STOCK MARKET WATCH, Wednesday April 14

Source: du

STOCK MARKET WATCH, Wednesday April 14, 2010

---

Euro, Yen, Loonie, Silver and Gold

---

Handy Links - Market Data and News:Economic Calendar    Marketwatch Data    Bloomberg Economic News    Yahoo! Finance    Google Finance    Bank Tracker    
Credit Union Tracker    Daily Job Cuts

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

Handy Links - Government Issues:
LegitGov    Open Government    Earmark Database    USA spending.gov

Handy Links - Videos:
The Coming Collapse of the Middle Class    Charlie Rose talks with Roubini    Charlie Rose talks with Krugman
    William Black: This Economic Disaster    Bill Moyers with Kevin Drum and David Corn

Bush Administration Officials Convicted = 2
Names: David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

---

---

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

Read more: du

08:30 CPI Mar
Briefing.com 0.2%
Consensus +0.1%
Prior 0.0%

08:30 Core CPI Mar
Briefing.com 0.1%
Consensus 0.1%
Prior 0.1%

08:30 Retail Sales Mar
Briefing.com 1.4%
Consensus 1.2%
Prior 0.3%

08:30 Retail Sales ex-auto Mar
Briefing.com 0.5%
Consensus 0.5%
Prior 0.8%

10:00 Business Inventories Feb
Briefing.com 0.5%
Consensus 0.4%
Prior 0.0%

10:30 Crude Inventories 04/10
Briefing.com NA
Consensus NA
Prior 1.98M

14:00 Fed's Beige Book Apr

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

SINGAPORE – Oil prices rose above $84 a barrel Wednesday in Asia, breaking a five-day slide, as rising global stock markets boosted crude investor optimism. ...

The Dow Jones industrial average rose to a fresh 18-month high Tuesday. And after Intel Corp. reported better-than-expected earnings late Tuesday, most Asian stock indices were higher Wednesday. ...

A report saying U.S. gasoline supplies rose unexpectedly last week, which suggests demand remains weak, helped weigh on crude prices.

Gasoline inventories rose last week by 1.6 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected a fall of 1.3 million barrels,
according to a survey by Platts, the energy information arm of McGraw-Hill Cos. ....

In other Nymex trading in May contracts, heating oil was steady at $2.214 a gallon, and gasoline fell 0.59 cent to $2.303 a gallon. Natural gas fell 3.8 cents to $4.122 per 1,000 cubic feet.

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

WASHINGTON – Federal Reserve Chairman Ben Bernanke goes to Capitol Hill on Wednesday with a bittersweet message: The economic recovery is taking hold but won't be strong enough to quickly drive down unemployment. ...

To foster the recovery, Bernanke and other Fed officials have repeatedly pledged to hold interest rates at record lows for an "extended period." The hope is that low rates will entice people and businesses to spend more, generating enough economic activity to help keep the recovery going.

But Bernanke is likely to warn again that the pace of the recovery will be sluggish because Americans still face formidable headwinds: high unemployment, stagnant wages, weak home values, rising foreclosures and hard-to-get credit.

The Fed chief will offer his latest assessment on the economy when he appears before Congress' Joint Economic Committee. He'll be under more pressure than usual. It's an election year for lawmakers, whose constituents — including individuals and small businesses — are anxious about their financial prospects. ...

Many private economists say it will take at least until the middle of this decade for the jobless rate to drop to a more normal 5.5 percent to 6 percent. Recoveries after financial crises tend to be more subdued as some credit problems linger.

http://news.yahoo.com/s/ap/20100414/ap_on_bi_ge/us_bernanke_economy

April 14 (Bloomberg) -- The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.

Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.

The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help. .....

Regardless of whether the Fed appeals, the Clearing House will take the next legal step by asking for a review by the full appellate court, Saltzman, 49, said at his office in New York. If the ruling is unfavorable, the bank group will petition the Supreme Court, he said. ....

Bloomberg sued in November 2008 under the U.S. Freedom of Information Act, after the Fed denied access to records of four Fed lending programs and a loan the central bank made in connection with New York-based JPMorgan Chase’s acquisition of Bear Stearns Cos. in March 2008.

http://www.bloomberg.com/apps/news?pid=20601109&sid=ax8ulGXswn4E&pos=11

that all the shit hits the fan? AND the appropriate criminals?

I recall the J.K. Galbraith book "1929 The Great Crash" with the large host of financial schemers who went to prison. Today's prison population would swell massively if justice were done upon those who created this mess.

Yes, the rich have a recovery but the poor, not so much. And the rich don't give a shit about the poor so nothing will be done.

Let them eat tranches.



Tansy Gold

WASHINGTON – Small businesses are still waiting for the economic rebound that's enabled larger companies to obtain low-interest credit and to boost exports and production in recent months.

Smaller companies aren't much more optimistic than they were in the depths of the recession, according to a survey released Tuesday by the National Federation of Independent Business. ...

The NFIB's small business optimism index fell 1.2 points to 86.8 in March, the lowest level since July 2009. That's a sharp contrast with other surveys showing larger companies rebounding. ...

Small businesses account for about half of gross domestic product. Firms with fewer than 50 employees historically have created about one-third of new jobs, according to Scott Brown, chief economist at Raymond James.

The NFIB's index has been below 90 for 18 straight months, the longest sub-90 period since the survey began in 1973. It fell below 90 for only one three-month period in the steep 1981-82 recession.

http://news.yahoo.com/s/ap/20100414/ap_on_bi_ge/us_small_business_pessimism

Well, this is another fine mess.

With yesterday's revelations of Rahm Emmanuel's direct ties to the biggest crooks, coupled with this month's revelations of the banksters actions, I have to conclude that the US is a totally captured and failed state.

Our goose is surely cooked. There is no force for justice or change left within government. There is no rule of law. There is nothing worth saving.

If any nation deserved to lose its entire top elite in a plane crash, it is the US, not Poland. I envy my cousins abroad.

The TBTF have been revealed as criminal enterprises, and Europe is on to them. They will be shut out entirely. They have no money (save the worthless US paper) no assets (save the worthless paper they are trying to unload on India and China) and no power save Rahm, Geithner, Bernanke, Summers and Obama the Clueless who is really going to earn the wages of sinning with dogs.

the game is over. We have lost. It truly is time to get the hell out of Dodge.

The People are not entirely blameless. The People who voted for Reagan precipitated this. But the Corporations, ALL the outsourcing bastards, went along with it. They are all traitors to the nation, to the People. Our leadership sold us all down the river.

I am speechless, save for screams of rage and wails of despair.

http://dealbreaker.com/2010/04/the-secret-story-behind-the-infamous-magnetar-trade/

And to think, Yves Smith broke this story.

http://www.nakedcapitalism.com/2010/04/rahm-emanuel-and-magnetar-capital-the-definition-of-compromised.html

Magnetar

1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies
2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created

Rahm Emanuel

1) White House Chief of Staff
2) Politician selected by Magnetar’s CEO to be sole recipient of his political donations, 2006-2008

Strange as it may seem, nearly three years after the onset of the global financial crisis, its greatest, most destructive, and most profitable “it ought to have been a crime” has gone almost entirely unnoticed.

Most people believe that they understand the broad outlines of the financial crisis, and that a central element was an explosion in mortgages made to people who could not afford them.

But how did such destructive behavior occur on such a large scale? The conventional view is that the subprime mortgage blowup resulted from bank
executives being short-sighted, greedy, or both.

But that simple story deters inquiry into how and why this disaster came to pass. Some recognize that the appetite for subprime mortgages seemed to come from investors. In fact, it resulted in a large degree from the way traders at certain large banks used subprime mortgages in a strategy to make their profits seem much larger than they actually were. The effect of this “negative basis trade” strategy was to overpay employees of those banks and consequently eviscerate the banks’ abilities to withstand future economic uncertainty.

The appetite for subprime mortgages was also inflated by people who were betting that the housing market would fail.

Moreover, the devastation wrought by this strategy remains virtually a secret. The fact that it has been almost invisible and appears to have been entirely legal, demonstrates a set of vexing problems. First, that investigations of the crisis have not delved deeply enough, and second, that the deregulation so keenly sought by the financial services industry has made activities legal that by any common-sense standard should be criminal.

But the sponsors of this toxic trade did bother to make sure they had a powerful friend. The head of the firm in question gave substantial amounts of money by political contribution standards to Rahm Emanuel’s PACs, and only his PACs, over the period when these transactions were in play.

The moving force behind a brilliant and devastating subprime short strategy was a heretofore unknown Chicago hedge fund, Magnetar, headed by Alec Litowitz, formerly of the hedge fund behemoth Citadel. Our studies indicate that Magnetar alone accounted for between 35% and 60% of demand for subprime mortgages in the year 2006.

This is how their strategy worked in detail.

The ruse at the heart of their transactions was creating subprime (so called “mezz” or mezzanine) collateralized debt obligations by investing in the riskiest layer, the so-called equity tranche. This kind of CDO consisted almost entirely of not just any subprime risk, but that of the dodgiest layer that could be sold short, the BBB tranches, via a combination of actual bonds and credit default swaps.

But Magnetar’s true objective was not to invest in this toxic waste, which its role as funder of the CDO would lead most to believe. While Magnetar paid roughly 5% of the total deal value for its equity stake, it took a much bigger short position by acting as a protection buyer on some of the credit default swaps created by these same CDOs. This insurance in turn was artificially cheap because over 80% of the deal was rated AAA. Most investors did not understand what Magnetar recognized: this concentrated exposure to the very riskiest type of bond associated with risky mortgage borrowers, each of these CDOs was a binary bet. It would either work out (in which case Magnetar would still show a thin profit) or it would fail completely, giving Magnetar an enormous profit and wiping out even the AAA investors who mistakenly believed they were protected by having other investors sit below them and take losses first. Thus the AAA investors were only earning AAA returns for BBB risk.

As the equity investor, Magnetar could further stack the deck in its favor through the influence it gained over the deals’ parameters. It was able to ensure that the CDOs held particularly dubious BBB exposures, and pushed for, and often got, “triggerless” structures, which stripped away another protection most deals had. When CDOs start to show significant losses, the payments to the lower-tier investors, including the equity tranche, are cut or halted to defend the AAA layer, much the way the human body, when exposed to severe cold, will restrict blood flow from the extremities to save the brain and organs. But triggerless deals, even as they started to fail, kept paying the lower tranche holders, including, in this case, Magnetar itself.

While these transactions may sound similar to the widely decried Goldman synthetic CDO program, Abacus, by which the firm went short various real estate exposures, effectively dumping the risk on customers, the Magnetar program was not only much larger, but also produced far more devastating systemic consequences, thanks to the distinctive structure of its CDOs.

As I explain at greater length in my book ECONNED: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism, the use of cash bonds turned mezz CDOs from a dumping ground for otherwise unsellable mortgage bond risk to a breeding ground for demand. Ex Magnetar-inspired appetite, it is hard to find an explanation for the widely-discussed phenomenon of 2006 and 2007, of the mortgage securitization pipeline screaming for more subprime product, precisely when Federal Reserve interest rate increases should have stanched demand for risky loans above all others.

Market participants have estimated that Magnetar’s CDOs drove over 50% of demand for subprime bonds during the market’s toxic phase, 2006 and 2007. With the input of a team including professionals who have worked on some of these trades, ECONNED, we’ve performed repeated, conservative analyses that indicate the true figure is probably at least 35% of demand, and perhaps as high as 60%. And that’s before allowing for the fact that Magnetar’s strategy was imitated by the proprietary trading desks of major dealers. And for good reason. Magnetar made billions, some observers contend as much as subprime kingpin John Paulson, whose fund earned over $20 billion on its short strategy.

And the hedge fund’s cagey bet on Rahm? Litowitz and his wife had never before made significant political donations. In 2005, they started giving to Rahm and his PACs, and only PACs connected to Rahm, just before the Magnetar CDO program began, and continued through the first quarter of 2008, when the trade would have started to pay out handsomely. The Litowitzs gave a total of $8,000 to Emanuel and $10,000 to his Our Common Values PAC in May 2005. In 2006 and 2007, they contributed $51,700 to the Democratic Congressional Campaign Committee, while Emanuel was chairman. We have been advised by individuals involved in political fundraising that the amounts given would be considered significant, and the way the payments were distributed across the PACs is sophisticated. Put it another way: this money was not given impersonally.

But this troubling connection should be no surprise. Rahm has long been a favorite of the hedge funds, having raised more money from them than any Senator not running for President. Not surprisingly, he has been a staunch supporter of the financial services industry, and is widely credited with playing a key role in securing passage of the TARP after its initial defeat.

As the Magnetar-Rahm connection highlights, Obama raised more money from financial services players than any previous presidential candidate, so it can hardly be a surprise that he and his minions are happy to give the industry a free pass. Key policy figures maintain that no one was at fault, that there was a pervasive lack of regulation, and there are therefore no bad actors. That party line also means that destructive behavior is and will remain unquestioned, unexamined, uncorrected, and unpunished. We are still paying for the costs of the financial train wreck of 2007 and 2008. We can no longer afford the costs of willful blindness.

Addendum: Hat tip to Corrente who posted on this relationship on April 11, and finally prodded us to post our writeup of this story. We worked closely with Moe Tkacik on the story she put up on DailyFinance and took down, and had held off publishing our version pending her releasing her final version.

Never mind my question then in the other post.

He's a crook. Obama has surrounded himself with a class of compromised individuals that Warren Harding would have enjoyed in his company. Damn! this is bad.

and also the Boys from Goldman, and the Fed Reserve?

(this can be found here)

I knew that Emmanuel has been in cahoots with plenty of banksters - but what is the new information?

We are in a fine mess indeed, Demeter. Reagan saw to it that any middle to working class person eventually would not have a pot to piss in with all his "shining city on a hill" happy talk that amounted to nothing. Increased wages were swapped with increased debt. Government regulations, which were reframed as onerous to everything American, were loosened. People making public policy surrendered any control over the raping, pillaging barbarian hordes in three-piece suits.

Indeed, we are in a fine mess.

Some people are already angry at the fraud and corruption. When the entire herd wakes up, and stampedes, watch out.

Like the bursting of a huge, hot boil.

We are in for Civil War, the Sequel. Will the Corporations win at last, or will people prevail?

If the Enemy is properly identified...like that is going to happen!

I don't see anything radical happening in my lifetime, but surely in my kids. I worry most about the world that my toddler grandchildren will be living in.

I wonder if we don't have our own complacency to deal with and it blinds us to a certain extent to just how volatile the situation is. The hoocoodathunk syndrome. "I never thought I'd live to see the day." Etc.

Maybe it's closer than we think. Or maybe not. At any rate, I think we walk into the future better prepared simply because we're aware of the possibility.




Tansy Gold

I think a lot depends on when the massive herd changes direction, when everyone jumps in, because that is the thing to do. Right now, we're just too fragmented...there are some people here at DU, some over at Denninger's forum, some at other forums. And yeh, we're all better prepared because we pay attention to what is going on.

But there are zillions more wandering around clueless. It's when they wake up and become a massive herd of anger, that is when we need to watch out for the stampede. I have no idea how to predict when that will happen.

figured out an equation that will confirm the herd will never coalesce from its current state of dispersal.

And then when it happens, hoocoodathunk?

I do think there will be warning signs, however. i don't know what they are or will be, but I do believe that once it starts, it will be a rapidly-accelerating spiral into madness.



Tansy Gold, into doom and gloom heavily this morning because she has to write out one fat check to the IRS and another to the county for property taxes. . . . .

The JPMorgan Chase & Co executive was at a congressional hearing in Washington when a lawmaker asked him who mortgage borrowers could turn to if they felt his bank's employees were not helping them hold onto their homes.

"Come to me," said David Lowman, chief executive for JPMorgan Chase & Co's home mortgage business in response to the question from Massachusetts Democrat Barney Frank.

Minutes later, around 50 borrowers burst from the audience and presented Lowman with a 6-page document alleging his bank reneged on a pledge to help struggling homeowners.

The activist who organized the protest said Lowman did not want to talk and left the hearing.

"He ran. He ran like a dog with its tail between his legs," said Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), which helps homeowners avoid foreclosure. "He was scared to death because he doesn't really want to talk to homeowners."

http://www.reuters.com/article/idUSTRE63C5LO20100413

Our Founding Fathers agreed on one thing more than any other--Religion was to be totally shut out from the power of the State.

They also in principle agreed that Corporations should be shut out, but did not put in sufficiently explicit and unbreakable rules about it. And from the Civil War on, the Corporations started to take over the nation. Now their capture is complete.

We now see the error of this omission. It will have to be fixed, or else the US will cease to exist in any recognizable form. God help us all!

:sarcasm:



TG

You certainly deserve it.

I will finish my taxes this afternoon. The forms are complete, save a little error checking.

The government owes me an apology, several war crimes trials, the complete RICO and shutdown of the banksters, and a posthumous scourging of Reagan. I won't settle for being bought off by a few pennies. A free passport out of here would be a nice gesture, though.

We didn't have any deductions left this year, and our withholding was waaay too low. And I thought that I qualified for around a $3k credit. I didn't.

I hope all of you freeloading, deadbeat hippies enjoy my hardly worked for money! :hurts:

Maybe they can get together for a beer?


Tansy Gold, the non-freeloading, non-deadbeat hippie

I had to pay $3888-but I don't mind-I got a big loan partially forgiven. :woohoo:

My daughter, the student got $1055 and she is elated.

I am figuring up hubby and the business. He did not do the receipts and is missing some big ones. He is out trying to get them. He was pissed when I told him how much he will loose. I guess it is really different in India. We think he will get a large refund.

I think I can get this in to the CPA for the final touches by tonight or tomorrow-I love technology

Fed and state
:(

With my wife's and my IRA contributions we reduced our taxes by over $700. Nice instant return on investment. We essentially transferred some of our rainy day fund from cash to IRA's. Probably a good thing as it made us invest for our hypothetical retirement.

(Down a little. Good day all.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,347,343,971,647.64 + 4,479,035,484,639.21
DOWN 193,173,374.30 + UP 885,238,455.45

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,055,008 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,501.93.
A family of three owes $124,505.79. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 31 days.
The average for the last 22 reports is 11,395,481,517.51.
The average for the last 30 days would be 8,356,686,446.17.
The average for the last 31 days would be 8,087,115,915.65.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 132 reports in 194 days of FY2010 averaging 6.94B$ per report, 4.72B$/day.
Above line should be okay

PROJECTION:
There are 1,014 days remaining in this Obama 1st term.
By that time the debt could be between 14.2 and 21.0T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/12/2010 12,826,379,456,286.85 BHO (UP 2,199,502,407,373.77 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,916,550,452,775.10 ------------* * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,724,437,707,540.78 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/23/2010 +000,796,033,080.11 ------------********
03/24/2010 +000,495,755,553.04 ------------********
03/25/2010 +024,094,622,106.32 ------------**********
03/26/2010 -000,521,947,711.23 ---
03/29/2010 -000,032,502,739.57 ---- Mon
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon

172,248,584,651.38 Total of 15 above reports.

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

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4341599&mesg_id=4341632

(Down a little. Good day all.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,347,257,429,111.42 + 4,483,935,954,579.27
DOWN 86,542,536.22 + UP 4,900,469,940.06

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,061,654 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,516.61.
A family of three owes $124,549.84. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 23 reports in the last 30 to 32 days.
The average for the last 23 reports is 11,109,326,990.83.
The average for the last 30 days would be 8,517,150,692.97.
The average for the last 32 days would be 7,984,828,774.66.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 133 reports in 195 days of FY2010 averaging 6.93B$ per report, 4.72B$/day.
Above line should be okay

PROJECTION:
There are 1,013 days remaining in this Obama 1st term.
By that time the debt could be between 14.2 and 20.9T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/13/2010 12,831,193,383,690.69 BHO (UP 2,204,316,334,777.61 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,921,364,380,178.90 ------------* * * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,724,605,121,873.33 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/24/2010 +000,495,755,553.04 ------------********
03/25/2010 +024,094,622,106.32 ------------**********
03/26/2010 -000,521,947,711.23 ---
03/29/2010 -000,032,502,739.57 ---- Mon
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon
04/13/2010 -000,086,542,536.22 ----

171,366,009,035.05 Total of 15 above reports.

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

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4342932&mesg_id=4342961

April 14 (Bloomberg) -- Starwood Capital Group LLC, Colony Capital LLC and TPG, whose leaders profited from the 1990s savings and loan crisis, are among firms buying assets from the Federal Deposit Insurance Corp. for as little as 22 cents cash on the dollar, according to data compiled by Bloomberg.

The sales, some including no-interest financing from the agency, are part of an FDIC effort to clean out $40 billion of loans that regulators seized from failed banks. Starwood Chief Executive Officer Barry Sternlicht told potential investors in February it’s “very hard to lose money” on the deals.

The government, which was faulted two decades ago for letting bank assets go at fire-sale prices, is planning to profit along with investors. Instead of selling the loans outright, the FDIC kept stakes of 50 percent or more in at least five loan portfolios sold since September. It’s also demanding as much as 70 percent of any gains. ....

The sales involve packages of loans acquired by the FDIC from 182 banks that failed since the start of 2009. The loans typically are tied to commercial real estate and residential development, and can include debt on which borrowers stopped making payments or property seized by the bank.

Terms entitle taxpayers to a share of any money that private investors squeeze from delinquent borrowers or any profit earned reselling the assets. The FDIC-backed debt has to be repaid before the private-equity firms can take any cash generated by the loans.

http://www.bloomberg.com/apps/news?pid=20601109&sid=anr29UoL2OBE&pos=10

Remember those who said, that for 1/10th of what the bailout cost, the govt. could have paid off every mortgage in the nation, and the credit card debt, and all the car loans...

April 14 (Bloomberg) -- Morgan Stanley, which once ran the biggest property-investment arm among Wall Street banks, expects to lose $5.4 billion, or 61 percent, of its $8.8 billion global fund from 2007, said a person familiar with the situation.

The firm sent a fourth-quarter update to investors in recent weeks showing the fund was likely to recover $3.4 billion of the investment, said the person, who declined to be identified because the information wasn’t public. A spokesman for New York-based Morgan Stanley declined to comment. ....

Morgan Stanley invested its 2007 fund around the world, including Asia and Europe. In the U.S., the firm defaulted last year on a $2 billion loan to buy Crescent Real Estate Equities Co. in 2007 and handed over 17 million square feet of office buildings to lender Barclays Capital. Morgan Stanley agreed in 2009 to relinquish five San Francisco office buildings to its lender, two years after buying them from Blackstone Group LP.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeO9Ze5Vz7bo&pos=7

Ben Bernanke, William Dudley and Donald L Kohn are on the Fed’s Open Market Committee (FOMC).

They are also on the board of directors of the Bank for International Settlements (BIS) – often called the “central banks’ central bank”. And Kohn is an alternate director for BIS.

Alan Greenspan, of course, was a BIS director for many years.

Dudley is also chairman of BIS’ Committee on Payment and Settlement Systems. (Tim Geithner – previously on the FOMC – previously held that post).

So there is clearly quite a bit of overlap between the two groups.

In addition, BIS’ chief economist – William White – and others within BIS – repeatedly warned the Federal Reserve and other central banks that they were setting the world economy up for a fall by blowing bubbles and then using “using gimmicks and palliatives” which “will only make things worse”.

As Spiegel wrote last July:

White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market…

It was probably the biggest failure of the world’s central bankers since the founding of the BIS in 1930. They knew everything and did nothing. Their gigantic machinery of analysis kept spitting out new scenarios of doom, but they might as well have been transmitted directly into space…In their report, the BIS experts derisively described the techniques of rating agencies like Moody’s and Standard & Poor’s as “relatively crude” and noted that “some caution is in order in relation to the reliability of the results.”…

In January 2005, the BIS’s Committee on the Global Financial System sounded the alarm once again, noting that the risks associated with structured financial products were not being “fully appreciated by market participants.” Extreme market events, the experts argued, could “have unanticipated systemic consequences.”

They also cautioned against putting too much faith in the rating agencies, which suffered from a fatal flaw. Because the rating agencies were being paid by the companies they rated, the committee argued, there was a risk that they might rate some companies too highly and be reluctant to lower the ratings of others that should have been downgraded.

These comments show that the central bankers knew exactly what was going on, a full two-and-a-half years before the big bang. All the ingredients of the looming disaster had been neatly laid out on the table in front of them: defective rating agencies, loans repackaged to the point of being unrecognizable, dubious practices of American mortgage lenders, the risks of low-interest policies. But no action was taken. Meanwhile, the Fed continued to raise interest rates in nothing more than tiny increments…

more here

They totally knew this shit was going to blow up. Yet they did nothing. Nothing at all.

Much like the homeowner sinking slowly into debt over their head but still keeps going out to eat, taking vacations, charging up the credit cards. "It'll all work out ok."


Well, it didn't.

And this administration is complicit in that it will not hold those responsible over the flames.

Still buying McMansions, taking exotic vacations, eating at trendy restaurants, and charging up the credit cards. They think the market rallying is great and there aren't going to be anymore meltdowns. The worst is over.


:wtf:

some items I didn't get to on Saturday...

Right now, though, I have to get ready for work.

Take care, all.

:donut: :donut: :donut:

http://dailyreckoning.com/greenspan-came-not-to-save-consumers-but-to-bury-them/

Former Federal Reserve Chairman Alan Greenspan defended the central bank’s record on consumer protection in the years before the financial crisis…. “The Federal Reserve, often in partnership with the other federal banking agencies, was quite active in pursuing consumer protections for mortgage borrowers,” Greenspan said in testimony for a hearing today of the Financial Crisis Inquiry Commission in Washington.

April 7 (Bloomberg) — “There’s a lot of amnesia that’s emerging,” Greenspan said.

The attention Alan Greenspan devoted to consumer protection on April 7, 2010, was a strange diversion, which is what it was. The Financial Crisis Inquiry Commission had penetrated, to an uncomfortable degree, the shallow defenses Greenspan has dreamt up to justify his indefensible behavior. For instance, he offered a ridiculous response when asked if monetary policy was one failure during his tenure. Greenspan changed the subject, only – one suspects to Greenspan’s surprise – to be asked the same question again. He again ran off on a tangent. Maybe even Greenspan understood the emperor who wore no clothes had been exposed.

To those not suffering a bout of amnesia, his fidelity to the consumer was a surprise. That is, to those who have read the Greenspan Papers. We need only review transcripts of Federal Reserve Open Market Committee (FOMC) meetings in 2002. The man who built his reputation as a disciple of Ayn Rand (to be sure, a false claim) dearly wanted to drain the consumer of economic self-sufficiency. He succeeded.

The economy was emerging from recession, though imperceptibly. The mean household income declined in the United States every year from 2000 through 2004. To the Fed, consumer spending leads the economy. Since income from jobs was not boosting the GDP, innovative consumer finance was an FOMC obsession.

The Federal Reserve chairman spent the year not trying to protect consumers, but to bury them. At the March 2002 meeting, he stated: “f the mortgage rate goes up, we will get some restraining effects on personal consumption expenditures because a goodly part of PCE has been financed by equity extraction from the appreciation in housing values.”

At 2002 meetings, Greenspan spent a good deal of time talking about consumers cashing out home equity from their houses and – it would only boost the GDP with the and – spending it. At the September FOMC meeting, Greenspan reported on the rising level of consumer cash from home sales and from cash-out refinancing.

First, from home sales: “We know, for example, that the current level of existing home turnover is quite brisk and that the average extraction of an existing home is well over $50,000. A substantial part of the equity extraction related to home sales, which is running at an annual rate close to $200 billion, is expended on personal consumption and home modernization, two components, of course, of GDP.” GDP growth, of course, is the Federal Reserve chairman’s popularity barometer.

Second, from refinancing extractions: “pplications reported by the Mortgage Bankers Association a very large increase in cash-outs. We estimate that they, too, are running in the $200 billion range at an annual rate, up very significantly from where they were a year or eighteen months ago.”

This was good news: “I think it’s fairly evident the unprecedented levels of equity extractions from homes have exerted a strong impetus on household spending.”

Also at the September meeting: “here is no question that a goodly part of the robustness of household expenditures stems from . Cars and light trucks which have been quite strong, are examples of large ticket items that are disproportionately purchased when equity is extracted from the sale of a home….”

In November, he thought “it’s hard to escape the conclusion that at some point our extraordinary housing boom and its carryover into very large extractions of equity, financed by very large increases in mortgage debt, cannot continue indefinitely into the future.”

All to the good, as Edward Gramlich was told at the August meeting:

GRAMLICH: “I am just uncomfortable that the refinancing of housing should be the source of so much of the support for our recovery.”

GREENSPAN: “You sound like a true conservative.” So said the head banking regulator, responsible for the solvency of the banking system.

At the August 2002 meeting, Greenspan unrolled a theory, one that may actually work in the real world: the decline of interest rates plays an important role in trading, extracting and spending. (The Federal Reserve staff believed only the level of interest rates matter.) The chairman declared the “decline has had a major impact on thirty-year mortgage rates…. e are seeing very significant churning in the mortgage markets, and as I have indicated previously, the increase in home equity is cumulative over a period of years because the prices of houses very rarely turn negative. What we are observing at this point is a very high rate of house turnover. Existing home sales are very high….”

This churning was as important as rising prices. A faster rate of house trading, multiplied by profits from house sales, prompted greater cash-out consumer spending.

At the November meeting, Greenspan once again pushed his decline-in-interest-rate theory: “In sum it strikes me that we are looking at an economy that potentially has significant upside momentum if it can get through the current soft spot. y suggestion would be to lower the funds rate by 50 basis points – it is possible that such a move may be a mistake. But it’s a mistake that does not have very significant consequences.” The FOMC voted to cut the funds rate.

It might seem extraordinary, if we were not discussing Alan Greenspan, that the Federal Reserve chairman actively engaged in financial shenanigans with the specific intention of encumbering Americans with more debt at a time their incomes were falling.

The consequences today are most visible in Las Vegas, California’s Inland Empire and in southern Florida. As for Greenspan, the Fed had cut the funds rate 12 times in 2001 and 2002, from 6.5% to 1.25%. His theory was running out of ammunition. Greenspan’s manipulation of thirty-year fixed mortgage rates was nearly spent. (How does his 2002 theory square with his 2010 theory that short-term interest rates set by the Fed had no influence on the mortgage bubble?) By 2004 and 2005, he gave speeches exhorting Americans to buy adjustable-rate, interest-only and negative-amortizing mortgages.

The man never stops trying.

http://dailyreckoning.com/examining-stock-market-valuations-brace-for-turbulence/

“The last time that had no government debt, you had a Scottish president. His name was Andrew Jackson. Not only did he pay off the national debt, he also abolished the central bank and tried to close down all the commercial banks.”

– CLSA Strategist (and Scotsman) Russell Napier, March 24 CFA Society speech

I had the good fortune to attend a speech by Russell Napier last week. Napier is a stock market historian. But he’s not just an ivory-tower academic; he operates on the front lines of the investment management business as an analyst for the brokerage firm CLSA. Napier’s been in the trenches of the global financial markets for several decades.

Napier’s speech, which echoed themes from his excellent book, Anatomy of the Bear, stressed the need for investors to understand the long-term trends in stock valuations.

Secular, or long-term, bull markets are best defined as a period of rising valuations, he explained, while bear markets are the opposite. Near bull market peaks, investors become so optimistic that they pay silly earnings multiples for stocks. A simple way to view a P/E multiple is the “payback period” for the return of the capital you part with in order to buy a stock. The higher the starting PE ratio, the longer the payback period.

Napier’s discussion of cycles in stock market valuation is based on the work of Yale Professor Robert Shiller, and his now-famous “Shiller P/E ratio.” The Shiller P/E ratio is calculated as follows: divide the S&P 500 by the average inflation-adjusted earnings from the previous 10 years. Here is a chart of the Shiller P/E going all the way back to 1880:

Long Term Shiller P/E Ratio

It’s the best P/E ratio to use over long stretches of history, because it smoothes out the extreme peaks and valleys in earnings, giving a better framework for thinking about future S&P earnings power. The mean and median Shiller P/E since 1880 are both about 16. Today, it’s about 22. At the last four major bear market bottoms, in 1921, 1932, 1949, and 1982, the Shiller P/E fell below 10. This is a far cry from bouncing sharply off of 15 – which is what happened at the March 2009 bottom.

Valuation is the main reason why I expect the bear market to last several more years into the future – probably somewhere in the 2015-2020 timeframe. I think we’ll get there through some combination of falling stock prices and modest earnings growth.

Rapid earnings growth – along with rising valuations – drove the great 1982-2000 bull market. The sprint up to the 2000 peak was, in hindsight, the biggest stock market bubble in history. History shows that bubbles are nearly always corrected over very long periods. The next decade will surely be especially turbulent, because that’s when markets and politics will sort out what the inevitable train wreck in the US entitlement programs will look like.

How much will entitlement promises be financed by currency debasement? How much are Baby Boomers willing to sacrifice in terms of medical rationing? Or higher retirement ages for Social Security? These are the big questions of our time. The one thing that’s certain is that it won’t be painless. Most entitlement recipients expect a standard of living that the welfare state can simply not afford.

In his speech, Napier’s dry humor nailed the situation: “For 120 years, the US borrowed money to kill people . Now, it’s borrowing money to keep them alive.”

As it turns out, demographic trends are a crucial driver of both politics and markets. Napier cited a study that Professor Shiller and a few of his graduate students conducted to discover a data series that fits closely with the Shiller P/E ratio. The study revealed that demographics heavily determine stock market valuations. It compared the number of 40-year-olds with the number of 20-year-olds through time. If the number of 40-year-olds grows faster than the number of 20-year-olds, valuations rise. If the number of 20-year-old grows faster than the number of 40-year-olds, valuations fall.

In statistics jargon, the “r-squared” of this variable, in explaining valuations, was 0.79. That’s very high, meaning the demographic trends are important in determining long-term stock market returns. Over the next several years, the number of 40-year-olds will decline, due to the lower birth rates between the Baby Boomers and the Boomers’ kids. So the Shiller P/E ratio is very likely to fall.

Napier’s talk concluded with his outlook for stock valuations. He said, “I fully expect to be here in five or six years telling you to buy US stocks at 6 times earnings – at a time when the geopolitical decline of America is on the front page of every newspaper; at a time when you have capital controls; at a time when the government is manipulating the debt market.”

http://dailyreckoning.com/emerging-market-inflation-brace-for-turbulence-part-ii/

History shows that when the governments grow desperate to finance deficits, they get creative.

During WWII, the US government needed investors to buy an unprecedented amount of Treasury bonds. Commercial banks loaded up on Treasuries, which limited the amount of credit that could be granted to the private sector. It may have been the patriotic thing to do, but the real returns from war bonds were very poor. Napier said, “That’s the type of society had to run to sustain our government debt. And I’m suggesting to you that these are exactly the sorts of things we have to look out for in our future.”

Napier then summarized one of the conclusions that economists Carmen Reinhart and Ken Rogoff reached in their book This Time is Different. Financial crises morph into fiscal crises. But the thing that has yet to frighten investors is the next stage: financial suppression. This is the process of forcing private sector savings into public sector debt. Most investors will tell you that this is impossible. But Napier ticked off two potential tools the government could use to strong-arm investors into Treasuries:

1. Capital controls: An example of this comes from the UK in the 1970s. For most of this decade, the yield on UK government bonds was below inflation. The government wouldn’t let investors take money out of the country.

2. The “Buffett tax”: Political leaders would say, “We love capitalism. It is the best thing America has ever had. And we would really, really like to promote it. And the best way we can promote capitalism is to get all you capitalists to invest with a long-term holding period.” The idea would involve a 4% “transaction tax.” This effectively forces shareholders to engage more deeply with corporate executives, rather than trading shares aggressively. The authorities would say, “This is a wonderful thing because Warren Buffett does it. And if Buffett does it, it has to be good. So as of tomorrow, we’ll have a 4% ‘Buffett’ tax for the trading of all financial instruments except for government debt.”

Napier says the government can’t get away with inflating away its debt in a free market. If it were attempted in an aggressive fashion, yields would soar, making the process self-defeating. So the government will make the Treasury market a “less free” market. In other words, it will stack the deck in favor of Treasuries, to the detriment of all other financial assets.

But the authorities should know that this type of action would have huge consequences for global financial markets. A big driver of the global economic growth over the past three decades has been the liberalization of capital. Capital could easily migrate across borders to seek out the highest risk-adjusted returns. Today, the international flow of capital is just as important as the flow of international trade. Capital controls, if they get too onerous, could wind up leading to a 21st Century version of the Smoot-Hawley tariff.

As distasteful as it is, investors must pay close attention to politics and policy. “We’ve spent our professional careers analyzing supply and demand,” Napier explained. “Now, we must analyze supply, demand, and government. , the government didn’t like what supply and demand were doing; supply and demand were inducing deflation and creative destruction, so the government stopped it.”

Napier thinks that the catalyst to end the unsustainable status quo of the developing world financing US trade deficits will be inflation in the emerging markets. Emerging economies believe that they can export their way to prosperity, but they cannot. “40% of the world’s population has a great plan to get rich by selling stuff to 14% of the world’s population,” Napier observed. “That can work for several years, and it has – particularly if 14% of the world’s population is prepared to gear like crazy to buy all of this stuff.”

Now that US consumers are deleveraging, Asia’s mercantilist economic and currency policies aren’t as effective as they once were. These countries will not be focused on undervaluing their exchange rates forever. If aggressively debasing your currency were a guaranteed road to high growth and low inflation, paper money would have a much better reputation among historians.

The downside of this currency policy is that it can lead to inflation at the local level. Eventually, the supply of existing and new money will overwhelm the growth of productivity in China’s industrializing economy. These emerging markets will have to eventually allow currencies to rise to prevent inflation from getting out of control.

We’re seeing more examples of rising imported commodity prices hurting Chinese industry. The price of iron ore is soaring, thanks to China’s aggressive infrastructure investment and its suppressed currency. International iron ore markets are so tight that supply contracts are switching from yearly to quarterly pricing adjustments. The Financial Times this week reported on this evolution in the pricing of iron ore, which will feed through to higher steel prices: “The new price system will lift the cost of iron ore to Asian steelmakers to about $110-$120 a tonne during the April-June period, up between 80 and 100 per cent from the $60 level at which the 2009-10 annual contracts were settled.”

If China allowed its currency to appreciate, it would pay less to import iron ore and other crucial imports like oil. A strengthening Renminbi would increase demand for imported oil, which translates into more expensive oil for US consumers. A few years from now, Washington, DC may come to regret its push for China to appreciate its currency.

Napier also addressed the subject of Europe, Greece, and the Euro. He said, “The creation of a single currency is not an economic event, it’s a political event. Unfortunately, the ten guys in Europe who run this currency have all got Ph.D.s in economics.”

Napier then told us about his experience working in Hong Kong in 1998. That year, the French senate sent a delegation to Honk Kong to investigate the Asian financial crisis, and consult Napier about the evolving project that was the Euro.

The French delegation was convinced of the merits of establishing the Euro, because it would supposedly bring lasting peace along with economic integration. WWII was still a searing memory. The delegation asked whether the Euro would help “iron out the inefficiencies” across Europe. Napier replied, “The things you call ‘inefficiencies’ here in Hong Kong are the things in France you call ‘culture.’” He knew that currency integration without political integration wouldn’t work.

Napier fears that the political will to save the Euro is forcing “economic deflation” in Greece and the other spendthrift countries within the Eurozone. Those running the ECB may rightly note that wages in Greece might decline to achieve a healthier Eurozone equilibrium. But Napier believes that if too much harsh austerity is imposed on the Greek economy, the democracy in Greece might be destroyed in the process. Napier points out that democracies very rarely deflate. They instead devalue their currencies and push new money supply through the channels of commerce.

Napier is concerned that “the ECB will not change its mind on hard money until it destroys one of the democracies in Europe.” Then came the most shocking thing Napier said in his hour-long speech: a prominent Greek businessman confidently assured him that the United Nations will be running Greece by September. If so, this should keep fear in financial markets at healthy levels through this spring and summer. Greece is not resolved, yet the markets appear to believe so.

When asked for a forecast of the best potential asset class over the next decade, Napier’s replied: “A basket of Asian currencies.”

But if you think about it, it is almost common sense. The stock market valuations are (supposed to be based on growth), and the bedrock on which all demand growth is based is population growth. Maybe that's why rethuglicans are so against birth control-- it cuts into their profits. (Not being facetious in the least.)

http://dailyreckoning.com/the-great-correction-still-pending/

For more than a year, the “recovery” bounce in the stock market has refused to give up. The indexes have recovered more than 50% of what was lost. Technically, they look pretty good. What’s more, the S&P sells at more than 21 times normalized earnings, according to Robert Shiller’s latest tally. It seems like nothing can stop stocks now.

Then there’s the Treasury market. Overall, yields remain remarkably low. It is almost as if Treasury buyers are unaware that they are being asked to finance the biggest increase in sovereign debt ever. It doesn’t seem to matter either that many of the applicants for money will be incapable of repaying it. Several sovereign debtors, including the US, have already reached the “point of no return,” according to professors Rogoff and Reinhard.

Still, the financial press is optimistic. Economists are irrationally confident. Investors and advisors are overwhelmingly bullish. And the American public seems willing to add a trillion-dollar health-care program to its burdens – a sign of remarkable faith in the nation’s prospects.

So, let’s go back and reexamine our basic position. Is this really the “Great Correction” that we think it is?

If there is one lesson we’ve learned over the years, it is that we need to be patient. Things that have to happen generally do, sooner or later. You just have to wait. And when they happen, they generally happen much faster than you expected. Even when you’ve been expecting something for years, it can come and go before you realize what is going on.

You get used to being wrong…or at least premature. You wait. You watch. You think the time has come…and then: whoops…not yet. Pretty soon, you are overcome by anticipation fatigue. Then when the real thing finally does start to happen you don’t believe it. You wait to be sure…you hesitate…and then it’s over!

Just what am I waiting for? I’m anticipating more evidence of this Great Correction, including another big swing down in the real price of stocks, bonds and commodities…further deterioration in the real estate market…a falloff in consumer spending…and a higher savings rate.

I’m also expecting higher yields from government debt…and a dangerous intensification of financial problems in both the private and public sectors. If I’m right, those things must happen eventually. So far, we’re still waiting.

But this week the long-awaited turnaround in the bond market may have begun. Rates are rising along the entire yield curve, especially at the long end. “The bond market is now very close to saying, ‘We’ve had enough,’” predicts the octogenarian stock market technician, Richard Russell. The 30-year T-bond’s recent decisive move above 4.80% marks the end of a 25-year bull market in bonds, says Russell. Rates will be moving higher from here.

Investors are starting to tune into how sovereign debt works. And they’re starting to realize that even governments can default. In fact, almost all of them do default eventually. Yes, even governments whose debts are denominated in their own currencies default. And even when they have the power to print the currency themselves.

How could that be? Well, it is very simple and worth spending a little time on. I want to make two points:

First, governments will usually choose to default on their debt rather than risk hyperinflation of their currencies. Second, when they reach a “point of no return” they have no choice. They cannot cut back spending. Because even the most drastic cutbacks will not do the job. That would simply result in lower tax receipts and an even bigger deficit. At a certain point, the multiplier effect becomes the divider effect.

I’ve made the point many times that democracy seems hell-bent on self-destruction. America’s founding fathers noticed many years ago that when people realized that they could vote themselves money from the public treasury, democracy would be doomed.

Most people presume that if a politician offers benefits, “someone else” will pay for it somehow, someday. In practice, the money doesn’t come from additional taxes. Taxes are already, at least theoretically, at their optimal level. Higher tax rates produce lower economic activity, which lowers tax receipts. So instead of raising taxes, governments borrow the money. Then sovereign debt loads become larger and larger until, as Greece has recently discovered, they are impossible to carry.

America also has public sector debt problems – of about equal measure to Europe – and she has huge private sector debt problems as well. For the moment, the skies over the American financial markets are clear. But out at sea a hurricane is spinning faster and faster. There is a huge wave of debt defaults/foreclosures in the private sector that will hit the markets soon. This wave, combined with record borrowing from the US government, is bound to push up bond yields…making it harder than ever to get needed funding.

The situation with the US government is more complicated than it is with private borrowers – or even with Greece or California. The federal government can print money. But it, too, is ultimately at the mercy of the bond market. Last year Uncle Sam borrowed $2.1 trillion. This year it will borrow $2.4 trillion. Without this money, US government spending would have to come to a halt. The US counts on lenders. It needs lenders. Without them it would be forced to make cuts equal to about 10% of GDP. Think you’ve got de-leveraging now? Just imagine what that would do.

Typically, of course, government bond buyers don’t cut off a lender altogether. They merely demand a higher rate of interest to offset what they see as an increased level of risk. The higher interest rate adds to the borrower’s cost – increasing his deficit and forcing him to borrow more.

This is where it gets interesting. You might say that a government can “print its way out” – it can just print the money it needs rather than borrowing it. But what would happen if the US chose to print $2 trillion this year? It would risk hyperinflation. Lenders would run for cover. Prices would shoot up. The damage to the economy would be severe…so severe that only governments under extreme pressure – think Weimar Germany or Mugabe’s Zimbabwe – are willing to risk it. Instead, they try to muddle through, as Greece is doing now – promising budget cuts, making special financing deals and pushing up the rate of inflation a bit, but not so high as to cause panic in the bond market.

See, as long as the bond market permits it, debt levels continue to grow. But at some point – the point of no return – a government can no longer save itself from disaster. How does that work? Well, when deficit/debt levels are too high, the cuts necessary to bring the budget back in balance are so great that they squeeze the economy hard, reducing output and decreasing government’s tax revenues.

In this case, the government cannot escape. It has to print money. Or default. Most often, it will choose default, because it is the less painful solution. Either way, the government finds that it will be cut off from the bond market. Hyperinflation is merely an additional and unnecessary aggravation. (That said, I agree with Nassim Taleb, that hyperinflation remains an underestimated black swan risk.)

The underlying story of the economy has not changed. We are in a Great Correction. We don’t know exactly what it is correcting…but it looks as though it will at least reduce some of the leverage that has been added to American and British households over the last 60 years.

So far, the process is tentative…and unsure of itself. From a peak of 96% of household income in 2007 debt has fallen to…94%! The drop is so small that it makes you wonder if it is a trend at all. But if it is, it has a long way to go. Ten years ago – at the peak of the dot-com bubble – household leverage was only 70% of income. At the present rate it will take another 24 years to get back to 1999 levels.

Albert Edwards of Societe General has examined the non-financial leverage in the system. There is excess leverage of about 60% of GDP, he says. He calculates it will take a decade of “Japan-like pain” to eliminate it.

Either way, you’re talking about a long process of getting back to “normal.”

The Great Correction is also what is keeping housing and unemployment down. When the banks aren’t adding to the nation’s credit, you just can’t expect many new jobs or many new house sales.

Nothing has changed in the last week – except we have moved one week closer to whatever crisis lies ahead.

HONG KONG (Reuters) - Chinese dairy products maker Taizinai, which counts Goldman Sachs and Morgan Stanley among its investors and Citigroup among its lenders, has collapsed, leaving around 3 billion yuan ($440 million) in unpaid debt, sources familiar with the matter said on Wednesday.

Morgan Stanley, Goldman and private equity firm Actis Capital had paid $73 million for a 31 percent stake in Cayman Islands-registered Taizinai in 2007, with Morgan Stanley providing $18 million, Goldman $15 million and Actis Capital $40 million, sources said.

The Grand Court of the Cayman Islands appointed Hong Kong accountant Borrelli Walsh as provisional liquidator of the former high flyer, the South China Morning Post reported on Wednesday, citing documents it had reviewed.

The paper was first to report the company's collapse.

May they drown in the finest Chinese tea. If the banksters think that China will let them walk all over them, the way they have stomped over the US, they are in for a rude awakening.

Your reports are welcome.

I swear, that cartoon explains things better than 90% of what I've read...

things must be even worse than I thought, given the tone here this AM - and that's hard to manage, given my grim view...

...meanwhile, I seem to note happy dances elsewhere on the site - not sure I remember correctly 'cause I mostly just scan thread headers, but seems to be over more consumer spending and higher trade imbalance...yeahhhhhhhh!!!! recovery!!!! woo hoo!!!!! people are spending $$$$$....yeeeeee hawwwwwww!!!


:woohoo: :eyes: :rant:

reduced to smilies...no words do justice

but when IGNORANCE IS BLISS, somebody's getting screwed.

I want to say, it's been nice confabbing with you all. Too bad we couldn't make enough of a difference to save anything. At least we could save some of our own lives, I hope.

I mean, seriously, is it possible? Is it?

I don't think it is. I just can't wrap my head around a scenario in which what's going on now leads to anything remotely like "the way we were." And isn't that what they think is coming down the road?

It's scary, because there are so many who I think are gonna be running smack dab into a very large and very hard brick wall and they are NOT going to be in a very conciliatory mood when that happens. IF that happens. Is there any doubt that it will?

Can it be postponed to beyond our boomer lifetimes? Will we be glad to have escaped it only to have our children and their children suffer the consequences?

I'm not in an optimistic mood today. It must have something to do with the wind and that fat check I still have to write to the IRS.



Tansy Gold

Give your best guess as to when the economy resumes its interrupted freefall.

Freefall will be marked by an increase of 2% in the official Unemployment tally to 12% or more, a drop of 400 points in a week on the DOW, or some other suggested measure.

When will the cat be let out of the bag? Anyone?

Solar heat is nice. Now to mix up a big batch of my deadly lemonade, and we're all set.

I had to shut the solar off to get it down to a perfect 86 though.

Perhaps the decline is approaching soon and the banks need to get out the most gains today.

4/14/10 Fed survey: Recovery is spreading; jobs still weak
Fed survey: Recovery is spreading to most parts of the country, but jobs picture still weak

The economic recovery is spreading to most parts of the country. Merchants are seeing better sales and factories are boosting production, but many companies are still wary of ramping up hiring, the Federal Reserve reported Wednesday.

The Fed's new survey is consistent with chairman Ben Bernanke's view that a modest recovery is unfolding, although it won't be strong enough to quickly drive down unemployment now at 9.7 percent.

more...
http://finance.yahoo.com/news/Fed-survey-Recovery-is-apf-3122422610.html?x=0&sec=topStories&pos=main&asset=&ccode=

:eyes: