STOCK MARKET WATCH, Monday April 7, 2008

[Demeter]

Source: DU

STOCK MARKET WATCH, Monday April 7, 2008

COUNTING THE DAYS DAYS REMAINING IN THE * REGIME 289
DAYS SINCE DEMOCRACY DIED (12/12/00) 2633 DAYS
WHERE'S OSAMA BIN-LADEN? 2359 DAYS
DAYS SINCE ENRON COLLAPSE = 2650
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

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

---

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

AT THE CLOSING BELL ON April 4, 2008

Dow.......... 12,609.42 -16.61 (-0.13%)
Nasdaq........ 2,370.98 +7.68 (+0.32%)
S&P 500........1,370.40 +1.09 (+0.08%)
Gold future..... 913.20 +3.60 (+0.39%)
30-Year Bond 4.32% -0.07 (-1.57%)
10-Yr Bond.... 3.48% -0.11 (-3.06%)






GOLD, EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

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

For information on protests and other actions
Citizens For Legitimate
Government>

---

No link yet.

[Demeter]

1. Since Ozy Hasn't Yet....Here It Is!

[DemReadingDU]

17. Thank you!

Must have our daily SMW!


:)

[Hugin]

58. Thanks Demeter.

:)

[Demeter]

2. Today's Reports

Consumer Credit Feb

Briefing.com $5.0B
Consensus $6.0B
Prior $6.9B

[UpInArms]

89. U.S. Feb. consumer credit rises $5.2 billion, or 2.4% rate

23. U.S. Feb. nonrevolving credit rises $497 million, or 0.4%
3:00 PM ET, Apr 07, 2008 | Comments: 0 | Tags: none

24. U.S. Feb. revolving credit rises $4.7 billion, or 6% rate
3:00 PM ET, Apr 07, 2008 | Comments: 0 | Tags: none

25. U.S. Feb. consumer credit rises $5.2 billion, or 2.4% rate
3:00 PM ET, Apr 07, 2008 | Comments: 0 | Tags: none

[JNelson6563]

3. Where are my shades? Gosh those futures are bright!

B-)

[Demeter]

42. Didn't Last Long, Did It?

Up 100, down 50 in the space of 10 minutes...hang onto your hats, looks like it's going to be a bumpy ride today.

[RawMaterials]

66. I have been thinking about this McSame stuff

I think to many repubs want the same old same old.
It makes me so sad.

[Demeter]

4. A Brief Technical Update BY TIM W. WOOD

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

In today’s update I want to look at the market from a couple of different perspectives. Recently, I have heard it said that the Dow Theory is now giving a “Buy Signal.” This is not exactly true. In order to explain where we are from a Dow Theory perspective, I first have to explain where we have been.

In looking at the chart below you can see that both averages last made joint highs back in July. In Dow Theory terms, this was known as a “secondary high point” in which both averages confirmed one another. From those highs, both averages moved into their August “secondary low points.” It was the rally out of that low in which things began to deteriorate. As the Industrials pressed higher into their October highs, the Transports lagged, and in doing so failed to confirm the Industrials. This created a Dow Theory non-confirmation at the October secondary high points and is illustrated by the blue trend lines on the chart below. I wrote about this at the time and explained that upside non-confirmations served as warnings that something was wrong.



Now I want to talk briefly about cycles, but first let me clarify that cycles have absolutely nothing to do with Dow Theory. Cycles are a completely separate discipline. As the markets rolled over into the summer lows in 2006, many proclaimed that as having marked the 4-year cycle low. Then when the August lows were reached in 2007 others proclaimed those lows as having marked the 4-year cycle low. All the while, I maintained that the 4-year cycle was stretching and that neither the 2006 nor the 2007 low marked the 4-year cycle low. I want to add here that 81% of all 4-year cycles have topped in conjunction with a Dow Theory non-confirmation just like what occurred at the October 2007 high in the Industrials. There were no non-confirmations present at either the May 2006 high or the February 2007 high, which serves as one of the many statistical facts that I used to guide me. The decline into the 2006 low was a mere 8.32% and the decline into the 2007 low was 10.72%, while the decline into the recent January low brought the Industrials down 18.05%. So, it should now be obvious to all that the decline from the October 2007 highs has been a much more significant decline. Also, my statistical data surrounding the 4-year cycle has now all been proven correct once again, as we were indeed dealing with an extended 4-year cycle that has stretched into 2008. Now, the question on many people’s minds is whether or not we have seen the 4-year cycle bottom. This is a topic I am watching closely as it develops. The key indicator here is the behavior of my Cycle Turn Indicator. Confirmation of cycles is a process and there are various tests and levels of confirmation that have to occur in a progressive manner.

Now, let’s go back to the Dow Theory. From the October 2007 non-confirmation the averages faded lower, and on November 21, 2007 both averages moved below their August 2007 secondary low points, which is illustrated in green on the chart above. In doing so, this break served to confirm that the primary trend, in accordance to Dow theory, turned bearish. In accordance with Dow Theory, once the primary trend is established, that trend is considered to still be intact until it is reversed by the signal of another primary trend change. I am seeing some writings suggesting that this has happened. However, this is not the case. The primary trend is still considered bearish because it has not yet been reversed.....

[Ghost Dog]

5. GLOBAL MARKETS WEEKAHEAD - G7 rescue plan dominates investors

LONDON, April 6 (Reuters) - Eight months after the credit crunch first swept the global market place, the contours of an unprecedented joint plan to fix the banking and financial system are slowly emerging.

Investors will hope this week to get a clearer idea of what this means when the Group of Seven financial chiefs discuss a range of drastic options to tackle banks and financial markets devastated by the credit crisis.

Policymakers who will gather in Washington on Friday and Saturday may also fire a warning shot at volatile currency markets as the dollar limps just a few cents away from record lows against the euro.

...

Steps being discussed by the G7-backed Financial Stability Forum include tax-funded bank bailouts to tackle a worst-case scenario, public mortgage repurchases and a sort of collective coming out of banks -- simultaneous disclosure of financial positions using the same model.

...

Stephen Jen, head of global currency strategy at Morgan Stanley, says authorities are moving onto the next stage of the crisis management.

"They've dealt with one side of the balance sheets -- funding. They are now crossing the line and going into assets. That would be the other side of balance sheets. It is symbolic and in practice a major step," Jen said.

"Governments are doing all it takes to stabilise the markets. The immediate future is positive as far as asset prices are concerned."

...

U.S. bank State Street said the reallocation to financials echoed the behaviour of institutional investors following the burst of the technology bubble in 2002.

"No one is saying the credit crisis is over. But, the known knowns increase every day ... As they did in previous horror quarters such as Q3 2002, institutional investors are being contrarian and buying stocks that have been shunned," it said.

"It is a slightly more constructive approach to a challenging environment than portentous predictions of doom."

However, others doubt last week's equity rally heralded the beginning of an end of the credit crisis.

"Financial crises are a bit like wars -- long periods when nothing much happens punctuated by short periods of intense activity. In each case, it is important not to confuse the quieter periods with an end to hostilities," said Paul Mortimer-Lee, global head of market economics at BNP Paribas, in a note to clients.

"The testing time will come in the run-up to the next financial reporting season. Given the scale of likely future losses, it is too soon to be thinking the turning point has been reached."

/... http://www.reuters.com/article/marketsNews/idINL0587211820080407?rpc=44&sp=true

[Ghost Dog]

6. - Dollar up on equity bounce, narrower credit spreads

LONDON, April 7 (Reuters) - The dollar strengthened on Monday, joining buoyant equity and credit markets in shrugging off last week's soft U.S. jobs data as investors took heart from central bank efforts to alleviate the global credit crunch.

Central bankers and finance ministers from the Group of Seven rich nations meet in Washington later this week and are expected to discuss a broad range of proposals aimed at restoring confidence in the battered banking system.

These measures include raising transparency, tightening standards on banks' securitisation, increasing authorities' oversight powers and even more drastic steps such as bank bailouts for worst-case scenarios.

These efforts are seen as boosting the dollar, which has been sold aggressively in recent months as the deepening malaise in the U.S. banking system prompted the Federal Reserve to slash its benchmark interest rate to the current 2.25 perecent.

"Any signal from the authorities to boost market confidence ... or try and boost liquidity I would associate with dollar-positive and risk-taking trades," said Paul Mackel, director of currency strategy at HSBC in London.

"The risk is that labour market conditions could be much nastier going forward but the dollar's not responding to U.S. data as much over the past couple of weeks. It's responding much more to asset market developments, the improvement in money markets or credit spreads," Mackel said.

At 0745 GMT the dollar's value against a basket of six currencies was up 0.6 percent on the day at 72.361 .DXY.

/... http://www.reuters.com/article/marketsNews/idINL0746265220080407?rpc=44

[Ghost Dog]

7. - World stocks power to one-month high

LONDON, April 7 (Reuters) - World stocks hit a fresh one-month high and the dollar rose on Monday, bolstered by firmer commodity prices and growing expectations that banks are close to cleaning up their credit-related troubles.

Optimism also stemmed from speculation that finance chiefs from the Group of Seven rich nations, meeting in Washington this weekend, are considering drastic steps to fix banks and markets battered by the U.S. mortgage meltdown.

...

Banking stocks in Europe climbed as efforts by financial firms to come clean, and a possible joint plan by governments to help them, bolstered sentiment.

"Any signal from the authorities to boost market confidence ... or try and boost liquidity I would associate with dollar-positive and risk-taking trades," said Paul Mackel, director of currency strategy at HSBC in London.

The FTSEurofirst 300 index rose 0.7 percent on the day while MSCI main world equity index .MIWD00000PUS was up a quarter percent, hitting its highest since late February.

European banking stocks rose almost 0.8 percent, while mining shares were up on firmer metal prices.

The dollar was up half a percent against a basket of major currencies .DXY and around 0.6 percent higher at $1.5630 per euro <EUR=>. The June Bund future FGBLM8 was down 30 ticks, pressured by firmer stocks.

/... http://www.reuters.com/article/marketsNews/idINL0746481720080407?rpc=44

[Ghost Dog]

8. - Nikkei at 5-week closing high as resource firms gain

TOKYO, April 7 (Reuters) - Japan's Nikkei average rose 1.2 percent on Monday to a five-week closing high as higher oil and metals prices boosted trading houses such as Mitsui & Co Ltd (8031.T: Quote, Profile, Research) and other resource firms.

Nippon Steel Corp (5401.T: Quote, Profile, Research) and other steel shares fell on the prospect of a more than 200 percent rise in the coking coal prices they pay to miners in the financial year that started on April 1, squeezing their profits.

"Higher crude and raw materials prices push up resource-related shares, and they could further improve their valuations if investors start to believe those factors will benefit their earnings," said Kazuhiro Takahashi, a general manager of equity marketing at Daiwa Securities SMBC.

"Still, the market will likely stay calm for the coming week or two as investors want to see U.S. corporate earnings results to get clues about the health of the economy and whether the financial turbulence will continue."

The benchmark Nikkei .N225 added 157.01 points to 13,450.23, its highest close since Feb. 29. It gained 3.7 percent last week.

The broader TOPIX index climbed 1.3 percent or 16.69 points to 1,305.63.

Masaru Hamasaki, senior strategist at Toyota Asset Management, said some technical signs indicate that the market has room to advance while still staying in a bearish pattern. Continued...

/... http://www.reuters.com/article/marketsNews/idCAT12164620080407?rpc=44

[Ghost Dog]

12. Asian Stocks Rise to Five-Week High, Led by BHP; ANZ Tumbles

April 7 (Bloomberg) -- Asian stocks rose, lifting the region's benchmark to a five-week high, as gains in commodities prices boosted mining and oil companies.

BHP Billiton Ltd., the world's biggest mining company, advanced in Sydney to the highest in three months. KDDI Corp. and Softbank Corp., Japan's second- and third-largest mobile- phone companies, gained on a broker upgrade. Australia & New Zealand Banking Group Ltd. led a drop among Australian banks after increasing bad-debt provisions.

``Given the huge potential earnings growth some of these large resources companies face as China continues to grow, it makes them look reasonable buys,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds $128 billion of assets. ``It's a continual rotation between financial and resources'' stocks.

The MSCI Asia Pacific Index gained 0.8 percent to 146.32 as of 7:22 p.m. in Tokyo, the highest since Feb. 29. Almost three stocks rose for each that declined. The index is down 7.3 percent this year on concern the U.S. will enter a recession amid mounting losses at banks and brokerages.

...

Most stock benchmarks in Asia rose. China's CSI 300 Index climbed 5.3 percent, the most in the region, while Hong Kong's Hang Seng Index added 1.3 percent.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=aXnABGLbCbzQ&refer=asia

[Ghost Dog]

9. - European shares rise early, driven by miners, M&A

LONDON, April 7 (Reuters) - European shares rose in early trade on Monday, building on the previous session's gains, as British Energy (BGY.L: Quote, Profile, Research) jumped on bid talk and miners advanced on higher metal prices and bullish brokerage comment.

At 0717 GMT, the FTSEurofirst 300 index of top European shares was up 0.6 percent at 1,325.91 points.

Anglo American (AAL.L: Quote, Profile, Research), BHP Billiton (BLT.L: Quote, Profile, Research), Vedanta (VED.L: Quote, Profile, Research), Kazakhmys (KAZ.L: Quote, Profile, Research), Antofagasta (ANTO.L: Quote, Profile, Research) and Rio Tinto (RIO.L: Quote, Profile, Research) all notched up gains of 2 to 4 percent, with the sector driven by a positive note from Goldman Sachs.

Embattled Swiss bank UBS (UBSN.VX: Quote, Profile, Research) gained 4.3 percent after a Merrill Lynch upgrade, while British Energy rose 3.5 percent on a newspaper report that Centrica had launched talks with France's EDF (EDF.PA: Quote, Profile, Research) over a joint bid for it.

Nestle (NESN.VX: Quote, Profile, Research) rose 3.3 percent after striking a deal to sell a stake in eyecare group Alcon to Swiss peer Novartis (NOVN.VX: Quote, Profile, Research), while Novartis rose 1 percent.

L'Oreal (OREP.PA: Quote, Profile, Research) topped European gainers with a 4.4 percent rise on speculation that Nestle would raise its stake in the group, traders said.

/. http://www.reuters.com/article/marketsNews/idCAL0742030320080407?rpc=44

[Ghost Dog]

14. Rice Run Prompts Curbs to Rival Credit Market Seizure

April 7 (Bloomberg) -- From Cairo to New Delhi to Shanghai, the run on rice is threatening to disrupt worldwide food supplies as much as the scarcity of confidence on Wall Street earlier this year roiled credit markets.

China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year, and Indonesia says it may do the same. Investigators in the Philippines, the world's biggest importer, raided warehouses last month to crack down on hoarding. The World Bank in Washington says 33 nations from Mexico to Yemen may face ``social unrest'' after food and energy costs increased for six straight years.

Rice, the staple food for half the world, rose 2.4 percent to a record $20.985 per 100 pounds in Chicago today, double the price a year ago and a fivefold increase from 2001. It may reach $22 by November, said Dennis DeLaughter, owner of Progressive Farm Marketing in Edna, Texas.

``Rice will gain substantially over the next two years,'' said Roland Jansen, chief executive officer of Pfaffikon, Switzerland-based Mother Earth Investments AG, which holds 4 percent of its $100 million funds in the grain. Governments will likely maintain curbs on exports ``because those countries want to be able to continue to feed their own populations,'' he said.

The upheaval parallels turmoil in global capital markets that seized up nine months ago when subprime mortgages collapsed. The difference between what it costs the U.S. government to borrow and the rate banks charge each other for three month loans ended last week at 1.36 percentage points. A year ago the gap was 0.33 percentage point.

Export Curbs

Rice growing nations are driving up prices for producers that want to sell abroad. The Vietnam Food Association said April 2 it asked members to stop signing export contracts through June, following China, which imposed a 5 percent tax on exports as of Jan. 1. Egypt banned rice shipments through October.

Prices ``are not coming back to the levels we came from,'' said Mamadou Ciss, head of Singapore-based rice broker Hermes Investments Pte Ltd. Vietnam's 5 percent broken-grain rice may be 40 percent higher within three months, he said.

Record grain prices are stoking inflation. Wholesale costs in India rose 7 percent in the week ended March 22, the fastest pace in more than three years, underscoring the threat from rising food costs, the Ministry of Commerce and Industry in New Delhi said April 4.

The increase may boost profits for suppliers. Padiberas Nasional Bhd. rose the most in seven years in Kuala Lumpur stock exchange trading last week. The company is Malaysia's only licensed rice supplier.

Commodity Rally

Goldman Sachs Group Inc. forecasts that all agricultural commodities it covers will rise during the next six months, except for sugar. Global cereal demand will expand 2.6 percent this year, 1.6 percentage points above the 10-year average, according to the Food and Agriculture Organization in Rome.

The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials gained for six consecutive years and advanced 15 percent this year.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=a0fU0S8MSK64&refer=asia

[UpInArms]

10. dollar watch

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

Last trade 72.191 Change +0.241 (+0.33%)

Can Dollar Bulls Jump Start a Rally?

http://www.dailyfx.com/story/topheadline/Can_Dollar_Bulls_Jump_Start_1207529015992.html

As the week progressed it looked like the dollar counter trend rally may have finally arrived. Buoyed by better than expected ISM Manufacturing numbers and a surprisingly positive ADP estimate, dollar bulls were able to drive the EURUSD to 1.5500 by mid-week. Most market players started to focus on the softening economic situation across the pond where data last week indicated that both EZ and UK are beginning to feel the impact of global slowdown in growth. As result euro started to lose its luster.

But as we noted on Friday, “Yesterday’s horrid US weekly jobless claims which printed above the key 400K level for the first time since hurricane Katrina completely changed the sentiment of the market.. Since the release of the jobless claims report at 12:30 GMT Thursday both euro and the pound have risen nearly 200 points on fears that US labor situation is deteriorating rapidly. With consumer debt at record highs, traders fear that a massive loss of jobs and income could send US reeling into a severe recession as consumers become unable to service their obligations and demand for goods and services contracts significantly.”

No doubt, the dour labor situation stopped the dollar rally cold, but with NFP’s now history, players may once again refocus on the economic troubles in the Eurozone. With US calendar containing only second tier data, the trade in the pair this week will likely be driven by event risk across the pond, most notably the ECB interest rate policy meeting next Thursday. While no one expects any change in policy, traders will be listening intently to any change in tone. If President Trichet sounds a more sober note regarding EZ growth and de-emphasizes the need to control price pressures, that may all that’s necessary to jump start the dollar rally once again.



...more...

Dollar Firms - Is This The Week Of The Bounce?

http://www.dailyfx.com/story/bio2/Dollar_Firms___Is_This_1207562963502.html

Despite poor NFP numbers last Friday, the greenback firmed on the first day of trade this week as investors shrugged off the data and focused instead on the stabilization in the US financial sector evidenced by Citibank securing $4.5 Billion in funding. Dollars strength was most pronounced against the yen with the pair rising more than 100 points from Friday’s close. The EURUSD traded below 1.5700 for most of Asia and early Europe, although it did have a small rally after the EZ Sentix survey of investor sentiment printed far better at 4.1 versus 0.2 expected.

With US calendar containing only second tier data, the trade in the pair this week will likely be driven by event risk across the pond, most notably the ECB interest rate policy meeting next Thursday. As we noted in our weekly, “While no one expects any change in policy, traders will be listening intently to any change in tone. If President Trichet sounds a more sober note regarding EZ growth and de-emphasizes the need to control price pressures, that may all that’s necessary to jump start the dollar rally once again.”

In the meantime, 1.5700 appears to be the tug of war line as bulls and bears vie for the control of the pair this week. The EURUSD is clearly overbought, and is having a hard time making any forward progress despite lackluster US data. However, much of the dollar bull case rests on the assumption of deteriorating economic fundamentals in the EZ. If EZ data this week proves surprisingly resilient the pair may once again try scale the 1.5900 all time high. If on the other hand market consensus starts to build around the idea that ECB may have to follow the Fed in easing monetary policy relatively soon, the intermediate term top in the EuRUSD is likely to have been put in place.

...more...

[Demeter]

73. Hopes of Continued Dollar Rally Fading

http://www.nakedcapitalism.com/2008/04/hopes-of-continued-dollar-rally-fading.html

With America's high current account deficit not showing much improvement. the dollar's recent rally seemed to be based on the greenback being oversold rather than improved fundamentals. Historically, countries that run current account deficits in excess of 4% of GDP suffer depreciation of the value of their currency, and the US is still well above that level.

From Bloomberg:

Futures traders doubled bets against the greenback in the past two months, data from the Commodity Futures Trading Commission in Washington show. Citigroup Inc., Deutsche Bank AG and Royal Bank of Scotland Group Plc, which handle almost 40 percent of global foreign exchange trading, say the currency may slump to $1.65 per euro by October, from $1.5672 today.....

``The dollar will continue to move lower in the next couple of months until the U.S. economy improves markedly,'' said Adam Boyton, senior currency strategist in New York at Deutsche Bank...

Futures traders have grown more bearish, as three Fed interest rate cuts in 2008 totaling 2 percentage points reduced demand for U.S. deposits. They amassed a net total of 246,101 futures contracts betting on a dollar decline versus eight other currencies, up from 126,342 on Jan. 22, CFTC data show.....

``We are close to a tipping point where, I mean, the willingness to hold dollars is definitely impaired,'' billionaire George Soros, 77, said in an interview in New York on April 3. His bet against the British pound in 1992 helped drive the U.K. out of Europe's system of linked exchange rates.

Foreign private investors sold a net $37.6 billion of U.S. stocks and bonds in the six months ended Jan. 31, the most recent Treasury Department data show. The last time sales exceeded purchases over a six-month period was April 1996....

The U.S. currency received a reprieve last week. The dollar rose 0.4 percent against the euro and 2.2 percent to 101.47 yen as the recapitalization plans by UBS and Lehman Brothers boosted investor confidence in financial institutions shaken by $232 billion of losses and writedowns from the freeze in capital markets.

``The dollar is bottoming out,'' said Benedikt Germanier, a currency analyst in Stamford, Connecticut, at UBS, the second- biggest currency trader after Deutsche Bank. It may rise to $1.45 per euro by June, he said.

The median of 41 estimates in a Bloomberg News survey is for the dollar to appreciate to $1.51 per euro by Sept. 30 and to $1.48 at year-end as the U.S. economy recovers and Europe slows.

``The U.S. economy is deteriorating so fast that it's hard to believe economies outside of the U.S. won't get affected,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup in New York. ``As the slowdown in the U.S. reverberates to Europe, the ECB can't be sitting this one out. They have to cut,'' which may limit dollar losses, he said.

Analysts have predicted a rebound before only to be proven wrong. At the start of 2008, they expected the dollar to gain to $1.48 per euro by June and reach 110 yen, according to Bloomberg surveys. They now see it at $1.55 to the euro and 98 yen....

``For verbal intervention or actual intervention to work you need some substantive policy behind it and the last thing you will see right now is a monetary tightening by the Fed,'' said Robert Sinche, head of global currency strategy at Bank of America. He expects the dollar may fall past $1.60 per euro this quarter.

[Demeter]

11. Oil rises on prospects for more Fed cuts By PABLO GORONDI, AP

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

Oil prices rose Monday as prospects for further cuts in U.S. interest rates seemed more likely after poor U.S. jobs data at the end of last week.

Light, sweet crude for May delivery rose 80 cents to $107.03 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. On Friday, the contract rose $2.40 to settle at $106.23 a barrel.

In London, Brent crude futures rose 56 cents to $105.46 a barrel on the ICE Futures exchange.

"The dollar fell because investors figured that the U.S. Federal Reserve would cut interest rates even further to help bolster the economy," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

The Fed has cut its key rates several times since the middle of last year in an effort to shore up the U.S. economy against fallout from the subprime housing loan crisis. And each reduction has pulled investors to oil, gold and other hard commodities as a hedge against inflation and a weakening currency.

"The falling dollar has been one of the key factors supporting oil prices in the past weeks," Shum said.

While oil demand in the world's largest energy consumer has slowed along with the U.S. economy, oil prices have not.

Many analysts believe that's partly because weak economic data has hastened the decline of the dollar, whose weakness sustains the purchasing power of oil consumers using other currencies, and prods oil exporters to raise prices for the dollar-denominated commodity.

"The weakening fundamentals exert a lid on how high oil pricing can go, but the weak dollar continues to prop up oil pricing," Shum said. "We have this tug of war going on. ... I think that fundamentals will eventually prevail and pull back oil prices as you can defy the gravity of fundamentals only for so long."

Figures released last week by the U.S. Energy Information Administration supported concerns that demand growth in the United States for oil and its products continued to weaken.

For example, negative demand growth for diesel "could be an indication of less trucking activity stateside, which could be the result of an economic slowdown," said a report by JBC Energy in Vienna, Austria, which forecast a 1 percent drop in U.S. demand this year.

In other Nymex prices, heating oil futures rose 2.97 cents to $3.0218 a gallon (3.8 liters) while gasoline futures added 1.47 cents to $2.7714 a gallon.

Natural gas futures rose 9.9 cents to $9.421 per 1,000 cubic feet.

[UpInArms]

26. U.S. gasoline prices rise to almost $3.32/gallon

http://news.yahoo.com/s/nm/20080406/bs_nm/energy_gasoline_retail_dc

NEW YORK (Reuters) - The average price for a gallon of gasoline in the United States rose 5.26 cents to a record high in the last two weeks, and an industry analyst said retail prices would keep rising amid refinery cost increases.

The national average for self-serve, regular gas was $3.3171 a gallon on April 4, according to the nationwide Lundberg survey of about 7,000 gas stations. This was 53 cents higher than a year ago and compares to a March 21 record of $3.2645.

Survey editor Trilby Lundberg said prices would keep rising along with crude oil and ethanol prices as refiners pass on the costs of mandated spring reformulations of gasoline.

"The essential causes are strong crude oil prices, dramatically higher ethanol prices and seasonally rising gasoline demand," without any year-to-date gasoline demand growth compared with last year, Lundberg said.

To comply with federal environmental protection regulations refiners have to reformulate gasoline by using more ethanol, which has itself been rising in price, Lundberg said, noting that more ethanol than ever is required this year.

As a result, she estimated that it would "take a substantial drop in the price of crude for gasoline prices to fail to jump up from here" as refiners absorb these costs.

...more...

[UpInArms]

27. Iran to OPEC: Stop oil sales in dollars

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

TEHRAN, Iran - Iranian President Mahmoud Ahmadinejad is urging OPEC members to form a joint bank and stop pricing oil trades in U.S. dollars.

According to the Iranian government's Web site, Ahmadinejad told OPEC Secretary General Abdalla Salem el-Badri the cartel "should establish a joint bank as well as having joint currency."

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves.

Iran has repeatedly urged OPEC members to shift sales away from dollar.

...more...

[mdmc]

59. Uh no!

:kick:

[UpInArms]

90. (OMG!) Crude closes up $2.86, or 2.7%, to $109.09 a barrel

27. Crude closes up $2.86, or 2.7%, to $109.09 a barrel
2:49 PM ET, Apr 07, 2008 | Comments: 0 | Tags: none

:puke:

can someone hold my hair??

:scared:

[UpInArms]

13. Hedge fund managers make mint on housing crisis

http://www.reuters.com/article/businessNews/idUSN0346019020080407?feedType=RSS&feedName=businessNews?sp=true

BOSTON (Reuters) - Millions of Americans may be facing the prospect of losing their homes, but a handful of fund managers have become the best paid in their industry -- taking home 10-figure paychecks last year -- by betting against mortgages.

John Paulson, who ran a medium-sized fund until last year, zoomed to the top of the industry's earnings table when he took home an estimated $3 billion in 2007, double what the top earner made in 2006, according to data released by magazine Trader Monthly on Monday.

By standing conventional wisdom on its head and deciding that housing prices could decline on a national level, and that investment-grade mortgage bonds would be subject to default in record numbers, Paulson, 52, set a new record for payouts on Wall Street, industry analysts said.

Paulson's $3 billion payout is equivalent to $26 for every U.S. household (114.4 million in 2006).

This year seems to be no worse for Paulson as his Advantage Plus fund was up roughly 8 percent through the middle of March. Many other hedge funds, however, are suffering heavy losses, with industry analysts estimating the average fund lost 5 percent in the first quarter. Hedge funds often promise to make money in all markets by using tools, such as shorting, that are off limits to other money managers.

...more...

[Demeter]

15. $3 BILLION???

Folks, there is no point to this. The market is totally broken.

[Tansy_Gold]

35. Correct me if I'm wrong. . . . .

. . .. but if this guy takes home $3 billion on a winning bet, doesn't that mean someone else is on the losing end of the deal, someone who had just as much opportunity to read the program, study the horses, er, markets, and make an informed bet, er, investment, er, bet? (These are not, after all, "investments" the way we used to think of "investments," are they? I mean, there's no sense of being "invested" in a company for the long term to, well, you know what I mean.)

And again -- WHERE IS THIS REAL MONEY THAT HE'S PUTTING IN HIS BANK ACCOUNT COMING FROM???????



Tansy Gold, asking non-rhetorical questions

[scisyhp1]

52. That would be the taxpayers. Letting the Bear Stearns shareholders

to take that loss will be too dangerous. They may become more timid
when time comes to inflate another bubble.

[Tansy_Gold]

57. Oh, course! Silly me! Why didn't I figure that out?

And goodness knows, we need all the bubbles we can get!

:sarcasm:


Welcome to DU, scisyhp1!

:hi:

[Demeter]

16. Wall St banks 'hooked on emergency funds scheme'

http://www.guardian.co.uk/business/2008/apr/06/useconomy.usa

This article appeared in the Observer on Sunday April 06 2008 on p1 of the Business news & features section. It was last updated at 00:04 on April 06 2008.

Fears are mounting that Wall Street banks are relying too heavily on tens of billions of dollars in loans made available by the US Federal Reserve. Their borrowing levels have rocketed by almost 200 per cent to $38bn (£19bn) a day in just three weeks.

The latest loan data released by the Fed shows that Wall Street banks and investment firms borrowed an average of $38.4bn every day last week, a big jump from the $32.9bn borrowed the week before, but almost three times the $13.4bn borrowed when the emergency scheme was launched on 17 March.

The loan programme was part of a wider Wall Street rescue package ushered in to stave off the imminent collapse of Bear Stearns, the troubled investment bank being bought by JP Morgan.

The scheme, called the Primary Dealer Credit Facility, is made available through the Federal Reserve Bank of New York and is designed to help big investment banks oil the wheels of the credit market so they can continue with business as usual, even though the credit crunch shows no signs of abating.

The Fed has capped the amount available to all banks at $50bn, although insiders said it never imagined the banks would take advantage of the entire facility. Analysts and economists now fear it is being too heavily exploited, and that banks may be using it to delay facing up to liquidity problems.

David Wyss, the chief economist at Standard & Poor's, thinks the Fed loan programme is a good idea, and perhaps the only way that government can keep the credit markets churning. Even so, he believes taking out such large short-term loans could cause problems.

'My fear is that the banks could become too dependent on this money. At some point, the Fed will have to wean them off these loans, but how it does that I do not know,' he said.

[Demeter]

21. Demythologizing Central Bankers and the Great Moderation

http://www.thomaspalley.com/?p=103

It is often said that the winners get to write history, which matters because the way we tell history frames our understandings. What is true for general history also holds for economic history, and the way we tell economic history affects our expectations and aspirations for the economy.

The last twenty-five years have witnessed a boom in the reputation of central bankers. This boom is based on an account of recent economic history that reflects the views of the winners. Now, with the U.S. economy entering troubled waters that reputation may get dented. More importantly, there is an opportunity to tell an alternative account of recent history.

The raised standing of central bankers rests on a phenomenon that economists have termed the “Great Moderation.” This phenomenon refers to the smoothing of the business cycle over the last two decades, during which expansions have become longer, recessions shorter, and inflation has fallen.

Many economists attribute this smoothing to improved monetary policy by central banks, and hence the boom in central banker reputations. This explanation is popular with economists since it implicitly applauds the economics profession by attributing improved policy to advances in economics and increased influence of economists within central banks. For instance, the Fed’s Chairman is a former academic economist, as are many of the Fed’s board of governors and many Presidents of the regional Federal Reserve banks.

That said, there are other less celebratory accounts of the Great Moderation that view it as a transitional phenomenon, and one that has also come at a high cost. One reason for the changed business cycle is retreat from policy commitment to full employment. The great Polish economist Michal Kalecki observed that full employment would likely cause inflation because job security would prompt workers to demand higher wages. That is what happened in the 1960s and 1970s. However, rather than solving this political problem, economic policy retreated from full employment and assisted in the evisceration of unions. That lowered inflation, but it came at the high cost of two decades of wage stagnation and a rupturing of the link between wage and productivity growth.

Disinflation also lowered interest rates, particularly during downturns. This contributed to successive waves of mortgage refinancing and also reduced cash outflows on new mortgages. That improved household finances and supported consumer spending, thereby keeping recessions short and shallow.

With regard to lengthened economic expansions, the great moderation has been driven by asset price inflation and financial innovation, which have financed consumer spending. Higher asset prices have provided collateral to borrow against, while financial innovation has increased the volume and ease of access to credit. Together, that created a dynamic in which rising asset prices have supported increased debt-financed spending, thereby making for longer expansions. This dynamic is exemplified by the housing bubble of the last eight years.

The important implication is that the Great Moderation is the result of a retreat from full employment combined with the transitional factors of disinflation, asset price inflation, and increased consumer borrowing. Those factors now appear exhausted. Further disinflation will produce disruptive deflation. Asset prices (particularly real estate) seem above levels warranted by fundamentals, making for the danger of asset price deflation. And many consumers have exhausted their access to credit and now pose significant default risks.

Given this, the Great Moderation could easily come to a grinding halt. Though high inflation is unlikely to return, recessions are likely to deepen and linger. If that happens the reputations of central bankers will sully, and the real foundation and hidden costs of the Great Moderation may surface. That could prompt a re-writing of history that restores demands for a return to true full employment with diminished income inequality. How we tell history really does matter.

[Tansy_Gold]

37. HA HA HA HA HA HA HA HA HA HA HA HA

'My fear is that the banks could become too dependent on this money. At some point, the Fed will have to wean them off these loans, but how it does that I do not know,' he said.


Ever hear of "cold turkey," Mr. Wyss? No, I didn't think so.

[Demeter]

39. You're Such a Card, Tansy Gold!

As if! Good joke!

[TalkingDog]

76. Create a Meme contest: Old and Busted - Welfare Queens.

New Hotness: Welfare ______________???


All you wags out there offer up your choicest Bon Mot.

Winner is chosen by SMW votes and will receive the admiration of your fellow posters and the silent crushing millions of lurkers.


BTW: Thanks again Demeter! You have earned my deep affection and admiration for your willingness to step up to the plate.

[Demeter]

79. I'm Glad I Could, But Worried. Where's Ozy?

Seen anybody in a striped shirt and glasses...or is that Waldo I'm thinking of?

[burf]

80. Wall Street Welfare Club

Follow that with: "You were outraged when Reagan told of "welfare queens" having their food stamp purchased groceries loaded into Cadillacs. Today, because of the policies of deregulation and lack of oversight, your hard earned tax money is being loaded into the limousines of the members of the Wall Street Welfare Club".

[AnneD]

83. Memo Contest.....

My name is Uncle Sam
Uncle Sam I am.
I hear that you are in some jam.

I like green eggs
and I like ham.
But I'll not have it
with your jam.

There once was a bear
with golden hair
He took the jam to
his winter lair
and ate it all
was that fair?

I like green egg
and I like ham
but I'll not have it
with your Jam.

Uncle Sam I am. (AKA the Tax Payer)

Edited to add...vote for me-I wrote it on a 3rd grade reading level so even the eCONomist could read it! In loving remembrance to the original conspirator that disposed of Dick and Jane-Dr Seuss.

[Hugin]

92. "Welfare Barons"

My entry. ;)

[MilesColtrane]

45. There's the moral hazard of the Fed bailing Bear Stearns.

Banks will now be looking for riskier investments, safe in the knowledge that the Chopper will engineer a bailout if worst comes to worst.

Screw subprime mortgages, banks will now be investing in bundled celebrity rehab futures.

The banks could make a potential killing.
Bobby Brown and Britney are bound to relapse some time.

[Hugin]

61. It seems to me that just a couple of days worth would put the whole 'Sub-Prime'...

Myth to bed.


Properly applied that is... Youknow, to the mortgage borrowers.

OMG! Loans to American citizens and not to HUGH MEGAGLOBOCONGLOMOS!!!1! Why, that'd be SOZIALSIZMS!!!1(hammer&sickle)!1!!

:panic:

Will any event ever happen to better illustrate how individual Americans are no longer 'people' and Corporations
have gained 'personhood' than this? I doubt it.

[AnneD]

65. I guess in Chopper Ben education he never read the scholarly tome...

If You Give a Mouse a Cookie. One of the advantages of working with kids-you read the latest 'business' books.

[Demeter]

18. The Chop Shop Economy: Other People's Money By ALAN FARAGO

http://counterpunch.com/farago03282008.html

The air is escaping from the little multi-hundred billion dollar balloon Bush administration floated to resolve sunken credit markets. Meanwhile, news on the economy, in the past week especially, has been massaged within an inch of its news cycle life. We're not getting the whole story, by half.

Lifting the housing industry from its sharpest contraction seems to be the primary political focus of both Democrats and Republicans. The news media appears to be having difficulty parsing the differences.

Let's start with a simple explanation. The first step of the free-market acolytes within the Bush administration involves nationalization.

That is what Federal Reserve chief Ben Bernanke did, authorizing the use of derivative debt tied to mortgages as collateral for loans to banks. US Treasury Secretary Paulson has said, the unprecedented step is "temporary", an "emergency response" to avert a financial meltdown, but journalists need to measure the two hundred billion against the ocean of toxic derivatives whose owners now have reason to come calling for charity. It is on the order of trillions.

Taken as a whole, the US financial system was turned into a chop shop where stolen property is taken to be dismantled and sold off piecemeal. That Republicans, the party of fiscal conservatism and limited government, presided over the unravelling of fiscal common sense is astounding.

Today, the Bush administration is engaged in a highly risky gamble through monetary policy: that the consumer can withstand more inflation so long as housing markets are jump started in the process.

A more cynical view is that allowing inflation to rise while home values decline will establish some sort of lower order, miserable equilibrium that will allow Republicans to hold onto political power. In response, we get more fictions-- like the weak American dollar will lift exports and the fortunes of the economy.

Paul Craig Roberts wrote recently, "According to the latest US statistics as reported in the February 28 issue of Manufacturing and Technology News, in 2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP. A country whose imports exceed its industrial production cannot close its trade deficit by exporting more."

Here is the point: even if we could export more, the sad truth is that after 20 years of globalization the manufacturing supply chain in the United States has rusted out. Except for airplanes and guns, every basic, wage-intensive industry that links raw commodities to end products has been shipped to low cost labor nations, either in whole or part.

The US economy spent the past decade balancing on one leg: housing. For a time, foreign investors in US debt were fine with arrangements that allowed them to charitably view this performance.

Roberts observes: "Noam Chomsky recently wrote that America thinks that it owns the world. That is definitely the view of the neoconized Bush administration. But the fact of the matter is that the US owes the world. The US "superpower" cannot even finance its own domestic operations, much less its gratuitous wars except via the kindness of foreigners to lend it money that cannot be repaid."

Using other people's money only works when other people have confidence that you can deliver predictable repayment of your debts. There is nothing predictable about what is happening in the US economy, as skeins of markets unravel. Unprecedented, is the better word.

Alan Farago of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at [e-mail].

[Tansy_Gold]

41. "It's the history, stupid."

"Well into the 1920s, memories of London's prewar glories at the center of world finance still convinced governments that Britain could return to the belle epoque of P&O liners and a pound sterling as unassailable as the Royal Navy. Small matter that the war had forced Britain to liquidate £500 million of its overseas assets, extend huge and possibly uncollectible loans to France and Russia, and borrow £1,000 million from the United States. If textiles and steel might never regain pre-1914 production and export levels, the City of London and financial services could and would. This hope was reinforced by changing 1920s wealth patterns in which commerce and finance (merchants, bankers, shipowners, merchant bankers, stock brokers, and insurers) accounted for almost 40 percent of British millionaires.

"To bet on this financial future, British policymakers chose in 1925 to return to a highly valued pound to reestablish sterling's global role, rejecting a cheaper valuation that might have produced an export-led manufacturing revival. . . .

. . .

"The embarrassments of the late 1940s -- liquidation of overseas assets, the perils of sterling, and financial dependence on the U.S. -- made Edwardian prowess ancient history despite the passage of little more than three decades. . . .

. . .

"Such were the postwar tax levels on British wealth that dukes opened their ancestral castles to well-paying tourists. Other formerly affluent Britons simply gave up. John Harris, a British writer, "discovered a situation that had no parallel elsewhere in Europe: a country of deserted country houses, many in extremis, most in surreal limbo awaiting their fate." He wrote -- and also captured by camera -- their embarrassing protrait in a book called No Voice from the Hall.

"The caution of the three tales and the abandoned mansions, of course, is for the United States."



The "three tales" are the histories of imperial Spain, the Netherlands, and as mentioned above England, and how their empires collapsed not via foreign invasion but by the mutation of thriving, productive economies into parasitic "financial" cancers.

With acknowledgment and enormous thanks to Kevin Phillips, author of "Wealth and Democracy: A political history of the American Rich," pp. 188-189.


Tansy Gold, still learning (unlike many in the current madministration /sic/)

[wordpix]

93. I do not trust what BushCo has put up as collateral to borrow heavily, totaling $9.2 trillion debt

The national forests, perhaps? Maybe the lumber there is worth a few billion. The national parks and "wildlife refuges?" Lots of land for the Chinese creditors to build their dream houses on. National monuments? Charging Americans to visit places like the the Washington and Jefferson Memorials and Independence Hall would generate cash for creditor nations. National museums? Why should people get into the National Gallery and Air and Space for free? If owned by our Chinese and Saudi creditors, we'll be paying to get in. :shrug:

I truly do not like the way this is going and don't doubt the scenarios above if we do not GET CONTROL of the debt. :grr: Notice that NO ONE in Congress or the White House is mentioning the DEBT. :scared:
:scared: :hide:

[DemReadingDU]

19. Bonddad: The Bush Boom Was a Complete Bust

4/6/08
Either we're in a recession or we're about to start one. Either way, the latest expansion is over. While there may be some question about when it happened (the expansion, that is) the reality is it was the least impressive expansion since WWII.

Before I move forward, let me address specifically any readers who still think the last expansion was "the Greatest Story Never Told." I am going to use facts to demonstrate why the latest expansion was terrible. If you don't like the facts please feel free to present you own facts. In fact, please do so. But please only use facts from reliable sources. Reliable sources would be the government agencies that collect and present this data. To sit at this table, you must bring data (properly adjusted for inflation) that is from sources used by all economists not from sources whose credibility is non-existant.

There are lots of graphs and charts
Summary:

1.) The weakest job growth since WWII led to a declining median family income.

2.) In order to keep spending the US consumer continued to save less and borrow more.

3.) At the national level, the US government has issued over $500 billion dollars of net new debt per year since 2002. This has led to an increased reliance on foreign investors to finance our way of life.

4.) The trade deficit has continued to expand, although oil is responsible for a fair amount of that increase.

5.) In short, the US continues to consume more than it produces.

At some point, we will have to pay the bill.

This is the end result of the "Bush boom" or "the greatest story never told."

If the story was so great, we wouldn't need people to remind us of how good it is.

read more...
http://www.dailykos.com/story/2008/4/6/101348/9564

or read here...
http://www.huffingtonpost.com/hale-stewart/the-bush-boom-was-a-compl_b_95278.html

[DemReadingDU]

20. Max Keiser: Fixing the Problems on Wall Street is Easy: Raise Margin Requirements

4/6/08 Max Keiser's first posting on Huffington Post...

Margin requirements should be the centerpiece of any congressional testimony dissecting the recent market meltdown on Wall Street (Iceland, Spain, and Poland). The securities acts of '33 and '34 (covered at length in the series 7 exam I took in 1983 when I got my broker's license) contain excellent reforms that cleaned up the excesses that led to the '29 crash. Margin requirements mandating customers put up 50% or more (instead of 10% or less) of the purchase price of stocks deterred noxious speculation. The logic behind it makes sense. Raise the cost of speculation, deter speculation.

Market theocrats, however, don't like this idea. They like to think of the market as existing in a Friedman-esque vacuum of pure, unadulterated price discovery nirvana encapsulated by the virginal image of Adam Smith's "invisible hand" that serves as the market fundamentalist's equivalent to Mary's virgin birth. I don't buy it. I don't buy it for the same reason I reject religious fundamentalism; whether it's Christian or Muslim. Absolutism in any form is the enemy of reason. Only feudal lords (Bush, Cheney, Rumsfeld) and monopolists (Larry Ellison and Bill Gates) believe in the divine right of kings and corporations and I'm sorry, but my American ancestors fought a Revolutionary War to defeat that kind of thing.

There are many who believe that Greenspan, when he spoke of 'irrational exuberance' back in '96 should have raised margin requirements, Robert Shiller of Yale being one of them. If Greenspan had done so, many argue, much of the damage of the dot-com bubble would have been avoided and therefore much of the damage of the subsequent 'bubble transplant' of '00 when the 'hot money' bolted NASDAQ and juiced real estate prices (but much worse).

Adam Smith is not God and Greenspan-Bernanke are not his appointed representatives on Earth. But millions of home owners are getting crucified for their sins nevertheless. The efficient market theory is bunk. Neo-liberalism doesn't work. Margaret Thatcher's reputation is entirely due to the UK's lucky oil find in the North Sea (now that it's nearly all used up, Britain is re-opening the coal mines Maggie shut). If Reagan were alive today he'd be working at J.P. Morgan along with Tony Blair.

To reign in the hedge funds and the 'hot money' that is terrorizing the world's finances with what Warren Buffet calls 'weapons of mass financial destruction,' the Fed must raise margin requirements. It's cheaper than bailing out banks and it's 'deflationary' so we would see a drop in the price of energy and food.

http://www.huffingtonpost.com/max-keiser/fixing-the-problems-on-wa_b_95340.html

Max Keiser's recent film documenting the war between savers vs. speculators can be found here.
http://uk.youtube.com/watch?v=qxYi2W9vEfw

[DemReadingDU]

22. Bill Fleckenstein: Our housing-bubble hangover

4/7/08
All those interest-rate cuts aren't making it any easier for the average Joe to afford a house. There's no simple remedy for the aftermath of a borrowing binge.

The market has been bouncing around on misplaced hopes that the Federal Reserve will somehow save the day. Beyond the din, it's important to focus on one overarching fact: The fundamental problem in our country is the aftermath of the housing bubble.

We'll be dealing with it for some time. That's because the math doesn't work -- in terms of the average person trying to buy the average house. And it's not likely the math will improve, via lower mortgage rates, given our inflation rate and given where yields will probably go.

more...
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/OurHousingBubbleHangover.aspx

[Demeter]

23. Road for electric car makers full of potholes By Ken Bensinger Los Angeles Times Staff Writer

http://www.latimes.com/business/la-fi-garage5apr05,1,3703506,full.story


Lacking the acumen of traditional automakers, the start-ups building the vehicles are struggling with production problems.


...Tesla's Roadster had arrived months behind schedule with an improvised transmission that reduced acceleration by 40%. Or that the San Carlos, Calif.-based company's visionary co-founder had been abruptly ousted months before. Or that Tesla plans to make fewer than 1,000 of the cars this year -- and sell them for $100,000 apiece.

Tesla and more than two dozen other start-up companies -- most based in California and backed by piles of venture capital -- are in a feverish race to develop a viable electricity-powered alternative to the internal combustion engine. Electric cars, they argue, offer less pollution and noiseless operation for a fraction of the per-mile cost of traditional automobiles, while weaning drivers off oil.

Yet even environmentalists and investors who want to see these companies succeed question whether they have the know-how or leadership to replace the nation's gasoline fleet with one that runs on electrons. Despite increasing competition from rival technologies such as ethanol and hydrogen fuel cells, many of these companies seem bogged downfighting lawsuits, issuing breathless press releases, pummeling their rivals on blogs and bickering internally.

Last week, California's top air regulator voted to reduce the number of all-electric vehicles it would require large automakers to market in the state in coming years. That, combined with the start-up industry's challenges, could further delay technological advances and shift momentum away from electric cars altogether...


"It's very cute for people out of Silicon Valley to want to bolt an electric motor to a chassis," said Ray Lane, managing partner at venture capital firm Kleiner Perkins Caufield & Byers, which has invested in two electric start-ups: Irvine's Fisker Automotive Inc. and Think! of Norway. "But that's a long way from actually making a real car."

Most traditional automakers have programs to develop electric, fuel cell and biofuel cars, and are under government pressure to improve the fuel economy of their fleets, adding to speculation that they may gobble up any start-up that produces a viable electric car.

"Even if these start-ups are successful, I worry their prize will be that they're forced to compete with Toyota and GM," said Silicon Valley venture capitalist Vinod Khosla, who put money in ethanol rather than electric cars. "That's why I never invested."

A closer look at four of these California companies -- Tesla, Phoenix Motorcars Inc., Fisker and Zap -- illustrates the challenges facing start-ups trying to build the car of the future....

MORE AT LINK

[Demeter]

24. Credit Card Redlining by Adam Levitin

http://www.creditslips.org/creditslips/2008/04/credit-card-red.html

Several months ago, when I was a scarcely tolerated guest blogger, I wrote a post that asked (What Determines) What's In Your Wallet? The point was to highlight how little we know about what determines what credit card offers a particular individual receives. I suggested that there was a danger of red-lining in the credit card industry based at least on what solicitations one received. (I got a bunch of indignant e-mails about this emphasizing that federal law prohibits discriminatory lending...as if no one ever violated the law. Ah, Camelot.)

Well, now comes an empirical study from Ethan Cohen-Cole, an economist at the Boston Federal Reserve that indicates that there is redlining in the credit card industry. Residents of black neighborhoods are less likely to receive less consumer credit than residents of white neighborhoods, all things being equal:

This paper’s principal observation is that remarkably, in spite of identical scores and identical community characteristics, our individual in the Black neighborhood receives less consumer credit (e.g. fewer credit cards) than the individual in the White area. That is, in spite of the fact that both have been assessed to have similar risks of nonpayment, as determined by the credit score, the person living in the Black area has less ability to access credit.

And if there is less available credit card credit, where do people in black neighborhoods turn for credit?

To be sure, a single empirical study is just that and one can quibble about methodology, but wow! Talk about opening up a new front in credit card regulation. I've got to think that if this study gets some attention it is going to cause Congress to ask some questions. Of course, the study says nothing about the terms of the credit, but if I had to take a guess...well, what would you think?

The study includes a number of appropriate caveats about its findings. It also notes that

given the degree of regulatory scrutiny over the credit decision itself, one suspects that if any disparity exists in the provision of credit, it likely originates in the pre-screening (marketing) efforts.

I'm less sure of this. Certainly the marketing is a big factor; there are certain cards that are specifically marketed at particular minority communities, e.g., the Freedom Card (not to be confused with the Chase Freedom Card), which is marketed to poor blacks in Philadelphia. Moreover, the study can only speak to aggregate levels of credit, not to individual issuers' lending solicitation and lending decisions.

But the regulatory scrutiny of the credit issuance decision--what exactly is that? Who (if anyone) is actively screening for Equal Credit Opportunity Act (ECOA) violations and how are they doing it? We don't have anything like HMDA data for credit card lending. If the issuer never records the race of the borrower, but only uses a proxy variable, it would be pretty hard for an examiner to pick up systematic ECOA violations. And is it a ECOA violation is the discrimination is not on race per se, but on a proxy variable?

The card industry has carefully homed in on all sorts of variations in consumer behavior to fine-tune its profit model. In a competitive industry that does such careful data mining, do we really think that every issuer would shy away from discriminatory lending if it were (a) profitable and (b) not explicitly discriminatory because of use of a proxy variable? Or is racial discrimination different and just out of bounds? I'm not sanguine.

What this all speaks to is the need for greater transparency in the credit card industry, including the collection of more publicly available data. Government agencies are charged with enforcing the ECOA, but they have limited resources. Making collecting data and making it publicly available allows the academic community to contribute to ECOA monitoring, a win-win for the public and data hungry academics.

[DemReadingDU]

25. Mike Whitney: Fed Up: Bernanke joins G-7 to Stem Global Financial Meltdown

4/6/08
In a recent interview with the New York Times, former Secretary of the Treasury Paul O' Neill, was asked how the problems with subprime mortgages could lead to a financial crisis of global proportions. O' Neill said,

“If you have 10 bottles of water, and one bottle has poison in it, and you don't know which one, you probably won’t drink out of any of the 10 bottles; that’s basically what we’ve got here.”

Bulls-eye. O' Neill's answer is the best yet for explaining a complex situation in simple terms. The term “subprime” is a red herring; it is used by the media to minimize what is really going on. The meltdown in financing extends across the entire range of mortgage-security products. No loan-type has been spared. The wholesale market for anything connected to mortgages is frozen and the details are being intentionally withheld from the public. Two years ago, more than 65 percent of all mortgages were converted into securities and sold off to Wall Street. No more. That scam unraveled in July when two Bear Stearns hedge funds blew up and their were no takers for billions of dollars of mortgage-backed junk. Since then, bankers and hedge fund managers have been scrambling to conceal the facts about what mortgage-backed securities (MBS) are really worth; nothing. The fear is that when the public finds out what is really going on, they'll draw the logical conclusion that the banking system is bankrupt, which it probably is.

lots more...
http://www.informationclearinghouse.info/article19683.htm

[Demeter]

30. READ THE WHOLE ARTICLE!

Talk about a nightmare....What do you get when you hire an expert on the Great Depression?


I'll leave the punchline for the class to fill in.

[DemReadingDU]

44. Reading Mike Whitney is like reading a small novel

Always a lot of information, it's difficult to decide which paragraphs to post.

But do read the entire article!

[Hugin]

62. Oh! Oh! Pick me! Oh Oh!...

Cookies! :D

[Demeter]

68. Okay Prag, Since Bueller Isn't Here--

What do you get when you hire an expert on the Great Depression?

[Hugin]

69. Uh... Umm... Umm...

An Expert Great Depression?

(Aside: I don't see how there can be such a thing as nobody has officially agreed on what caused the Great Depression...
I'm assuming he was hired for the same reason as Condi who is an expert on the Soviet Union.)

[Demeter]

71. A Greater Depression, Of Couse!

New, improved, with more bells and whistles, a Depression fit for a Boomer and his grandkids. Designed to drain every last crumb out of the hollowed out consumer and the hollowed out economy, making the Grinch pre-change-of-heart look like a benevolent Santa Claus.

[DemReadingDU]

97. If the Democrats win the Presidency and get 60+ in the Senate

Do you think Bernanke will be allowed to stay as the Fed Chairman, being the expert he is in Depressions?


:evilgrin:

[Demeter]

99. We Can Hope He Isn't Reappointed

but who would be a better candidate? They're all in on the scam. The purpose of this whole expercise is to privatize the American economy and put it under the thumb of the Fed, a bunch of losers if ever there was one.

[donkeyotay]

64. Read the whole article!

A few more snippets:

Rate cuts, auction facilities or covert monetization all weaken the currency and levee an unfair tax on savers and people on fixed incomes. Unfortunately, these people have no voice in government, so we can't expect their interests to be fairly represented.

 . . .

By approving the $30 billion dollar deal with JP Morgan, the Fed arbitrarily went beyond its mandate of providing liquidity to the markets and usurped Congress' authority to appropriate funds. It was a power-grab engineered under shaky pretenses. The Fed isn't authorized to prevent privately-owned businesses that are recklessly leveraged at 30 to 1 from defaulting.

. . .

It's a banker's coup.

end>

Funny how they always seem to profit from the chaos they create for us...

[Tansy_Gold]

84. "These over-leveraged banking behemoths need to fail."

Exactly.

LET THEM FAIL. THEY DON'T HAVE ANYTHING OF VALUE ANYWAY. THEY ARE MERELY A DEVICE TO FUNNEL OUR REAL MONEY INTO THEIR STINKING HANDS.

They played a game amongst themselves and they lost. There is no legitimate reason for the taxpayers to bail these people out. It is OUR MONEY, not theirs.


I need to step away from the computer. I really do.



Tansy Gold, getting up from the chair, removing her hands from the keyb

[Tansy_Gold]

82. Hey, folks! Look over here!

"Since then, bankers and hedge fund managers have been scrambling to conceal the facts about what mortgage-backed securities (MBS) are really worth; nothing."

NOTHING.

NADA

ZERO

ZIPPO

ZILCH

NOT A FREAKIN' RED PENNY.

Tansy Gold, who is pretty sure she said something about these things being pretty much worthless several months ago but what did she know????

[DemReadingDU]

95. Best sentence in the article!

"Since then, bankers and hedge fund managers have been scrambling to conceal the facts about what mortgage-backed securities (MBS) are really worth; nothing."



Tansy Gold, what else do you see in your crystal ball!

[wordpix]

96. "the logical conclusion that the banking system is bankrupt"--how about the FEDERAL system?

We now have $9.2 trillion in federal debt and NO ONE IS TALKING ABOUT IT.

Well, hardly anyone. :evilgrin:

[DemReadingDU]

28. Dana Milbank: Meet Alan Schwartz, welfare recipient.

4/4/08 Buddy, Can You Spare a Billion?

As the chief executive of Bear Stearns, he's getting rather more public assistance than your typical welfare mom -- specifically, $30 billion in federal loan guarantees to help J.P. Morgan Chase take over his firm. But then, Schwartz has had rather more than his share of suffering of late.

As his firm collapsed, he was forced to forgo his entire 2007 bonus, leaving his compensation for the past five years at a paltry $141 million, according to Business Week. Things have become so bad that, the Wall Street Journal discovered, Schwartz has had to rent out his 7,850-square-foot home on the ninth green of a suburban New York golf course -- leaving the poor fellow with only his 17-room, seven-acre home in Greenwich, his condo in Colorado and the athletic center he built for Duke University.

Schwartz's tale of woe tugs at the heartstrings all the more because he and his colleagues at Bear Stearns were, he believes, blameless for the bankruptcy of two hedge funds and the subsequent collapse of the 85-year-old investment bank. "I am saddened," Schwartz told the Senate banking committee yesterday. He was saddened that Bear Stearns was undone by "unfounded rumors and attendant speculation," despite its impeccable balance sheet.

"Due to the stressed condition of the credit market as a whole and the unprecedented speed at which rumors and speculation travel and echo through the modern financial media environment, the rumors and speculation became a self-fulfilling prophecy," Schwartz told the senators. "There was, simply put, a run on the bank."

Sen. Richard Shelby (R-Ala.) asked the corporate-welfare recipient whether he shares any blame for his indigent circumstances. "Do you believe that your management team has any responsibility for the company's collapse?"

Schwartz could think of no missteps -- not even his decision to remain at a conference at the Breakers in Palm Beach while his firm was imploding. "I just simply have not been able to come up with anything, even with the benefit of hindsight," said the blameless chief executive, escorted into the hearing room by superlawyer Robert Bennett.

more...
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/03/AR2008040303984_pf.html

[Demeter]

29. A Brighter Spotlight, Yet the Pay Rises By CLAUDIA H. DEUTSCH

http://www.nytimes.com/2008/04/06/business/06comp.html?_r=1&ref=business&oref=slogin

WASN’T 2008 supposed to be the year of shareholder victory on the executive compensation front?...
Shareholders were mad about excessive compensation last year, when the economy was booming. This year, governance experts say, they are livid. “They are furious about the dichotomy of experiences — their shares fall, yet C.E.O. pay still rises,” said Paul Hodgson, a senior research associate at the Corporate Library, a governance research group.

The compensation research firm Equilar recently compiled data about chief executive pay at 200 companies that filed their proxies by March 28 and had revenues of at least $6.5 billion. And the data illustrates Mr. Hodgson’s point. It shows that average compensation for chief executives who had held the job at least two years rose 5 percent in 2007, to $11.2 million (If new C.E.O.’s are counted, that number is $11.7 million). Even though performance-based bonuses were down last year, the value and prevalence of discretionary bonuses — ones not linked to performance — were up. A result is that C.E.O.’s who have held their jobs for two years received an average total bonus payout of $2.8 million, up 1.1 percent from 2006. “We’re not against pay,” said Dennis Johnson, a senior portfolio manager who is responsible for corporate governance for Calpers, the California pension fund. “But we are certainly against pay for failure, or for just showing up.”...At the 200 companies that Equilar studied this year, the average value of performance-based bonuses granted to chief executives who had been in their jobs for at least two years was $1.8 million, a drop of 2.5 percent from 2006. Moreover, only 73 percent of the chiefs got performance bonuses, down from 78.6 percent in 2006.



A group of investors, led by the American Federation of State, County and Municipal Employees, is asking companies to limit or bar “gross-ups,” in which companies pay the taxes the C.E.O.’s incur from their pay packages...The timing is not surprising. Many shareholders were aghast last year when Angelo R. Mozilo, who earned $100 million at Countrywide Financial in 2006, successfully argued that Countrywide should pay the taxes that were incurred that year when his wife accompanied him to business functions on the corporate jet.

And gross-ups certainly have not disappeared this year. R. Chad Dreier, the chief of Ryland Homes, earned almost $8.2 million last year. Only $1 million of his pay was salary, and a bit over $2 million was bonus. More than $4 million was gross-ups to cover taxes incurred by vesting of restricted stock that was granted in previous years...The Corporate Library has just released data showing that 20 percent of chief executives received a tax gross-up on part of their income in 2006. The median gross-up amount was just $13,000, but the concept — that any corporate chief should receive tax assistance on top of multimillion-dollar payouts — stuck in shareholders’ craws...Shareholders are also concerned about pay packages that can encourage executives to sacrifice the future for a present-day payout. Mr. Hodgson points to Sprint Nextel as a prime example. In a recent filing to the Securities and Exchange Commission, the company said it had redesigned its compensation plans so that incentive pay for progress toward goals would kick in every quarter....And a growing cadre of investors are asking that companies reward only superior performance — for example, if the company was more profitable than its peers. The United Brotherhood of Carpenters has filed pay-for-superior-performance proposals at 33 companies, including Best Buy, Honeywell International, WellPoint and Northern Trust, according to RiskMetrics records.

Disclosure — or lack thereof — remains a huge issue for shareholders....So does the S.E.C. The agency has contacted 350 companies to insist that they specify performance targets and couch their disclosures in understandable English...Perhaps surprisingly, not all governance experts buy into the idea of forced transparency on targets. Some worry that if shareholders win on this issue, it might be a pyrrhic victory. “We worry about unintended consequences,” said Rebecca K. Darr, a senior fellow at the Aspen Institute, which convenes forums at which executives and shareholders discuss governance issues. “If companies have to say how they measure individual performance, they might simply revert to easily quantifiable numbers like earnings per share, rather than complex long-term goals.”...In fact, some compensation consultants say the S.E.C. disclosure rules went too far. Pearl Meyer, a senior managing director at Steven Hall & Partners, suggests that executives who missed performance targets might still deserve hefty bonuses, if they managed to stem losses even as economic factors beyond their control — say, soaring oil prices or a housing slowdown — decimated their industry. But, she said, it would be hard to lay out a cogent formula for that. Thus, she concludes, making directors spell out the details of their compensation plans could force them toward rewarding conventional short-term performance.

OF course, some governance experts are suggesting the quintessentially simple fix: Have directors sit down with shareholders and ask what they really want to know...Pfizer, for one, seems to be doing just that. Shareholders were outraged last year when Hank McKinnell, the company’s former chief, walked away with nearly $200 million when he was ousted. So last October, the Pfizer directors invited representatives of large shareholder groups to sit down and air any governance issues that troubled them. About a third of the discussion revolved around compensation.

LOTS MORE AT LINK

[Demeter]

31. Bear/JP Morgan: The Rashomon Defense

http://www.nakedcapitalism.com/2008/04/bearjp-morgan-outrage-continues.html


...What does have me agitated (and this blogger prefers to stay detached) is the Fed's $29 billion subsidy to JP Morgan's purchase of Bear and the utter lack of candor and accountability about it. Paulson came up with an excuse to run away to China to avoid testifying at the Congressional hearings on the Bear bailout this week (perhaps, having been a staffer to John Erlichman, he is acutely aware of the danger of committing perjury before Congress). In the end, Paulson's absence probably made no difference, because the key actors executed a brilliant strategem, the Rashomon defense.

As in Kurosowa's masterwork, certain basic elements are not in dispute: in the movie, a rape; in the financial world, a rape an unprecedented commitment on the Fed's part that appears to be well beyond authority. (While the Fed can lend against all sorts of collateral in exigent and unusual circumstances, I have been advised those loans are for a maximum of 28 days. It might have been possible to arrange overlapping loans that would have achieved the same end, but the Fed couldn't be bothered to observe the niceties.)

In both performances, the witnesses tell stories that simply cannot be reconciled. The SEC insists Bear had sufficient capital. Bear CEO Schwartz maintains there was no action he could have taken to save the firm. Bernanke and Geithner claimed that the deal was necessary to preserve the financial system because Bear was going to have to file for bankruptcy (they indicated the big worry was the credit default swaps). Dimon said his firm is sound and the fact that he did the deal means he thought it was good for shareholders.

So we have at least three possible scenarios, with no way to sort them out:

1. Bear really was solvent but did not manage the crisis or its cash levels defensively enough

2. Bear was worth either not much or nothing dead, but JPM used the panic and the possibility of a Lehman-on-the-ropes further ratchet down to extract big concessions from the Fed. Put more simply, JPM played what were real risks to the max and exploited the Fed and Treasury's desperation to get a deal done

3. There was a black hole in Bear's balance sheet (I mean this in sense of either serious negative equity in liquidation or an information void). The possibility of losses to JPM was real (although Dimon still could have overplayed it)


What makes me even more keen for disclosure is that the de facto subsidies to JPM were even greater than previously disclosed....MORE AT LINK!

[Demeter]

32. Banks Backlogged by Foreclosures, Let Defaulting Borrowers Stay in Homes

http://www.nakedcapitalism.com/2008/04/banks-backlogged-by-foreclosures-let.html

We had read earlier of banks failing to foreclose in Dade and Broward counties because the marker was so glutted with properties for sale that there was simply no point. We heard yesterday of discussion in Cleveland of plowing largely vacant subdivisions back to farmland.

A third indicator of the degree of real estate stress: some banks are so backed up that their normal foreclosure process is falling behind. This means that the foreclosure statistics paint a more positive picture than the reality on the ground.

From Bloomberg:

Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.

Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.

``We don't have a sense of the magnitude of what's really going on because the whole process is being delayed,'' Zandi said in an interview. ``Looking at the data, we see the problems, but they are probably measurably greater than we think.''

Lenders took an average of 61 days to foreclose on a property last year, up from 37 days in the year earlier, according to RealtyTrac Inc., a foreclosure database in Irvine, California. Sales of foreclosed homes rose 4.4 percent last year at the same time the supply of such homes more than doubled, according to LoanPerformance First American CoreLogic Inc., a real estate data company based in San Francisco

``Some people stay in their houses until someone comes to kick them out,'' said Angel Gutierrez, owner of Dallas-based Metro Lending, which buys distressed mortgage debt. ``Sometimes no one comes to kick them out.''

Banks are reluctant to foreclose on homeowners for a variety of reasons that include the cost, said Peter Zalewski, real estate broker and owner of Condo Vultures Realty LLC, a property consulting firm in Bal Harbour, Florida.

Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said....

``Some of the banks just don't want the houses to be empty, especially if it's in an area where there's a lot of theft or there are five other houses empty on the street,'' said Kapsalis, who works at Added Value Realty LLC in Livonia, Michigan, another Detroit suburb. ``They'll lose toilets, plumbing, appliances, everything. Banks are getting wise and allowing people to live there longer.''.....

Five million existing homes were sold in February, down 31 percent from the peak of 7.25 million in September 2005, data compiled by the Chicago-based National Association of Realtors show. More than 4 million existing homes were on the market in February, 53 percent more than the 2.6 million average of the past nine years, the Realtors reported.

``Excess inventories pose the biggest risk to the market,'' Michelle Meyer and Ethan Harris, New York-based economists at Lehman Brothers Holdings Inc., wrote in a report last month. ``As long as inventories are high, home prices will fall.''....

State laws determine the length of time between the filing and an auction of the house. In most states, it's two to six months, according to Foreclosures.com. In Maine, it can be up to a year and in New York, 19 months; in Georgia, it's as quickly as one month, and in Nevada, it can be 35 days, according to the database.

[Demeter]

33. Housing Bust Duration

http://calculatedrisk.blogspot.com/2008/04/housing-bust-duration.html

This first graph shows real Case-Shiller house prices for Los Angeles and the Composite 20 Index (20 large cities). The indices are adjusted with CPI less Shelter.



Case-Shiller Real House Price, LA vs Composite 20

The most obvious feature is the size of the current housing price bubble compared to the late '80s housing bubble in Los Angeles.

The Composite 20 bubble looks similar (although larger) to the previous Los Angeles bubble. (Note the Composite 20 index started in 2000).

Perhaps we can overlay the current Composite 20 bubble on top of the previous Los Angeles bubble and learn something about the possible duration of the current bust.

In the second graph, the real price peaks are lined up for late '80s bubble in Los Angeles, and the current Composite 20 bubble. Note that the real price peak for the Composite 20 was flat for several months, so the real peak was chosen as May '06. It could also be a few months later.



Housing Bust Duration The peak and trough for the Los Angeles bubble are marked on the graph.

Prices are falling faster this time, probably because the bubble was larger.

It might be reasonable to expect that the dynamics of the current bust will be similar to the previous bust. After another year (or two) of rapidly falling prices, it's very likely that real prices will continue to fall - but at a slower pace. During the last few years of the bust, real prices will be flat or decline slowly - and the conventional wisdom will be that homes are a poor investment.

The Los Angeles bust took 86 months in real terms from peak to trough (about 7 years) using the Case-Shiller index. If the Composite 20 bust takes a similar amount of time, the real price bottom will happen in early 2013 or so. (But prices would be close in 2010).

[Demeter]

34. "The next time we have Black Monday"

http://www.salon.com/tech/htww/2008/04/04/the_next_black_monday/index.html

In the most unexpected demonstration of the thesis that all things are interconnected in a myriad of nonobvious ways, I received an e-mail today from a now-retired reporter named Stephen Pizzo.

Back in 1995, Pizzo and I were colleagues at the Pleistocene-era online magazine Web Review, a daring experiment in the new world of online journalism bankrolled by computer book publisher O'Reilly & Associates. I was a freelancer who was writing madly about the Internet for anyone who would pay me. Pizzo was an established reporter who had coauthored a well-received book on the savings-and-loan crisis. His honed hard-news reporting chops were a welcome complement to the rest of the staff's geeky cyber-enthusiasms.

Pizzo had been reading my coverage recently of Wall Street's economic misadventures, and wanted to draw my attention to testimony he gave in Congress in 1991, at a hearing exploring proposed legislation aimed at deregulating the commercial banking industry.

Prescient is too mild a word to describe Pizzo's testimony. I recommend reading it in its entirety, so as to savor the full flavor of his brimstone and fire. But here is a choice excerpt, featuring Pizzo's prediction as to the likely baleful consequences of allowing commercial banks to play with securities.

As we autopsied dead savings and loans, we were absolutely amazed by the number of ways thrift rogues were able to circumvent, neuter, and defeat firewalls designed to safeguard the system against self-dealing and abuse. One of the favorite methods was to link up like-minded thrifts in the daisy chains through which they could circulate inflated assets and hide their rotten loans to each other and to each other's customers from regulators.

Banks that need to get money to a troubled securities affiliate will do exactly the same thing. By linking up three or more banks, each with its own securities subsidiary, a daisy chain will facilitate a round robin of reciprocal loans in times of need. Then, the next time we have a Black Monday on Wall Street, this daisy chain will swing into action as a handful of mega-banks try to prop one another's securities subsidiaries and their customers as the market plummets.

In such a scenario, billions of federally insured dollars will disappear in the twinkle of a few program trades.

That will happen, not might happen but will happen, and when it does these too-big-to-fail banks will have to be propped up with Federal money. In the smoking aftermath, Congress can stand around and wring its hands and give speeches about how awful it is that these bankers violated the spirit of the law, but once again, the money will be gone, the bill will have come due, and taxpayers will again be required to cough it up.

Nice work, Stephen. Too bad they didn't listen to you.

[Tansy_Gold]

60. S&L history, RTC, Lincoln Savings, Charles Keating, etc.

In 1991, I worked for the RTC at the defunct Lincoln Savings in Phoenix. As a "loan documentation specialist," I spent my days digging through the huge notebook files -- nothing on computer in those days -- for the paperwork that analyzed how and why the loans were made. Many were unsecured -- multi-million-dollar gifts to Keating friends and family -- others were based on real estate values that had been grotesquely inflated via multiple back and forth sales between "friends."

The booooshies and their friends who "learned" via the S&L collapse are now raking in even larger piles of cash through the hedge fund and derivatives collapse. I'm tempted to suggest that the S&L fracas was just a practice run, a prelude to the real thing.

Understand this: The people at the top WANT the system to collapse. Its collapse will bail them out, will convert their tissue paper money into the real thing, which they will collect/steal from us. Delaying the inevitable will not prevent it. Perhaps the only real way out is for us to precipitate the collapse so that WE control it, not them.


Tansy Gold

[wordpix]

94. thanks for that. I bought my condo in '98 near the end of previous bust & start of the 2000's boom

Just dumb luck it happened that way. :) But now I can't afford to move b/c "moving up" to something better is still too expensive. :(

[Demeter]

100. So Just Wait a Couple of Years

See graph above and article

[Demeter]

36. A BAD TRADE by Bill Bonner

DAILYRECKONING.COM

The Daily Reckoning PRESENTS: Every mother wanted her babies to grow up and work on Wall Street or the City. Why? Because the money was so good. No sector was more profitable; no employees were better paid. But that was the basic problem too. Bill Bonner explains...



The present period in financial history favors ducks and undertakers. On the banks of the Thames and the Hudson, every day they fish a couple more cadavers out of the water. And then the medical examiner opens them up so we get to see what caused them to go under. What a sight! It is amazing that any sane investor ever had anything to do with them in the first place.

We are speaking about the entire financial industry, in general, and hedge funds in particular. Picking at the innards of the deceased, we find their plumbing so twisted, it’s a wonder they lived as long as they did.

Of course, every mother wanted her babies to grow up and work on Wall Street or the City. Why? Because the money was so good. No sector was more profitable; no employees were better paid. But that was the basic problem too. People who worked in the financial industry were encouraged to take outsize gambles in the hopes of outsized bonuses. And as long as the credit cycle was on the upswing, the wagers paid off.

“Until the recent tempest,” says Fortune magazine, “Wall Street firms looked like just about the world’s best businesses. Year after year they boasted sumptuous profitability, ever-rising share prices, and, if you believed their claims, a new generation of chief executives who had mastered the art and science of risk management.”

In the period, 2002 to 2006, the sun never shined more brightly for the five big independent firms - Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Bros., and Bear Stearns. Their earnings rose 200%, to more than $30 billion, with an average return on equity of 22%. Too bad they didn’t hold onto the money. But when the money was on the counter, the clerks at financial firms didn’t put it in the till. They took it home.

Fortune continues with the numbers: In 2006, the top six employees at Lehman pocketed $150 million, and James Cayne, who was at the time Bear Stearns’s CEO, paid himself $40 million. Employee compensation at Wall Street’s big five investment banks included restricted stock and options equal to 26% of the companies’ outstanding shares.

As long as the weather was good, no one complained. But in 2007, the monsoons began. Since the middle of the year, just three firms alone – Bear, Merrill Lynch and Morgan Stanley – have taken more than $40 billion in writedowns. Bear drowned...while managers at other firms looked for ways to stay afloat. Shareholders, meanwhile, raced to the cupboard to look for the companies’ rainy-day reserves. Alas, employees had stripped the company of capital.

As for hedge funds, we have nothing against them. Au contraire, we value them as we value influenza and Russian roulette....they help carry off the weak and eliminate the stupid.

It was a bad week for hedge funds. Poor John Meriwether, for example, was back in the news; we get to laugh at him twice. He was the captain of LongTerm Capital Management which sailed along beautifully – thanks to the aid and comfort provided by two Nobel Prize-winning economists, Myron Scholes and Robert Merton – until it hit a reef in 1998. After the LTCM sinking, Meriwether swam ashore, dried himself off, and went back to doing what he did best – taking a big piece of investors’ money. But in 2008, his flagship fund is down 28%. And he’s not the only one. It was the worst quarter ever for the hedge funds. And March was almost as bad for hedge fund managers as it was for Julius Caesar; the average fund was down 2.4% in the month alone. Some of the big, well-known funds fell much more. Endeavor Capital dropped 34%. London Diversified Fund Management’s flagship fund lost 10%. And in New York, Pardus Capital Management, which seems to specialize in airline stocks, refused redemptions on its $2 billion fund.

Alert readers will already be asking questions. Isn’t the whole idea of a ‘hedge’ fund to hedge against market disasters, by taking countervailing positions in different asset classes? We assume that was a rhetorical question, since everyone knows hedge funds ceased to hedge a long time ago. Instead, they are some of the biggest go-for-broke gamblers in the financial world.

It is the old principal/agent problem – a traditional bugaboo among economists – says a colleague. You hire someone to do a job for you and you assume he’s on your team. And then you discover than your doctor operates a funeral parlor on the side. It’s a problem in business and politics as well as the investment world. Turn your back for just a moment and your CEO is awarding himself stock options and your kids are wearing your socks; your local politicians are hiring their girlfriends, and your hedge fund manager is taking extraordinary risks with your money.

In the world of hedge funds, the problem was particularly acute. Because the managers have such lopsided incentives. If they make money, they take 20% of it off the table and put it in their own pockets. If they lose it, you, the investor, get to keep the whole loss. Heads I win, tails you lose. This is why Warren Buffett calls hedge funds a “compensation system,” not an asset class. Over time, the hedge fund manager is practically guaranteed to end up with more of your money than you have. John Kay, writing in the Financial Times last month, demonstrated that if Buffett had charged like a hedge fund, he would have ended up with 90% of his client’s money in the 42 years he’s been investing.

But in the recent stormy weather, 50 hedge funds have washed up. Only about 7,950 left to go.

[Demeter]

38. The Bottoms Are In - Or Are They?

DailyReckoning.com


Today, we have to open our collar and loosen our tie; we see more bottoms than at the Folies Bergeres.

“What do you call it when the stock of the country’s fifth-largest investment bank trades at $50 on a Thursday and at $3 the following Monday?” asks Jim Cramer. “I call it a bottom.”

Of course, everyone says he saw the bottom in the U.S. stock market in January...and the bottom in the financials when Bear Stearns owners panicked and agreed to sell the firm for $2 a share...subsequently amended upwards.

And look at the U.S. builders – they seem to have bottomed out too. “It can’t get worse than this,” say industry spokesmen. The index has now turned up.

Meanwhile, look at the Chinese stock market. As predicted in this space – remember, lines of people in Shanghai waiting to open up brokerage accounts? Thousands of new accounts being opened every day? Share prices up 500% in two years? Now, the Chinese stock market has collapsed. The FXI – a kind of Dow Jones Industrial average for the Shanghai market – fell from 220 to 120, a loss of 45%.

It wasn’t the only one. Both Japan and India fell 31%. And Vietnam must have felt as though it had been hit by another Tet Offensive – stocks are down 53% since October. (Colleague Manraaj Singh swears this is a buying opportunity for the Vietnam Fund...more about that some other time.)

But now...all these markets seem to be going back up. Have we seen the bottoms?

And what’s this – gold, our favorite metal went down to $887 or thereabouts, then bounced back over $900. And yesterday, gold added another $9. Have we seen the bottom in the gold market correction too? A lot of people are betting on it...

Look around you; you’ll see bottoms everywhere. Yesterday, prices on just about everything were rebounding. The euro rebounded against the dollar. Asian markets rose. Wheat, soy, rice prices – all on the way back up. The CRB index rose too.

(Even base metals have gotten so precious that a front page report in today’s International Herald Tribune tells us that thieves are stripping the lead off of church roofs in the UK.)

About the only thing that didn’t bounce yesterday was oil – which was off a bit, but still holding over $100. Yes, dear reader, it looks to us as if oil found its bottom at around $100, which is a remarkable thing.

Even in volatility, it looks like a kind of bottom has been found – meaning, volatility is decreasing...markets are calming. As they say on Wall Street...the bottoms are in...

...or are they?

George Soros wonders:

“We had a good bottom,” Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JP Morgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. “This will probably not prove to be the final bottom,” he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.

*** Soros had a new book released online yesterday: The New Paradigm for Financial Markets (Public Affairs, 2008). He explains the causes of the current meltdown, which he traces to the big turnaround in 1980...when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power and borrowing ballooned.

Hmmm...sounds familiar. That is what we have been saying too – that people got the wrong idea about the free market. They thought it was a panacea. As long as you reduced taxes and regulation, they believed, you could get away with murder...or at least leverage.

Not so. Capitalism is not a system that makes people rich. It’s a moral system...not really a financial system at all. And like any moral system, it’s fuzzy at the edges and difficult to master. Where does the Atlantic stop and the Jersey shore begin? No one can tell you exactly. And no one can tell you where, exactly, one person’s rights begin and another’s stop. Does a landowner really have an unencumbered right to enjoy the usufructs of his property...knowing that his ancestor stole the land, even fair and square, from the local natives? Does an airline have the right to fly its jumbo jets into an airport...regardless of the noise pollution it causes to the local householders? Would motorists have the right to drive gas-guzzlers if the planet really were headed for a global climatic disaster? Who knows? All you can do is do your best...trying to respect other peoples’ property...and other peoples’ freedom to do what they want...and trying to hold people to their agreements and obligations. Some people get rich; some people get poor. Some people lose; some win. But mostly, grosso modo, the free market gives people what they’ve got coming.

*** While George Soros believes the advanced markets of the West will begin heading down again in a few months, he thinks that some emerging markets will continue going up. He’s heavily invested in India, for example, where he believes “the fundamentals remain good.”

In other words, capitalism still works. But the winners in this capitalistic world are not necessarily those who blather on about freedom and market economies.

Soro’s former sidekick, and our old friend, Jim Rogers, says he wouldn’t put a dime in India. He sold all his emerging markets, except China. The Middle Kingdom has very little political freedom. According to the theorists of the Reagan/Thatcher era...China as it is today couldn’t exist. Political freedom was thought to be inseparable from economic freedom. And economic freedom was considered essential to growth and prosperity. But there it is – China! What to make of it?

Jim is so sure that China will be the world’s next super-power, perhaps replacing America as the leading hegemon of the planet, that he has insisted that his daughter learn to speak Mandarin. Practically from the day she was born she’s had a Chinese nanny.

So colleague Manraaj Singh is good company. He has faith in the emerging markets too. His favorite Asian market is Vietnam, also a communist country...the one that booted out U.S. troops 40 years ago and imprisoned America’s candidate for president, John McCain.

But yesterday, Manraaj was not talking about Vietnam. Instead, he had this to say about U.S. Treasury Secretary Paulson’s visit to China:

“In a press conference in Beijing, he said that he emphasised to the Chinese government the benefits of more efficient capital markets as a device that could ensure ordinary citizens received an “adequate” return on their savings...and that’s when I burst out laughing!

“Since the beginning of the decade, the S&P 500 Index has actually fallen by five percent. In China, the benchmark Shanghai A-shares Index is up by 124 per cent – and that’s after falling 43 per cent from its peak in October. They were up 296 per cent at their peak. I think that Chinese investors have seen an “adequate” return on their savings. U.S. investors, on the other hand, probably wouldn’t think so...and neither would the average British investor... the FTSE is down 11 per cent over the same period.”

Interestingly, Asian markets have been hit hard... not by anything they did wrong, but by the sub-prime crisis, which was 100% made in America. The emerging markets have their troubles and weaknesses, Manraaj concedes, but they are fundamentally in better positions than the US, because they have less debt and cheaper operating costs.

*** We mentioned Icelandic bonds the other day. They’re an intriguing investment because yields are exceptionally high. Obviously, wherever you get high rewards, it is a good idea to look around to find out why; there’s bound to be a reason. Mr. Market never gives our favors without strings attached. The cord attached to this particular yield leads right to the krona – which fell 22% last year. Even if you can get an inflation adjusted, or real, yield of 5% on Icelandic bonds, another drop like that in the currency would leave you deep in the hole.

We put the question to a team of investment managers from HSBC. Here is their reply:

“There is obviously a chance that all the pessimism over debt and default is over done and that the bonds are a good buy at these prices. HSBC PB (Private Bank) wouldn’t recommend it as a strategy. The main reason is that our view is that the bust in credit will take a long time to correct and has significantly further to go. The market has to come to a point that it is willing to lend to Icelandic banks again. This is unlikely for the foreseeable future. As I am sure you know the mainstays of the economy are fishing (70% of exports!), aluminum (the country has a developed a large amount of geothermal electricity) and to a small extent tourism - not particularly inspiring given the scale of the problem.

“Rather than re-visiting an old bull market story, such as Iceland, we would prefer to look to the future. That would mean that we would be looking at different sectors which will grow or protect investors money because they are working in high-demand areas. Because the developing economies of Russia, China, Latin America and the Middle East are cash-rich on the back of the commodities boom, we prefer to invest, generally, in those economies.”

[AnneD]

46. It is that comment.....

that George Soros makes that keeps me on the sidelines. It you jump into in the bear market too soon, you tend to get mauled. I sit on the sidelines with assorted cash, wainting til we hit bottom. Same with housing. I am ok with where we are at the moment, so we will wait it out.

[AnneD]

40. Morning Marketeers......

:donut: and lurkers. Well, it really is official now-we are not just starting a recession, but deep into one. I am basing this on a local source. Now what stat am I basing it on you might ask.....the increase in car repo's.

Our local news did a story last night on the increased number of car's getting repo'ed. One of the guys interviewed said he took cars out of all neighbourhood as of late- even the well to do. Guess the price of gas is a mute point after that.

Ask around in your are-you might be surprised. If your home is repo'ed, and your car is repo'ed, where do you go. Look for more Bushvilles to start popping up.

Happy Hunting and watch out for the bears.

[Demeter]

43. Morning, AnneD

Another week dawns, blighted before it even gets started, by the lack of Impeachment and all the consequences thereof.

[AnneD]

47. Some good news...sort of

Some job fields expected to weather recession well
Hospital workers and teachers should be OK, but housing and auto layoffs expected to be high

WASHINGTON — Hospitals, schools and the assembly line at an airplane factory look like pretty good places to be with a recession looming and unemployment rising. Construction workers, real estate agents and auto workers aren't expected to fare as well.

The startling news that the economy lost 80,000 jobs last month and nearly a quarter-million over the last three months is the starkest signal yet that the country has probably fallen into a recession, with things on the job front expected to get worse.

"All the indicators suggest that we will see even larger job declines in coming months. Businesses are getting nervous and pulling back," said Mark Zandi, chief economist at Moody's Economy.com.

<snip>
Economists are forecasting a jobless rate that will peak at around 6 percent, but probably not until early next year, several months after the recession is expected to end. Analysts said as many as 2 million people could lose their jobs in the current downturn.

<snip>
Gault said he expected a mild recession that will end when tax rebate checks are spent this summer. He said he wasn't looking for as big a rise in unemployment as the 2001 downturn because companies have not added as many workers to their payrolls during the current expansion.

<snip>
http://www.chron.com/disp/story.mpl/business/5679577.html

What do you want to bet that Gault is the next suprised economist.:eyes:

[AnneD]

48. Report: WaMu close to $5B infusion

NEW YORK — Washington Mutual is close to landing a $5 billion cash infusion from private-equity firm TPG and other investors, according to a report Monday in the Wall Street Journal.

The U.S. mortgage crises has sapped the capital requirements of dozens of banks, included that of the nation's largest savings and loan.

While the deal would deliver much needed capital to Washington Mutual Inc., it would dilute the holdings of current WaMu shareholders.

The rapid deterioration of assets tied to U.S. mortgages has forced some banks to hunt urgently for capital, at the risk of regulatory review.

Banks with a rapidly increasing non-performing asset to risk-based capital ratio will likely experience the scrutiny of regulators, FBR analyst Paul Miller wrote in a research note. A ratio approaching 100 percent could trigger sanctions or penalties, but any rapidly increasing ratio could spark a review.

more.....

http://www.chron.com/disp/story.mpl/ap/business/5679776.html

I bet they are not the only ones needing a transfusion.....

[AnneD]

50. Put this on your radar screen.......

TPG Capital (formerly Texas Pacific Group, commonly referred to as "TPG") is a private equity investment firm founded by David Bonderman, James Coulter and William S. Price III in 1992. TPG has offices in Fort Worth, San Francisco, London, Hong Kong, Mumbai, Tokyo, Melbourne and New York City. The firm's industry focuses include consumer/retail, media and telecommunications, industrials, technology, travel/leisure, and health care. The firm is currently investing its fifth fund, TPG Partners V, L.P.

Notable companies TPG has owned or invested in over the years include Continental Airlines, Ducati, Neiman Marcus, Burger King, J. Crew, Lenovo, MGM, Seagate, Alltel Wireless, Harrah's, Avaya, Freescale Semiconductor, and Univision.

TPG is among the "megafunds" in the private equity industry as well as one of the four most elite players (TPG, The Blackstone Group, KKR, and The Carlyle Group). TPG is also known for its deep operating capability and consistently high returns over the course of its existence.

Euromoney named the firm Best Global Private Equity House in 2006, a year in which it was involved in deals that comprised a record $101 billion.

http://en.wikipedia.org/wiki/TPG_Capital,_L.P.

[Demeter]

67. TPG to Invest $5 Billion in Wamu--Naked Capitalism Commentary

http://www.nakedcapitalism.com/2008/04/tpg-to-invest-5-billion-in-wamu.html


Private equity funds (except for specialists like Chris Flowers) seldom make investments in banks, and for good reason. They are regulated businesses with complex, integrated overhead structures that don't lend themselves to the sort of cost cutting and breakups that are easy ways for LBO firms to unlock value.

On the one hand, with sovereign wealth funds turning a cold shoulder to requests for further cash from strained financial firms, the recapitalization of the banking industry will have to come largely from domestic sources, so the TPG move in theory is a positive development. On the other hand, if like the SWF, they have merely acquired the right to lose money, TPG and any "me too" deals could be the last private sector hurrah before banks start resorting to more desperate measures (dividend cuts, asset sales despite the weak market for banking businesses, rights offerings).

If I were in TPG's shoes, I'd wait for banks to hive off large businesses. These are easier to evaluate and (for them to be saleable) would have to have only a limited direct exposure to the mortgage crisis.

I anticipate TPG will come to regret this deal.

[nichomachus]

49. If you adjust for inflation

The current Dow is about 60 percent of what it was when Bush took office.

He has presided over an economic disaster.

[Demeter]

51. It's Not Even the Same DOW

Most of the stocks were changed as they delisted, went bankrupt or otherwise failed to meet Dow criteria.

[slipslidingaway]

81. Since Bush took office...

"It's Not Even the Same DOW
Posted by Demeter
Most of the stocks were changed as they delisted, went bankrupt or otherwise failed to meet Dow criteria."


Five of the thirty DOW components changed since Bush took office, so while I agree that it is not the same DOW, I do not agree that most were changed and I am not aware that any of the five companies went bankrupt or were delisted.

http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average


"On April 8, 2004, another change occurred as International Paper, AT&T, and Eastman Kodak were replaced with Pfizer, Verizon, and AIG. On December 1, 2005 AT&T returned to the DJIA as a result of the SBC Communications and AT&T merger. Altria Group and Honeywell were replaced by Chevron Corp and Bank of America on February 19, 2008.<7>"

[Wednesdays]

53. Link?

Because that's a startling statistic, and if true the word should be spread.

[DemReadingDU]

54. The Real Dow

Here is a graph
http://www.itulip.com/realdow.htm


and some text
http://homepage.mac.com/ttsmyf/

[nichomachus]

55. And if you count real inflation

Very interesting, but using the government's official inflation figures understates the problem. Anyone who thinks inflation is 2.X percent shouldn't be allowed to handle large amounts of money -- say over 50 cents at one time.

Almost everything real people spend money on these days is skyrocketing out of control. The government artificially suppresses the inflation figure, so it won't have to compensate people whose income is pegged to inflation. This is what gasoline is up 30 percent in the last year; bread, milk, and flour up 20 percent or more; home heating oil up 20 percent; medical costs are out of sight; even my Medicare supplement plan went up 7 percent and my Part D went up 10 percent -- but Social Security recipients got a 2.3 percent cost of living increase. Had the government reported true inflation, Social Security recipients would have gotten somewhere between a 12 and 15 percent increase.

The government can't afford that -- not when there are CEOs in danger of having to lay off staff at one of their vacation homes.

[DemReadingDU]

56. inflation, higher prices

I see prices skyrocketing every week at the grocery store. Some trips I hold off buying things thinking the next week, they will go on-sale. But the following week, the prices are even higher. :(


edit: maybe the CEOs should take a paycut, sell their yacht and donate proceeds to a food bank.

[Hugin]

63. Thanks for pointing that out nichomachus...

Yep, about a month ago they dropped a couple and added a couple... Including a big oil group.

[Demeter]

70. The Manic-Depressive Market

mirrors our real-life situations (but in reverse, for me).

[Demeter]

72. Central banks are dangerous

http://interfluidity.powerblogs.com/posts/1207473165.shtml

I really thought that Michael Shedlock was overstating the case:

The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing...

Don't expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem...

The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it's easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.

But then I read this piece, by Robert Shiller (hat tip Yves Smith), and all of a sudden I'm frightened. It's one thing when Hank Paulson proposes turning the Fed into the macroeconomy's philosopher king. Paulson will be gone in a blink of an eye. But Robert Shiller is an increasingly influential economist. He's already got Mark Thoma signed up for the plan. These guys are smart, they matter, and they will continue to matter next January. So let's think about this very, very carefully.

Shiller points out that...

In recent years, central banks have not always managed macro confidence magnificently. The Fed failed to identify the twin bubbles of the last decade — in the stock market and in real estate — and we have to hope that the Fed and its global counterparts will do better in the future. Central banks are the only active practitioners of the art of stabilizing macro confidence, and they are all we have to rely on.

He's right on both counts. For now, central banks are all we have to prevent a catastrophic unwinding of our unstable financial system. But they had everything to do with getting us here. It's not just the Fed, with its famous "serial bubble-blowing", its cheering on of any novelty as beneficial innovation, its absolute refusal to peer into the magical sausage factory that Wall Street had become. The problem with central banks is much bigger than that. If you haven't been obsessing over every word Brad Setser has written for the past several years, you owe yourself an education. A growing "official sector" has largely defined the global macroeconomy in the first years of this millenium. In the USA, Japan, China, Europe, central banks have indeed been "active practitioners of the art of stabilizing macro confidence". For most of those years, it seemed like they were succeeding. They were never succeeding. Call it what you want, call it "Bretton Woods II", call it "financial imbalance" or a "global savings glut" or "exorbitant privilege". Each central bank, while trying to stabilize its own bit of the world, found itself with little choice but to support and expand unsustainable financial flows on a scale so massive they have reshaped the composition of every major economy on the planet. As Herb Stein told us, what cannot go on forever won't. "When the music stops, in terms of liquidity, things will be complicated." Remember that? The music may have stopped already for Citibank, but it's still playing for the USA. The record is just beginning to skip.

The Federal Reserve can keep every major US bank and investment house on life support for as long as it wants to. The "credit crunch" can be made to disappear in an instant, if we are willing to pay sufficient ransom to hostage-takers. But what the US economy produces is no longer well matched to what Americans consume, and we are structurally unprepared to generate tradables, goods or services, in quantity adequate to cover the difference. The Fed's magic wand will be of no use if manufacturers in Asia and oil producers in the Gulf stop giving us stuff for free, using central-bank financial alchemy to hide their generosity.

Things may turn out okay. We've already begun to "adjust", and knock on wood, we'll manage a worldwide reequilibriation before things get too ugly. But it'll be a close call. That financial alchemy by central banks is the ultimate source of skyrocketing inflation in China and the Gulf states, and an ominous sign that Stein's Law is beginning to bite. We may yet escape, but we have been drawn very close to something very dangerous, to a genuine crisis of scarcity in the United States and a catastrophic failure of Say's Law in China, to mass unemployment, social instability, and fingers and missiles pointed in both directions across the Pacific. This is serious stuff. And central banks are largely to blame.

Private, profit-seeking actors would not have generated the corrosive financial flows that have characterized this millennium. "Financial imbalance", a euphemism for real resource misallocation, would have quickly been corrected, had Wall Street and the City of London not learned that the official sector could be their best customer. Less politically-independent monetary authorities could have leaned against unsustainable financing. A bit of capital-account protectionism might not have been bad policy for the United States during this period, but a central bank blind to obvious "facts on the ground", accountable only to an economic orthodoxy, did not even consider such a thing.

As readers of this blog know, I'm not a laissez-faire, the-private-sector-is-always-right kind of guy. I like to think about the "information architecture of the financial system". That leads me to dislike actors large enough to unilaterally move markets, especially when their motives might not be aligned with wise resource allocation. I dislike large private banks, and think they should be broken into itty-bitty pieces or turned into safe, regulated utilities. For the same reason, I dislike central banks. They have the power to act consequentially, but they do not have, and cannot have, the information or the wisdom to always be right. And when they are wrong, the consequences are devastating.

So, what to do? For now, we have no choice but to "use the army we have". Our long-term plan, though, ought not be to canonize central banks, but to render them obsolete. It won't be easy. The usual "sound money" trope, reviving the gold standard, is not a good idea. Much as it is suddenly out of fashion, we will need some "financial innovation" to build a new monetary architecture. Just because we've had a glut of snake-oil on the market recently doesn't mean there's no such thing as penicillin. We'll have to do a better job of distinguishing novel idiocies from good ideas. But we will need the good ideas. We can and should liberate money from the bankers, central and otherwise.

[Demeter]

74. Mortgage Bankers Association struggles to pay its mortgage

http://www.bloggingstocks.com/2008/04/07/mortgage-bankers-association-struggles-to-pay-its-mortgage/

The Washington Post reports that the Mortgage Bankers Association (MBA) is getting what it feels is a raw deal on a mortgage for its Washington headquarters. Boo hoo! The MBA is buying a building there for $100 million, but is paying a higher interest rate on its mortgage as its income declines and the leasing market is slow leaving it with no tenants for the building.

This couldn't have happened to a nicer association. After all, the MBA encouraged people to take out subprime mortgages -- many of which went bad. Despite the Fed's rate cuts from 5.25% to 2.25% mortgage interest rates are up thanks to bankers' fear of lending. And the resulting economic slowdown is making it harder for the MBA to find tenants for its building.

Let's survey the damage to the MBA. First, its membership has declined 17% in the last year and it predicts a 10% to 15% decline in revenue as a result. Bankers are making the MBA put up about 10% more of a down payment than it had planned and the lack of tenants has moved its lender to increase the financing costs slightly. Perhaps there's justice in the universe. If not, at least MBA's predicament is giving it a taste of its own medicine.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.


SENT TO ME BY MY SIS, WHO THOUGHT I NEEDED CHEERING UP--AND PASSED ALONG TO YOU STALWART READERS, FOR THE VERY SAME REASON!

[Demeter]

75. Prag, We Need Another Goose Report

Something fishy going on here....

[Hugin]

87. I'll check...

But, they've been less than transparent lately!

Darn, Welfare Pits

[Hugin]

91. "U.S. Treasury balances at Fed higher on April 4"

WASHINGTON, April 7 (Reuters) - U.S. Treasury balances at
the Federal Reserve, based on the Treasury Department's latest
budget statement (billions of dollars, except where noted):
April 4 April 3
Fed acct 5.759 3.558
Tax/loan note acct 2.462 10.856
Cash balance 8.221 14.414
National debt subject to limit 9,359.109 9,357.940
The statutory debt limit is $9.815 trillion.

The Treasury said it issued $9.14 billion in individual
income tax refunds and $374 million in corporate income tax refunds.
(Reporting by Nancy Waitz; Editing by Dan Grebler)


_______________________________________________________________________

I had to point out the 'entitlements' to the corporations.

No gooses, tho.

[Demeter]

77. Gold futures soar 2%; other metals also rise By Polya Lesova, MarketWatch

http://www.marketwatch.com/news/story/gold-futures-sharply-higher-pacing/story.aspx?guid={D1DEB9F0-AD83-42CF-B3E1-1BEEE76AA395}&siteid=yahoomy

Last update: 12:27 p.m. EDT April 7, 2008

NEW YORK (MarketWatch) -- Gold futures rallied along with other commodities Monday, as worries about the health of the U.S. economy drove investment demand for the precious metal. Gold for June delivery rose $17 at $930.20 an ounce on the New York Mercantile Exchange. "I believe you're seeing a flow back into gold and commodities as Friday's data reminded us once more that we are not out of the woods and things are due to get worse before they get better," said Zachary Oxman, a senior trader at Wisdom Financial."The tone you will find this week is one of strength, moving gold back to the mid 900's," Oxman said. "The market will benefit from continued builds to the long side."

The Reuters-Jefferies CRB index, a benchmark barometer gauging the prices of major commodities, surged 1.6%.

Crude oil and other energy futures also recorded broad gains. See Futures Movers.
On Friday, gold closed with a modest gain, as the dollar slipped following a report that March employment declined more than expected, another sign that the U.S. economy may have gone into a recession.

The Labor Department reported that nonfarm payrolls fell by a steeper-than-expected estimated 80,000, the largest decline since March 2003. For the week, however, gold futures posted a loss of $23.30.
"Friday's data again served to create recessionary fears in the U.S., and will continue to draw interest from longer-term investors looking to offset recessionary/inflationary fears, and factor in some form of safe-haven protection," James Moore, an analyst at TheBullionDesk.com, wrote in a research note.

"In the short term, though, we expect gold to remain in a volatile mood," Moore added.
On the currency markets, the U.S. dollar was higher against major counterparts, finding support as Asian equity markets started the week on a positive note. The dollar index, which tracks the performance of the greenback against other currencies, gained 0.3% at 72.16. The firmer tone in equities translated into renewed risk appetite for higher-yielding currencies, analysts said, in turn pressuring low-yielding units such as the Japanese yen and the Swiss franc. Also on the Nymex, May silver futures gained 41 cents at $18.16 an ounce and July platinum futures rose $16.30 at $2,046.80 an ounce. June palladium futures surged $16.60 at $461 an ounce, and May copper futures gained 4 cents to $4 a pound.

[Demeter]

78. Stocks rise on hopes for financial recovery

http://www.marketwatch.com/news/story/us-stocks-rise-wamu-cash/story.aspx?guid={1243C063-DEBF-49A6-AA0F-A2403FDEE2AE}&siteid=yahoomy

NEW YORK (MarketWatch) -- U.S. stocks extended earlier gains on Monday, helped by a report of a $5 billion injection into Washington Mutual fueling hopes that ailing financial firms are on course to recovery...

"I'm encouraged by market action over the past three weeks," said Ken Tower, chief market strategist at Covered Bridge Tactical. "We shrugged off the very bad data that we saw on Friday, which was very positive for the market."

The market managed to close mostly higher Friday, locking in strong weekly gains, with investors hoping that another dismal employment report and a likely economic recession is already priced into stock prices....

Analysts polled by Thomson Financial expect first-quarter earnings for S&P 500 components to drop 12%. Not surprisingly, the financial sector is seen likely to perform the worst, with earnings seen dropping 60%, while energy-sector firms are seen as the best with an anticipated 28% rise.

"What we see is that first-quarter earnings will likely fall below expectations," said Tower of Covered Bridge Tactical. "The market moves on expected future growth, and if the last quarter was worse than expected, that dampens expectations going forward."

"This could be a tough reporting season," Tower said.

[TalkingDog]

85. Seems the Fashionistas knew before Shrub & Co.

But then again, seemingly so did everybody else: http://fashion.about.com/b/2008/02/11/fashions-future-its-the-economy-stupid.htm (from February)


And if this site is an indication, it looks like good ideas are hard to come by.....
Boost the Economy dot Com

http://boosttheeconomy.ning.com/

[AnneD]

86. Novartis buys stake in Alcon, eyes full takeover

GENEVA - Switzerland’s Novartis AG said Monday it will spend about $39 billion in a two-step bid for a majority stake in U.S. eye-care company Alcon.

The deal for Alcon Inc., which makes Opti-Free contact lens solution and has 14,500 employees worldwide, would be one of the largest in Swiss history.

Novartis will initially pay food and beverages giant Nestle SA $11 billion for a 25 percent share of the Texas-based company.

http://www.msnbc.msn.com/id/23992715/

OK, the story is not that big outside of Texas...but the headline.:rofl:

[TalkingDog]

88. 1.71?!!! Really? All they can manage is the same stakes as penny poker?

Wow.


Can anybody say flatline?

Well, fellow lib. George Soros says we're in for a last gasp boom over the summer and then some sort of wicked "October Surprise" ...well, okay. He didn't use the phrase October Surprise, but he was thinking it. I can tell.....

[Demeter]

98. To Go With the Vaudevillian, Rollercoaster Ride, Might I Propose Today's Theme?

Man on the Flying Trapeze

Traditional
Written By: George Leybourne
Copyright Unknown



Once I was happy,
But now I'm forlorn,
Like an old coat
That is tattered and torn;
Left in this wide world
To weep and to mourn,
Betrayed by a maid in her teens.

Now this girl that I loved,
She was handsome,
And I tried all I knew
Her to please,
But I never could please her
One quarter so well
As the man on the flying trapeze.

Oh, he floats through the air
With the greatest of ease,
This daring young man
On the flying trapeze;
His actions are graceful,
All girls he does please,
My love he has purloined away.

He'd play with a miss
Like a cat with a mouse,
His eyes would undress
Every girl in the house.
Perhaps he is better
Described as a louse,
But the people they came just the same.

Oh, he'd smile from his perch
On the people below
And one day he
Smiled on my love.
She blew him a kiss
And she hollered, "Bravo!"
As he hung by his nose up above.

Oh, he floats through the air
With the greatest of ease,
This daring young man
On the flying trapeze;
His actions are graceful,
All girls he does please,
My love he has purloined away.

Oh, I wept and I whimpered,
I simpered for weeks,
While she spent her time
With the circus's freaks.
The tears were like hailstones
That rolled down my cheeks,
Alas, and alack, and alacka!

I went to this fellow,
The blackguard, and said,
"I'll see that you get
Your desserts!"
He put up his thumb to his nose
With a sneer,
He sneered once again, and said, "Nertz!"

Oh, he floats through the air
With the greatest of ease,
This daring young man
On the flying trapeze;
His actions are graceful,
All girls he does please,
My love he has purloined away.

One night to his tent
He invited her in,
He filled her with compliments,
Kisses, and gin
And started her out
On the road to ruin,
Since then l have known no repose.

But e'en now l loved her, I said,
"Take my name!
I'll gladly forgive
And forget;"
She rustled her bustle
Without any shame,
Saying, "Well, maybe later, not yet."

Oh, he floats through the air
With the greatest of ease,
This daring young man
On the flying trapeze;
His actions are graceful,
All girls he does please,
My love he has purloined away.

One night as usual
I went to her home,
And found there
Her father and mother alone,
I asked for my love,
And it soon was made known,
To my horror, that she'd run away.

Without any trousseau,
She'd fled in the night
With him with the
Greatest of ease,
From two stories high
He'd lowered her down
To the ground on his flying trapeze.

Oh, he floats through the air
With the greatest of ease,
This daring young man
On the flying trapeze;
His actions are graceful,
All girls he does please,
My love he has purloined away.

Some months after that
I went into a hall,
And to my surprise
I found there on the wall,
A bill in red letters
Which did my heart gall,
That she was appearing with him.

Oh, he'd taught her gymnastics,
And dressed her in tights,
To help him to live
At his ease,
He'd made her take on
A masculine name,
And now she goes on the trapeze.

Oh, she floats through the air
With the greatest of ease,
You'd think her a man
On the flying trapeze,
She does all the work
While he takes his ease,
And that's what's become of my love.

Alternate lyrics at

http://lyricsplayground.com/alpha/songs/t/themanontheflyingtrapeze.shtml

[Hugin]

103. Great choice!

and you did without a safety net!

:wow:

[Wednesdays]

101. And today's headline: Dow Closes in Positive Territory!!

Whee!! :rofl: :crazy:

(I'd actually laugh, too, if it weren't so true the M$M would actually trumpet such a headline.)

[UpInArms]

102. closing numbers and blather

Dow 12,612.43 3.01 (0.02%)
Nasdaq 2,364.83 6.15 (0.26%)
S&P 500 1,372.54 2.14 (0.16%)
10-Yr Bond 3.556% 0.075

NYSE Volume 3,747,868,000
Nasdaq Volume 1,779,187,875

4:25 pm : The final numbers don't tell the whole tale of today's session, which had a split personality of buying in the morning and selling in the afternoon. The end result was a market that was little changed and, for many bulls, that's just fine given the scope of last week's 4.2% gain in the S&P 500.

A familiar catalyst got things going this morning, namely a report surrounding the prospect of a capital raise for another leading financial institution. This time it was Washington Mutual (WM 13.15, +2.98) that found itself in the spotlight after The Wall Street Journal carried an article that suggested private equity firm TPG, and other investors, are close to a deal to invest $5 billion in the company.

Shares of Washington Mutual soared 29% on the report in yet another relief rally tied to the idea that such an investment would ensure the company won't face a liquidity crisis.

This is the same belief that jumpstarted the market last week in the wake of UBS's $19 billion write-down warning. Sure enough, the market caught a bid on the WaMu news and the financial stocks helped lead an early advance that saw the S&P 500 gain as much as 1.2% at its highs for the session.

A separate report that Novartis (NVS 50.00, -2.12) was going to pay $39 billion for a 77% stake in Nestle's Alcon unit, and carryover momentum from last week's rally, also contributed to the early buying interest. Another M&A item of note involved Microsoft (MSFT 29.16, unch), which threatened Yahoo! (YHOO 27.70, -0.66) that it would turn into a hostile suitor if Yahoo! didn't agree to a sale in the next three weeks. Microsoft made a $44.6 billion offer for Yahoo! at the end of January.

Around 1:00 ET, though, the rally effort began to fade. Presumably, a burgeoning sense that the market has gone too far, too fast, led to the broad-based pullback. From its low last Monday to its high today, the S&P 500 gained 5.6%.

Despite the selling pressure, the market still managed a slight gain for the session on the relative strength of the financial sector (+1.0%) and gains in other areas like telecom services (+1.0%), health care (+0.4%) and energy (+0.2%).

Separately, the gains in the energy sector trailed that of oil prices themselves, which jumped 2.5% in Monday's trade to $108.87 per barrel.DJ30 +3.01 NASDAQ -6.15 NQ100 -0.3% R2K -0.2% SP400 +0.3% SP500 +2.14 NASDAQ Dec/Adv/Vol 1518/1418/1.76 bln NYSE Dec/Adv/Vol 1410/1736/1.25 bln

3:35 pm : The major indices have made a modest recovery off their lows. The Nasdaq remains in negative territory.

Looking ahead, aluminum company Alcoa (AA 37.58, -1.42) kicks off the first quarter earnings season tonight after the close. Tomorrow, February pending home sales and the minutes from the FOMC's March 18 meeting are set for release.DJ30 +17.18 NASDAQ -4.47 SP500 +3.66 NASDAQ Dec/Adv/Vol 1465/1432/1.48 bln NYSE Dec/Adv/Vol 1319/1804/1.00 bln

3:00 pm : The major indices fall to new intraday lows as an economic report hits. The Nasdaq is in the red, while the S&P 500 holds onto a slight gain.

This session's sole economic report is just hitting the wires. February consumer credit fell to $5.2 billion from the prior reading of $10.3 billion. Economists expected a reading of $6.0 billion.

The materials sector (-1.1%) is now posting the largest decline of the day. Dow component Alcoa (AA 37.55, -1.45) is the main laggard ahead of its earnings report after the close. Fellow Dow component DuPont (DD 48.92, -0.58) is also showing weakness.DJ30 +1.79 NASDAQ -7.78 SP500 +1.62 NASDAQ Dec/Adv/Vol 1416/1458/1.33 bln NYSE Dec/Adv/Vol 1269/1850/892 mln