Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 05.12.2009
Seen on a t-shirt: "Recession is when your neighbor loses his job. Depression is when you lose yours. Recovery is when Obama loses his."
Everyone Is Wrong, Again (Except The Gold Bulls) One of our readers sent us a very interesting article from itulip.com entitled "Everyone is wrong, again -- 1981 in Reverse Part II: Nine Signs of Inflation". The article is an explanation by Peter Warburton (the author of the book "Debt and Delusion") of why generalised 'price inflation' is likely to become an issue by early next year, with comments by itulip's editor (Eric Janszen) interspersed. We don't agree with every aspect of this article, but we do concur with its gist and conclusions. Unfortunately, we can't provide a link because it is in the subscriber area of the itulip web site, but what we can (and will) do is discuss some of the article's main points and tie them in with our own views.
Be wary of the markets - gold still offers the best insurance In a week that has seen global stock markets continuing to perform positively, gold has done remarkably well given that many experts are predicting the start of a new bull market. There has been little, if any, disinvestment from gold over the period, which suggests there are many out there continuing to hedge their bets. And indeed they may well be wise to do so. Major bear markets of the past have seen big upswings during their progress, sucking investors back in, only for the upturns to end dramatically as some further major financial collapse spooks the markets again and prices tumble.
Gold coin production up at Royal Mint LONDON: Gold has emerged as the biggest winner during the recession and this has resulted in demand for gold coins soaring to unimaginable levels. Following the never-ending rise in gold coin demand, UK’s Royal Mint has stepped up production of coins. The UK mint, which is based in Wales, used 75 per cent more gold in the opening three months of 2009 than it did a year previously. It produced 28,496 ounces of gold coins in the first quarter, compared to 16,317 ounces in the same period in 2008, while production last year also increased 30 per cent.
The gold monetization scheme is ending The G8 appears finished but their policymakers continue to try to bend the G20, and the world, to their will. The establishment, the Fed, the Bank of England, the Bank for International Settlements, the same gang that has been setting policy for decades, is still at it. They appear to remain in charge (with nary a whimper of criticism about the trillions of dollars' worth of damage their policies have caused) but, when it comes to gold, they are slowly losing their grip.
Sterling silver turns a hot commodity Even as the world is fighting recession and jewellery shops across the globe are facing a crisis to dispose of their collections, Philippines’ leading silver jewellery brand Michelis is going gung-ho over its future plans. According to a press note, the company will concentrate on creating new collections and mapping out new measures to boost consumer interest.
Boosting The Dying Dollar With A False Rally On Friday the dollar completely broke down, with the USDX collapsing to about 82.5, as monetizations by the Fed became a stark reality. A world stock market collapse could be imminent as a source of dollar support. We wonder how low they will let the dollar go before they collapse the stock markets to chase people back into US treasuries, which have also broken down, with treasury interest rates on the rise despite various Fed purchases of treasuries in the hundreds of billions. So much for the bogus stress tests as things turn much uglier than anticipated by the boneheads in Goldman Sachs South who are attempting to resurrect the Goldilocks Matrix. The suckers rally is simply the loading and winding of a catapult meant to throw the dollar upward as the stock market spring unwinds at the moment chosen by the PPT, which moment has already been telegraphed to Illuminist insiders for their continued looting of the sheople and for the filthy aggrandizement of their growing mountain of ill-gotten gains. The stock market shorts are being set up in the dark pools of liquidity beyond the purview of regulators as this article is being written, so if you plug yourself back into the pod electrodes of the Goldilocks Matrix again, you are in for a major shock.
Dollar Fails Crucial Test The U.S. dollar failed an important technical test recently. "This move has really lit a fire under the dollar bears," says Chuck Butler. "Many institutional investors use the dollar index as their means of trading the dollar. And to see it fall through its 200-day moving average was enough proof for them that the dollar is heading south.
Dollar Rally Will End, Rogers Says; May Short Stocks The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after they jumped 34 percent in the U.S. in nine weeks. The rally in the dollar has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.
Rick Santelli Says: Watch This Video Of A Clueless Fed Inspector General! No fan of the Federal Reserve, CNBC's Rick Santelli is eager to highlight anything that shows just how corrupt and counter-productive the organization is. In one of his classic rants, the Chicago bond guy said to search YouTube for "Elizabeth Coleman Inspector General" to see just how clueless the person tasked with monitoring the Fed actually is. Here you go. It is pretty much a trainwreck
Is Anyone Minding the Store at the Federal Reserve?
Big spending to revive U.S. economy is still planned With banks needing less, the Treasury Department could prop up municipal bonds and aid life insurers such as Hartford or Lincoln Financial. The Obama administration still plans to spend tens of billions of dollars reviving the nation's financial system, even after the government's unexpected finding that major banks need only a little bit more direct government aid. Despite signs that the worst of the recession may be over, senior officials say they think big actions are necessary to spark an economic revival.
Estimate of Budget Deficit Now Tops $1.84 Trillion The economic crisis is already taking a toll on the Obama administration's new budget projections, adding $90 billion to its already historically high estimates of deficits for both this fiscal year and next. The changes, reported on Monday by the Office of Management and Budget, brings the deficit for this fiscal year, which ends Sept. 30, to $1.84 trillion from a February projection of $1.75 trillion. For fiscal 2010, the new estimate is $1.26 trillion, up from $1.17 trillion.
Goldman Pays to End State Inquiry Into Loans In the first major settlement involving Wall Street's role in the subprime mortgage business, the Goldman Sachs Group agreed on Monday to pay up to $60 million to end an investigation by the Massachusetts attorney general's office into whether the firm helped promote unfair home loans in the state. The money will be used for a loan modification program that would allow Massachusetts homeowners with mortgages from Goldman entities to write down their principal balances by as much as 50 percent.
Three Banks to Sell Stock to Repay TARP Funds Three United States banks, apparently emboldened by the clean bills of health they received under the federal stress tests, announced plans Monday to pay down the government's investments under the TARP program by selling billions of dollars in new stock. The announcements came from Capital One Financial, US Bancorp and BB&T Corporation, each of which were found not to need additional capital under the examinations of 19 large financial institutions, whose results were made public last week. The decision to sell new stock to help buy back government's preferred shares and warrants shows that just a few months after last fall's credit-market meltdown, some banks are feeling increasingly confident of their ability to stand on their own.
Bank Stock Sales Add Billions in New Capital The nation's largest banks are taking advantage of the recent stock market rally to raise billions of dollars in new capital, allowing the firms to improve their financial health much more quickly and cheaply than government officials had expected. Capital One of McLean joined three other large banks yesterday in announcing new sales of common stock that together total more than $6 billion. Large banks have announced more than $18 billion in share sales since the government's release of stress test results last week.
Wall Street's rally hits a wall Stocks fall as investors take a step back from the two-month rally. Dow posts its biggest selloff in 3 weeks. Stocks stumbled Monday as investors took a step back after propelling the major stock gauges by more than 30% each in just two months. Treasury prices rallied, lowering the corresponding yields, as investors pulled money out of stocks and put it into the safer-haven bonds. The Dow Jones industrial average (INDU) lost 156 points, or 1.8%. It was the Dow's biggest one-day selloff in three weeks.
The day the commodity world changed Energy bears are stunned. They say it is impossible and there is no reason for it. Energy seems to be defying gravity. The bears and the rest of the world are waking up to the fact that something has changed in the energy complex. Petroleum and now natural gas are soaring despite the fact that the supplies are overwhelming. There's shock and disbelief that oil and gas can defy the normal historical reactions to supply and demand. Traders are calling me and are stunned with no idea of what is happening.
Oil Falls a Second Day on U.S. Equity Markets, Higher Supplies Oil fell for a second day as the drop in equities signaled the global economy and fuel consumption may not recover anytime soon, pushing crude stockpiles higher. Crude followed equity markets lower, reversing gains made last week after the U.S. economy lost fewer jobs than expected. The Standard & Poor’s 500 Index declined 2.2 percent while the Dow Jones Industrial Average dropped 1.8 percent. U.S. oil inventories probably gained for a 10th week, according to a Bloomberg News survey.
Peter Schiff, End The Fed!
We're Dull, Small Banks Say, and Have Profit to Show for It It's unlikely that any group of professionals is happier to highlight the dullness of their work than small-town bankers. At a recent conference held here by the Indiana Bankers Association, attendees said it over and over: our business is plodding and boring and we would not have it any other way. "Banking should not be exciting," said Clay W. Ewing, president of retail financial services at German American Bancorp, a community bank in Jasper. "If banking gets exciting, there is something wrong with it." It is an ethos squarely at odds with the risk-addicted style of megabanks, like Citigroup and Bank of America, that trafficked in the subprime mortgages and complex financial products that helped drive the country into the grimmest recession in decades.
Recession robberies of banks on the rise Financial pressure pushes some people over the edge Bruce Windsor lived the life of a respectable family man - father of four, deacon in his South Carolina church, youth soccer coach, a volunteer who helped build orphanages in Brazil. Then four days after his 43rd birthday, authorities say, he donned a mask, wig and sunglasses and tried to rob a bank at gunpoint. Windsor, it turns out, was falling down a financial hole. A real estate investor who ran several property business, his troubles predated the recession but continued as the housing bubble burst and easy credit for businesses and consumers dried up. Clad in an orange jumpsuit, his hands cuffed at his waist, Windsor calmly told the judge at his bond hearing, "I've never stolen anything in my life."
High-End Homes Won't Evade Crash Will homes maintain their value best in expensive neighborhoods, where homeowners presumably are not under the gun to sell or even to make mortgage payments? I've argued the opposite - that in percentage terms, high-end homes are likely to fall the hardest as the nation's real estate crash runs its course over the next 4-5 years. While it is true that the wealthy, most of whom own their homes outright, do not face jeopardy from mortgage lenders, they could find themselves on the ropes for other reasons, including the failure of a business, or devastating investment losses. That could easily force the sale -- for starters -- of a vacation home, which would put price pressure on all of the other homes in the neighborhood. Keep in mind that prices are set at the margin and that $2 million homes in a high-end development all become $1.4 million homes overnight if just one of the homeowners is forced to sell in a hurry.
Ron Paul to Bernanke: Continue Down Path of Socializing Our Entire Economy + Transparency
Recession changes the rules of retail As consumers buy only the clothes they need today, stores try to keep fashions in sync with the seasons. When times were good, retailers sold sundresses in February and heavy wool sweaters in August. Now, Americans worried about the recession are buying only what they need today. This new frugality has merchants and suppliers overhauling every aspect of their businesses, from window displays to the fabrics they choose. It's changing some of the rules of retail. Joan Danehy, a 63-year-old retired teacher from Cazenovia, N.Y., would always get a head start on spring, buying summer clothes for her grandchildren when it was still chilly in March. She would put her purchases aside and give out the items a few months later when the weather turned warm. This year, she passed by the colorful assortment at Lord & Taylor without buying.
Boeing Targets $10 Billion Market for Leased Drones Boeing Co., the second-largest U.S. defense contractor, is leasing drones to government agencies and militaries seeking to bypass years-long purchasing processes, a market the company says may grow to $10 billion in a decade. Boeing won contracts in 2007 and 2008 for a total of $312.7 million to supply the U.S. Navy and Marine Corps with ScanEagle spy drones on a fee-for-service basis and got a $250 million contract from the U.S. Special Operations Command on similar terms last month. Under the deals, Boeing owns the equipment and sends the operators where the military wants them.
Change in Estate Tax Suggested to Pay for Health Care Struggling to find ways to pay for the president's signature health care overhaul, the administration on Monday proposed to raise nearly $60 billion more over 10 years mostly from tightening rules for inheritance taxes affecting the wealthiest estates. The Treasury Department's proposals, and several others affecting taxation of life insurance and some other financial products, are intended to fill a gap that has opened up in President Obama's health care plans. Revised estimates show that his main idea for financing the initiative - a 28 percent limit on deductions for Americans in the top two tax brackets - would raise $266.7 billion over a decade, not $318 billion as he had projected in his overall budget blueprint last February.
Obama's Push for Health Care Cuts Faces Daunting Odds President Obama engineered a political coup on Monday by bringing leaders of the health care industry to the White House to build momentum for his ambitious health care agenda. Mr. Obama pronounced it "a historic day, a watershed event," because doctors, hospitals, drug makers and insurance companies voluntarily offered $2 trillion in cost reductions over 10 years. The savings, he said, "will help us take the next and most important step - comprehensive health care reform."
Health industry pledges to spend $2 trillion less Foes of '93 reform plan now seek edge The health care industry's pledge to the White House on Monday to reduce spending increases by $2 trillion was the first step as both sides began to jockey for the upper hand in the congressional battle over expanding health care coverage. President Obama noted that some of the players who fought the last proposed health care overhaul in 1993 were at the White House on Monday, but the groups say they have not signed on to his health care agenda and are hoping voluntary cuts now will stave off onerous government mandates.
Chances Bright for Legislation Seeking FDA Regulation of Tobacco After 15 years of debate, tens of millions spent on lobbying and a roller-coaster legislative history, public health advocates say they believe Congress is finally ready to regulate tobacco -- and their opponents privately agree. This week, a Senate committee will take up its version of a bill that passed the House by a comfortable margin last month. Supporters say they have more than the 60 votes needed to make the legislation filibuster-proof when it reaches the Senate floor sometime after Memorial Day.
Bill would allow return to lower credit-card rates Consumers who are paying more in interest because they have fallen behind on their credit-card bills could regain their older, lower rates if they pay their bills on time for six months, under a compromise proposal reached by senators seeking changes in laws governing the credit card industry. The Senate proposal was brokered between Republicans, who say lenders should be able to take into account a person's behavior, and Democrats, who contend that the practice of hiking rates on past balances prevents consumers from climbing out of debt.
Rich Folks Buy Art To Beat Hyperinflation Your currency could be worthless soon, what do you do? You could buy gold, but that's a pain. You can buy a farm and water and firearms, but that's kind of depressing. If you're in Europe you can buy dollars, but those could be toilet paper, too. How about art? Despite the horrifying environment for the once super-wealthy, recent art auctions haven't been getting killed like you might expect. Sure it's down, but not horrendously so. People will still plunk down millions for oil paint on canvas.
Empty big-box stores drag down their neighbors Large vacant stores cast their shadows on empty parking lots. Several shopping carts lie on their sides. The retail area in Dublin near the 580 and 680 freeways looks like it's halfway to becoming a ghost town. A slumping economy has transformed part of this city, where Mervyns, Circuit City and Expo Design Center have all closed recently, into an extreme example of the malaise affecting shopping centers across the Bay Area.
Ford to raise up to $2bn with new share issue Ford Motor, the only one of the three Detroit carmakers surviving without a government bail-out, has further distanced itself from its troubled rivals with plans for an equity issue that could raise close to $2bn. The proceeds could enable Ford to pay cash for a sizeable chunk of its contributions to a union-managed healthcare trust that would otherwise have been made in shares. Alan Mulally, Ford's chief executive, described the share issue as "another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet".
Credit insurance hampers GM restructuring Hedge funds and other investors stand to make billions of dollars on credit insurance contracts if GM declares bankruptcy, a prospect that is complicating efforts to persuade creditors to agree to a restructuring plan for the automaker, analysts say. Holders of $27bn in GM bonds have until June 1 to decide whether to swap their debt for a 10 per cent equity stake in the company as part of an offer that would give the US government 50 per cent of the shares, a United Auto Workers union healthcare fund 39 per cent and existing shareholders 1 per cent.
Your Auto Bailout Tab: $83 Billion And Counting Now that you've finished filing your taxes, here's another task sure to clog your calculator-tallying the cost of the auto bailout. With General Motors Corp. running through $10 billion in cash from the federal treasury during the first three months of 2009 and Congress poised to offer consumers substantial tax credits for new, more fuel efficient vehicles, the costs of helping the struggling automobile industry are mounting fast. Throw in special financing for auto loans supported by the Federal Reserve Board, and the aid for automakers now totals $83 billion-and it keeps growing.
Experts say GM bankruptcy almost inevitable With a June 1 deadline looming, automaker is running out of viable options For General Motors Corp., the task at hand is so difficult that experts say a Chapter 11 bankruptcy filing is all but inevitable. To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business - all in three weeks. "I just don't see how it's possible, given all of the pieces," said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy.
G.M. Says Offer to Bondholders Won't Change General Motors does not plan to sweeten its debt exchange offer to bondholders, even though its failure would probably push the company into bankruptcy, G.M.'s chief executive said Monday. Bondholders, who hold more than $27 billion in G.M. debt, have until May 27 to decide whether they will swap their bonds for shares of a reorganized G.M. The company has said it needs 90 percent of the bonds to be exchanged to meet Treasury Department guidelines to receive additional loans. Analysts say that is unlikely to happen.
Egypt Prepares for Center Stage When Obama Addresses Arabs CAIRO - President Obama's decision to deliver a speech here next month has given significant encouragement to a once powerful ally that has grown increasingly frustrated over its waning regional influence and its inability to explain to its citizens why it remains committed to a Middle East peace process that has failed to produce a better life for Palestinians. After eight years in which Egypt felt unappreciated and bullied by the Bush administration, Egyptian officials were gleeful about Cairo's selection last week for the president's address to the Muslim world. They said that it proved Egypt remained the capital of the Arab world and that it eased concerns that Washington might undermine its Arab allies in exchange for a grand deal with their rivals in Iran.
Pope Backs a Palestinian Homeland JERUSALEM - On the fourth day of his first trip to the Middle East as pope, Benedict XVI arrived Monday in Israel and immediately called for a solution to the conflict that would yield a "homeland of their own" for both Palestinians and Israelis. While he did not use the word "state," he made clear in a brief speech that he was underscoring the Vatican's previous support for the creation of a Palestinian state, albeit with a stronger resonance imparted by the setting and timing of his remarks within minutes of arriving in Israel.
U.S. Replaces Commander in Afghanistan in War Overhaul The Pentagon is replacing the top American commander in Afghanistan, Gen. David McKiernan, less than a year after he took over, marking a major overhaul in military leadership of a war that has presented President Obama with a worsening national security challenge.
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