirds of the world's capital to expand its cache of Cadillac Escalades and flat-screen TVs; giving nothing back in return except mortgage-backed junk, cluster bombs, and crummy green paper. Nothing changes; it only gets worse. But this is different. The world is now facing the very real prospect of "completely avoidable" famine because twelve doddering old banksters at the Federal Reserve would rather bailout their sketchy friends and preserve their spot at the top of the economic food-chain then save the lives of starving women and children. Bernanke now has an opportunity to do more damage than Bush with one swipe of the pen. If he cut rates; the dollar will fall, commodities will spike, and people will starve. It's as simple as that.

[Demeter]

62. A new world order as US sinks

http://www.theaustralian.news.com.au/story/0,25197,23480097-36375,00.html

HERE'S a big lesson of the first international financial crisis of the 21st century: some old-fashioned economies are weathering the storm better than those that borrowed big to spur growth or those that bet heavily on debt-strapped American consumers.

The US, the economy at the centre of the turmoil, is dragging down world growth. On Wednesday, Federal Reserve chairman Ben Bernanke gave his most pessimistic assessment to date of the US economy's outlook, strongly suggesting that a recession was likely. In testimony before Congress, he also said the Fed projected slower global growth over the coming quarters. How the other economies fare could offer important insight that world leaders already are trying to glean. Over the coming week, the global economy will be at the centre of discussions as finance ministers gather for the spring meetings of the International Monetary Fund and World Bank in Washington. At the top of their agenda: what steps to take to revamp global financial regulation, ease the global credit squeeze and boost growth.

Countries such as Australia, Brazil, the United Arab Emirates and Qatar are still expanding smartly, although down from 2007, because they have rich veins of high-priced oil, iron ore, alumina or copper. Old-line heavy machinery makers such as Germany and Japan are riding out the problem because they have diversified their markets.

On the flipside, consumer-goods exporters of Asia that rode to prosperity by trading with the US - Thailand, the Philippines, Malaysia and even China - are seeing their lofty growth rates sag. And the Baltic countries, Hungary and Iceland, which borrowed heavily to finance growth, are now watched by international financial institutions to see whether they will come unhinged by the credit squeeze.
...Right now the global economy looks well positioned to weather the turmoil, unless the US falls into a deep, lingering recession. The global economy is expected to grow 3.8 per cent this year, compared with 4.7 per cent a year earlier, according to numbers due yesterday from The Peterson Institute for International Economics, a Washington think tank.

Resource-rich countries - including Russia, Brazil and Australia - are poised to keep prospering. Vast appetites for raw materials in China, India and elsewhere give commodity producers alternatives to the US market, and have lessened the chance of a commodities crash. Russia, a centre of the last global financial crisis in the late 1990s, now touts its economy as a "safe harbour" thanks to surging prices for its oil, gas and other commodity exports. Brazil, another late 90s loser, has become a new economic pillar thanks to soaring demand for iron ore, coffee and sugar. Brazil's interest rates are heading downward after years in the stratosphere, giving Brazilians relatively cheap credit which they're ploughing into new homes, cars and small businesses.


For some commodity producers, the biggest danger is overheating. Middle Eastern oil producers are sinking their new wealth into government-financed roads, airports and new oil and gas field development. But the spending is stoking inflation. That is exacerbated by a sharply falling US dollar, which raises the price of imports in Persian Gulf nations. In Qatar, inflation is running at 14 per cent. In the UAE, inflation has triggered a series of violent protests by expatriate labourers angered by their falling buying power. In response, some governments in the region are lifting Customs duties on construction materials and food imports, and boosting government salaries by as much as 70 per cent.

A number of world economies might be in for pain, including Turkey and the parts of Eastern and Central Europe that have borrowed heavily on global markets to finance spending on consumer goods and real estate. The likes of Romania, Bulgaria, Hungary and the Baltic trio of Latvia, Lithuania and Estonia could now face a drying up of credit. That raises the risk of a replay of the 90s financial crisis, when Latin America, Russia and Southeast Asia couldn't repay their foreign currency debts, causing banks and companies to fail and plunging economies into recessions. Sparsely populated Iceland is among the newly vulnerable countries. At the end of last year, its foreign debts, held mainly by banks, amounted to 430 per cent of its gross domestic product, several times the level in the countries of Eastern Europe. The global credit crunch means Iceland's banks must pay higher interest now to borrow funds abroad, which they then lend at home. In response, local companies and households are curtailing their borrowing and spending. Iceland's policy makers counter that the country's banks have ample funds to service their debts and that recent investments in aluminium smelting will spur export revenues. Still, Iceland's currency, the krona, is under heavy pressure. The cost of buying insurance for debts owned by Icelandic banks has reached the highest level of any country's lenders. That usually means investors believe a debt default is a strong possibility...

[Zynx]

72. I will caution it is very early to declare victory for a lot of those countries.

The European economies are beginning to slow dramatically and it is very unlikely that the global economy will escape a slowdown or recession.

[Demeter]

73. I Agree. We Are All In Uncharted Waters

The country most able to stand on its own two feet without any supranatural, corporate interference will be the ultimate victor. Which means we ourselves are doomed, unless we slay or at least leash those dragons.

[Demeter]

74. 13,000. Now That's Just Obscene

Now it's slipped back 6 points...

[specimenfred1984]

75. Complete and utter unregulated insanity

just as predicted for years but completely ignored as usual. What a pathetic society, a torturing and spying bunch of corrupted and brainwashed tools so massively deluded from years of propaganda that truth has become "manufactured consent".

The entire world is just waiting for 2009 and for this nightmare to end.

[UpInArms]

84. closing numbers and $24.12 billion clydesdales for everybody!

Dow 13,010.00 189.87 (1.48%)
Nasdaq 2,480.71 67.91 (2.81%)
S&P 500 1,409.34 23.75 (1.71%)
10-Yr Bond 3.749% 0.01

NYSE Volume 4,449,778,500
Nasdaq Volume 2,362,707,250

Thursday the stock market closed at its session high of 1409, which is the first time since January that the stock market closed above 1400. The S&P 500 is now 12% off its 52-week low, which was hit in March, but still almost 11% off its 52-week high, which was hit in October 2007.

Financials (+3.9%) provided leadership to the market, receiving particular help from regional banks (+5.1%) and consumer finance firms (+6.5%). Dow Jones components Bank of America (BAC 39.39, +1.85), American International Group (AIG 48.25, +2.05), and JPMorgan Chase (JPM 49.25, +1.60) were the most influential leaders in the financial sector.

Energy (-2.2%), on the other hand, was the worst performing sector of the session. Industry stalwart Exxon Mobil (XOM 90.27, -2.80) announced it earned $2.03 per share for its most recent quarter, missing the consensus earnings per share estimate by $0.11. In similar fashion, energy exploration and production company Apache (APA 126.23, -8.45) announced this morning it missed the consensus earnings estimate.

Energy was also knocked lower by a drop in oil prices. Oil traded more than 2.0% lower during the session, partly fueled by strength in the dollar. The dollar index rose more than 1.0% Thursday to its best level in more than a month.

Strength in the greenback also pushed commodities lower, causing the CRB Commodities Index to reach its lowest level in four weeks. In turn, the materials sector (-0.7%) also underperformed the rest of the market, but finished off its session low.

Gold finished the day down $13.70 to $851.40 per ounce. Although the precious metal is up 1.5% this year, it has plummeted 18% from its all-time nominal high of $1033.90 per ounce that was reached on March 17.

Large-cap tech players fared well as the Nasdaq 100 finished more than 3.0% higher. Particular strength came from Apple (AAPL 180.00, +6.05) and Microsoft (MSFT 29.40, +0.88). Various reports indicated Microsoft may be willing to raise its offer to acquire Yahoo! (YHOO 26.81, -0.60) to as much as $33 per share. Microsoft's CEO, Steve Ballmer, is remaining stern in his offer.

Equities were the primary focus for the session, pushing Treasuries out of favor. The benchmark 10-year Treasury Note fell 10 ticks to yield 3.77%.

April's ISM Manufacturing survey posted a reading of 48.6, which is a bit above the 48.0 reading that was widely anticipated. The reading was unchanged from the prior month, seemingly indicating that manufacturing conditions have not worsened.

Construction spending during March took a dip, however. According to government data released today, construction spending for March slipped 1.1% month-over-month. The decline was more pronounced than the 0.7% decline that economists expected.

Initial jobless claims for the week ending April 26 totaled 380,000. The consensus estimate pegged jobless claims at 365,000. Though reported claims exceeded expectations, we continue to note that the average weekly claims never breached levels often associated with a recession.

Personal spending continues to rise, despite challenging macro trends. March's personal consumption expenditures, announced this morning, increased 0.4% in March, which is more than the expected 0.2% increase. Core PCE increased 0.2%, exceeding the estimated 0.1% increase. The increase was not much of a surprise as many already concluded that a rise in consumer spending helped first quarter GDP increase modestly. DJ30 +189.87 NASDAQ +67.91 SP500 +23.75 NASDAQ Dec/Adv/Vol 894/1956/2.35 bln NYSE Dec/Adv/Vol 928/2217/1.40 bln

http://news.yahoo.com/s/ap/20080501/ap_on_bi_ge/fed_credit_crisis">Fed auctions $24.12 billion in Treasuries to ease credit

WASHINGTON - The Federal Reserve has auctioned $24.12 billion in super-safe Treasury securities to big investment firms, part of an ongoing effort to ease credit problems.

The auction — the sixth of its kind — was held Thursday and fetched bids slightly less than the $25 billion being made available. That small reduction could suggest that demand for Treasuries may be moderating a bit. That might be viewed as a sign of some improvement in credit conditions.

In exchange for the 28-day loan of Treasury securities, bidding firms can put up more risky investments, including certain shunned mortgage-backed securities, as collateral. Bidders' identities are not made public.

The program began on March 27.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — The Federal Reserve has auctioned $24.12 billion in super-safe Treasury securities to big investment firms, part of an ongoing effort to ease credit problems.

The auction — the sixth of its kind — was held Thursday and fetched bids slightly less than the nearly $25 billion being made available.

...more...

[Demeter]

85. That's Some Goose

Like giving vodka to a drunk.