STOCK MARKET WATCH, Thursday May 8

[ozymandius]

Source: du

STOCK MARKET WATCH, Thursday May 8, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 258
DAYS SINCE DEMOCRACY DIED (12/12/00) 2664 DAYS
WHERE'S OSAMA BIN-LADEN? 2389 DAYS
DAYS SINCE ENRON COLLAPSE = 2680
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

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

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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 May 7, 2008

Dow... 12,814.35 -206.48 (-1.59%)
Nasdaq... 2,438.49 -44.82 (-1.80%)
S&P 500... 1,392.57 -25.69 (-1.81%)
Gold future... 871.20 -6.50 (-0.75%)
30-Year Bond 4.62% -0.02 (-0.43%)
10-Yr Bond... 3.87% -0.03 (-0.67%)






GOLD,EURO, YEN, Loonie and Silver

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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

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Read more: du

[ozymandius]

1. Market WrapUp - The State of the Consumer:

Pretty bad
BY RYAN J. PUPLAVA, CMT

While we believe in a stock market rally mid 2008 because of fiscal and monetary stimulus, we don’t believe it will be the start of a new bull market as many predict.

Housing declines in sales and values haven’t bottomed as evidenced by the pending home sales index today. Rising inflation costs are hitting consumer pocket books not only in energy but now in food. How are we going to begin a new bull market in stocks if these issues are still keeping the consumer down? Sure, retail sales are up, but that’s because prices have gone up in the two things they’ve been buying: gas and food! A larger and larger percentage of consumer income is going towards necessities, not luxuries.

.....

Starting off with today’s economic releases, pending home sales fell 20.1 percent from a year ago. The report said that restrictive practices by lenders are adding to the troubles. In addition, foreclosures are adding to supply on the market and pushing home prices lower. I’ve heard of some homeowners in San Diego contacting banks to work out their upside down loans only to be turned down a discussion unless they’re three months late on their mortgage. They must be swamped!

.....

Reporting late in the day, consumer credit rose $15.3 billion as consumers borrowed heavily in March. That represents $6.3 billion in revolving credit and $9.0 billion for non-revolving credit. The non-revolving credit is expected to decline in April based on weak vehicle sales. The rise in revolving credit in the first quarter points towards rising fuel and food costs racking up on credit cards. Despite the drop in the federal funds rate, the consumer hasn’t seen much of that reflect the rates he/she is paying on new car loans, credit cards, and home loans. During the first quarter in 2007, the interest rate on a new car for a 48-month duration was 7.74. The last reading was in February 2008 for 7.27. Credit card APR was 13.41% in the first quarter 2007 while they’re currently 12.48%. The difference is marginal, yet consumers are borrowing 7.25% more. In many extreme situations, the consumer is walking away from their house in many instances and that could spell trouble for credit cards and car financing. Change in consumer credit is important because it tends to rise at the beginning of a recession as consumers depend more on their credit cards than they do on income to pay for necessities. We see here that debt-to-income and the percent change in consumer credit has been rising since the housing peak mid-2006.

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

[AnneD]

11. Morning Marketeers......

:donut: This is precisely why I was more alarmed by the consumer credit yesterday than cheerful. At this point in time, any rise in credit spending-all things considered-means that gap between what folks earn and their bill totals are growing from a gap to a gulf. I don't think it is new cars or any other crap the talking heads were spouting yesterday.

But on another note...this will get you marketeers off to a cheerful start. An animal charity was offering a tea with Greenspan that finally sold for $11,000. Last year a similar time with Greenspan went for $45,000. I don't know if THAT bubble has popped but as my gardening Grandma would say-the bloom is off that rose.:spray:

Happy hunting and watch out for the bears.

[Hugin]

15. Good Morning AnneD...

:hangover:

Thanks for the cheer. :)


Well, throughout my readings yesterday it struck me that when people hear hoof-beats they're more likely to look
for a unicorn than a horse. Why is this? All I can say is that it's a tendency wholly encouraged by the Corporate
Media.

[AnneD]

17. Funny you should say that....

the best advice I got from an old Nurse was when you hear hoof beats-it's probably a horse not a zebra. So in my Nursing Diagnosis-I start simple to complex. And you know what....after a while, you get so good with the common that you can pick the unusual out right away (ie. if those hoof beats sound lighter and closer together-I know it is a zebra because I have heard the horse's hoof beats so often).

[ozymandius]

2. Today's Reports

08:30 Initial Claims 05/03
Briefing.com 370K
Consensus 375K
Prior 380K

10:00 Wholesale Inventories Mar
Briefing.com 0.4%
Consensus 0.5%
Prior 1.1%

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

[UpInArms]

10. Initial Claims in @ 365,000 - last wk rev'd up 3,000

08. U.S. 4-week avg. continuing claims highest in 4 years
8:30 AM ET, May 08, 2008

09. U.S. 4-week avg. continuing claims up 16,750 to 3.00M
8:30 AM ET, May 08, 2008

10. U.S. 4-week avg. initial claims up 2,500 to 367,000
8:30 AM ET, May 08, 2008

16. U.S. continuing weekly jobless claims fall 10,000 to 3.02M
8:30 AM ET, May 08, 2008

17. U.S. initial weekly jobless claims fall 18,000 to 365,000
8:30 AM ET, May 08, 2008

[ozymandius]

3. Oil steady after record near $124, with bulls in control

VIENNA, Austria - Oil prices held steady Thursday after jumping to a record near $124 a barrel in the previous session, as investors captivated by upward momentum seemed to ignore indications of growing U.S. crude and gasoline supplies.

Analysts had no clear answer for what prompted a surge that pushed prices past $120 for the first time earlier this week.

The fact that prices didn't decline sharply after the weekly U.S. inventory report signaled to some investors that the market was ripe for another rally.

"The bulls are in control and there's a lot of momentum driving the oil price up," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Participants now tend to focus on only the bullish elements of the news out there."

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

[ozymandius]

4. Some See Oil At $150 a Barrel This Year

A growing number of oil-market watchers say voters riled by soaring fuel costs may face far worse this summer, as factors ranging from unrest in Nigeria to slumping production in Russia could shove benchmark oil prices over $150 a barrel.

U.S. benchmark crude notched another record Tuesday, settling at $121.84 on the New York Mercantile Exchange. Nymex crude oil so far this year is up 27% and is now 17% above its previous inflation-adjusted record in April 1980. It is up 96% from a year ago.

Oil's seemingly unstoppable surge has led some analysts to issue gloomier price outlooks. Goldman Sachs Group Inc., which predicted the latest run-up, says the world may face a "super-spike" in which crude ranges from $150 to $200 a barrel as early as October, up from just over $120 now.

.....

At the pump, $150 oil translates into gasoline prices of more than $4.50 a gallon, putting further strain on U.S. auto makers, airlines and utilities. It would also stoke the political debate in Washington. Regular grade gasoline in April averaged $3.46 a gallon.

http://online.wsj.com/article/SB121010625118671575.html?mod=hpp_us_whats_news

[Roland99]

9. At this rate, it'll be by Memorial Day.

[AnneD]

13. Exxon's Nigeria unit producing at pre-strike levels

Exxon Mobil's Nigeria unit restored oil production to pre-strike levels after being forced to shut down output last month.

"Production operated by Exxon Mobil upstream affiliates in Nigeria has been restored to pre-shut-in levels," company spokeswoman Gloria Essien-Danner said in an e-mailed statement.

Exxon declared force majeure on oil exports after the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, began a strike April 24 over pay, halting about 860,000 barrels of crude a day, according to a union official.

In 2007, the gross operated production of Exxon's Nigerian affiliates was about 800,000 barrels a day, according to company spokeswoman Margaret Ross. She declined to comment on whether force majeure had been lifted.

Force majeure is a legal clause allowing producers to miss contracted deliveries because of circumstances beyond their control.

http://www.chron.com/disp/story.mpl/business/5763439.html

This is a dangerous hot spot for oil field workers these days. Lots of political unrest.

[AnneD]

14. All plastic, assembly required

Nathan Sawaya never outgrew Legos.

And in a cavernous hall packed with huge displays of genuine undersea oil and gas production equipment at the Offshore Technology Conference, he has spent the week painstakingly constructing a platform for oil field services company Weatherford International with the familiar interlocking plastic bricks — 50,183 of them to be exact.

"I don't have an engineering or architecture background, but my father's an engineer, so maybe it's in the blood," Sawaya said minutes after he placed the last brick on the intricate structure Wednesday, wrapping up three days of work.

A conference this big, with hundreds of booths and 65,000 or more attendees, encourages companies to devise eye-catching displays to attract potential customers and partners. Houston-based Weatherford, which doesn't build platforms, snagged Sawaya in a playful effort to promote "better build" from wells to partnerships, said Christine McGee, the company's vice president of marketing.

http://www.chron.com/disp/story.mpl/business/5762869.html

The photo doesn't do it justice-it is really cool. It went over very well (no pun intended);)

[AnneD]

16. Transocean's profit more than doubles

Transocean, the world's largest offshore oil driller, said its first-quarter profit more than doubled as record crude prices increased exploration for new reserves.

Net income rose to $1.2 billion, or $3.71 a share, from $553 million, or $2.62, a year earlier, the Houston-based company said in a statement. Excluding one-time items, profit was $3.80 a share.

First-quarter sales more than doubled to $3.1 billion from $1.3 billion.

http://www.chron.com/disp/story.mpl/business/5762873.html

Transocean has always been one of those quiet, steady companies that I have watched grow over the years. As we work harder to find oil-I think they will do even better-IMHO.

[UpInArms]

5. dollar watch

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

Last trade 73.597 Change +0.071 (+0.10%)

Will The Fed's Liquidity Policy Be Enough To Keep Rates Unchanged?

http://www.dailyfx.com/story/special_report/special_reports/Will_The_Fed_s_Liquidity_Policy_1210195453057.html

Confidence in the beleaguered credit markets seems to be slowly improving. With the Fed adding to its cumulative 325bps of easing last week and expanding its ad hoc efforts to revive liquidity, lenders are less fearful of a default and banks aren’t as apprehensive with taking on so-called risky assets that may be difficult to price and/or sell should there be another turn for the worse. Just this past week, the monetary policy authority has taken significant steps to squash the credit crisis once and for all. Adding to the already significant improvements to its lending facilities, the Fed announced it would increase its bi-weekly TAF auctions from $50 to $75 billion and further that it would now accept AAA-rated ABS as collateral. A potential long-term fix, Bernanke asked congress this morning to provide interest on commercial reserves.

<snip>

CREDIT MARKET: HOW IS IT DOING?

Confidence in the beleaguered credit markets seems to be slowly improving. With the Fed adding to its cumulative 325bps of easing last week and expanding its ad hoc efforts to revive liquidity, lenders are less fearful of a default and banks aren’t as apprehensive with taking on so-called risky assets that may be difficult to price and/or sell should there be another turn for the worse. Just this past week, the monetary policy authority has taken significant steps to squash the credit crisis once and for all. Adding to the already significant improvements to its lending facilities, the Fed announced it would increase its bi-weekly TAF auctions from $50 to $75 billion and further that it would now accept AAA-rated ABS as collateral. A potential long-term fix, Bernanke asked congress this morning to provide interest on commercial reserves.



<snip>

U.S. CONSUMER: HOW ARE THEY DOING?

While the data that has crossed the wires over the past week has been relatively promising for investors, it has not bolstered the outlook for consumers. Friday’s non-farm payroll report was a perfect example of the differing reactions between traders and American citizens. While the market was happy to see a smaller than expected drop in net layoffs, the fourth-consecutive drop in NFPs (the worst trend since the second half of 2003) confirms that conditions are still worsening. More recent data hasn’t even had a silver lining between the two groups. An independent report revealed business and individual bankruptcies in the US rose 31 percent in the year through April. Elsewhere, the government’s consumer credit indicator reported a jump from $5.2 to $15 billion as rising prices for necessary goods like gasoline and food are eating into disposable income and forcing consumers to rely on credit.



...more...

BoE Leaves Rates Unchanged On Inflation Concerns

http://www.dailyfx.com/story/topheadline/BoE_Leaves_Rates_Unchanged_On_1210245935453.html

The BoE left their benchmark interest rate unchanged at 5.00%, in order to gauge inflation risks. The central bank has been concerned with inflation breaching its 3% threshold, which requires Governor King to write a letter of explanation to Chancellor Alistair Darling.

The BoE left their benchmark interest rate unchanged at 5.00%, in order to gauge inflation risks. The central bank has been concerned with inflation breaching its 3% threshold, which requires Governor King to write a letter of explanation to Chancellor Alistair Darling. Inflation stands at 2.5% far above the desired 2% target, as record oil and food prices continue to squeeze consumers. Committee member and perennial dove David Blanchflower has recently called for aggressive action in order to avoid a recession. The economy has shown signs of contracting with the services sector reporting its first decline in five years and manufacturing weakening as, the housing woes spread throughout the economy. The housing slump is expected to continue with house prices recording their first yearly drop since 1996, and demand declining as banks continue to tighten lending standards.

...more...

[UpInArms]

7. Weak dollar helps reduce protectionism: U.S. envoy

http://www.reuters.com/article/bondsNews/idUSL0837316520080508

BRUSSELS (Reuters) - The dollar's weakness is helping to reduce protectionism in the United States and eases the impact of higher oil prices in Europe, a top U.S. envoy said on Thursday.

The U.S. special envoy for European Affairs, C Boyden Gray, was responding to a question about a Financial Times report that EU Trade Commissioner Peter Mandelson was concerned about protectionist talk from U.S. presidential candidates.

"The dollar reduces protectionist pressure in the U.S. by helping to reduce our current account deficit and increasing exports," Boyden Gray told reporters.

"The dollar has come back in recent days, weeks," he said.

The FT also reported on Thursday that officials in the United States and Europe were now united in their desire to see the dollar strengthen against the euro, citing officials on both sides of the Atlantic.

But Boyden Gray said Europe benefited from the strong euro.

"For Europe, the increase in the price of oil is no way near as damaging as it is for us. You can look at it all in different ways but it balances out in the end," he added.

...more...

[UpInArms]

8. you should read a bit about who C. Boyden Gray is

he really is not a guy in a white hat.

C. Boyden Gray

A very interesting article ran in a July 1995 issue of The New York Times -- "On My Mind - $20 Billion Thriller - a limited hangout" by Council on Foreign Relations Member A.M. Rosenthal, which included the following:

"Members of the Council on Foreign Relations in the State Department and National Security Council planned a carefully prepared psycho-political operation to defraud the American public and enrich themselves and other Council on Foreign Relations members. It was planned and scripted by members of the Council on Foreign Relations in the state department, and on the National Security Council. This group has been carrying out similar psycho-political operations aimed at the American public since World War I.

"C. Boyden Gray is the son of Gordon Gray, a powerful Council of Foreign Relations member, now deceased. Upon graduating law school C. Boyden Gray joined Wilmer, Cutler & Pickering. Many of the firms associates counsel different Government departments including the FBI and CIA. Lloyd N. Cutler counseled President James Earl Carter, Jr.; C. Boyden Gray counseled President Bush. Cutler, Carter, and Bush belong to the CFR. The OIC Iran-Contra report tells us about the character of Presidential Counsel Gray -- Gray and his colleagues advised Bush to lie.

"In 1993 Environmental Organizations sued to compel production of an environmental impact statement on NAFTA before it was submitted to Congress. William Jefferson Clinton sided with the Environmental Organizations. A law called The National Environmental Policy Act required an environmental impact study in major Federal Actions. The Environmental Organization won. The judge ordered the study.

"The group that lost was the Office of the U.S. Trade Representative (OTR), an executive agency that advises the president. The OTR appealed. The Automobile Manufactures Association, had C. Boyden Gray file a friend of the court brief in behalf of the OTR. Gray used political connections, legal chicanery, weasel words and double talk. The OTR won the appeal. President Clinton and the American Citizen lost. NAFTA was 'fast-tracked' through congress, there was no impact study."

[Warpy]

31. There are three types of men I have a knee jerk mistrust of

and one of them is a man who drops his first name but insists on retaining the initial. Think about it, G. Gordon Liddy being a prime example.

Since I just woke up and am incapable of fully digesting either of these fine posts, I'm left with silly speculation on what that "C" stands for that was more heinous than the "Boyden." Cecil? Cuthbert? Clarence? (hey, LUMPY!)

This man and men like him are indicative of what's gone wrong with our country: men who have started at the top and who have attended law school with the entire aim of learning how to violate the spirit of the law while seeming to adhere to its letter, all in an attempt to claw their way higher up the dungheap of obscene wealth and power.

Thank you for bringing yet another slimeball to my attention.

[UpInArms]

6. UBS to return $35 mln to US state over investments

http://news.yahoo.com/s/afp/20080508/bs_afp/switzerlandusbankingcompanyubs

GENEVA (AFP) - Swiss banking giant UBS said Thursday it will return some 35 million dollars (23 million euros) to towns and cities in the US state of Massachusetts over investments disallowed under state law.

In a statement sent to AFP, the Swiss bank said: "UBS has agreed to purchase, at par value, the principal investments of certain Massachusetts municipalities that invested in the ARS (auction rate securities) market.

"The agreement addresses particular ARS transactions that were not permissible for these public entities' accounts under applicable law."

The bank added that the case applies due to the particular circumstances of Massachusetts law and that it is "pleased that the matter has been resolved."

According to Massachusetts' attorney general Martha Coakley's office, investigations into allegations that UBS had misled towns, cities and state and municipal entities on whether ARS were a permissible investment for them began in February 2008.

...more...

[DemReadingDU]

12. Who Has More Level 3 Assets Than Capital?

5/7/08 Who Has More Level 3 Assets Than Capital? by Bennet Sedacca

New accounting rules allow for trading assets to be divided into three levels. Level One assets are the most liquid assets and therefore the easiest to price. They make up less than a quarter of most firms' assets.

Level Two assets make up the majority of firms' assets but rely heavily on the firms' assumptions about things such as interest rates because they are far less liquid than Level One assets; according to regulatory filings by the five largest U.S. brokers and largest money center banks, there are more than $4 trillion in Level Two assets on their balance sheets.

Finally, Level Three assets are the least liquid of the firms' trading assets and therefore are valued using what are called "unobservable inputs."

Level Three assets include real estate, mortgage-backed securities, private equity investments and possibly even "undertakings of great advantage, but nobody to know what they are" (cf. South Sea Bubble).

The three magic words that make an asset a Level 3 asset are "no observable inputs." What this means is that not only are they hard to price, but nearly impossible to sell.

Recently there's been such deterioration in all types of mortgages that more and more assets are finding their way into this category. Also, this is the first time insurance companies have made the list. I think the list will continue to grow.

Ten companies now have more Level 3 assets than capital. In order they are (as a % of total shareholder equity:

1) Bear Stearns (BSC): 313.97%
2) Morgan Stanley (MS): 234.88%
3) Merrill Lynch (MER): 225.4%
4) Goldman Sachs (GS): 191.56%
5) Lehman (LEH): 171.18%
6) Fannie Mae (FNM): 161.48%
7) Northwest Air (NWA): 142.02%
8) Citigroup (C): 125.06%
9) Prudential (PRU): 119.36%
10) Hartford (HIG): 108.52%

So now we have insurance companies joining the party. Yes, the contagion is spreading and no, it's not over. Not even close. C just had to pay 8.5% for $2 billion in preferreds. One of these days, there will be no takers.

http://www.minyanville.com/articles/index.php?a=17068

[AnneD]

18. Wall Street forced to open its kimono

The Securities and Exchange Commission, caught seemingly unaware by the collapse of Bear Stearns, is mandating that all investment banks disclose their capital and liquidity levels.
According to Bloomberg:

"One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity,'' SEC Chairman Christopher Cox told reporters in Washington today. "Making that information public can certainly help.''

Despite supposedly close scrutiny of Bear's capital, the Federal Reserve had to step in an negotiate a fire sale of the firm to JP Morgan Chase in March. Investors and customers began pulling money out of the firm amid concerns that bad mortgage debt would crimp its capital.
Cox said the SEC will begin requiring the increased disclosure later this year. Much of it the commission already collects but doesn't make available to the public, he said.

Not surprisingly, Wall Street doesn't like the bright lights. After Cox's announcement, the five biggest firms had their largest share price declines in a month, Bloomberg noted.

It's a reasonable first step in beefing up the scrutiny of Wall Street. The question is, if the public had had a better picture of Bear's cash position, would it have stanched the panic, or fanned it?




http://blogs.chron.com/lorensteffy/

I'll say it again, Loren Steffy is one of my fav Chron business writers. He pulls out these gems that have me both laughing and fuming at the same time.

[Hugin]

19. ~10: Aught 2 EST: Up.

Index Last Change % change
• DJIA 12850.18 +35.83 +0.28%
• NASDAQ 2445.72 +7.23 +0.30%
• S&P 500 1394.90 +2.33 +0.17%

[DemReadingDU]

20. General Motors' entry into mortgage lending proves to be costly albatross

5/8/08
General Motors thought it had found a safe and profitable business, far away from the ups and downs of the automobile business that was causing so many headaches for it. Instead, it found an albatross that is now forcing the company to put up billions of dollars just to stay in business and hope for a turnaround.

That business was residential mortgages, and GM went into it in a big way. It bought one of the more aggressive lenders around, Ditech, and came to specialize in the kind of innovative mortgages that flourished in recent years.

By early 2006, most of the mortgage loans that it issued required that borrowers pay only the interest - no principal at all in early years - or allowed them to pay even less than that. Ditech was a pioneer in offering 125 percent loans, in which the borrower could get more than the property was worth. It specialized in low-documentation mortgages, which became known as liars' loans because many borrowers falsified their income.

The result has been a wave of defaults and foreclosures, bringing on big losses for both the company and for those who bought securities backed by those mortgages.

Now the mortgage company is warning that it may not be able to pay its bills, and has set out to force those who lent money to it to agree to accept only a fraction of what they are owed. It appears that its lenders have little real choice. If they insist on being paid all that they are owed, they will go to the back of the payment line, with the risk they will get nothing.

The mortgage industry has bitterly opposed legislative proposals that bankrupt homeowners be able to ask judges to reduce the amount they owe. But that is what this company hopes to accomplish through the threat of a bankruptcy filing.

The lender in trouble is now known as ResCap, short for Residential Capital. It is a subsidiary of GMAC, which was formerly owned by GM. Now the automaker's stake is down to 49 percent, with the majority stake held by Cerberus Partners, a private equity fund.

When it was riding high, ResCap took lots of risks. It was a major lender in California. It invested in home developments, and bought model houses in subdivisions, hoping to sell the homes later at a profit.

It expanded into many countries, including Australia, Mexico, Britain, Germany and Spain. Now it has problems in many of those countries, and has suffered losses on the model homes.

ResCap has recently modified thousands of mortgages to make them more affordable, but those changes have almost all involved changing the interest rate, not reducing the amount owed, as ResCap is demanding from those who lent money to it.

Back in 2005, when ResCap was formally separated from the rest of GMAC, the idea was to insulate the profitable mortgage business from the troubled auto finance business. Now the situation is reversed, and the mortgage losses are producing deficits for GMAC, even though its other businesses are profitable. GMAC is being forced to invest billions more to keep ResCap afloat.

Owners of some notes issued by ResCap are being asked to trade them in for new bonds with face values of as little as 80 cents on the dollar. Other holders are being offered the chance to sell back bonds to the company, for as little as 65 cents on the dollar. GMAC has bought back some ResCap bonds in the public market, paying around 50 cents on the dollar.

"We believe bondholders have little choice in this situation, as the alternative could be a filing" for bankruptcy, wrote Richard Hoffmann and Adam Steer of CreditSights, a bond analysis firm.

more...
http://www.iht.com/articles/2008/05/08/business/norris09.php

[DemReadingDU]

21. GMAC considering several ResCap asset sales

5/8/08
NEW YORK, May 8 (Reuters) - Finance company GMAC LLC on Thursday said it is considering several asset liquidations for its Residential Capital LLC mortgage unit, which is trying to bolster liquidity after losing $5.3 billion in the last six quarters.

In a U.S. Securities and Exchange Commission filing, GMAC said liquidations may include a sale of interests in ResCap's mortgage securitizations, the marketing of loans secured by time-share receivables and by ResCap's British and continental Europe mortgage portfolios, whole loan sales, and the marketing of businesses unrelated to mortgage finance.

ResCap on May 5 said it would need to raise $600 million by the end of June to avoid "negative liquidity," even if several plans to relieve its debt burden, including a $14 billion bond exchange offer, were successful.

A group led by private equity firm Cerberus Capital Management LP owns 51 percent of Detroit-based GMAC. It bought that stake in 2006 from General Motors Corp (GM.N: Quote, Profile, Research), which owns 49 percent. ResCap is the largest independent U.S. mortgage lender other than Countrywide Financial Corp

http://www.reuters.com/article/mergersNews/idUSWEN559420080508

[Hugin]

22. Well, I learned something from this piece...

I thought GM had sold off GMAC... But, now I see they have not only a thumb left in the pie, GM has a whole fist left in there.

"The lender in trouble is now known as ResCap, short for Residential Capital. It is a subsidiary of GMAC, which was formerly owned by GM. Now the automaker's stake is down to 49 percent, with the majority stake held by Cerberus Partners, a private equity fund."

A tangled twisted spaghetti pile... That's what it is.

[DemReadingDU]

27. GM May Break Up SUV-Truck Marriage to Cut Fuel Use, Emissions

May 8 (Bloomberg) -- General Motors Corp. may be forced to break up a seven-decade marriage of pickups and large sport- utility vehicles as Americans restrict the fossil-fuel diet of their transportation.

Under pressure to produce a more fuel-efficient and cleaner- running line of vehicles, GM is investigating ways to design a lighter replacement for its biggest SUVs, such as the Chevrolet Tahoe, without relying on a heavier pickup-truck frame, according to people familiar with the effort.

The Tahoe and its predecessors have shared the design of the Chevy Silverado pickups since the model was introduced in 1965. While no decision has been made, GM engineers are considering a shift in 2012 to a car-like construction for successors to the Tahoe and other large SUVs, including the GMC Yukon and Cadillac Escalade, said the people, who asked not to be named because the talks are confidential.

``It's a sea change in the type of vehicle that Americans are going to be driving,'' said Rebecca Lindland, an analyst at consulting firm Global Insight Inc. in Lexington, Massachusetts. ``This is a big thing. For a long time, GM has been able to rely mostly on profits from trucks. That's changing.''

GM, the world's largest automaker, may also cut annual production capacity for these larger SUVs and pickups by 40 percent to 1 million vehicles from 1.7 million, the people said. Detroit-based GM announced April 28 that it will cut one shift each at three truck plants and one making SUVs starting in July because of sales declines this year.

GM has no comment on design or production changes for future SUVs, spokeswoman Sherrie Childers Arb said.

Shift Away

A shift away from a 72-year history of building an SUV off a large pickup-truck chassis would echo other moves by Chief Executive Officer Rick Wagoner as he tries to meet a government requirement to cut fuel use 40 percent by 2020. Ford Motor Co. and Chrysler LLC are also making fewer heavy-duty trucks to reduce their fleets' fuel consumption and meet the future mandate of a national average of 35 miles a gallon.

Lighter vehicles would not only reduce emissions and dependence on gasoline amid record fuel prices, they may also help GM sell more vehicles. Seeking to draw fuel-conscious buyers and end three years of losses, the automaker has already begun to eliminate larger eight-cylinder engines and is developing more models that use electric power and burn fuels from plant waste.

``This is part of the broader debate on how much the fuel- economy discussion is going to change cars and trucks,'' said Jim Hall, principal of 2953 Analytics, a Birmingham, Michigan, automotive consulting firm. ``This is fallout.''

more...
http://www.bloomberg.com/apps/news?pid=20601109&sid=ak87hDNumPjU&refer=home

[AnneD]

23. The Stealth Battle Between Bernanke and Paulson

The Wall Street Journal's “Treasury Plans to Press Lenders” and “Subtle Ben (Bernanke) Inches Closer to Barney (Frank)” describe the not so subtle, under the radar battle being waged between the Federal Reserve and the Treasury. Chairman Bernanke has made many speeches supporting an FHA program to trade mortgage guarantees for mortgage principal write downs. Both the Fed and the FDIC are calling for a systemic approach to process mortgage modifications quickly and efficiently, although they differ in methodology. Secretary Paulson has taken to obstructing a systemic approach at every turn. Paulson continues to say that mortgage principal write downs should only be done on a case by case basis.

Paulson has proved to be the more powerful influence, but he is losing the public relations fight. The Treasury has warned bankers and mortgage servicers that unless they adopt some set of rules for “voluntary” mortgage modifications, the “socialists” will overwhelm them (my words). The Treasury hosted a six hour meeting yesterday with ten major industry participants. Included were: Bank of America (BAC), Countrywide (CFC), Fannie Mae (FNM), Freddie Mac (FRE), and J.P. Morgan (JPM).

The message the Treasury purveyed was that through small concessions, the industry could avoid aggressive actions by the Democrats, and by consequence the wrath of tightening Fed regulation. The only concessions the Journal cited were a five day acknowledgment of a loan modification request and a possible answer in five days. The Journal also reported that the Treasury is trying to facilitate compromise between first and second mortgage holders.

The timid endorsement by Bernanke has given Congressman Barney Frank credibility. The House is preparing to vote on a $300B plus package of FHA loan guarantees. The clock is running out for Paulson.

Disclosures: Author is long CFC, FNM and FRE.

http://seekingalpha.com/article/76077-the-stealth-battle-between-bernanke-and-paulson

This explains a lot:think:

[Hugin]

25. SMW Movie selection of the week as inspired by H. Paulson.

and based on the comments of this author: "The Treasury has warned bankers and mortgage servicers that unless they adopt some set of rules for 'voluntary' mortgage modifications, the 'socialists' will overwhelm them (my words)." :D

You may want to check out...

The Russians Are Coming, The Russians Are Coming

"The Russians Are Coming, The Russians Are Coming is a 1966 American comedy film. Based on the Nathaniel Benchley juvenile novel, The Off-Islanders, it was adapted for the screen by William Rose. The movie tells the Cold War story of the comedic chaos which ensues when the Soviet submarine, (Sprut, Octopus), accidentally runs aground near a small New England town."


Edit: Added more of the quote from the article for clarity and removed Cyrillic Font.

[Tansy_Gold]

29. I loved this movie!!!!!

Alan Arkin, Paul Ford, Carl Reiner, Theodore Bikel, John Philip Law, Eva Marie Saint, it's wonderful!

[Hugin]

30. It's been far too long since I've seen it.

;)

[Tansy_Gold]

33. Overdue for another screening

I saw this when it first came out in 66; the guy I was dating thought it was stupid, but I loved it. "Don't you understand?" I said earnestly to him. "It's about people, how we're all just people and we're really the same when you strip away all the propaganda." His response: "They're all just commies. This was stupid."

Then saw it on tv a couple times and rented it once or twice to share with the kids as they were growing up, and always enjoyed it. Maybe I can scrape up enough pennies to rent it this week-end.

[AnneD]

34. Thanks Prag.......

I have to admit though.....I saw it the first time around. But while we are recommending movies, I would add 'A Funny Thing Happened on the way to the Forum' for your funny bone, and to help you out of your funk slump, 'Steel Magnolias' -it will renew your spirit. I guess Marketeers fretting oil prices could catch 'Local Hero' (ratz-I'll be humming the theme song for the rest of the day now).

[Tansy_Gold]

37. And from 1962, year of Cuban Missile Crisis, depths of cold war. . .

for your (instrumental) listening pleasure --

http://www.youtube.com/watch?v=HKA49VLvwOw

"Midnight in Moscow," by Kenny Ball and his Jazzmen



Tansy Gold, who has the vinyl 45 with the big hole somewhere in her collection

[AnneD]

24. Shareholders Revolt Against Bloated CEO Pay

Last month, at a Hilton Hotel ballroom in New York, things turned ugly for some of Wall Street’s most eminent power suits. The occasion: the annual meeting of Citigroup, the financial colossus that last year wrote off $20.4 billion in subprime-related losses — and has so far this year lost another $9.1 billion.

On hand for the annual meeting: over a thousand angry Citi shareholders. They packed the ballroom. And they wanted answers — about the remarkably cushy rewards that continue to flow to Citigroup’s top executives.


How cushy? In January, just a month after Citi's CEO through the worst of the mortgage mess left the company with an exit package worth $42 million, Citigroup’s board of directors awarded that CEO's chief financial officer, Gary Crittenden, a $12 million “retention bonus.”

The company’s current CEO, Vikram Pandit, did his best at the Citi annual meeting to justify this sublimely generous board gesture. Citigroup, he noted, was operating in a “competitive” environment and needed to pay well to “retain” staff.


The shareholders didn’t buy that explanation — or much of anything else Citigroup executives had to say. They jeered. They booed. They laughed sarcastically. And they cheered shareholders who lined up at the ballroom microphones to vent their outrage.

more....

http://www.alternet.org/workplace/84468/

Somehow, I think annual meetings will never be the same.:rofl:

[Hugin]

26. It's almost worth investing to attend...

:popcorn:


:rofl:

[DemReadingDU]

28. State Street Subprime Damages May Reach 12 Times Reserve Amount

May 8 (Bloomberg) -- State Street Corp., the largest money manager for institutions, may have to pay more than 12 times the $625 million it set aside for damages from lawsuits over losses from subprime-mortgage investments made for pension funds.

Prudential Financial Inc., the second-largest U.S. life insurer, is suing the Boston-based company on behalf of more than 200 retirement plans, alleging that State Street inappropriately invested their money in risky securities. Three other companies filed similar actions.

Neither side has disclosed potential losses, though State Street has reported that the value of assets ``adversely affected'' by the collapse in subprime mortgages fell 56 percent to $6.1 billion at the end of 2007 from $13.9 billion on June 30. That $7.8 billion decline represents the money manager's maximum legal exposure, according to Marcia Wagner, 45, a partner at Boston-based Wagner Law Group, which specializes in retirement fund and employee-benefit law.

The cumulative loss in value serves as a ``ceiling'' in these cases, and the $625 million reserve State Street put aside in December is the company's ``floor,'' or minimum liability, Wagner said.

The reserve is a ``lowball,'' Wagner said. ``We are talking very large in terms of damages,'' though they're unlikely to reach as high as the ceiling.

``To the extent plans were misled into purchasing something they were not authorized to purchase, they may have a fiduciary obligation to sue,'' said Wagner, who isn't representing the investment manager or plaintiffs. ``It's sue or be sued.''

`Bad Investments'

``They allowed bad investments, so they should be attempting to make the plans whole,'' Wagner said. ``State Street is quite exposed, especially if one of its affiliates rendered advice or marketed the funds to be something they were not.''

State Street will probably have to pay a minimum of $1 billion, according to William Fredericks, 46, attorney for plaintiff Unisystems Inc., a closely held New York publisher.

``Based on public disclosures to date, damages should certainly be in the 10 figures,'' said the lawyer from Bernstein Litowitz Berger & Grossmann in New York.

State Street's reserve is ``currently adequate to satisfy our legal exposure,'' spokeswoman Arlene Roberts said. A sum of $1 billion would represent 80 percent of the company's 2007 net income.

Three corporate retirement and welfare funds have asked the U.S. District Court in Manhattan to consider granting class- action status, which allows others with similar claims to join a case.

Companies That Sued

The companies are Nashua Corp., a maker of print-imaging products in Nashua, New Hampshire; Merrimack Mutual Fire Insurance Co., based in Andover, Massachusetts; and Unisystems.

That possibility raises the financial stakes for State Street, according to Adam Savett, a vice president at RiskMetrics Group Inc., a New York firm that studies corporate risks, including legal issues.

``When you have a class action, and it's composed of hundreds or thousands of people, that starts to mean eye-opening amounts of damages,'' Savett said.

To achieve class-action status, the funds need to show that their cases have common facts, said John Coffee, a securities law professor at Columbia University in New York.

``The common issue will be, did they all get the same advice?'' Coffee said. Even without class-action status, the pension plans may still sue separately because the size of the claims justifies the cost of individual cases, Coffee said.

Under Erisa

State Street is being sued under the federal Employee Retirement Income Security Act, or Erisa. Plaintiffs claim State Street breached its fiduciary duty by investing pensioners' money in high-risk securities instead of the conservative funds promised.

That kind of accusation is easier to prove than fraud, a claim non-pension plaintiffs would have to make, said Patrick DiCarlo, a lawyer at Atlanta-based Alston & Bird, which isn't involved in the case.

``In your classic securities-fraud context, you have to prove a fraudulent intent,'' DiCarlo said. ``Here, all you have to prove is that the investment is imprudent.''

Success against State Street might lead to similar litigation against other companies, DiCarlo said. Suits against investment advisers including Regions Financial Corp.'s Morgan Keegan unit are being studied, according to Derek Loeser of the Seattle law firm Keller Rohrback, which represents the plaintiffs seeking class-action status.

Morgan Keegan Response

``With there not being any litigation in place, we don't have anything to comment on,'' Morgan Keegan spokeswoman Kathy Ridley said.

``You will absolutely see something like this State Street litigation against another company,'' said RiskMetrics' Savett, who tracks securities and Erisa cases related to the subprime lending crisis. He said he knows of none so far.

Loeser said he expects State Street to become a target of more suits, particularly from public-sector pension funds.

The company was also sued over pension-fund losses by the Houston police officers' pension system, the Memorial Hermann Healthcare System in Houston and the Welborn Baptist Foundation in Evansville, Indiana. Those cases don't include Erisa claims.

Litigation makes investors uneasy about the shares, analysts said.

``It's certainly a dark cloud,'' said Gerard Cassidy of RBC Capital Markets in Portland, Maine. ``It's another reason why investors have to be cautious on this stock.'' He rates State Street sector perform, equivalent to a ``hold'' recommendation.

Analyst Recommendations

Nine analysts label the company ``buy,'' and 10 recommend holding it, according to Bloomberg data. State Street yesterday fell $1.92, or 2.5 percent, to $74 in New York Stock Exchange composite trading.

The company is up 5.8 percent for the past 12 months, versus a 7.8 percent decline in the Standard & Poor's 500 Index and a 30 percent drop in the S&P 500 Financials Index.

The cases are combined in In re State Street Bank and Trust Co. Erisa Litigation, 1:07-cv-08488, U.S. District Court, Southern District of New York (Manhattan).

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFmtm4GkYmxE&refer=home

[DemReadingDU]

32. Jon Markman: Credit crisis over? Not likely

5/7/08
Now that money market funds have stopped buying commercial paper issued by SIVs, banking regulations require the banks to bring them onto their books, and that means they must shore up their capital base by selling new shares or shedding other assets. Every dollar that is used for this purpose is a dollar that can't be used to make loans for corporate buybacks, commercial customers or hedge funds. Without such loans, banks' earnings growth will be greatly impaired.

Worse still, the buying power of two key drivers of the last bull market -- hedge funds and corporate Treasurys -- has been crippled because the leverage they've used to reap big profits has suddenly turned against them.

Here's an example of how that leverage works: Assume a hedge fund has $20 of real capital. If a bank allows it to leverage five times its capital, the fund can acquire $100 of risky assets with $20 of equity and $80 of debt. Now assume the assets fall by 10% in value, or $10. The hedge fund's leverage suddenly increases to nine times -- that's $10 of equity (the original amount less the loss) and $80 of debt now supporting $90 of assets.

If the permitted leverage stays constant at five times, then the hedge fund must sell $50 of assets, or 50% of its holdings. If lenders more realistically reduce permissible leverage to three times the loss, then the hedge fund must then sell $70 of assets, or 70% of its holdings. This process is bad enough in normal markets, but when buyers are scarce, prices of these involuntary sales are knocked down to levels that can wipe out the fund.

This scenario continues to play out across the global economy with occasional timeouts. As hedge funds deleverage in fits and starts, much of their inventory is going back to bank balance sheets. This is known in the banking business as involuntary asset growth, and it isn't good. It forces banks to issue more new equity to comply with international capitalization rules, further undermining current shareholders.

Deleveraging is going on among corporations and individuals as well, leading to less buying power for both. That leaves less money available for homes, cars, televisions and travel, further leading to the sort of buyers strike characteristic of long periods of slow or stagnant economic growth.

more...
http://articles.moneycentral.msn.com/Investing/SuperModels/CreditCrisisOverNotLikely.aspx

[TalkingDog]

35. Myanmar long term microeconomics: Rice croplands damaged

http://www.nj.com/newsflash/index.ssf?/base/international-27/1210170242142780.xml&storylist=topstories

snip:
"There is likely going to be incredible shortages in the next 18 to 24 months," said Sean Turnell, an economist specializing in Myanmar at Australia's Macquarie University. "Things will be tough."

snip:
It also warned that the rice harvest in the Bago district could be lost since it was still in the ground, and that future plantings in the delta could be threatened due to "salinity and decrease of nutrients" from the storm's tidal surges.


And although Myanmar doesn't really import or export rice; they eat what they grow, the vultures have spotted their opening:

http://newsfeedresearcher.com/data/articles_b19/idb2008.05.07.13.16.11.html#hdng0

"Rice Climbs for Fourth Day After Cyclone Hits Myanmar"

[TalkingDog]

36. Pew. As in Pee-eewww the economy now stinks for almost everybody.

Even the Kool-Aide Drinkers:


"It's the Inflation, Stupid"

http://pewresearch.org/pubs/780/dismal-views-of-the-national-economy--its-the-inflation-stupid

I did notice that around 10% think the economy is in great shape. I wonder who those folks could be.....I wonder???????

[ozymandius]

38. End of the day.

Dow 12,866.78 Up 52.43 (0.41%)
Nasdaq 2,451.24 Up 12.75 (0.52%)
S&P 500 1,397.68 Up 5.11 (0.37%)
10-Yr Bond 3.805% Down 0.062
NYSE Volume 3,827,561,500
Nasdaq Volume 2,100,801,250

4:30 pm : Trading in the stock market was largely range-bound Thursday. The S&P 500 bounced between the unchanged mark and 1400, which has been a key level among technical traders, but still finished the session with decent gains.

Positive sales data from a handful of key retailers lent some initial support to market participants, but the data was largely dismissed after the opening bell.

Wal-Mart (WMT 57.16, +0.33), Costco (COST 71.20, -0.88), BJ's Wholesale (BJ 37.73, -1.21), and Target (TGT 52.34, -1.10) all reported positive same-store sales growth for April. Specifically, Wal-Mart reported a 3.2% increase, excluding fuel sales, Costco and BJ's announced an 8.0% and 17.8% increase, respectively. Target noted that its 3.1% increase was slightly below its expectations.

Several noteworthy apparel and accessories retailers posted declining same-store sales for April. Nordstrom (JWN 34.67, -0.82), Limited Brands (LTD 17.93, +0.31), and Gap (GPS 17.84, -0.40) all reported a downturn.

News Corp (NWS.A 19.68, +0.48) offered a positive update upon announcing third quarter results after yesterday's close. The media giant reported earnings of $0.91 per share for the quarter, up from $0.29 per share the year before. News Corp's latest results were helped by a $1.7 billion gain related to a stock and asset exchange with Liberty Media.

Jobless claims for the week ending May 3 totaled 365,000. The consensus estimate called for 370,000 claims. Jobless claims for the prior week were revised slightly higher to 383,000 from 380,000. Notably, the four-week average has increased to 367,000 from 364,500, but remains below levels typically associated with a recession.

Wholesale inventories for March declined 0.1%, which is less than the 0.5% increase that economists forecast. February's inventories increased 0.9%, down from the 1.1% increase initially reported.

The materials sector (+2.3%) was the best performing economic sector in the S&P 500. Particular strength was exhibited by Alcoa (AA 39.65, +1.56) and Freeport-McMoRan (FCX 118.07, +3.71).

The energy sector (+1.9%) also finished with a solid gain after crude set an all-time intraday high of $124.61 per barrel. Oil companies Exxon Mobil (XOM 89.93, +1.11) and Chevron (CVX 97.44, +2.16) were among the leaders.

Financial companies were down noticeably. Bank of America (BAC 37.33, -0.67) and AIG (AIG 44.15, -0.93) were the primary laggards.

Thursday's choppy trading prompted buying in government Treasuries. The benchmark 10-year Treasury Note traded 27 ticks higher, lowering its yield to 3.78%.DJ30 +52.43 NASDAQ +12.75 SP500 +5.11 NASDAQ Dec/Adv/Vol 1307/1482/2.09 bln NYSE Dec/Adv/Vol 1295/1802/1.21 bln