STOCK MARKET WATCH, Tuesday June 3

[ozymandius]

Source: du

STOCK MARKET WATCH, Tuesday June 3, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 232
DAYS SINCE DEMOCRACY DIED (12/12/00) 2690 DAYS
WHERE'S OSAMA BIN-LADEN? 2415 DAYS
DAYS SINCE ENRON COLLAPSE = 2706
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 June 2, 2008

Dow... 12,503.82 -134.50 (-1.06%)
Nasdaq... 2,491.53 -31.13 (-1.23%)
S&P 500... 1,385.67 -14.71 (-1.05%)
Gold future... 896.90 +5.40 (+0.60%)
30-Year Bond 4.68% -0.03 (-0.59%)
10-Yr Bond... 3.97% -0.08 (-1.85%)






GOLD,EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

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

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

[ozymandius]

1. Market WrapUp: Fish or Cut Bait

BY ROB KIRBY

Last week the buzz was all about Scott McClellan’s new tell-all book, What Happened. One of the key points former Press Secretary McClellan made in his book – which is frequently mentioned on this site and in this space -- was ‘the failure of the press to ask the critical questions and report accordingly.' In referencing how the Bush Administration generally viewed the press, McClellan added,

“If the press had any useful role at all, writes McClellan, it was as intermediaries in a propaganda campaign…”

Speaking of propaganda campaigns, haven’t we all heard enough utterances of Federal Reserve lackeys? On May 28, 2008, Dallas Fed President and current FOMC member Richard Fisher had the gall to ‘lay on’ this disingenuous clap-trap last week as he stood before the Commonwealth Club of California:

“I am also not going to engage in a discussion of present monetary policy tonight, except to say that if inflationary developments and, more important, inflation expectations, continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic economic scenario. Inflation is the most insidious enemy of capitalism. No central banker can countenance it, not least the men and women of the Federal Reserve.”

Notice how Fisher speaks about the importance the Federal Reserve places on inflation expectations? Here, Fisher reveals how the Fed could care-a-less about people’s reduction in living standards through actual debilitating price increases which have already occurred, so long as they don’t realize what is occurring and incorporate this reality into their expectations going forward. Ladies and gentlemen, this is akin to worrying about the welfare of horses AFTER they’ve bolted from the barn. It was the Fed’s solemn duty to ensure that the barn doors were secure in the first place!

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

[ozymandius]

2. Today's Reports

00:00 Auto Sales May
Briefing.com NA
Consensus NA
Prior 4.9M

00:00 Truck Sales May
Briefing.com NA
Consensus NA
Prior 5.6M

10:00 Factory Orders Apr
Briefing.com -0.5%
Consensus -0.1%
Prior 1.3%

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

[ozymandius]

37. Rising demand pushes goods orders up in April

WASHINGTON - Orders for manufactured goods posted a surprisingly strong increase in April as demand rose across a number of industries.

The Commerce Department reported that orders were up 1.1 percent in April following a 1.5 percent increase in March. Orders had fallen in January and March as a spreading slowdown in the overall economy depressed activity in manufacturing.

...just a wee bit more...

http://news.yahoo.com/s/ap/20080603/ap_on_bi_go_ec_fi/economy_26

[UpInArms]

45. U.S. April factory orders up 1.1% on higher energy prices

21. U.S. April factory orders ex-transportation up 2.6%
10:00 AM ET, Jun 03, 2008

22. U.S. April factory shipments rise 2.2%, most in 15 months
10:00 AM ET, Jun 03, 2008

23. U.S. April factory inventories unchanged
10:00 AM ET, Jun 03, 2008

24. U.S. April core capital equipment orders surge 4.0%
10:00 AM ET, Jun 03, 2008

25. U.S. April factory orders rise 1.1% vs. 0.1% expected
10:00 AM ET, Jun 03, 2008

26. U.S. April factory orders up 1.1% on higher energy prices
10:00 AM ET, Jun 03, 2008

[UpInArms]

58. Chrysler U.S. May sales fall 25 percent

http://www.reuters.com/article/businessNews/idUSWNAS672020080603?feedType=RSS&feedName=businessNews

DETROIT (Reuters) - Chrysler LLC said on Tuesday its U.S. sales fell 25 percent in May from a year earlier on an unadjusted basis, under pressure from declining demand for large pickup trucks and sport utility vehicles.

Chrysler said its sales fell to 148,747 vehicles in May for its Chrysler, Dodge and Jeep brands, down from 199,393 a year earlier. Car sales fell 33 percent and truck sales fell 22 percent, it said.

...more...

[UpInArms]

59. GM U.S. May sales plunge 30 percent

http://news.yahoo.com/s/nm/20080603/bs_nm/gm_sales_us_dc

DETROIT (Reuters) - General Motors Corp (GM.N) on Tuesday reported a 30.2 percent fall in May U.S. auto sales on an adjusted basis, led by a 39 percent decline in truck sales.

GM's overall sales fell to 272,363 vehicles in May from 375,682 in the same month a year earlier.

[UpInArms]

60. Ford U.S. May sales fall 16 percent

http://news.yahoo.com/s/nm/20080603/bs_nm/ford_sales_dc

DETROIT (Reuters) - Ford Motor Co said on Tuesday that U.S. sales fell 16 percent in May, driven by steep declines in sales of large trucks and sport utility vehicles.

Sales fell to 217,998 vehicles in May from 259,470 a year earlier, including all of the automaker's brands, Ford said. Car sales rose 2.8 percent, while truck sales fell 25.8 percent.

May had one extra selling day in 2008 compared with a year earlier.

[ozymandius]

3. Oil steady above $127; possible peak versus demand

Crude oil futures traded steadily above $127 a barrel Tuesday as investors sought to gauge whether oil prices have peaked, even as many worry that supplies are barely meeting growing global demand.

By midday in Europe, Light, sweet crude for July delivery was down 17 cents at $127.59 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract rose 41 cents to settle at $127.76.

In London, Brent crude on the ICE Futures exchange fell 10 cents to $127.92 a barrel.

Oil prices have fallen back sharply over the last dozen days after climbing above a record $135 a barrel on May 22. Prices edged higher on Monday on concerns about heating oil supplies and after an OPEC official said there is no need for the cartel to pump more oil.

.....

The Institute for Supply Management's index of manufacturing activity edged up to 49.6 in May compared with an April reading of 48.6, easing some concerns that soaring oil prices were crushing manufacturers. However, the reading remained below 50, the dividing point that indicates if manufacturing is in a recession.

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

[ozymandius]

4. Gas prices a risk for casual restaurants, Starbucks

LOS ANGELES (Reuters) - Record high U.S. gas prices threaten a new level of pain for casual dining restaurants stuck between value-oriented fast food and high-end eateries whose customers can afford to shrug off the economy's woes.

Shops and restaurants around the United States are reporting fewer visitors in the face of a credit crunch, mortgage crisis and price and fuel inflation.

Now-common $4-per-gallon gas is a psychological jolt for many, said Bob Goldin, executive vice president at restaurant consulting firm Technomic.

.....

While the high-end restaurant segment caters to wealthier people who are less likely to feel the pain of $4 gas and fast-rising grocery bills, casual dining restaurants cater to many of the same people who are being hardest hit by the housing-led economic downturn.

.....

CEO Howard Schultz has blamed the housing meltdown for weakness in Starbucks' U.S. business and said that customers were cutting back on coffee purchases and not trading down to lower-priced competitors.

http://news.yahoo.com/s/nm/20080602/bs_nm/economy_oil_restaurants_dc

[TalkingDog]

17. High end restaurants

Of the (probably 1/2 a dozen) upscale restaurants in my little town (with chefs and everything) I know the owners of 2 of them as part of my social circle.

Given our small size and median income level we aren't a really good example, but on Saturday night Mayo's, one of the longer lived establishments, had exactly 6 tables.

A table can be 1 guest or it can be 12.

While the food and service are exceptional, we can only afford to eat there on special occasions (a full meal of appetizer, salad, meal, dessert drink and wine easily runs 100.00 per person). Luckily, the owner likes us enough to comp. us a meal for favors or just because we stop by to chat.

[AnneD]

48. Morning Marketeers....

:donut: and lurkers. While our economy seems to be holding on (flat I would say, no big losses but no big gains either), the areas of discretionary spending have been hurting. Our chef friends are really hurting. When we had the chance to eat out yesterday-our decision was based on who was having the hardest time. Forget chains anymore-we only go out to our local friends places. We try to keep the money in town.

And speaking of keeping our money in town...I received an unsolicited offer to buy my old 89 Honda Accord the other day when I went to the gas station yesterday. The station owner asked me a few questions then gave me a price. Said if I ever changed my mind to call him. When our case is settled, we will get a newer car, but Hubby will get the Honda because it can carry 2-3 sitars and lots of his equipment. If you have cash, you can make some good deals now.

I haven't seen many cars out during non peak hours or shoppers either. Most folks are buying things that are staples and the like. Since my financial position has improved a tad, the most frivolous thing I bought were 2 new sets of sheets, 2 new pillows and a memory foam pad and a few on sale dvds so we can stay in rather than go out. I don't think that will pump up our economy-but I'll sleep better at night and we won't waste gas. We have no big spending projects other than our bills. After that we will be saving up for retirement and our house.

I am curious to see the WS response to the economy. I think this election is our last shot at a peaceful, relevant change. If McCain wins, it will be pretty much over. I am distressed at the Hillary folks wanting to switch to McCain just as much as I am at the Obama followers raging on the Hillary folks. It makes no sense at all.That is not how you win elections. We have pissed through 2 election cycles like this and I hate to see us lose a third one, but we will if this keeps up. Whom ever is the candidate-he/she needs the full support because these is no telling how much elephant shit is left behind. We have serious issues and we need serious leaders. We had a good strong field, but eventually folks need to suck it up, shake hands, and remember-it isn't about you, it's about the country and the direction we are going.....

Happy hunting and watch out for the bears...

[ozymandius]

5. Cheney calls suspending gas tax a 'false notion'

WASHINGTON - Vice President Dick Cheney on Monday rejected a suspension of the federal gasoline tax as proposed by his party's presumptive presidential nominee, Sen. John McCain. Cheney said it would offer little help to consumers coping with gas prices around $4 a gallon.

The vice president's critique went further than President Bush's own comments on the idea, which appears dead anyway.

"I think it's a false notion, in the sense that you're not going to have much of an impact, given the size of the gasoline tax on the total cost of the gallon of gas," Cheney said when asked about the matter during a luncheon appearance. "You might buy a little bit of relief there, but it's minimal."

The national average for a gallon of regular gasoline on Monday was $3.98, according to a survey of stations by AAA and the Oil Price Information Service. Of that total, the federal tax on gasoline is 18.4 cents per gallon.

.....

The gas tax is the main source of revenue for the Highway Trust Fund that provides grants for highway and bridge construction and repair.

http://news.yahoo.com/s/ap/20080603/ap_on_go_pr_wh/cheney_4

---

:wtf: I agree with Cheney on the gas tax. What is the world coming to?

[TalkingDog]

23. Agreeing with Cheney.

Well, Evil never did equate to stupid.

Shortsighted and lacking empathy, yes. Stupid, sometimes, not necessarily.

It's like the joke about the guy whose gets a flat tire just outside an Insane Asylum on a dark, rainy night.

He gets out and begins to change the tire when he sees, what is obviously an inmate who has sneaked out of his dorm, standing by the wrought iron fence. The inmate is watching him intently.

The man is bit distracted by this, but goes on. Loosening the 5 lug nuts and putting them in he nearby hubcap.

He has the tire off and is replacing it with the spare when he spills the contents of the hubcap into the tall wet grass beside the road.

The man sets to cursing and fuming. He'll never find the lug nuts, he's in the middle of nowhere, he can't go up to the asylum for help because there is an escaped crazy man standing there watching his every move. In his frustration he turns to the inmate and says, "Okay, NOW what am I gonna do?".

The inmate looks at him for a moment and says, "Take one lug nut from each of the remaining wheels. You will have four lug nuts to each wheel. It will get you to a service station."

The man is taken aback. "How did you figure that out?" he asks.

The inmate replies, "I'm crazy. That doesn't mean I'm stupid."


(dating myself with this joke on SO many levels)

[ozymandius]

16. After a pause, gas prices set new mark

NEW YORK (CNNMoney.com) -- Retail gas prices set a record high for the 26th time in the past 27 days, motorist group AAA's Web site showed Tuesday.

AAA reports the national average price for a gallon of regular unleaded gasoline rose to $3.978. That was up 0.3 cent from the $3.975 mark set Sunday and matched Monday, the first time pump prices didn't rise since May 7.

.....

The average price for gas has passed the $4 a gallon mark in 12 states, as well as in Washington, D.C. Those states where gas has already passed the $4 threshold are as follows: Alaska, California, Connecticut, Hawaii, Illinois, Michigan, Nevada, New York, Oregon, Rhode Island, Washington, and West Virginia.

http://money.cnn.com/2008/06/03/news/economy/gas_prices/index.htm?postversion=2008060306

[ozymandius]

6. Toll Brothers swings to hefty 2Q loss on write-downs

HORSHAM, Pa. - Toll Brothers says hefty write-downs on the value of land joint ventures drove the luxury homebuilder to a second-quarter loss, but results topped Wall Street expectations.

For the period ended April 30, Horsham, Pa.-based Toll Brothers Inc. has reported a loss of $93.7 million, or 59 cents per share, compared with year-ago profit of $36.7 million, or 22 cents per share. Excluding write-downs of $174.6 million, Toll says it earned $81.3 million, or 49 cents per share, in the latest quarter.

very brief...

http://news.yahoo.com/s/ap/20080603/ap_on_bi_ge/earns_toll_brothers

[DemReadingDU]

7. Bradford & Bingley Must Buy $4.1 Billion GMAC Loans

June 3 (Bloomberg) -- Bradford & Bingley Plc, the U.K. lender struggling to raise cash in a rights offering, must honor a 2006 deal to buy about 2.1 billion pounds ($4.1 billion) of mortgages by the end of next year from GMAC LLC.

Customer payments are more than three months late on 5 percent of loans already purchased from Detroit-based GMAC, the car and home lender trying to avert bankruptcy for its residential mortgage unit. That's more than double the average rate for mortgages held by the Bingley, England-based bank, it said yesterday in a statement.

``This is what has spooked everybody,'' said Alan Beaney, who manages $2.1 billion of stocks as head of investments at Principal Investment Management in Sevenoaks, England. ``They are committed to keep buying these things.''

Rising loan defaults were ``by far the biggest factor'' in Bradford & Bingley's decision to sell a 23 percent stake to U.S. leveraged buyout firm TPG Inc., Chairman Rod Kent told analysts on a conference call. The bank fell 24 percent in London trading yesterday, the most since its initial public offering in 2000, after it slashed the price of the rights offering by a third and said the U.K. housing market is deteriorating.

The bank, which provides one in five buy-to-let loans in the U.K., gained as much as 7.1 percent in today's trading and was up to 71 pence at 10 a.m., valuing it at 437 million pounds. The shares have dropped 74 percent this year, the worst performance in the FTSE All-Share Bank Index.

Bradford & Bingley first agreed in 2002 to buy loans from GMAC. Steven Crawshaw, who stepped down June 1 as Bradford & Bingley's chief executive officer, renewed the deal in December 2006 and committed to buy as much as 4 billion pounds of loans a year through 2009.

more...
http://www.bloomberg.com/apps/news?pid=20601087&sid=adnIuxe.xRB4&refer=home

[ozymandius]

12. This exemplifies some of the pain that must be experienced

before anything resembling a "recovery" will materialize. Bets and commitments that were made before the test of due diligence had been completed will cripple many brokerages, banks and hedge funds. One need not look far to find litigation over these matters.

How many will go belly-up, cannibalized by others with enough capital unfettered by bad decisions made during those heady days of CDO mayhem?

[DemReadingDU]

21. ResCap Gets GMAC, Cerberus Funding to Avoid Default

June 3 (Bloomberg) -- Residential Capital LLC said parent GMAC LLC and private-equity firm Cerberus Capital Management LP agreed to inject $1.43 billion in cash to help keep the distressed mortgage-finance company afloat.

ResCap needs the money to help meet its debt obligations after failing to complete anticipated asset sales, according to a regulatory filing today. GMAC agreed to buy ResCap's resort- finance business and Cerberus will buy as much as $950 million in performing and non-performing mortgages as well as other assets, Minneapolis-based ResCap said.

``If liquidity needs are greater, ResCap may be unable to independently satisfy its near-term liquidity requirements,'' the company said in the filing.

ResCap has been struggling to stave off default after a slump in the mortgage market drove it to six quarterly losses. The company said last month it may not be able to meet its June debt obligations and started a bond tender to help delay some repayments.

GMAC has stepped in with financing, including offering a $3.5 billion credit line, to help keep the mortgage company out of bankruptcy. Detroit-based General Motors Corp. and New York- based Cerberus may guarantee the first $750 million of the borrowings.

GMAC Purchase

Cerberus led a group that paid GM $7.4 billion for 51 percent of GMAC in 2006 as part of what has become a $15 billion bet on selling cars and providing loans to the buyers. The company also bought Chrysler LLC and its financing unit.

Cerberus spokesman Peter Duda referred questions to GMAC. A call to GMAC spokeswoman Gina Proia was not immediately returned.

ResCap last month said it would need $600 million to meet its debt obligations in June and today said it would need an additional $1.4 billion after it failed to sell $1.3 billion of assets.

GMAC and ResCap are both working with banks to refinance some credit lines and will announce details soon, ResCap said in the filing.

Separated from GM, GMAC's credit rating was supposed to rise from junk, which would have lowered borrowing costs. Instead, mounting losses at ResCap have led New York-based Moody's Investors Service to cut GMAC's debt rating four times as the economy endured the worst housing slump since the Great Depression. GMAC injected more than $2 billion of capital into ResCap, the eighth-largest U.S. residential lender in 2007, after the unit was stung by falling home prices and record foreclosures.

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

[TalkingDog]

26. Carpetbaggers. Say, why does this sound familiar?

http://www.gusmorino.com/pag3/greatdepression/

Mass speculation went on throughout the late 1920's. In 1929 alone, a record volume of 1,124,800,410 shares were traded on the New York Stock Exchange 38. From early 1928 to September 1929 the Dow Jones Industrial Average rose from 191 to 38139. This sort of profit was irresistible to investors. Company earnings became of little interest; as long as stock prices continued to rise huge profits could be made. One such example is RCA corporation, whose stock price leapt from 85 to 420 during 1928, even though it had not yet paid a single dividend40. Even these returns of over 100% were no measure of the possibility for investors of the time. Through the miracle of buying stocks on margin, one could buy stocks without the money to purchase them. Buying stocks on margin functioned much the same way as buying a car on credit. Using the example of RCA, a Mr. John Doe could buy 1 share of the company by putting up $10 of his own, and borrowing $75 from his broker. If he sold the stock at $420 a year later he would have turned his original investment of just $10 into $341.25 ($420 minus the $75 and 5% interest owed to the broker). That makes a return of over 3400%! Investors' craze over the proposition of profits like this drove the market to absurdly high levels. By mid 1929 the total of outstanding brokers' loans was over $7 billion41; in the next three months that number would reach $8.5 billion42. Interest rates for brokers loans were reaching the sky, going as high as 20% in March 192943. The speculative boom in the stock market was based upon confidence. In the same way, the huge market crashes of 1929 were based on fear.

Prices had been drifting downward since September 3, but generally people where optimistic. Speculators continued to flock to the market. Then, on Monday October 21 prices started to fall quickly. The volume was so great that the ticker fell behind 44. Investors became fearful. Knowing that prices were falling, but not by how much, they started selling quickly. This caused the collapse to happen faster. Prices stabilized a little on Tuesday and Wednesday, but then on Black Thursday, October 24, everything fell apart again. By this time most major investors had lost confidence in the market. Once enough investors had decided the boom was over, it was over. Partial recovery was achieved on Friday and Saturday when a group of leading bankers stepped in to try to stop the crash. But then on Monday the 28th prices started dropping again. By the end of the day the market had fallen 13%45. The next day, Black Tuesday an unprecedented 16.4 million shares changed hands46. Stocks fell so much, that at many times during the day no buyers were available at any price47.

This speculation and the resulting stock market crashes acted as a trigger to the already unstable U.S. economy. Due to the maldistribution of wealth, the economy of the 1920's was one very much dependent upon confidence. The market crashes undermined this confidence. The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 192948. As a result jobs were lost, and soon people starting defaulting on their interest payment. Radios and cars bought with installment credit had to be returned. All of the sudden warehouses were piling up with inventory. The thriving industries that had been connected with the automobile and radio industries started falling apart. Without a car people did not need fuel or tires; without a radio people had less need for electricity. On the international scene, the rich had practically stopped lending money to foreign countries. With such tremendous profits to be made in the stock market nobody wanted to make low interest loans. To protect the nation's businesses the U.S. imposed higher trade barriers (Hawley-Smoot Tariff of 1930). Foreigners stopped buying American products. More jobs were lost, more stores were closed, more banks went under, and more factories closed. Unemployment grew to five million in 1930, and up to thirteen million in 193249. The country spiraled quickly into catastrophe. The Great Depression had begun.

[ozymandius]

8. GM seen cutting deeper as recovery sideswiped

DETROIT (Reuters) - General Motors Corp (GM.N), facing a sinking U.S. market for trucks and SUVs, is expected to unveil steps on Tuesday to conserve cash and cut production of slower-selling models in a bid to shore up a faltering restructuring now in its third year, according to analysts.

GM said on Monday that Chief Executive Rick Wagoner and Chief Operating Officer Fritz Henderson would make a series of announcements and take questions from reporters and analysts as part of the automaker's annual meeting for shareholders.

Analysts expect GM to confirm deep production cuts pickup trucks and SUVs in North America as consumers bolt from those higher-margin vehicles in the face of record gas prices.

.....

Among the options in its recession playbook, GM could also opt to cut dividend payments, commit to more quickly winnow overlapping models from its line-up and lay off white-collar workers in its sagging home market, analysts said.

.....

GM's U.S. sales have dropped by almost 12 percent through April, a month that saw the industry's weakest sales since 1998. May U.S. sales, set to be announced on Tuesday just after GM's restructuring news, are expected to be as weak or weaker, with an even sharper drop in sales of more profitable trucks.

http://news.yahoo.com/s/nm/20080603/bs_nm/gm_dc

[DemReadingDU]

11. GM May Need A Loan, And Soon

If conditions in the auto industry don't start improving soon, General Motors will have to start looking for coins between the seats of its vehicles.

The automaker currently has $24 billion in cash and another $7 billion in undrawn credit lines--plenty of liquidity, it says, to sustain its global operations through 2008. But will it be enough to limp through the economic downturn swamping the company's recovery efforts? Maybe not, say analysts, who expect General Motors (nyse: GM - news - people ) may need to tap the credit markets for as much as $9 billion over the next two years.

Not as easy as it sounds. While credit markets are loosening up a bit, GM might have some difficulty selling bonds, says GimmeCredit.com's Shelly Lombard, because lenders are already heavily exposed to automotive debt from Ford Motor (nyse: F - news - people ) and Chrysler. "There's a price at which they can raise bonds," she says--12% to 13% yield, she figures--"but they probably don't want to pay that price."

More likely, she says, GM will seek less-expensive bank debt by offering assets (perhaps some of its healthier foreign subsidiaries) as collateral. Ford mortgaged virtually the entire company in fall 2006 to secure a $23 billion credit deal. "Even so, it's tough," says Lombard. "Banks are not in any condition to do a lot of leveraged lending right now. But if you can get anything done in this market, it's in the secured market."

more...
http://www.forbes.com/business/2008/06/30/gm-debt-credit-biz-manufacturing-cz_jm_0602gm.html

[UpInArms]

20. GM to end work at four truck plants

http://www.reuters.com/article/bondsNews/idUSN0334749120080603?sp=true

DETROIT, June 3 (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research) is expected to announce that it will stop production at four truck plants in North America, a Canadian union official briefed on the plan said on Tuesday.

GM Chief Executive Rick Wagoner is set to meet with reporters for an update on the automaker's restructuring plans before the company's annual meeting on Tuesday in Wilmington, Delaware.

The plants slated for closure are in Janesville, Wisconsin; Moraine, Ohio; Silao, Mexico; and Oshawa, Ontario, according to the Canadian Auto Workers union official, who asked not to be named.

A United Auto Workers union spokesman had no immediate comment. A GM spokeswoman had no comment.

It was not immediately clear when production would be phased out at the plants, with the exception of Oshawa, which is now slated to stop producing in the third quarter of 2009.

Last month, the CAW reached an agreement with GM as part of a new contract to postpone layoffs at the Oshawa plant until September 2009.

...more...

[UpInArms]

24. GM Announcement line items

03. GM CEO Wagoner confirms that dividend will remain the same
8:27 AM ET, Jun 03, 2008

04. GM workers notified of closings Tuesday morning
8:13 AM ET, Jun 03, 2008

05. GM adding shifts at Chevy Malibu, Chevy Cobalt plants
8:13 AM ET, Jun 03, 2008

06. GM's Wagoner: 'These are difficult decisions'
8:13 AM ET, Jun 03, 2008

07. GM to shutter plants in Canada, Wisc., Ohio, Mexico
8:12 AM ET, Jun 03, 2008

08. GM to save $1 bln a year by in latest truck plant closing
8:12 AM ET, Jun 03, 2008

09. GM mulling sale, or revamp of Hummer brand
8:12 AM ET, Jun 03, 2008

10. CEO Wagoner: GM committed to respond to energy cost,
8:11 AM ET, Jun 03, 2008

16. GM confirms shutdown of four truck plants
8:11 AM ET, Jun 03, 2008

17. GM board OK'd production funding for Chevy Volt
8:08 AM ET, Jun 03, 2008

18. GM OK's new 1.0 to 1.5 liter compact car engine
8:07 AM ET, Jun 03, 2008

19. GM OK's new Chevy compact program
8:05 AM ET, Jun 03, 2008

20. General Motors sees higher gas prices long term
8:04 AM ET, Jun 03, 2008

[Tansy_Gold]

52. Excuse me?

Is this a "We gotta pay the stockholders, even if it means putting workers out of a job" announcement?

:grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke: :grr: :puke:

[DemReadingDU]

25. GM to close Moraine assembly plant

Moraine is a suburb of Dayton, Ohio


The General Motors Moraine plant will close in mid-2010, said the shop chairman of the union that represents the plant.

"The plant is scheduled to cease operations after the 2010 model," said John Harlow, of the International Union of Electronic Workers-Communication Workers of America Local 798, which represents more than 2,000 workers at the local SUV assembly plant.

GM will announce the closure of four plants today, June 3, total, Harlow said, but he did not know which plants would be named besides the Moraine facility.

"I've got a bunch of emotions right now, to be honest with you," said Harlow.

High gas prices helped seal the fate of the plant, which makes mid-size SUVs such as the Chevrolet TrailBlazer and the GMC Envoy.

It also apparently ends the history of a plant that has operated since October 1950, when GM built the plant for its Frigidaire division.

Asked if there was any chance of a change or a reprieve for the plant, Harlow said: "We're going to continue to keep working, going to keep that 'never-say-die' attitude."

http://www.daytondailynews.com/b/content/oh/story/business/2008/06/03/ddn060308gmweb.html


:(


Edit: If GM could remodel the plant from making Frigidaire appliances to making vehicles, why can't GM remodel the plant to making electric cars?

[TalkingDog]

42. Because they know that people who don't have money to spend

won't be able to buy electric cars.

That and it does very little to keep BushCo's Oil buddies in business.


Cynical much?

yeah......

[DemReadingDU]

44. People don't have money for big suvs either

It's all about oil. Maybe the Chinese will be keeping BushCo's Oil buddies in business?

[ozymandius]

40. GM to close plants, rush to cars as gasoline rises

WILMINGTON, Delaware (Reuters) - General Motors Corp (GM.N) on Tuesday announced a series of steps to cut jobs, costs and its exposure to slow-selling trucks and SUVs in response to a rise in gasoline prices that the automaker now sees as permanent.

.....

In addition, Wagoner said GM was reviewing the Hummer brand and could sell the military-derived SUV brand, which has become synonymous for gas-guzzling excess.
.....

In a related shift, Wagoner also said GM's board had approved funding for a next-generation compact model for the Chevrolet brand as well as a new subcompact Chevy Aveo, expected to go on sale in the U.S. market in 2010.

GM's board also allocated production funding to the Chevy Volt, a heavily touted, all-electric vehicle that GM expects to have in showrooms by 2010, Wagoner said.

http://news.yahoo.com/s/nm/20080603/bs_nm/gm_dc

[ozymandius]

9. Lehman may raise $3-4 billion fresh capital: WSJ

BANGALORE (Reuters) - Lehman Brothers Holdings Inc (LEH.N) may raise billions of dollars of fresh capital, suggesting the investment bank will post its first quarterly loss since going public, the Wall Street Journal said on Tuesday, citing sources familiar with the matter.

Analysts and Wall Street executives estimate it might total $3 billion to $4 billion, the newspaper said.

Lehman may issue common stock, diluting current shareholdings, and will probably reveal its capital plans when it reports quarterly results the week of June 16, the WSJ said.

.....

Second-quarter losses from asset writedowns and ineffective hedges are likely to top $2 billion, the newspaper said. The bank will also realize losses tied to job cuts, the WSJ said, citing a person familiar with the matter.

Lehman in May decided to cut around 1,300 jobs, or nearly 5 percent of its workforce, a person briefed on the matter said. It had laid off more than 5,000 people since the middle of 2007.

http://news.yahoo.com/s/nm/20080603/bs_nm/lehman_capital_dc

[ozymandius]

13. Analysis: Lehman on the Ropes Again, Looking to Raise Equity

Lehman managed to escape the same fate as Bear Stearns around the Ides of March partly due to the heroic intervention of the Fed, in part to reporting first quarter profits. A member of the skeptically-minded short cohort described that the earnings as a sham, and noted that they depended entirely on counting the increase of their debt spread as a gain. And there were other red flags: changes in the way the firm measured leverage (and leverage increased nevertheless); a claim that their hedge for their Alt-A exposures was mortgage servicing rights; unrealistically flattering marks on commercial real estate and high yield. And the conference calls were described as Orwellian.

But the Street gave Lehman a pass, since if they went over the brink, who knew who might be next (UBS was the next on most lists). But sentiment appears to have taken a sharp turn. Ben Bitroff provides this tidbit:

The open interest in LEH puts is absolutely massive, especially at strikes that would only pay off if LEH completely imploded (a la Bear Stearns). Either some idiots are going to be out a lot of money come June, July and October... or LEH implodes before then...

The open interest is absolutely massive and can only pay off if LEH collapses. Most of the open interest is at sub $35 levels... a level that LEH has now breached. A lot of the puts at the 'bankruptcy' strikes (say anything below $15) also expires in June. So either the put buyers or LEH are quickly running out of time....

Will Lehman implode? I don't know. I can't tell... I just don't have enough information. The rumors continue to make their rounds and traders are definitely nervous.

.....

In addition to a debt downgrade yesterday, the other triggers were equity analysts cutting their marks:

Also Monday, Merrill Lynch analyst Guy Moszkowski lowered his rating on Lehman stock to underperform from neutral. Oppenheimer & Co. analyst Meredith Whitney swung her earnings forecast to a loss from a profit.

Moskowski has long been a top-rated Institutional Investor analyst for investment banks; Whitney has cred due to her early and accurate calls on Citi, so these were particularly damaging calls.

http://www.nakedcapitalism.com/2008/06/lehman-on-ropes-again-looking-to-raise.html

[ozymandius]

10. Stock futures mixed before Bernanke speech

NEW YORK - Wall Street headed for a narrowly mixed opening Tuesday as investors awaited a speech from Federal Reserve Chairman Ben Bernanke on the U.S. economy.

Bernanke's speech out of Barcelona, Spain, is scheduled to begin at 9 a.m. Eastern time. After the Fed indicated last month that it intends to keep interest rates on hold amid uncertain outlooks for the economy and inflation, investors are trying to determine if the central bank sees weak growth or surging commodities prices emerging as the greater threat.

.....

Meanwhile, worries about the financial sector have been swelling up again. A day after Standard & Poor's downgraded financial services companies and Wachovia Corp. and Washington Mutual Inc. shook up their top management, The Wall Street Journal reported that Lehman Brothers might need to raise some $4 billion in capital to right itself after taking substantial debt write-downs for its fiscal second quarter, which ended last week.

Dow Jones industrial average futures fell 12, or 0.10 percent, to 12,494, while Standard & Poor's 500 index futures rose 0.60, or 0.04 percent, to 1,386.00. Nasdaq 100 index futures rose 2.25, or 0.11 percent, to 2,013.50.

http://news.yahoo.com/s/ap/20080603/ap_on_bi_st_ma_re/wall_street

[ozymandius]

14. Scary Bad Hot Money Influx Into China

I've tried to have more dignified labels for recurrent phenomena, but I keep defaulting to "scary bad" when I get updates on China.

The latest is that Michael Pettis does his usual workmanlike job of trying to make sense of China's generally incomplete reporting on its funds flows. While one suspects the gaps are in part by design, to keep foreigners guessing, it worrisomely is also a function of China having a less-than-mature financial system. The mechanisms for good data capture simply don't exist.

The shortcomings are evident in the area Pettis probes today, namely, that speculative money has all sorts of ways of getting into China. As an article in Caijing that summarizes a survey by Deutsche Bank’s Jun Ma found:

For those with 'business' connections/enterprises: 52% opted to bring money in as 'FDI', and 11% as under-invoicing. For those who bring money the old fashioned ways: 85% use either US$50,000 per person per year, using multiple relatives and friends, or the RMB80000 per day TT limit. 57% of respondents forecast RMB to rise to 5.50-6.00.

Pettis continues:

The survey also suggests that the “unexplained” portion of reserve accumulation – after backing out the trade surplus, FDI, interest income and revaluation gains – is biased downwards, since there may be substantial amount of hot money in the trade and FDI numbers. Take this out and add it to the “unexplained” part and the most stable sources of reserve growth – FDI, the trade surplus, and so on – are becoming an increasingly small fraction of total net inflows. ...Chinese monetary policy is largely a function of massive and very volatile speculative inflows driven by RMB appreciation.

China, in other words, is in a nasty fix. Speculative capital is coming in through so many channels that even if the authorities were to impose capital controls, the impact would be limited at best.

http://www.nakedcapitalism.com/2008/06/scary-bad-hot-money-influx-into-china.html

---

FYI (in case you're wondering): FDI is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor." In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. - Yikes! more here

[ozymandius]

15. UN chief: food production must rise 50 percent by 2030

ROME (AP) -- World food production must rise by 50 percent by 2030 to meet increasing demand, U.N. chief Ban Ki-moon told world leaders Tuesday at a summit grappling with hunger and civil unrest caused by food price hikes.

The secretary-general told the Rome summit that nations must minimize export restrictions and import tariffs during the food price crisis and quickly resolve world trade talks.

"The world needs to produce more food," Ban said.

The Rome-based U.N. Food and Agriculture Organization is hosting the three-day summit to try to solve the short-term emergency of increased hunger caused by soaring prices and to help poor countries grow enough food to feed their own.

http://biz.yahoo.com/ap/080603/un_food_crisis.html

[DemReadingDU]

18. Fat pensions spell doom for many cities

6/3/08

Vallejo, Calif., took the extreme step of filing for bankruptcy to get out of generous obligations to public employees. Other cities and states are watching.

The jig is up. For years, politicians have been playing what amounts to a multi-trillion-dollar shell game with state and local pensions. They've doled out lush retiree benefits to their heavily unionized workforces, knowing that they could shove the cost for those benefits onto future generations of taxpayers.

But a recent financial bombshell dropped by a San Francisco suburb shows why that shell game is now starting to unravel in a nasty way. And it's a cautionary tale that you can't afford to ignore.

Here's the skinny: In late May, Vallejo, Calif., became the largest city in California history to declare bankruptcy. Its financial demise was brought about partly by the real estate crash, which decimated home prices in the area and put a major dent in the city's tax revenues.

But the real nail in Vallejo's coffin was the city's labor costs. Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.

That's just the salaries, though. The final budget-crusher was the city's pension plan. Thanks to retroactive benefit enhancements approved by the city council in 2000, police officers and firefighters can now retire at age 50 and receive an annual pension equal to 90% of their final pay (assuming 30 years on the job), an amount that gets increased every year to help keep pace with inflation. The old plan had given the workers a pension equal to 60% of their final pay at age 50.

more...
http://money.cnn.com/2008/06/02/pf/retirement/vallejo.moneymag/index.htm?postversion=2008060305


My rant...
It's called hazard pay. Police in big cities are worth every penny of their salary. You couldn't pay me a million dollars to be a police officer. I could not deal with all the stuff officers deal with on a daily basis.

Cities would be wiser to look at the high-paying jobs that have been sent overseas. Those high-paying jobs generated the tax dollars to support our police and firemen. Fewer jobs means less taxes collected for city budgets.

This is another article looking for a reason to get rid of pensions.

[Hugin]

28. Hmm... No mention of the 'tax free' sweetheart deals to pay off their buds...

Uh, I mean to 'attract businesses' to locate there.

You're correct this is yet another 'Chamber of Commerce' hit piece on responsible government.

Blame it on the pensions... Yeah, that's it, that's the ticket. :eyes:

[AnneD]

50. ITA, DemReading DU

And that is what it is...just like trying to do away with SS. Thanks to a recent law, I cannot get SS because I have a pension....and now they want to do away with that? I am telling you-this will be the straw that breaks the camel's back. I made a decision to stay with the state because of the pension. That meant always having less money than my counterparts and putting up with crappier conditions-and now, 2/3rd's of the way through the dance-they want to change the tune. Not on your life.

I was telling my Sunday school class the other day, that I am close to retiring, I don't have to raise a kid anymore so what's to keep me from enjoying a night every now and again at the grey bar hotel. I am sure there are others that, when faced with these welshing cutbacks, won't feel the same way. Most state workers, esp cops, work multiple jobs to make ends meet all their days. I don't think this will set well. I never got or expected a grandiose retirement, just the chance to live my last days in dignity and not be a burden to my daughter.

[UpInArms]

19. dollar watch

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

Last trade 72.778 Change -0.171 (-0.23%)

US Dollar Fails to Move as ISM Manufacturing Improves

http://www.dailyfx.com/story/currency/eur_fundamentals/US_Dollar_Fails_to_Move_1212444180165.html

Rising turmoil in the financial markets led the US dollar to pull back from early morning gains, with the ISM Manufacturing index failing to move the with a better than expected - yet muted - release. As a result, the low yielding Swiss franc and Japanese yen picked up the biggest gains against the greenback, and was followed by the New Zealand dollar as the pair rose to trade in the 0.785 range. The high yielding Australian dollar tumbled further to 0.955 ahead of the RBA’s decision tomorrow, while the Canadian dollar found its way back to parity against the greenback. The US dollar found similar safe haven status against the euro as on a move to 1.554, while it soaked in the biggest gains against the British pound which fell more than 200 points.

Fading domestic demand paired with rising input costs weighed on factory activity last month, and thereby dampened the outlook for the health of the US economy going forward. According to the ISM Manufacturing index, the industrial sector contracted for the fourth consecutive month even though the indicator posted a modest improvement to a 49.6 reading from 48.6 in April. The components were similarly shrouded in disappointing overtones. The Prices Paid index rose to a four year high of 87.0 as firms were forced to absorb stifling crude and other raw material costs that have breached record highs recently. What’s more, the employment component sipped for a seventh consecutive month while the new orders number slipped for sixth month. Elsewhere, the housing recession is clearly ongoing with the home prices measured by the RPX Composite index falling at a 13.97 percent annualized pace from 11 percent the month before, while the Construction Spending sliding 0.4 percent through April.

Renewed credit concerns pressed on the stock markets as S&P lowered the debt rating for Morgan Stanley, Merrill Lynch, and Lehman Brothers, with the ratings agency forecasting additional losses for the investment banks - stemming from falling asset values. As a result, the DJIA fell 134.50 points to 12,503.82 points, with 26 of the 30 components trailing lower. Among the broader indices, the S&P 500 shaved 14.71 points to hold off at 1,385.67 points, with 177 stocks falling to a new 52 week low.

Bearish sentiment in the stock markets fueled demands for US Treasuries, and led risk adverse investors to seek the safe haven of risk free bonds. As a result, the benchmark 10-Year yield fell to 3.967 percent from 4.063 percent, while the 2-Year yield plunged to 2.512 percent from 2.653 percent.

...more...

US Dollar Finds Volatility With Manufacturing Survey, Safe Haven Flows

http://www.dailyfx.com/story/bio1/US_Dollar_Finds_Volatility_With_1212448525842.html

There is a considerable amount of event risk on the global economic calendar this week; but the US dollar is looking to only a few heavy-hitting fundamental releases for price action. The first of these major market movers was this morning’s ISM manufacturing survey. In the recent past, this indicator had actually beat out the non-farm payrolls release for generating volatility. However, this was not the case for the May reading. The manufacturing activity gauge beat the market’s forecast for a slight contraction by jumping a whole percentage point to 49.6. However, the bullish sentiment this indicator would generate was naturally limited by the fact that the sector contracted for the fourth consecutive month (implied by a reading below 50.0). The indicator’s components further revealed that the month-over-month improvement was based largely in exports, which hit a four year high, thanks to the weakness of the US dollar. In contrast, new orders fell for a sixth consecutive month while employment contracted for a seventh straight month. Outside of the economic docket, the dollar was also seeing its safe haven status bolstered. Speculation that another UK bank may be on the brink of bankruptcy and a round of downgrades for a number of major investment banks’ debt lead many investors back to the stalwart dollar and Treasuries.

...more...

[UpInArms]

22. Stagflation recipe missing one key ingredient (higher wages)

http://www.reuters.com/article/newsOne/idUSN0225847720080602

WASHINGTON (Reuters) - Dow Chemical Co (DOW.N: Quote, Profile, Research) hiked prices on products used in everything from diapers to antifreeze. American Airlines wants $15 to check your luggage. Then there's $4 gasoline and those rising grocery bills.

But for all the worry over inflation, the U.S. economy is actually in little danger of returning to the 1970s stagflation era of rising prices along with stagnant growth. There is one key ingredient missing -- higher wages.

"It is utter nonsense, in our view, to be talking incessantly about stagflation," Merrill Lynch economist David Rosenberg wrote in a note to clients, pointing to strong productivity gains and flat wages.

Three decades ago, when inflation was soaring and the U.S. Federal Reserve had to drive up interest rates to get it back under control, powerful unions had the clout to push for higher pay to compensate for rising prices.

That power is largely gone now.

"Instead of running out and going on strike for higher pay, people are adjusting by driving less, riding their bikes, car-pooling, or using mass transit," Rosenberg said.

...more...

See? you can just "adjust" yourself out of eating and breathing very soon!

[Hugin]

30. That is one of the...

most condescending ignorant quotes I've ever read. :wow:

Some of these people just don't -get- it!

People are 'adjusting' by not having health care, dying, starving, and it's only going to get worse as the future of America, our children, are 'adjusting' themselves out of a proper education.

:|

[ozymandius]

31. "pointing to strong productivity gains and flat wages"

Strong productivity gains typically translates to lower prices. If this were the case right now then Mr. Rosenberg's assertion would be correct. That being said - perhaps Mr. Rosenberg should review his 9th grade economics textbook regarding the difference between 'scarcity' and 'shortage'. Productivity means nothing if the transportation infrastructure by which that product gets to market is too expensive for the consumer to absorb the cost.

I am thinking of fishing boats that have been tied to the dock for four days (in France), independent truckers on strike (almost everywhere). These are images of scarcity due to skyrocketing transportation costs.

Rosenberg is a charlatan who is merely peddling his wares.

[Hugin]

32. I concur!

Well said, Ozy.

[happyslug]

39. He i just reporting the results of the fact Unions are much weaker then in the 1970s

Unions, lead by the United Steel Workers (USW) and the United Auto Workers (UAW), forced their employers to put cost of living adjustments in their union contracts, thus as inflation went up, so did their pay. Other unions followed. Non-unionized employers to get employees also had to agree to similar terms, or face rapid turnover in employees looking for higher wages in face of higher prices. With just over 10% of the population unionized in the the 1970s (it was down from 1/3 of the workforce in the late 1940s), the unions still lead the push for higher wages, for people had to MATCH what the unions were getting to their members, or lose those employees to employers who did match the pay (Most workers went from non-union to another non-union job, but the base provided by the unionized employers forced all employers to match what the union was getting).

n 1982, the Air Controllers went on Strike for better working conditions, Reagan fired them, and unions have NEVER recovered. It has been downhill ever since. The decline started with the passage of the Taft-Hartley Act in 1947, but accelerated when the GOP finally had control of not only the Presidency but Congress under Reagan. I know Reagan only had a GOP controlled Senate. The House of Representatives were still technically Democratic under Reagan. The problem was that that control was based on the support of a few very conservative Southern Democrats, who for all purposes should have been Republicans except for the Civil War. Thus under Reagan the GOP controlled both houses for all practical purposes and Unions were constantly under attack.

My point is the writer is correct, do to the weakness of the Unions, stagflation will NOT reappear, for workers have NO way to increase their pay except by switching jobs, and no one is hiring right now. People forget that Unions are like Doctors and the Police, you do NOT need them when things are going good, you need when things go bad. In the 1970s Unions showed they worth by keeping Working Class wages up and equal to Inflation, today the Unions can NOT do that and thus wages have stagnated under Bush II (Wages did increase a bit under Bill Clinton, but with the GOP Controlling Congress they was NOT much he could do, but what he did do caused the massive voter turnout in 2000 and 2004 the prevented the GOP from having complete control of the Government).

Thus do to the weakness of Unions Stagflation will NOT return, for there is NO push for higher wages from the working class and none will occur till the current generations finds that it needs Unions and give Unions the support Unions need to operate (And that will occur when more people find they can NOT make ends meet given their wages have NOT kept up with inflation for several years).

[Hugin]

41. Looks like a classic case of 'Stagflation' to me...

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

"Economists have identified the two principal contributing causes of stagflation. First, stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.<5> Second, both stagnation (recession) and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply, and the government can cause stagnation by excessive regulation of goods markets and labor markets."

To claim otherwise is yet another denial of the current state of the U.S. Economy. Similar to the months and months
of Recession Denial already experienced.

[happyslug]

49. In the 1970, a good bit of the inflation was "PUSH" by higher wages

Not almost all "Pulled" by higher prices as is the present situation (In reality it was both push and pull). One of the side affects of the 1970s was that Unionized labor wages kept increasing, while middle management and professional income FELL in real terms (i.e Accountants, Doctors, Lawyers saw their income DROP, while Union workers income stayed about the same).

In most periods of Inflation, Income, in real constant terms, DROP. That drop in income causes the inflation to drop while the economy goes into a recession. In the 1970s working class income held its own, which kept the pressure on inflation even as the economy slowed down (This was the heart of the stagflation of the 1970s, the Fed tried to reduce inflation by forcing a recession, but the unions kept their wages UP, instead of leaving them drop as normally happens when the Fed forces a Recession. Thus you ended up with Stagflation. No Gain in the Economy, but sky high inflation.

Even under Reagan and his "War on Inflation" we ended up with 6+ percentage annual inflation (And his attack on PATCO was part of the plan to forces wages DOWN in real terms). Reagan also benefited from the Drop in the price of oil (The Oil Glut of the 1980s) AND the collapse of the US Steel Industry, which further weakened unions in the US (USW locals agreed to all types of cost reductions, even cuts in labor wages, to save some of their jobs, the USW did this as Government support for Unions came to an almost complete halt under Reagan and Bush).

Now the above may the result of "Excessive Regulation of Labor markets" (and it was) so its comes under the rule you cite. Unions exist when the Government permits them to exist. Thus Unions and GOvernment Regulation of Labor Markets go hand in hand.

My point was simple, the author of the piece we are discussing, made a point, one of the biggest pushes for Stagflation of the 1970s, Unions, no longer can do what the Unions did in the 1970s, thus wages for working class employees will drop in real terms and thus keep inflation in check. Thus it will be hard to have stagflation today. It is almost impossible for Unions to push up wages, or even to keep up wages as Unions did in the 1970s, in the current political Climate (Note: i do expect it to change over the next few years, the country as a whole is more left wing then it was in the 1980s and that is expected to last for at least another generation).

[Tansy_Gold]

54. I could very well be wrong about this, as I am not an expert

on economics, but it seems to me that right now the cause of inflation is not rising wages at all, and therefore *lowering* wages -- which was allegedly Reagan's motivation in going after PATCO in the summer of 1981 -- will not have the desired effect.

Inflation today, it seems to me, is the result of speculation driven by greed.

1. Union-waged and other good-paying manufacturing jobs were off-shored to increase profits to the investor class. Eventually this would reach a point where there were too few U.S. consumers who could afford the products, wouldn't it??

2. Shift of economy from manufacturing to service left no leverage to raise wages. Service doesn't "make" money, it just moves it around, so there was no increase in value to improve the actual economy. Besides, as manufacturing jobs disappeared, there was a surplus of workers to constantly drive service wages down. I think the lack of any *successful* demand for increase in minimum wage for umpteen years is evidence that the pressure was on the downside rather than up.

3. Speculative pressure in areas like housing pulled money out of the working class and funnelled it to the investor class. This "wealth" went into the ponzi schemes of The Markets but did nothing for the real economy.

4. As the stock/bond/SIV market bubble began to deflate, investors begged for and got bailed out by the Fed. Given lots more "free" money to speculate with, the big investors/speculators continued to go after the big, easy money rather than do anything to fix the real economy that they themselves had broken. They turned to commodities. And unlike less tangible investments like stocks, which may have little connection to the day-to-day operations of the actual company, commodities are not only "real things," but they are both essential to the health and well-being of real human beings -- wheat, eggs, corn, oil, etc. -- AND they are finite in both supply and, if you will, shelf-life. Consumers have to buy them, and they have to buy them at the going price, no matter what it is.

5. As commodity prices skyrocketed, so did the price to the end consumer, those same workers in #1 and #2 who saw their real net incomes continually diminished.

Therefore, if prices continue to rise and wages CAN'T go up with them, there will be a collapse, won't there? Isn't it the whole economy that's broken, not just one part of it? And isn't it broken more or less by intention?

I dunno, because I'm just


Tansy Gold

[ozymandius]

56. Two things: wage inflation and price inflation.

The very similar scenario happened about 1960 with a classic wage-price spiral. Wage inflation trended upwards without the heavy influence of the unions. Price inflation also trended upwards. The rub in all this was the unemployment rate was a little more than 6.5% in 1960. So here is a scenario, not so distant in the past, where you have a lack of union power asserting itself.

You are very correct to say that unions and government regulation of labor markets go hand-in-hand. What happened under the Kennedy administration and then again under the Nixon administration illustrated this point to the letter. How these controls were implemented differed largely. During the early years of the Nixon administration, control over wages and prices were left to the unions and corporations to fight over. Governmental guideposts and benchmarks were no longer asserted in this power struggle as they were under Kennedy. That did not happen until Reagan, as you note, with union-busting intent.

Now power has shifted handily toward corporate power. Large corporations have the power to control wages through three tools: available employment; and through the banks with their power to seed businesses by giving access to credit, thus creating jobs in the small-cap world.

So I agree that stagflation such as that which we experienced in the 1970s would not happen today. And for the reasons you mention. (However unflatteringly, my assertion nearly throws this discussion into the realm of semantics.) Stagflation has occurred before the word 'stagflation' had been invented. How it has happened now is quite unique.

In 1960 rising unemployment coupled with rising prices and rising wages. What is different now is how wages and consumer prices have decoupled. The former stagnating and the latter rising. Economic growth has also slowed. To me, that is how I would define 'stagflation'.

[Tansy_Gold]

61. ITA, Ozy: Stagflation is (kinda) in the eye of the beholder

Nixon's imposition of wage and price controls proved ineffective as corporations found ways around them, as I recall. (IIRC, today's ubiquitous "rebates" were one of the children of price controls.) The fact that today's wages have little impact on prices -- because U.S. wages aren't making the things we buy in the same way as in the 60s, 70s, or even 90s -- alters the whole mix.

Kevin Phillips points out in "American Theocracy" that Carter's policies in the 70s regarding energy use were extremely effective -- oil importation dropped, homes and appliances became more energy efficient, cars got better gas mileage -- and the economy still grew. At the same time, mortgage rates reached 17%!

So while the details may be different, I think the end result -- serious economic pain for working people -- is what we have to look at, not the semantics.

[AnneD]

51. I remember all that talk about....

pools of liquidity a while back....I think they finally sucked the excess liquidity from the middle class.

[TalkingDog]

27. In Spain, Water Is a New Battleground

I know... this doesn't seem like this should be posted in a stock market thread...

But by my figuring, no water: no plants: no people: no economy

A well written article:

http://www.nytimes.com/2008/06/03/world/europe/03dry.html?hp

snip:
There is only one problem with the picture of bounty: this province, Murcia, is running out of water. Swaths of southeast Spain are steadily turning into desert, a process spurred on by global warming and poorly planned development.

Murcia, traditionally a poor farming region, has undergone a resort-building boom in recent years, even as many of its farmers have switched to more thirsty crops, encouraged by water transfer plans, which have become increasingly untenable. The combination has put new pressures on the land and its dwindling supply of water.

snip:
Southern Spain has long been plagued by cyclical droughts, but the current crisis, scientists say, probably reflects a more permanent climate change brought on by global warming. And it is a harbinger of a new kind of conflict.

The battles of yesterday were fought over land, they warn. Those of the present center on oil. But those of the future — a future made hotter and drier by climate change in much of the world — seem likely to focus on water, they say.

[ozymandius]

29. Bidness is being dealt.

9:39
Dow 12,515.21 Up 11.39 (0.09%)
Nasdaq 2,499.26 Up 7.73 (0.31%)
S&P 500 1,388.27 Up 2.60 (0.19%)
10-Yr Bond 4.003% Up 0.032
NYSE Volume 149,357,390.625
Nasdaq Volume 69,423,187.5

08:30 am : S&P futures vs fair value: +2.9. Nasdaq futures vs fair value: +5.5. Futures continue to suggest a slightly higher start to the trading day ahead of Fed Chairman Ben Bernanke's speech at 9:00 ET. In response to changing consumer preferences, General Motors (GM) is going to close four North American plants that produce trucks and SUVs. The company will review is Hummer brand, which includes the possibility of a complete sale.

[ozymandius]

33. 10:03 bounce

pawltry... but a bounce

Dow 12,529.38 Up 25.56 (0.20%)
Nasdaq 2,506.90 Up 15.37 (0.62%)
S&P 500 1,390.77 Up 5.10 (0.37%)
10-Yr Bond 4.00% Up 0.029
NYSE Volume 425,223,187.5
Nasdaq Volume 219,731,515.625

09:40 am : The stock market opens modestly higher after Monday's steep losses. We expect choppy trading conditions as economic data shoots down the worst recession fears, but still paints a picture of weak growth.

The financial sector is playing a significant role in whipsaw action of the market. Financials are again in focus today, as the Wall Street Journal reported Lehman Brothers (LEH 33.16, -0.67) is considering as much as a $4 billion new capital raise.

In other news, General Motors (GM 17.68, +0.24) is closing four North American plants that produce trucks and SUVs in response to changing consumer preferences in the face of $4 per gallon gas. GM expects the plant closings will save $1 billion. GM' stock is trading near 26 year lows.DJ30 +23.12 NASDAQ +9.15 SP500 +3.31

[Hugin]

34. More like an 'oof'...

or a 'grunt'.

[ozymandius]

35. Wall Street opens higher after Bernanke speech

NEW YORK - Wall Street opened modestly higher Tuesday after Federal Reserve Chairman Ben Bernanke reiterated expectations the economy will improve later this year.

After the central bank's recent interest rate cuts, loans to banks and tax rebates, the second half of the year should bring "somewhat better economic conditions," Bernanke said in a speech in Spain. The economy faces headwinds, however, and the inflation picture remains uncertain, he said, indicating that the Fed still intends to keep interest rates on hold.

http://news.yahoo.com/s/ap/20080603/ap_on_bi_st_ma_re/wall_street

---

Later... always later.

[ozymandius]

36. Fed auctions $75 billion to ease credit stresses

WASHINGTON - The Federal Reserve has auctioned another $75 billion in loans to squeezed banks to help them overcome credit problems.

http://news.yahoo.com/s/ap/20080603/ap_on_go_ot/fed_credit_crisis_1

---

Doing his masters' bidding, as usual. Maybe he was talking about the banks' economy improving later this year.

[Hugin]

38. I'm still waiting for an auction to ease my squeeze...

:tappingfoot: :checkingwatch:

Dum-dee-doo... Laa-te-doo...

[TalkingDog]

43. *LOL* That sounds quite Rude! n/t

[Hugin]

47. I can't believe I'm still waiting...

La-la-la... Humm... Do-rah-rah...

Still squeezed here! Squeezing, HERE! Squozen! Feeling the big 'S'!


You'd think they couldn't hear me.


:hi: TalkingDog, hope you're having a nice day. :)

[Dr.Phool]

46. Just a couple of Friedman units, give or take a few Friedman units.

[AnneD]

53. Time Warner to test Internet metering in Beaumont

Time Warner Cable, the second- largest U.S. cable television company, will begin metering Internet use on June 5 in a test market in Beaumont, with heavier users facing higher fees.

The test in Beaumont, where Time Warner has 90,000 customers, will run indefinitely as the company gathers data, spokesman Alex Dudley said today. High-use customers will be charged extra fees after two months, he said.

Time Warner and other cable operators are wrestling with how to keep high-speed Internet services operating smoothly as demand soars for features such as streaming video that place heavy demands on networks.

"Five percent of our users use over 50 percent of our bandwidth," or Internet capacity, Kevin Leddy, Time Warner Cable's executive vice president of advanced technology, said in an e-mailed statement. "Metered billing has the potential to be one of the tools we use to ensure that all of our customers have an optimal online experience."

http://www.chron.com/disp/story.mpl/business/5816017.html

Now if that just doesn't just suck donkey ball. Yet another way to nickel and dime us to death.

[AnneD]

55. 5 percent of Mass. taxpayers uninsured, some fined

BOSTON — Nearly 100,000 Massachusetts taxpayers have been fined for failing to obtain health insurance, even as a major survey concludes the effort to create near-universal coverage in the state is meeting key goals.

Five percent of taxpayers failed to obtain health coverage last year, and more than half of those — about 97,000 — were forced to forfeit their personal exemption — worth $219 — after it was determined they could have afforded health care.

Two percent of taxpayers — about 62,000 — were found not to earn enough for health care, avoiding fines. Under the landmark law, taxpayers must show they are insured or face penalties. The numbers were based on a review of 86 percent of expected tax filers for 2007.

The state's first-in-the-nation universal health insurance law required everyone in the state to be insured by July 2007, except for those who secured a waiver proving they couldn't afford insurance.

Gov. Deval Patrick said the fact that 95 percent of filers were insured shows the 2006 law is making progress.

http://www.chron.com/disp/story.mpl/ap/business/5815712.html

Our theme for today by one of my favs...Don Henley....Dirty Laundry, the folks that are fined can join the anvil chorus.:eyes:

Dirty Laundry

I make my living off the evening news
Just give me something-something I can use
People love it when you lose,
They love dirty laundry

<snip>

Kick em when theyre up
Kick em when theyre down
Kick em when theyre up
Kick em when theyre down
Kick em when theyre up
Kick em when theyre down
Kick em when theyre up
Kick em all around

We got the bubble-headed-bleach-blonde who
Comes on at five
She can tell you bout the plane crash with a gleam
In her eye
Its interesting when people die-
Give us dirty laundry

Can we film the operation?
Is the head dead yet?
You know, the boys in the newsroom got a
Running bet
Get the widow on the set!
We need dirty laundry

<snip>

Dirty little secrets
Dirty little lies
We got our dirty little fingers in everybodys pie
We love to cut you down to size
We love dirty laundry

We can do the innuendo
We can dance and sing
When its said and done we havent told you a thing
We all know that crap is king
Give us dirty laundry!


It is a powerful earworm and I have found myself humming it subconciously during news casts.

[ozymandius]

57. end of another day's drubbing

Dow 12,402.85 Down 100.97 (0.81%)
Nasdaq 2,480.48 Down 11.05 (0.44%)
S&P 500 1,377.65 Down 8.02 (0.58%)
10-Yr Bond 3.898% Down 0.073
NYSE Volume 4,396,376,500
Nasdaq Volume 2,238,029,000

4:30 pm : The stock market traded in a volatile manner on Tuesday, with financial stocks (-0.6%) driving much of the action. The S&P 500 ended the day 0.6% lower, although it traded as high as 0.5% and down as much as 1.1%.

Lehman Brothers (LEH 30.81, -3.02) was the underlying catalyst to the session's swings. The investment bank was in focus in the early-going after The Wall Street Journal reported the company may raise billions of dollars of additional capital, citing sources familiar with the situation.

The market shrugged off this news during early trade, with an unexpected increase in May factory orders acting as a buying catalyst. The 1.1% increase in factory orders (consensus -0.1%) indicate second quarter GDP may rise more than what is currently forecast.

Sentiment then soured, as Lehman Brothers, and the market, sharply sold off in late afternoon trade as rumors swirled that Lehman may have borrowed emergency funds from the Fed's discount window.

Lehman Brothers subsequently denied it borrowed from the Fed, according to reports. The market pared its losses on the denial, but still ended the day with a substantial decline of 0.6%.

Although Lehman stole the limelight on Tuesday, there was plenty of trading action in other areas of the financial markets.

Fed Chairman Ben Bernanke's remarks on the economic outlook gave support to the dollar (+0.5%). He said, "Over time, the Federal Reserve's commitment to both price stability and maximum sustainable employment and the underlying strengths of the U.S. economy... will be key factors ensuring that the dollar remains a strong and stable currency."

The strengthening dollar played a role in a 1.4% decline in commodity prices and a sharp 2.7% decline in crude prices. The weakness in crude weighed on the energy sector, which was the main laggard with a decline of 1.8%.

In corporate news, General Motors (GM 17.58, +0.14) rose as much as 4.2% on news that it is shutting down four North American plants that produce trucks and SUVs in response to a shift in consumer preferences on record gasoline prices. The company expects the measures will save its North American operations at a run rate over $1 billion by 2010. Some of the enthusiasm over the cost cutting measures faded after General Motors reported May North American auto sales fell 28%, compared to the expected decline of roughly 20%.

In the end, nine of the ten economic sectors ended the day with a loss. Energy (-1.8%) and telecom (-1.3%) posted the largest declines. Health care (+0.3%) was the sole sector to post a gain.DJ30 -100.97 NASDAQ -11.05 NQ100 -0.5% R2K -0.3% SP400 +0.03% SP500 -8.02 NASDAQ Dec/Adv/Vol 1623/1221/2.20 bln NYSE Dec/Adv/Vol 1844/1261/1.29 bln