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Beige Book: full text
June 11, 2008
Prepared at the Federal Reserve Bank of Richmond and based on information collected on or before June 2, 2008. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
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Reports from the Federal Reserve Districts suggest that economic activity remained generally weak in late April and May. Three Districts described economic activity as softer, weaker, or lower, with an additional four Districts reporting slower, sluggish, or modest economic growth. The remaining five Districts of Philadelphia, Cleveland, Atlanta, St. Louis, and San Francisco described activity as stable or little changed in recent weeks.
Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices. Higher energy prices also appeared to damp domestic tourism. Reports on nonfinancial services varied across Districts and industries. Manufacturing activity was generally soft in recent weeks, with weak demand for housing-related and some other products but with increasing demand for exports. Residential real estate markets remained weak across most Districts. Commercial real estate conditions varied across Districts, as did reports on nonresidential construction activity. Lending activity also varied across Districts and market segments, though tighter credit standards were reported for most loan categories. Districts reporting on the agriculture and energy sectors noted improved crop conditions and increased drilling and extraction activity.
Reports of higher input costs were widespread. Manufacturing contacts in several Districts noted some ability to pass along higher costs to customers. Retailers reported mixed results with respect to raising final goods prices. In most Districts, wage pressures were reported as moderate or limited for all but a few skilled-labor positions, as hiring activity remained spotty in most Districts.
Consumer Spending and Tourism
Consumer spending slowed further since the last report. Contacts in several Districts said rising energy and food prices contributed to softer sales in other categories. The overall pace of retail sales moderated in the Districts of Philadelphia, Richmond, Atlanta, St. Louis, Minneapolis, Dallas, and San Francisco, and was level in Cleveland, Chicago, and Kansas City. Retail sales reports were mixed in Boston and New York. According to contacts, retail inventory levels were generally higher in the Atlanta District and among some types of stores in San Francisco; some establishments in the New York, St. Louis, and Richmond Districts expressed concerns about inventory levels. In the Boston District retail inventories were stable. Employment was on the whole unchanged at Boston District retailers, whereas retailers in the Cleveland District said they were only hiring for new stores, and Richmond District retail contacts reported job cuts.
Reports on overall sales of automobiles and light trucks were weak, with several Districts indicating that sales of trucks and SUVs declined. Although dealers generally struggled to move vehicles off of their lots, contacts in the Richmond, Atlanta, and Chicago Districts reported solid sales of hybrid and other fuel-efficient vehicles.
Tourist activity varied across Districts. New York contacts said that tourist activity had softened, noting lower attendance at Broadway theaters. San Francisco reported weaker hotel bookings in Southern California and in Hawaii, but record hotel occupancy rates in parts of Alaska. Higher gasoline prices appeared to weaken tourism activity in the Chicago District, but increased activity at some resorts in the Richmond District as families took vacations closer to home. International visitors boosted tourism activity in the Atlanta and Dallas Districts.
Nonfinancial Services
Reports from nonfinancial services industries varied among Districts. New York and Minneapolis reported weaker business conditions while contacts in the Richmond District reported slower revenue growth, except in telecommunications. Demand growth for service providers slowed in the San Francisco District. Demand at services businesses in Boston and Chicago, however, was mixed and the pace of business spending was little changed in the Chicago District. Meanwhile, demand in the service sector generally strengthened in St. Louis and Kansas City. Staffing agencies in the Richmond District reported somewhat weaker demand overall, while staffing agencies in the Chicago and Dallas Districts said that demand was stable. In transportation services, intermodal shipments edged down in the Atlanta and Dallas Districts, while freight service growth was flat in the Cleveland District. Reports on air travel remained strong despite route reductions, according to contacts in the Kansas City Districts.
In service sector labor markets, Chicago reported a slower pace of hiring in recent weeks and Minneapolis reported that employment in professional services companies decreased from a year ago and is expected to remain flat over the next year. Cleveland and Richmond reported little net change in services employment, while contacts in the St. Louis District said that expansion at firms in some services industries will lead to additional hiring. Boston and Dallas noted tight labor markets for some skilled workers.
Manufacturing
Manufacturing activity was generally soft since the last report. Boston, New York, Richmond, Atlanta, and Chicago reported that activity had weakened, although St. Louis, Minneapolis, Kansas City, and Dallas indicated that activity had increased slightly. Philadelphia, Cleveland, and San Francisco described factory activity as nearly steady. Reports of softer demand for housing-related products continued to be widespread. Many Districts cited higher production costs and cuts in employment that contacts attributed to slumping home sales and construction. The Atlanta and Chicago Districts indicated that automotive production or sales fell short of expectations, while the Cleveland District saw an uptick in the production of domestic nameplates. Reports on food processing were mixed with some Districts indicating that higher prices had constrained demand, while others noted rising demand.
Industries demonstrating increased activity were boosted, in part, by a strong overseas market. Cleveland, Atlanta, Chicago, and Dallas reported that the demand for steel was strong. The output of energy-related equipment increased in the Boston, Cleveland, Atlanta, and Dallas Districts, while strong sales of farm equipment boosted demand for manufacturers of heavy equipment according to Chicago and San Francisco. Dallas also reported strong demand for transportation equipment to supply defense and aircraft industries.
Real Estate and Construction
Residential real estate markets were generally weak across most of the nation. District reports indicated flat or declining home sales in Boston, New York, Cleveland, St. Louis, and Dallas, and contacts in Philadelphia did not expect housing activity to expand strongly this year. Contacts in San Francisco reported that housing markets remained exceptionally weak, although a few reports pointed to some recent pickup in home sales attributed to increased affordability. Scattered reports from Philadelphia and Kansas City indicated seasonal improvements. Inventory levels of new and existing homes remained high or were rising in New York, Philadelphia, Cleveland, Richmond, and San Francisco. Home sales prices decreased somewhat in Boston, Atlanta, Kansas City, and San Francisco, but remained relatively stable in Richmond and Chicago. The New York and Chicago Districts noted that some potential buyers had difficulty in obtaining financing. Residential construction declined in Chicago, St. Louis, and Minneapolis, but was flat to slightly higher in parts of the Atlanta District and spiked in areas of the Dallas District where demand for apartments was solid. Homebuilders in Cleveland expected no improvement in the housing industry for the remainder of 2008, and Chicago reported that limited credit availability for new developments had caused many builders to suffer losses on existing projects. Richmond and San Francisco noted an increase in home foreclosures.
Commercial real estate conditions varied in April and May, with some Districts reporting that activity had softened. Leasing activity eased in Boston, New York, Philadelphia, Richmond, and San Francisco. Minneapolis, however, reported that market activity was up modestly, while activity was mixed across the St. Louis District. Vacancy rates edged higher in Boston, Kansas City, and San Francisco, as well as in pockets of the Richmond and St. Louis Districts. Absorption was negative in Boston and in Minneapolis for both office and manufacturing space. Overall rents were on the rise in New York, but were stable or beginning to slip in Boston, Philadelphia, Richmond, and Kansas City. Sales trended downward according to the New York, Philadelphia, and Kansas City Districts.
Reports on nonresidential construction activity were mixed. Contacts from Chicago and Minneapolis saw slight increases in activity. Philadelphia, Cleveland, Richmond, Atlanta, and Dallas, however, reported easing or weak levels of construction. A number of Districts--Cleveland, Richmond, Chicago, and Dallas--reported that obtaining financing remained difficult for some projects.
Banking and Finance
Reports on lending activity varied across Districts, although reports of softening in the consumer segment persisted. Overall loan demand cooled in Richmond, Atlanta, St. Louis, and San Francisco, while Philadelphia and Cleveland saw a modest increase. New York reported little change in demand across all categories, while lending activity in Chicago was mixed. Residential lending activity remained generally weak in Richmond, Atlanta, and Chicago. In contrast, demand picked up in Philadelphia, Cleveland, Kansas City, and Dallas, but was about the same in St. Louis. Commercial and industrial lending activity was mostly unchanged or declining in New York, St. Louis, Kansas City, and San Francisco, while Philadelphia, Richmond, and Chicago saw slight increases. Atlanta reported commercial lending activity as mixed.
The New York, Philadelphia, and Cleveland Districts reported increases in overall delinquencies, with respondents in New York indicating a notable rise in late payments for consumer loans. Credit quality deteriorated further in San Francisco, but began to stabilize in Chicago and Dallas. Contacts in Kansas City and Dallas expected loan quality to deteriorate going forward. All Districts reporting on credit standards noted further tightening for consumer, residential, and commercial loans.
Agriculture and Natural Resources
Despite less-than-ideal weather, crop conditions generally improved for most reporting Districts. Reports from the Richmond, Chicago, St. Louis, and Minneapolis Districts indicated that the combination of cooler-than-normal weather and wet conditions delayed planting and development of many crops. St. Louis said that planting of major crops was behind its five-year average pace, while Minneapolis noted delayed planting and development of corn and soybeans. Richmond and Chicago reported that some crops would require replanting, although Chicago District contacts expected small losses in yields. Despite weather delays, Kansas City noted that corn planting was almost complete, soybean planting was in progress, and the winter wheat crop was in good condition. Chicago and Dallas cited high input costs and price movements for corn as factors leading farmers to shift production away from corn towards soybeans. Dairy and livestock producers in the Chicago and Kansas City Districts voiced concerns that rising feed costs were eating into profit margins.
Activity in the energy industry remained strong according to reports from the Minneapolis, Kansas City, Dallas, and San Francisco Districts. Cleveland said that energy producers reported a pickup in oil and gas drilling, and Minneapolis indicated that robust oil and gas exploration and production continued in their District. Kansas City noted that the number of active drilling rigs surged since the last survey period and remained well above year-ago levels. San Francisco reported that oil and natural gas extraction expanded further in response to growing demand, but that activity had been constrained slightly by a shortage of equipment and materials. In contrast, Dallas noted that high oil and natural gas prices had pushed drilling to the highest level in 20 years without any shortages of equipment and services to date.
Prices and Wages
Business contacts in most Districts reported increases in input prices since the last report, especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food. Manufacturing contacts in several Districts reported some ability to pass along the higher costs to customers and contacts in the Cleveland District noted that they are considering additional price increases in the near future if input costs continue to rise. On the other hand, contacts in the Cleveland, Atlanta, and Chicago Districts noted falling or stable prices for certain goods related to the construction industry. Retail price reports were mixed, with contacts in the San Francisco District reporting subdued price pressures for most products save food and energy-intensive goods. Contacts in the New York District reported steady retail prices with somewhat more aggressive discounting. However, retail contacts in the Richmond and Kansas City Districts reported higher prices, while retailers in the Chicago District reported increased pressure to pass along higher food and energy prices. Contacts in the Kansas City and Dallas Districts cited expectations for higher retail prices in the near future.
Business contacts in most Districts reported moderate or limited wage growth in response to some loosening of labor market conditions. Contacts in the Boston, Chicago, Kansas City, and San Francisco Districts noted wage pressures for certain skilled labor positions in industries facing worker shortages.
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Ackerman: Dollar’s Rally Stirs False Hopes
By: Rick Ackerman, Rick's Picks
Wednesday, 11 June 2008
With the dollar up a relatively fragile 1.8% in the last two days, hope grows that the economy can finally get back on track. At least, that’s the story America’s mainstream news outlets seem to be selling at the moment. Just look at what the greenback’s gravity-defying skew has allowed Helicopter Ben to say without having a rotten tomato tossed at his face. Here he is Monday night, addressing a Fed-sponsored conference in Boston: "Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly." Is this guy cool, or what? A week ago he couldn’t have gotten a CETA job forecasting the weather in Igloo, South Dakota. Now, with the dollar ever-so-timidly on the rise, Helicopter Ben seems to have regained credibility in the newsrooms, and reporters appear to be taking seriously any hints that the Fed’s next move will be to tighten.
Yeah, sure. And here’s the deed to a bridge that you can give Dad for Father’s Day. With the U.S. economy weakened almost to the point of coma, pushing rates higher would be like tossing an anvil to someone who is drowning. But that hasn’t stopped the punditry from speculating about an imminent reversal of monetary policy, or exchange traders from laying odds that the Fed will tighten by October. We’re not buying it, though, since we remain convinced that all of the commodity inflation we’ve seen so far, even $139-a-barrel oil, is insignificant compared to the deflationary juggernaut that has yet to unwind. You think the housing bust has been nasty so far? Wait till you see how it unfolds with the banking system under siege.
Splat!
Those who believe that tightening lies ahead must be oblivious to the economic disaster it would cause. For starters, instead of the “soft landing” that a few highly visible fools still seem to think is possible, the economy would return to earth with the splat of a thousand-pound pumpkin dropped from an airplane. And although home prices are already falling more steeply than during the Great Depression, the decline would only accelerate, perhaps turning into a full-blown panic. Also, the banks would no longer be able to slowly move “bad” paper onto their balance sheets from one fiscal quarter to the next, since defaults would overwhelm such clever accounting tricks – tricks that even now are fooling only those who need to be fooled.
Just as easing has created inflation everywhere but in the housing sector that was supposed to have benefited, tightening will only create deflation in all of the wrong places. Anyone who actually believes the Fed can bring about a measured deflation at this point is a few cards short of a full deck.
http://news.goldseek.com/RickAckerman/1213164060.php
Fed. 1day RP + 8.25B [sm drain -1.75B ]
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Fed.(1)2) 1day RP + 11.00B [Net Add + 4.00B ]
Fed.(2) 28day 1 day foward RP + 20.00B
Note: This repo operation has 1 collateral tranche
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Fed. 1day RP + 7.50B [net Giveth +3.75B ]
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Chapman: International Forecaster June Gold, Silver, Economy + More.
Posted Sunday, 8 June 2008 | Digg This Article | Source: GoldSeek.com
The following are some snippets from the most recent issue of the International Forecaster. For the full 26 page issue, please see subscription information below.
US MARKETS
"Everything in the world may be endured, except continual prosperity." -- Johann Wolfgang von Goethe
Yes, our German philosopher was humorously correct. Any time people are prospering like we were just before August 15, 1971, the day that will live in infamy when Nixon took us completely off the gold standard, the sheople will find a way not to prosper anymore. And happily helping them on their way to destruction have been the Illuminati, who wanted to have a monopoly on prosperity. Unfortunately, there is very little that is humorous about our myriad of ongoing economic, social and political debacles, save that the Illuminati and their henchmen, who apparently thought that they in fact could endure continual prosperity, have, in their lust for money and power, managed to destroy themselves and, in the end, will themselves succumb to Herr Goethe's statement.
Somehow, through the machinations of the elitist would-be lords of the universe, and through our own flaccid efforts to stop them, which amounted to little more than total inaction, we have all managed to screw up a free lunch - royally - and have once again failed to endure continual prosperity. And may we add that those who own gold and silver will come far closer to enduring continual prosperity than those who do not, so load up and get on the prosperity train, which will soon be leaving the station as a hurricane of problems blows our supertanker economy toward the unforgiving rocks of hyperinflation, recession and depression! Be sure to add a heaping helping of weapons, ammunition and freeze-dried food, and by all means get as far out of debt as you possibly can before our supertanker economy does a reenactment of the Titanic!
Hugo Chavez some months ago compared Dubya to the Devil. He of course was correct, but may we add that it takes one to know one. Ask all the gold producers who, after apparently being led down the garden path, have watched their stocks destroyed as the hundreds of millions they invested in exploring Venezuela's mineral wealth and in preparation for extracting that wealth from the ground, have recently gone up in smoke before so much as a single penny had been earned from all their efforts and hard work. Chavez decided to simply pull the plug in a communistic power play to acquire more leverage against the Illuminist elements in the US, Europe and Canada that are trying to destroy him and some of his other despotic friends in OPEC, and to up the ante on the government's share of profits. The excuse given is the impact on the environment, which in reality would have been improved by the modern mining techniques to be employed in lieu of the copious amounts of unauthorized mining which has been rampant in the region. Such unauthorized mining has created an environmental disaster which these foreign mining companies would have helped to clean up. And never mind all the past agreements and promises which apparently were not worth the paper they were written on, sort of like our Federal Reserve notes, which Chavez's buddy, Mahmoud Ahmadinejad, the President of the Islamic Republic of Iran, accurately described as "worthless paper." Apparently, any written commitments, promises or contracts with the Venezuelan government have now also made their way into the "worthless paper" category.
Mr. Chavez apparently thinks he can depend on oil to save his country's economy, and will hit the metallic minerals like gold, silver and copper later if need be. This is a monumental mistake. When we go into recession and depression we are taking the rest of the world down with us, and as a result, oil consumption could drop into the subbasement. That event may only be a few years in the offing. Mineral extraction takes years to establish before you can even get your first ounce. Chavez could miss the blow-off top in gold and silver just as oil gets destroyed and as deflation reduces gold and silver prices. Such a blunder could result in his ouster from power, an ouster that would be supported for many other reasons, including the fact that communism (really Marxism in his case) simply does not work. He should be extracting gold and silver now to store up Venezuela's gold and silver supplies in preparation for the gargantuan run-up in precious metals that is under way even as we write this article. Further, his ability to support mineral extraction could be greatly hampered if oil prices are greatly reduced because he is foolishly depending on a one-dimensional oil economy to keep things running. It is hard to conduct mining operations in a state of civil unrest caused by poverty from rampant inflation and food shortages when receipts from your main export are going down the tubes. The massive proceeds from precious metals could help keep his people fed if the oil boom goes bust. What an incredible blunder, for a world leader to put all his eggs in one basket like that. And think of all the jobs that will be put on hold in the meanwhile. He will go down with the other OPEC countries which are already on the verge of imploding due to rampant inflation, diminishing reserves and suppressive regimes. And making matters even worse, the fact that he and his government cannot be trusted to keep their word on anything will result in a complete cessation of foreign investment in Venezuela.
This also shows you in spades that communism and corporatist fascism are just two sides of the same coin. Both systems have, as their ultimate goal, the establishment of a power elite who will lord it over their serfs and slaves in a crude, unjust, feudal system that was rightfully discarded as a necessary step to getting out of the Dark Ages. The serfs and slaves are everyone who is not a political insider, and insiders are a mere handful of people out of the overall population. You either play their game, or it is GAME OVER for you.
No wonder the Illuminati are trying to create a corporatist fascist state in the US, in Japan, in Canada, in the UK and in the rest of Europe. The resulting corporatist fascist states, and all the other Marxist regimes elsewhere throughout the world, will all pretty much be on the same page, making world government a much easier transition. As a result, the Illuminists have supported Marxism every step of the way. Otherwise, how does the despot of a tiny country like Cuba remain in power for half a century? Why did the US support the communist revolution in Russia instead of the Russian royal family who were far more like other Europeans? Why did we abandon the Hungarian freedom fighters, allowing them to be slaughtered by the Soviets by withdrawing our promised support at the last second, whose screams of agony and death over the radio still haunt us to this day? Why did we provide defective weapons and ammunition to the Nationalist Chinese, causing them to retreat in disgust to the island of Taiwan, thereby allowing the Maoist Communists to take over mainland China? Why do both Jackass presidential candidates have Marxist platforms, and why does the winner, Barack Obama, have communist party ties going way back? These are all things that make you go "Hmmm!"
In fact, one wonders whether all the world conflict we see is just one big theatrical performance, an ongoing charade meant to scare people into using their tax money to support defense budgets and to make the elitist owners of the corporations that comprise the industrial-military complexes around the world into trillionaires. Note how their children are almost never sent off as cannon fodder, yet they sure get mega-wealthy on the shed blood of everyone else's children. The few who do send their children into the military make sure they are never exposed to any real danger. The British royal family is a perfect example of this as we hear their bravado in the face of what amounts to the smallest of threats to their safety and well-being. The phony "War on Terror" is an outstanding example of the ongoing charade we are forced to endure at the hands of the reprobates and sociopaths that run our government and military-industrial complex.
The only difference between Marxism and corporatist fascism is one of semantics. In corporatist, fascist states, you have a power partnership between private corporations and government run by the same group of elitists. In Marxist states, you have a power partnership between corporations created and operated by the government, which are sometimes associated with certain "ministries," and the main body of the government itself, both again run by the same group of elitists. The final outcome is the same in both cases - a system of feudality. Marxism should be distinguished from communism and socialism, both of which technically involve the "dictatorship of the proletariat," meaning the rule of the working class. True communism and socialism are never the forms of government that are actually used anywhere in the world. The forms of government that other countries call communism or socialism are really just Marxism at their core, which involves the dictatorship of a ruling class, and which is sometimes referred to as the "dictatorship of the bourgeoisie."
True communism and socialism always fail because hard work and varying degrees of effort and skill are not adequately and proportionately rewarded, which leads to mediocrity and inefficiency. The system implodes on itself because people have fallen natures as described in the Bible. Because their lot in life cannot be improved beyond that of all the other slaves to the bourgeoisie-run state, the people of the proletariat fall back to doing the absolute minimum to get by, plunging the state's economy into a situation characterized by inefficiency, corruption and incompetence which send it down the road to Zimbabwe. In order for true communism or socialism to work, everyone must be perfectly altruistic in nature, which is completely and totally impossible. In fact, the precise opposite is true. Few, if any, can truly claim to have a thoroughly altruistic nature. Marxism and corporatist fascism fail because they are inherently unfair, creating power and privileges for monumentally undeserving overlords who think they know what is best for the rest of us. Unlike corporatist fascism, however, which is usually based on some form of capitalism and private enterprise, Marxism has the added disadvantage of an economy that is run on communistic principals which lead to near zero incentive to excel at anything, plunging the economy into a state of lethargy and poverty. All political systems, save the one our Forefathers gifted us with, are in the end nothing but glorified forms of dictatorship, that place wealth and power in the hands of a few.
By contrast, our republican form of government coupled with a capitalist economy succeeds because it is based on two Biblical principals. The first principle is that you ought to reap what you sow. This is the opposite of moral hazard, such as where banks reap bailouts at public expense when they have sowed the destruction of the entire financial system in an orgy of fraud. The second principle is that men have been given free will by their Creator to make decisions for good or for ill. This is the opposite of a dictatorship where your decisions are made for you by Big Brother.
In true communism and socialism, everyone is treated equally regardless of skill and effort, a sure loser because people by their nature will not tolerate such nonsense unless it is forced down their throats by the Marxist dictators and ruling class who are treated more equally than their suppressed subjects. Our form of government, when run correctly instead of being transformed into a corporatist, fascist state, creates an open market of ideas and the freedom to choose any of those ideas as each person sees fit. Since not all ideas can be implemented, we have what are supposed to be wise, honest representatives who are elected to help choose which ideas should be adopted based on a majority rule, which the people agree to support and abide by as part of their social contract with our government, that social contract being our Constitution and Bill of Rights. This creates efficiency when you have honest government, as mostly good ideas are adopted by honest, hard-working public servants. Contrast this with having a dictator's tunnel vision, based only on self interest, shoved up the public's collective derrieres. Currently, we can think of many colorful adjectives to describe our corrupt government, but honesty is not one of them, unless of course you were searching for an antonym.
You can attach whatever label you like to it, but any form of government that does not follow our republican form of government based on our ingenious Constitution, our Bill of Rights and our capitalist economic system, is little more than a euphemism for dictatorship. That is precisely why the despicable Illuminati have systematically destroyed our constitutionally based, republican form of government and have replaced it with corporatist fascism. Otherwise, they would have no chance of centralizing their power and the ultimate power would remain with the people as our Forefathers intended.
Incidentally, despite the disinformation propaganda fed to you by our fascist-operated public school systems, the United States of America is not a democracy. Look to ancient Athens for the closest form of what a true democracy is really all about. And as you may recall, that system did not work out very well, resulting in constant political schisms, economic catastrophes and continual wars that eventually destroyed that society. Ancient Rome was called a republic but was really a fascist dictatorship complete with an emperor and a ruling class of military and business elitists, which was their version of a military-industrial complex. No wonder Italy fell for Mussolini's corporatist fascism. It was just history repeating itself. And now, thanks to the Illuminati, we - and they - go the way of the Roman Empire - to ignominious destruction. We also note that rampant, blatant and deviant behavior have immediately preceded the destruction of every great society, being a reflection of the level of debauchery to which these societies have deteriorated prior to their complete and total collapse and utter destruction. For those of you who are students of the Bible, you might recall that after the Flood, this pattern of aggressive homosexuality preceding national destruction all started with Sodom and Gomorrah.
The Bakken oil fields in Montana alone could potentially produce 40 billion barrels of crude while Brown's Gas Conversion Kits (which can make any car capable of running on hydrogen produced from water which is then mixed with gasoline) could become all the rage and improve fuel economy in a few short years by 30-50%. The Montana oil alone could potentially eliminate all foreign oil imports for an entire decade at current rates of consumption. And if all you wanted to do was get rid of OPEC, the Montana oil could accomplish that feat for about two decades! Throw in the Brown's Gas Conversion kits (many of which are not patented and are based on knowledge in the public domain), and the vast untapped oil reserves from other states and regions such as Alaska, Wyoming, Colorado, South Dakota and the Gulf of Mexico, not to mention nuclear power and other, greener sources of energy, as well as innovations to increase energy efficiency, and you have the potential for a complete turnaround of our economy that could open a floodgate to new jobs. Then, get rid of foolish free trade, globalization, off-shoring, outsourcing and illegal immigration and replace these boondoggles with some good old-fashioned tariffs, quotas and other trade barriers for good measure.
It is not all about doom and gloom. Although an extreme amount of pain cannot be avoided, there are some valid and correct answers. But in order to get the proper and correct answers implemented, we must throw out all incumbents from Congress, except for Ron Paul, who could then potentially become the Speaker of the House. Get rid of the Fed and the income tax, and in place of these elitist debacles, have the Treasury act as our central bank and issue our own currency free of interest charges and implement a reasonable national sales tax while reducing big government and eliminating wars for profit. Thoroughly audit all of our Gold Reserves simultaneously for the first time in over half a century. Offer to replace all Federal Reserve notes with Treasury notes as JFK, Sr. had intended, with all new money to be backed by gold, silver and whatever other commodity or tangible real asset might be appropriate for that purpose. Let the fraudster financial institutions fail, and refuse every request for a bail, whether it be from borrowers or from banks and other financial institutions. Let them stew in their own juices. They made their bed, and now they can lay in it. Forcing people to endure the consequences of their failure will ensure that we will not have to suffer a repeat performance later on. Cool the many governmental spending jets, thoroughly break up the oil, utility, media, banking, legal, medical and pharmaceutical cartels, and you'll have yourself a right fine recovery in the making. It's time to kick some elitist ass!
http://news.goldseek.com/InternationalForecaster/1212955200.php
Schiff: The Fed's Strong Dollar Policy
by Peter Schiff
Ever since Robert Rubin began the tradition in the mid-1990s, it has been a significant element of the Treasury Secretary's job description to continuously state that a strong dollar is in the national interest. It is widely regarded that such utterances, if repeated often enough, can constitute the sum total of what is still laughingly known as the nation's "strong dollar policy."
Over the past two generations, the American government has launched many failed campaigns. To name just a few, there has been the war on drugs, the war on poverty, and the continued attempts to improve education. But the strong dollar policy must be seen as the poster child for all failed Federal policies. However, many in the market took cheer that the policy is now being greatly expanded. In an unprecedented move, the Fed Chairman is now adding his voice to the chorus and using the same rhetoric previously used by Treasury alone. That's two people saying the words...not just one. A double barrel strong dollar policy!
As the administration is so fond of saying, a nation's currency reflects the underlying strength of its economy, and in that sense can be seen as a nation's economic report card. In truth, a strong currency is in the interest of every nation, just as good grades are in the interest of every student. Using this basic analogy, a flunking student cannot improve his grades by simply telling his parents, teachers, and fellow students that he has adopted a "straight A policy." If his words are not accompanied by a change in actual behavior, whereby he stops cutting class, and starts studying more, his new policy is unlikely to achieve results. So long as his bad habits persist, the policy will not be any more effective simply because one of his friends chimes in.
In his speech this past Tuesday, Ben Bernanke finally admitted that the weakness in the dollar was contributing to both higher inflation and elevated inflation expectations. This stands in stark contrast to his recent testimony in front of the House Banking Committee, where in response to a question asked by Congressman Ron Paul, he confidently declared that the weakness of the dollar only effected Americans who travel abroad. It is amazing how little attention this complete reversal received.
The media of course wasted no time in declaring that Bernanke's speech heralded the opening of a new front in the campaign against the falling dollar. For example, CNBC's Larry Kudlow proclaimed that Bernanke had endorsed "King Dollar" (someone needs to remind Kudlow that the king has long since abdicated his throne) and the network ran an entire segment on how to profit from the new dollar rally. All of this because Bernanke merely mentioned the dollar, acknowledged its effects on inflation, and expressed concern for its plight. As far as the media and Wall Street are concerned, words without action are enough. Too bad that's not the way things work here on the planet Earth.
The real take away from Bernanke's comment is not that the dollar is about to rally, but that it is now more likely to sink even lower. I believe the main reason Bernanke has refrained from mentioning the dollar in the past is that he did not want to be put in a position of actually having to do something about its decline. He is now so fearful of an imminent dollar collapse that he must have felt compelled to throw down the gauntlet despite his fear that someone might actually pick it up.
My guess is that currency traders will ultimately see this as an act of desperation. When the dollar keeps falling a chorus will swell to demand that the Fed put teeth in its new policy. If Bernanke does nothing the world will finally see a naked emperor and the dollar's decline will turn into a rout. If, on the other hand, the Fed raises rates to defend the dollar, and only a short term bounce results, then all remaining confidence in the Fed's ability to support the dollar will evaporate as well. This is probably Bernanke's greatest fear and is likely the main reason he waited so long before mentioning the dollar. The fact that he felt compelled to do so now likely means he knows the game is coming to an end. Got gold?
For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff's book "Crash Proof: How to Profit from the Coming Economic Collapse." Click here to order a copy today.
More importantly, don't wait for reality to set in. Protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com, download our free research report on the powerful case for investing in foreign equities available at www.researchreportone.com, and subscribe to our free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp.
http://www.safehaven.com/article-10445.htm
Gas price record reaches $4 a gallon
AAA's daily survey tops the milestone for the first time after a 1.7-cent rise Sunday.
NEW YORK (CNNMoney.com) -- Gasoline rose to a milestone mark Sunday as the national average compiled by motorist group AAA reached $4 a gallon for the first time.
The national average for regular unleaded rose 1.7 cents to $4.005, according the daily measure on the group's Web site. That surpassed the previous record of $3.989 set Thursday.
The milestone was expected after a surge in crude oil prices added more than $16 to a barrel of oil over the last 2 trading days. Crude settled at a record $138.54 a barrel Friday, up by $10.75, after setting an all-time intraday high of $139.12.
The $10.75 gain was the biggest one-day advance in dollar value ever, nearly doubling the previous mark of $5.49 set Thursday. Weakness in the dollar, geopolitical concerns and an analyst's prediction of $150-a-barrel oil by July 4 helped spur Friday's advance.
In a statement Friday, AAA urged gasoline station owners not to overreact to the single-day oil spike.
"Consumers should not be overcharged for gasoline simply because the oil markets reacted so strongly to today's news," AAA said.
Big jump felt across the nation
So far this year, crude prices have increased more than 40%.
The average price is $4 a gallon or more in 14 states and the District of Columbia, according to the survey. California pays the most for gasoline, averaging $4.436, with Alaska and Connecticut both at $4.296. Other states above $4 are Hawaii, Illinois, Massachusetts, Maine, Michigan, Nevada, New York, Oregon, Rhode Island, Washington and West Virginia.
Missouri has the lowest average price at $3.802, followed by South Carolina at $3.809.
Gas prices have risen more than 10% from $3.671 a month ago and are nearly 29% higher than the $3.105 average a year ago, according to the AAA figures.
Gasoline prices in the survey have risen for 31 of the past 33 days, setting records on 29 of those days.
The price of diesel fuel, used by truckers hauling goods across the country, rose 0.8 cent to $4.762 a gallon. That's 3 cents below the all-time high set May 30.
On its Web site, AAA says the information is gathered by Oil Price Information Service based on credit card swipes at 85,000 gasoline stations across the nation.
Prices put a brake on driving
Higher gas prices have prompted a growing number of Americans to modify their driving habits.
A recent study by the Department of Transportation showed that the number of drivers on the road in March fell 4.3% versus the previous year. That was the first time March travel on public roads fell in nearly 30 years.
In addition to driving less, many consumers are shifting away from large, low mileage vehicles toward smaller vehicles that consume less gas.
Falling demand for gas-guzzlers has hit some of the nation's largest automakers hard. General Motors announced plans last week to shut four truck and SUV plants and said it would ramp up producing more fuel-efficient cars. Ford also recently said it would trim production of large trucks and roll out more small cars and crossovers.
But carmakers aren't the only ones hurt by soaring gas prices. The airline industry, which was ailing even before gas prices spiked, has been fraught with near-bankruptcies, drastic cost cutting efforts and mass groundings of aircraft.
Last week, Continental Airlines said it is eliminating about 3,000 jobs and grounding 67 mainline aircraft to cope with the rising cost of fuel. Other airlines have hiked fuel surcharges to fares and added fees to once-free benefits, such as food and checked baggage.
First Published: June 8, 2008: 5:56 AM EDT
Mauldin: When Bubbles Collide
by John Mauldin
June 07, 2008
I remember in the summer of 2006 I would face my blank computer screen on a Friday and wonder, what I could write about? The media was all Goldilocks, all the time. Today, there is such a target-rich environment. I could probably write three letters a week, there is so much happening that is worthy of our attention. The problem today is trying to decide what not to write about, which means I get emails from readers wondering why I don't mention their areas of particular interest. But at eight pages, I just have to stop. You need a break!
Today, we have to look at the unemployment numbers, and the connection between the credit crisis and the rise in oil of about $16 dollars a barrel in just two days! If there is still room, the dollar is certainly being pushed and pulled by central bankers, who are also worried about inflation. And I doubt we will have room to cover what is a very important rise in inflation in Asia. It is all connected. (And you HAVE to look at the picture of my daughter and associate Tiffani at the end of the letter. Too much fun!)
But first, a quick note. I will be in Las Vegas July 10-12 for the annual Freedom Fest Conference, where I will speak several times, and the line-up of speakers is as strong as for any conference I have ever been to: Denish D'Souza will debate Christopher Hitchens; and Steve Forbes, Ron Paul, Stephen Moore (Wall Street Journal), Charles Murray, George Gilder, John Goodman, and about 100 other speakers, each impressive in their own right, will be there, as will 1,500 freedom-loving attendees. You can go to http://www.freedomfest.com/promo.htm and click on the list of speakers to register. Mark Skousen is the driving force behind the conference, and he does it right. I hope to see you there.
Unemployment Jumps to 5.5%, On Its Way to 6%
The headline number said the US lost 49,000 jobs in May, somewhat fewer than expected. The details were much uglier. It is no surprise that construction saw losses of 34,000, but "goods production" also saw a drop of 57,000 and manufacturing was down 26,000. What was up? Health care (34,000), bars and restaurants (11,000), and government added 17,000 (though, as Phillippa Dunne and Doug Henwood of The Liscio Report noted, the gain was all from local governments, as federal and state governments shed jobs).
So, with all the large losses and few gains, how did we show a loss of only 49,000 jobs? As long-time readers will guess, it is our old friend, the birth/death model, which is the estimate of new jobs created by new and small businesses, which are not covered in the survey. Contrary to some opinions, it is not a conspiracy by a government agency to "cook the books" in an attempt to show a number better than it really is. (If it was, they are doing a really bad job!) It is simply a moving-average projection of the past few years. Like any trend-following system, it will be wrong (sometimes badly) at the inflection points of the change in the trend.
Thus, the Bush administration was right to be upset when the birth/death model significantly understated the growth in jobs during the recovery from the last recession, as Democrats talked about the "jobless recovery." Subsequent revisions showed that in fact there were a lot of jobs being created.
And now? As the economy rolls through a recession, the system is overstating the number of jobs created. It is just a function of the model. The BLS is very open with the numbers it uses, if you care to dig into them. In October the BLS will announce new benchmarks and apply them in March 2009, although they will only be applied through March 2008. The number of lost jobs through last March will be revised significantly upward, just about the time the recovery is underway. And also in time to help modestly understate the jobs being created in the recovery. As my friend Dennis Gartman likes to say, anybody who trades on the employment numbers deserves the spanking they get.
For the record, "March was revised down by 7,000, and April by 8,000. We've now had four consecutive months of downward first revisions, and also four consecutive downward second revisions - unusual strings that support the picture of a weakening employment trend." (The Liscio Report)
And the birth/death model? This month it added in an estimated 217,000 new jobs. But looking into the details, the model suggested that 42,000 construction jobs were added. The survey showed lost jobs in construction, but the birth/death model added more construction jobs than were lost. Given the current economic climate, that is highly improbable. Ditto for the 77,000 in leisure and hospitality. Do we really think 9,000 jobs were added in financial services or another 9,000 in small manufacturing start-ups?
The reality is that we probably saw a decrease in jobs of at least 100,000. The market was upset with 40,000. What will it do when the monthly number prints 100,000 later this year? And it likely will. The Federal Reserve projects that unemployment will rise to 6%. That means there are a lot more jobs to be lost. And that is if unemployment stops at 6%, which would be a very mild recession indeed.
There are two unemployment surveys. One is for businesses, called the establishment survey, and for whatever reason that is the one most people pay attention to. When they do the household survey, they found that the number of employed people fell by 617,000 last month, spiking the unemployment rate to 5.5%. Some on CNBC said it was just teenage unemployment showing up in the numbers, but that is not true. Teens, according to Phillippa, accounted for just 0.2% of the rise. Adult unemployment rose to 4.8% and accounted for 0.3% of the rise. (By the way, technically, for the three people with no social life actually watching the scorecards, the household survey dropped 250,000 jobs; but after you adjust for factors in the establishment survey and seasonally adjust, you get 617,000.)
One of the best indicators of the direction of employment is temporary employment. If the workload is shrinking, the first thing you do is lay off your temporary help, or simply do not hire them. Normally, unemployment is a lagging indicator, but temporary help is at least a coincident if not a leading indicator. Temporary employment is down 5.7% year over year and is showing continued monthly deterioration with each passing month since last October. That does not bode well either for future employment or consumer spending. We will watch to see when temporary help begins to rebound, to give us a hint that a recovery may be in our future.
What the Tax Numbers Show
Philippa Dunne & Doug Henwood write The Liscio Report. They focus on interpreting the employment numbers and doing in-depth research on tax collections at the state level, plus a lot of interesting "inside" information not typically known by the public. When you see an analyst talking about tax collections at the state level, there is a high likelihood that the source of the number is actually the work of Dunne and Henwood. I find their letter very useful, as I get analysis very quickly after the report comes out, and you always get "the rest of the story" not revealed in the press releases and the media. (www.theliscioreport.com) If I ran a trading desk I would want their reports on my desk.
I called Phillippa about a report they sent out this week. Basically, sales tax and income tax collections at the state level are either down or flat. You can do all the surveys and polls you like, but one of the rules of life is that no one pays a penny more in taxes than they have to. The flip side of that premise is that sales tax collections are a VERY good barometer of economic activity.
Phillippa was kind enough to send me a chart to share with my readers. The have a diffusion index which tracks how well states are doing in meeting their projections for tax receipts. This does not show the level of receipts, as a state could be "positive" in this index if it projects lower receipts and meets that target. In general, states have been lowering their projected income.
As it turns out, this index is a fairly consistent indicator of the direction of retail sales, as the graph below will attest. The green bar line is their sales tax diffusion index, and the red bars are retail sales growth. Their index has dropped precipitously in the last few quarters, leading retail sales down. And it suggests there is more pain in retail sales to come.
But wait, didn't we read yesterday that retail sales were up? "Wal-Mart sales, for stores open at least one year, increased 3.9%; Costco US showed a 7% US gain and a 15% foreign gain. BJ's Wholesale Club sales surged 13.4% on gasoline and food sales. BJ reports gasoline sales jumped 6.6% and perishable food sales surged 11% but general merchandise was flat!!!" (The Bill King Report)
Retailers that did not have food and gas to boost their sales showed considerable weakness. GAP was off 14%, JCPenney down 4%, and Limited Brands down 6%. Even the high-end stores like Saks (-9%) were down, and Nordstrom projects that June will be down 22%. Given the sales tax numbers, I would not be buying the retail stocks on the dips. There is an old saying about trying to catch a falling knife.
Auto sales have fallen precipitously on the lack of demand for trucks, which were the most profitable item for car manufacturers. Is it any wonder they are cutting back and closing plants?
Wages declined by 0.2 in April in nominal terms, and forget about it in real, after-inflation numbers. David Rosenberg of Merrill Lynch notes that the 0.2% decline in real spending on durables and semi-durables was the 6th decline in a row, which has never happened in the 49 years that such data has been tracked. He notes there has never been a time when consumer spending on durables (like cars and appliances) and semi-durables (like clothing) have contracted for two quarters when the economy has not been in a technical recession.
But there are other reasons for the slowdown in consumer spending. Since 2001, the average income of the bottom 90% of wage earners dropped by 0.9%, from $32,371 to $32,080 in 2006, in constant 2006 (inflation-adjusted) dollars. The further down the income scale, the more pressure on the consumer. (source: Center for American Progress)
The top 10% have seen their incomes rise from $221,000 to $254,000, a rise of 15%. Side bet: we will see the average income of the top 10% come down in 2008 and 2009.
From Goldman Sachs: "We estimate that the US government ran a budget deficit of $160 billion in May, about $92bn wider than in May 2007. Most of this reflects tax rebates (about $50bn) and calendar effects (about $27bn). The remaining $15bn is true deterioration, reflecting reduced tax revenue growth as the economy stagnates. In particular, withholding of income and payroll taxes was flat and corporate payments (usually tiny in May) fell."
In short, wherever you look, tax receipts are down. That means income and sales are down. There is no spin that trumps tax receipts. And Phillippa told me that her sources at the various states she surveys are not optimistic about a real recovery in the latter half of the year.
I would not want to own any stock whose earnings are tied to the US consumer. Between rising input prices and falling sales, earnings are going to be squeezed. Today's almost 400-point drop in the Dow is just a precursor to the direction of the market, until consumer spending starts to recover. This time, there will not be large mortgage equity withdrawals to bail out the economy. We will see a slow growth/no growth Muddle Through Economy for at least another 12 months.
What's Up With Oil?
The price of a barrel of oil was up $16 in the last two days, to $138.54, a violent 13% move. Is it those nasty speculators? Are fundamentals at work? Is the world worried about Israel bombing Iran? There are numerous factors involved, but the combination produced a kind of perfect storm in the trading pits. Let's look at several items and see if we can find a connection.
First, there is a real connection between the price of dollar and the price of oil. In dollar terms, oil rises as the dollar falls and vice versa. The weak dollar policy that this country has had (in spite of denials) is having an effect. This week, Ben Bernanke took the very unusual stance of commenting on the weakness of the dollar and its possible role in inflation. Typically, the value of the dollar is the responsibility of the US Treasury Department, and the Fed does not get involved. You can bet that Secretary Paulson knew in advance and approved Bernanke's statement. That put a bid under the dollar and hit oil and commodity prices in general.
No one should think that the Fed or the Treasury is getting ready to intervene in the market, which would be a rather futile effort. Rather, it was a clear signal that the Fed is "on hold" and is unlikely to lower rates in the current environment. Since the market felt that the next move from the European Central Bank (ECB) would be to lower rates in response to a weakening environment in Europe, that served to push the dollar higher against the euro.
Note that a German 2-year bond pays 4.64%, and the US 2-year note pays 2.39%. That difference helps put a bid under the euro. Also, note that interest rates in Europe are starting to get flat across the curve.
Then, as the US markets opened on Thursday, Jean Claude Trichet, the president of the ECB, shocked the markets. Let's let Dennis Gartman rewind the tape for us:
"Mr. Trichet made it clear that a number of ECB policy committee members actually support raising rates very quickly, and he suggested that the committee could move to raise rates as soon as the next policy meeting in the first week of July! Mr. Trichet said yesterday that
"'after having carefully examined the situation, we could decide to move our rates (by) a small amount in our next meeting in order to secure the solid anchoring of inflation expectations.... I don't say it's certain. I say it's possible [for] we had a number of us thinking that, all taken into account, all information, analysis of risks, we had a case for increasing rates... A number of us considered that there was a case for increasing rates, but later some amongst us considered there was not necessarily that case... [yet].'
"Mr. Trichet went on further to say that the ECB is on "heightened alertness" about inflation. At recent meetings Mr. Trichet has made it clear that the decision to keep policy steady was unanimous, but yesterday he said the decision was a consensus, and was not a unanimous decision. That obviously suggested that some on the committee were already voting to tighten, and that, we must admit, caught us off-guard. At the question and answer period following the meeting, Mr. Trichet was asked, following his statement that the decision to hold rate steady was a 'consensus,' why the committee had not moved to raise rates. He said that firstly the committee had to signal to the market that it was on the alert; that the debate had shifted from dead center to the edge; that the needle on the monetary tachometer was moving off of top-dead centre. We do not wish to parse things too severely, but it does seem that the committee is prepared to move at the next meeting, and that is a material change from our perspective, for we had thought that the Bank was poised to do nothing for several more months, and that the next move would instead have been to ease, not tighten. Clearly we had that wrong, and now the facts have changed."
It is not just Dennis who was caught off guard. The entire currency and commodity futures trading markets were surprised (including your humble analyst). The euro exploded up from $1.5395 to $1.5555 in a matter of minutes. Oil rose $6. Gold and grains moved violently. Soybeans "gapped," as commodities of all sorts responded to a weakening dollar.
If Trichet wanted to "signal" the market, it worked. He got everyone's attention very quickly.
There was a lot of short covering in the various markets, but especially in oil. But let's dig deeper.
I have been pondering for a few weeks about whether the long-only commodity index funds are really affecting the markets. Basically, these funds have become a huge part of the commodities market. It is clear that enough buying and in size will affect any market, but these funds do not take delivery. They "roll" their exposure as they get close to expiration, so they are not involved in the spot price. In theory, the spot price should be a function of immediate supply and demand.
But, it is not that simple, as Louis Gave reminded me. Looking at recent CFTC data, investors known as "commercials" were long 827 million barrels of oil. In the early part of the decade it was 3-400 million barrels. Commercials are supposed to be those who are hedging their production of oil. But large oil companies rarely hedge, and smaller producers only hedge a portion of their oil (see more below). Has supply increased over 100%? I think not.
Where is the increase in commercial interest coming from? The clear answer is long-only commodity index funds and ETFs. They simply buy baskets of commodities at whatever the price is, speculating on the rise in the price of the overall commodity market. It is a one-way trade. Jim Rogers is probably the most famous exponent of such trades, but there are scores of funds which mimic what he does. But there are limits to how much exposure speculators can buy, because the CFTC will allow a speculator to only buy so much of any given market, to keep large players from getting a corner on the market and driving up prices, a la the Hunt brothers and silver in 1980. These limits are known as "position limits."
There are no position limits for commercials who are hedging. They are in theory hedging their physical exposure to a given commodity they are selling or buying. Think of a farmer and General Mills. Both want to lock in the price of wheat so they can plan for the future. Speculators are useful in that they provide liquidity to the markets. In fact, they are essential to a properly functioning market.
The CFTC created a loophole when they allowed investment banks to be classified as commercial investors. So, when a long-only commodity index fund wants to buy a million barrels of oil, they can go to the investment bank, who will sell them a "swap" on the price of oil, and then immediately hedge their exposure in the futures market.
To be sure, the long-only index fund can now create positions far in excess of the position limits that are enforced upon normal speculators. These funds can grow to be huge - multi-tens of billions of dollars. Even though they are speculators, they are not included in the data as speculators. Because they get their exposure from an investment bank, they are ultimately listed as a commercial. In total, they represent an enormous part of the commodities markets. But they are providing liquidity, so what's the problem? They are not actually hoarding the commodities. The price is still set at the spot price. But.
But that is not the whole story. They are making it difficult, if not dangerous, to short the market. When massive buying comes into the market, it moves the market and sends the signal to the market that prices are rising. Momentum players move in, and prices rise some more.
In fact, as the price of oil has risen from $90 to $100 and higher, normal speculative open interest has declined, as who can afford to fight the tape? At the least, I expect the CFTC to require those "commercials" that are really long-only index funds to provide transparency. Politicians are demanding that something be done. It is entirely possible that they will impose position limits on the long-only funds. As I said last week, when the elephants are dancing, the mice should leave the floor. And Congress and the regulators are very serious elephants indeed. Let's hope they do whatever they are going to do quickly.
I think smaller investors should take the profits they have made over the last few years in these funds and move to the sidelines until it becomes clear what the rules are going to be. Let me also make it very clear that I am only talking about long-only commodity index funds. Funds that are managed by commodity trading advisors which can go both long and short have the potential to profit from volatility (and of course, they can also lose). In these types of markets, I like funds which are "long vol." (To be long volatility means you have the potential to benefit from volatile markets.)
Now, let's look at how the credit crisis is contributing to the problem. Let's say you are a small oil producer or grain company. You go to the futures market and hedge your oil production or the grain in your silos; and if the price goes up, you don't care, because you are going to deliver the grain at a cost you already know. But there is the matter of that margin call, and you need to borrow from your local bank to meet that call.
You are hedged. Your profits are locked in at some point in the future. But the margin clerk is calling today. And your bank is having a small problem with its capital base. What is the cover story in the Wall Street Journal today? "Real Estate Woes of Banks Mount." Banks, mostly smaller ones, may have to write off as much as $165 billion in bad real estate loans made to developers and commercial builders. Regulators are "encouraging" banks to raise capital and increase their lending standards.
So banks have less capital to lend. Your banker looks at you when you ask for more money to meet those margin calls, and says, "There are two types of problems. Mine, and not mine. Yours is of the latter variety." And you have to cover your hedges. Enter the margin clerk (the person who calls you and tells you to come up with more money or they will sell out your position at whatever the market price is.)
When Bubbles Collide
So, what happens? Bernanke talks the dollar up and commodities and oil go down. Two days later a French president of the ECB gets inflation religion and the markets react swiftly. Commodity prices rise and more money comes into the market. Traders start covering their shorts as quickly as possible.
Then this morning, the margin clerks of the world go to work and oil spikes as the pits smell blood. Morgan Stanley issues a call for $150 oil in July. The euro rises to $1.5778! Interest rates drop. The stock market falls large at the open.
And rumors of an attack on Iran? An Israeli politician says that Israel would need to bomb Iran to keep them from getting a nuclear weapon, just as it becomes clear Obama might be the next president and would not act to prevent such a problem?
Who can aggressively short in this environment? In a conversation with Dennis Gartman this afternoon, he commented that it felt like the NASDAQ. But is it 1999 or 2000? The oil market will continue to go up until it doesn't, and no one knows when that is. It will continue to rise until all the shorts that are not strong hands have been covered. The margin clerks are in control, and they will have their way. Was it all over today? I rather doubt it.
I wonder if some of the majors aren't tempted to sell some of their production at $138? I mean, really. If you don't think that is a reasonable price, and they tell us they don't, then why doesn't Exxon just go in and start taking all the bids they can? They and the other majors would be the ultimate strong hand. But then, what do I know?
Central banks, short covering, a respected analyst issuing a near-term call for a $20 rise in oil, conspiracy theories and Iran, long-only funds buying, everyone scared to short, margin calls, and a credit crisis all give us the perfect storm.
Add to that the ugly employment numbers, and the Dow drops almost 400 points. The S&P 500 violates all sorts of technical signals to the downside. The market sold off big at the close. Monday should be interesting.
Three quick points. I think oil is lower at the end of the year. Inflation in Asia and rising subsidies are going to force more and more Asian countries to allow the price of oil to rise and send the proper signals to consumers to use less oil. Over the next decade, oil will be much higher, but I think the pressure over the next year will be to the downside. But don't ask me how high it can go in the short term. Ask the margin clerks.
America on a Diet
Second, corn is going to go higher. Bad weather has meant that not enough got planted, and that will probably hurt yields in the fall. This is going to mean even higher meat prices and ethanol prices. Corn ethanol is such a bad idea. This is what happens when government decides to mess with the market.
Anecdotal inflation note: I eat two chicken fajita pitas without cheese from Jack-in-the Box for lunch about three times a week (after the gym!). I throw away the pita bread and just eat the chicken at my desk. The last three days the price has been the same, but the amount of chicken is noticeably smaller, perhaps 25% smaller. Where's the hedonic price adjustment in the BLS statistics for that? A friend of mine notes that the filet from his favorite steak house is now seven ounces instead of eight. But the steak is still the same price. Maybe portion control will finally get America to go on a diet.
Finally: George Friedman told me that the Saudis are taking in something like $10 billion a week! The entire gulf is awash in dollars. He thinks it may have nowhere else to go but to the stock markets of the world. We'll see. Unintended consequences.
http://www.safehaven.com/showarticle.cfm?id=10455&pv=1
Mauldin: When Bubbles Collide
by John Mauldin
June 07, 2008
I remember in the summer of 2006 I would face my blank computer screen on a Friday and wonder, what I could write about? The media was all Goldilocks, all the time. Today, there is such a target-rich environment. I could probably write three letters a week, there is so much happening that is worthy of our attention. The problem today is trying to decide what not to write about, which means I get emails from readers wondering why I don't mention their areas of particular interest. But at eight pages, I just have to stop. You need a break!
Today, we have to look at the unemployment numbers, and the connection between the credit crisis and the rise in oil of about $16 dollars a barrel in just two days! If there is still room, the dollar is certainly being pushed and pulled by central bankers, who are also worried about inflation. And I doubt we will have room to cover what is a very important rise in inflation in Asia. It is all connected. (And you HAVE to look at the picture of my daughter and associate Tiffani at the end of the letter. Too much fun!)
But first, a quick note. I will be in Las Vegas July 10-12 for the annual Freedom Fest Conference, where I will speak several times, and the line-up of speakers is as strong as for any conference I have ever been to: Denish D'Souza will debate Christopher Hitchens; and Steve Forbes, Ron Paul, Stephen Moore (Wall Street Journal), Charles Murray, George Gilder, John Goodman, and about 100 other speakers, each impressive in their own right, will be there, as will 1,500 freedom-loving attendees. You can go to http://www.freedomfest.com/promo.htm and click on the list of speakers to register. Mark Skousen is the driving force behind the conference, and he does it right. I hope to see you there.
Unemployment Jumps to 5.5%, On Its Way to 6%
The headline number said the US lost 49,000 jobs in May, somewhat fewer than expected. The details were much uglier. It is no surprise that construction saw losses of 34,000, but "goods production" also saw a drop of 57,000 and manufacturing was down 26,000. What was up? Health care (34,000), bars and restaurants (11,000), and government added 17,000 (though, as Phillippa Dunne and Doug Henwood of The Liscio Report noted, the gain was all from local governments, as federal and state governments shed jobs).
So, with all the large losses and few gains, how did we show a loss of only 49,000 jobs? As long-time readers will guess, it is our old friend, the birth/death model, which is the estimate of new jobs created by new and small businesses, which are not covered in the survey. Contrary to some opinions, it is not a conspiracy by a government agency to "cook the books" in an attempt to show a number better than it really is. (If it was, they are doing a really bad job!) It is simply a moving-average projection of the past few years. Like any trend-following system, it will be wrong (sometimes badly) at the inflection points of the change in the trend.
Thus, the Bush administration was right to be upset when the birth/death model significantly understated the growth in jobs during the recovery from the last recession, as Democrats talked about the "jobless recovery." Subsequent revisions showed that in fact there were a lot of jobs being created.
And now? As the economy rolls through a recession, the system is overstating the number of jobs created. It is just a function of the model. The BLS is very open with the numbers it uses, if you care to dig into them. In October the BLS will announce new benchmarks and apply them in March 2009, although they will only be applied through March 2008. The number of lost jobs through last March will be revised significantly upward, just about the time the recovery is underway. And also in time to help modestly understate the jobs being created in the recovery. As my friend Dennis Gartman likes to say, anybody who trades on the employment numbers deserves the spanking they get.
For the record, "March was revised down by 7,000, and April by 8,000. We've now had four consecutive months of downward first revisions, and also four consecutive downward second revisions - unusual strings that support the picture of a weakening employment trend." (The Liscio Report)
And the birth/death model? This month it added in an estimated 217,000 new jobs. But looking into the details, the model suggested that 42,000 construction jobs were added. The survey showed lost jobs in construction, but the birth/death model added more construction jobs than were lost. Given the current economic climate, that is highly improbable. Ditto for the 77,000 in leisure and hospitality. Do we really think 9,000 jobs were added in financial services or another 9,000 in small manufacturing start-ups?
The reality is that we probably saw a decrease in jobs of at least 100,000. The market was upset with 40,000. What will it do when the monthly number prints 100,000 later this year? And it likely will. The Federal Reserve projects that unemployment will rise to 6%. That means there are a lot more jobs to be lost. And that is if unemployment stops at 6%, which would be a very mild recession indeed.
There are two unemployment surveys. One is for businesses, called the establishment survey, and for whatever reason that is the one most people pay attention to. When they do the household survey, they found that the number of employed people fell by 617,000 last month, spiking the unemployment rate to 5.5%. Some on CNBC said it was just teenage unemployment showing up in the numbers, but that is not true. Teens, according to Phillippa, accounted for just 0.2% of the rise. Adult unemployment rose to 4.8% and accounted for 0.3% of the rise. (By the way, technically, for the three people with no social life actually watching the scorecards, the household survey dropped 250,000 jobs; but after you adjust for factors in the establishment survey and seasonally adjust, you get 617,000.)
One of the best indicators of the direction of employment is temporary employment. If the workload is shrinking, the first thing you do is lay off your temporary help, or simply do not hire them. Normally, unemployment is a lagging indicator, but temporary help is at least a coincident if not a leading indicator. Temporary employment is down 5.7% year over year and is showing continued monthly deterioration with each passing month since last October. That does not bode well either for future employment or consumer spending. We will watch to see when temporary help begins to rebound, to give us a hint that a recovery may be in our future.
What the Tax Numbers Show
Philippa Dunne & Doug Henwood write The Liscio Report. They focus on interpreting the employment numbers and doing in-depth research on tax collections at the state level, plus a lot of interesting "inside" information not typically known by the public. When you see an analyst talking about tax collections at the state level, there is a high likelihood that the source of the number is actually the work of Dunne and Henwood. I find their letter very useful, as I get analysis very quickly after the report comes out, and you always get "the rest of the story" not revealed in the press releases and the media. (www.theliscioreport.com) If I ran a trading desk I would want their reports on my desk.
I called Phillippa about a report they sent out this week. Basically, sales tax and income tax collections at the state level are either down or flat. You can do all the surveys and polls you like, but one of the rules of life is that no one pays a penny more in taxes than they have to. The flip side of that premise is that sales tax collections are a VERY good barometer of economic activity.
Phillippa was kind enough to send me a chart to share with my readers. The have a diffusion index which tracks how well states are doing in meeting their projections for tax receipts. This does not show the level of receipts, as a state could be "positive" in this index if it projects lower receipts and meets that target. In general, states have been lowering their projected income.
As it turns out, this index is a fairly consistent indicator of the direction of retail sales, as the graph below will attest. The green bar line is their sales tax diffusion index, and the red bars are retail sales growth. Their index has dropped precipitously in the last few quarters, leading retail sales down. And it suggests there is more pain in retail sales to come.
But wait, didn't we read yesterday that retail sales were up? "Wal-Mart sales, for stores open at least one year, increased 3.9%; Costco US showed a 7% US gain and a 15% foreign gain. BJ's Wholesale Club sales surged 13.4% on gasoline and food sales. BJ reports gasoline sales jumped 6.6% and perishable food sales surged 11% but general merchandise was flat!!!" (The Bill King Report)
Retailers that did not have food and gas to boost their sales showed considerable weakness. GAP was off 14%, JCPenney down 4%, and Limited Brands down 6%. Even the high-end stores like Saks (-9%) were down, and Nordstrom projects that June will be down 22%. Given the sales tax numbers, I would not be buying the retail stocks on the dips. There is an old saying about trying to catch a falling knife.
Auto sales have fallen precipitously on the lack of demand for trucks, which were the most profitable item for car manufacturers. Is it any wonder they are cutting back and closing plants?
Wages declined by 0.2 in April in nominal terms, and forget about it in real, after-inflation numbers. David Rosenberg of Merrill Lynch notes that the 0.2% decline in real spending on durables and semi-durables was the 6th decline in a row, which has never happened in the 49 years that such data has been tracked. He notes there has never been a time when consumer spending on durables (like cars and appliances) and semi-durables (like clothing) have contracted for two quarters when the economy has not been in a technical recession.
But there are other reasons for the slowdown in consumer spending. Since 2001, the average income of the bottom 90% of wage earners dropped by 0.9%, from $32,371 to $32,080 in 2006, in constant 2006 (inflation-adjusted) dollars. The further down the income scale, the more pressure on the consumer. (source: Center for American Progress)
The top 10% have seen their incomes rise from $221,000 to $254,000, a rise of 15%. Side bet: we will see the average income of the top 10% come down in 2008 and 2009.
From Goldman Sachs: "We estimate that the US government ran a budget deficit of $160 billion in May, about $92bn wider than in May 2007. Most of this reflects tax rebates (about $50bn) and calendar effects (about $27bn). The remaining $15bn is true deterioration, reflecting reduced tax revenue growth as the economy stagnates. In particular, withholding of income and payroll taxes was flat and corporate payments (usually tiny in May) fell."
In short, wherever you look, tax receipts are down. That means income and sales are down. There is no spin that trumps tax receipts. And Phillippa told me that her sources at the various states she surveys are not optimistic about a real recovery in the latter half of the year.
I would not want to own any stock whose earnings are tied to the US consumer. Between rising input prices and falling sales, earnings are going to be squeezed. Today's almost 400-point drop in the Dow is just a precursor to the direction of the market, until consumer spending starts to recover. This time, there will not be large mortgage equity withdrawals to bail out the economy. We will see a slow growth/no growth Muddle Through Economy for at least another 12 months.
What's Up With Oil?
The price of a barrel of oil was up $16 in the last two days, to $138.54, a violent 13% move. Is it those nasty speculators? Are fundamentals at work? Is the world worried about Israel bombing Iran? There are numerous factors involved, but the combination produced a kind of perfect storm in the trading pits. Let's look at several items and see if we can find a connection.
First, there is a real connection between the price of dollar and the price of oil. In dollar terms, oil rises as the dollar falls and vice versa. The weak dollar policy that this country has had (in spite of denials) is having an effect. This week, Ben Bernanke took the very unusual stance of commenting on the weakness of the dollar and its possible role in inflation. Typically, the value of the dollar is the responsibility of the US Treasury Department, and the Fed does not get involved. You can bet that Secretary Paulson knew in advance and approved Bernanke's statement. That put a bid under the dollar and hit oil and commodity prices in general.
No one should think that the Fed or the Treasury is getting ready to intervene in the market, which would be a rather futile effort. Rather, it was a clear signal that the Fed is "on hold" and is unlikely to lower rates in the current environment. Since the market felt that the next move from the European Central Bank (ECB) would be to lower rates in response to a weakening environment in Europe, that served to push the dollar higher against the euro.
Note that a German 2-year bond pays 4.64%, and the US 2-year note pays 2.39%. That difference helps put a bid under the euro. Also, note that interest rates in Europe are starting to get flat across the curve.
Then, as the US markets opened on Thursday, Jean Claude Trichet, the president of the ECB, shocked the markets. Let's let Dennis Gartman rewind the tape for us:
"Mr. Trichet made it clear that a number of ECB policy committee members actually support raising rates very quickly, and he suggested that the committee could move to raise rates as soon as the next policy meeting in the first week of July! Mr. Trichet said yesterday that
"'after having carefully examined the situation, we could decide to move our rates (by) a small amount in our next meeting in order to secure the solid anchoring of inflation expectations.... I don't say it's certain. I say it's possible [for] we had a number of us thinking that, all taken into account, all information, analysis of risks, we had a case for increasing rates... A number of us considered that there was a case for increasing rates, but later some amongst us considered there was not necessarily that case... [yet].'
"Mr. Trichet went on further to say that the ECB is on "heightened alertness" about inflation. At recent meetings Mr. Trichet has made it clear that the decision to keep policy steady was unanimous, but yesterday he said the decision was a consensus, and was not a unanimous decision. That obviously suggested that some on the committee were already voting to tighten, and that, we must admit, caught us off-guard. At the question and answer period following the meeting, Mr. Trichet was asked, following his statement that the decision to hold rate steady was a 'consensus,' why the committee had not moved to raise rates. He said that firstly the committee had to signal to the market that it was on the alert; that the debate had shifted from dead center to the edge; that the needle on the monetary tachometer was moving off of top-dead centre. We do not wish to parse things too severely, but it does seem that the committee is prepared to move at the next meeting, and that is a material change from our perspective, for we had thought that the Bank was poised to do nothing for several more months, and that the next move would instead have been to ease, not tighten. Clearly we had that wrong, and now the facts have changed."
It is not just Dennis who was caught off guard. The entire currency and commodity futures trading markets were surprised (including your humble analyst). The euro exploded up from $1.5395 to $1.5555 in a matter of minutes. Oil rose $6. Gold and grains moved violently. Soybeans "gapped," as commodities of all sorts responded to a weakening dollar.
If Trichet wanted to "signal" the market, it worked. He got everyone's attention very quickly.
There was a lot of short covering in the various markets, but especially in oil. But let's dig deeper.
I have been pondering for a few weeks about whether the long-only commodity index funds are really affecting the markets. Basically, these funds have become a huge part of the commodities market. It is clear that enough buying and in size will affect any market, but these funds do not take delivery. They "roll" their exposure as they get close to expiration, so they are not involved in the spot price. In theory, the spot price should be a function of immediate supply and demand.
But, it is not that simple, as Louis Gave reminded me. Looking at recent CFTC data, investors known as "commercials" were long 827 million barrels of oil. In the early part of the decade it was 3-400 million barrels. Commercials are supposed to be those who are hedging their production of oil. But large oil companies rarely hedge, and smaller producers only hedge a portion of their oil (see more below). Has supply increased over 100%? I think not.
Where is the increase in commercial interest coming from? The clear answer is long-only commodity index funds and ETFs. They simply buy baskets of commodities at whatever the price is, speculating on the rise in the price of the overall commodity market. It is a one-way trade. Jim Rogers is probably the most famous exponent of such trades, but there are scores of funds which mimic what he does. But there are limits to how much exposure speculators can buy, because the CFTC will allow a speculator to only buy so much of any given market, to keep large players from getting a corner on the market and driving up prices, a la the Hunt brothers and silver in 1980. These limits are known as "position limits."
There are no position limits for commercials who are hedging. They are in theory hedging their physical exposure to a given commodity they are selling or buying. Think of a farmer and General Mills. Both want to lock in the price of wheat so they can plan for the future. Speculators are useful in that they provide liquidity to the markets. In fact, they are essential to a properly functioning market.
The CFTC created a loophole when they allowed investment banks to be classified as commercial investors. So, when a long-only commodity index fund wants to buy a million barrels of oil, they can go to the investment bank, who will sell them a "swap" on the price of oil, and then immediately hedge their exposure in the futures market.
To be sure, the long-only index fund can now create positions far in excess of the position limits that are enforced upon normal speculators. These funds can grow to be huge - multi-tens of billions of dollars. Even though they are speculators, they are not included in the data as speculators. Because they get their exposure from an investment bank, they are ultimately listed as a commercial. In total, they represent an enormous part of the commodities markets. But they are providing liquidity, so what's the problem? They are not actually hoarding the commodities. The price is still set at the spot price. But.
But that is not the whole story. They are making it difficult, if not dangerous, to short the market. When massive buying comes into the market, it moves the market and sends the signal to the market that prices are rising. Momentum players move in, and prices rise some more.
In fact, as the price of oil has risen from $90 to $100 and higher, normal speculative open interest has declined, as who can afford to fight the tape? At the least, I expect the CFTC to require those "commercials" that are really long-only index funds to provide transparency. Politicians are demanding that something be done. It is entirely possible that they will impose position limits on the long-only funds. As I said last week, when the elephants are dancing, the mice should leave the floor. And Congress and the regulators are very serious elephants indeed. Let's hope they do whatever they are going to do quickly.
I think smaller investors should take the profits they have made over the last few years in these funds and move to the sidelines until it becomes clear what the rules are going to be. Let me also make it very clear that I am only talking about long-only commodity index funds. Funds that are managed by commodity trading advisors which can go both long and short have the potential to profit from volatility (and of course, they can also lose). In these types of markets, I like funds which are "long vol." (To be long volatility means you have the potential to benefit from volatile markets.)
Now, let's look at how the credit crisis is contributing to the problem. Let's say you are a small oil producer or grain company. You go to the futures market and hedge your oil production or the grain in your silos; and if the price goes up, you don't care, because you are going to deliver the grain at a cost you already know. But there is the matter of that margin call, and you need to borrow from your local bank to meet that call.
You are hedged. Your profits are locked in at some point in the future. But the margin clerk is calling today. And your bank is having a small problem with its capital base. What is the cover story in the Wall Street Journal today? "Real Estate Woes of Banks Mount." Banks, mostly smaller ones, may have to write off as much as $165 billion in bad real estate loans made to developers and commercial builders. Regulators are "encouraging" banks to raise capital and increase their lending standards.
So banks have less capital to lend. Your banker looks at you when you ask for more money to meet those margin calls, and says, "There are two types of problems. Mine, and not mine. Yours is of the latter variety." And you have to cover your hedges. Enter the margin clerk (the person who calls you and tells you to come up with more money or they will sell out your position at whatever the market price is.)
When Bubbles Collide
So, what happens? Bernanke talks the dollar up and commodities and oil go down. Two days later a French president of the ECB gets inflation religion and the markets react swiftly. Commodity prices rise and more money comes into the market. Traders start covering their shorts as quickly as possible.
Then this morning, the margin clerks of the world go to work and oil spikes as the pits smell blood. Morgan Stanley issues a call for $150 oil in July. The euro rises to $1.5778! Interest rates drop. The stock market falls large at the open.
And rumors of an attack on Iran? An Israeli politician says that Israel would need to bomb Iran to keep them from getting a nuclear weapon, just as it becomes clear Obama might be the next president and would not act to prevent such a problem?
Who can aggressively short in this environment? In a conversation with Dennis Gartman this afternoon, he commented that it felt like the NASDAQ. But is it 1999 or 2000? The oil market will continue to go up until it doesn't, and no one knows when that is. It will continue to rise until all the shorts that are not strong hands have been covered. The margin clerks are in control, and they will have their way. Was it all over today? I rather doubt it.
I wonder if some of the majors aren't tempted to sell some of their production at $138? I mean, really. If you don't think that is a reasonable price, and they tell us they don't, then why doesn't Exxon just go in and start taking all the bids they can? They and the other majors would be the ultimate strong hand. But then, what do I know?
Central banks, short covering, a respected analyst issuing a near-term call for a $20 rise in oil, conspiracy theories and Iran, long-only funds buying, everyone scared to short, margin calls, and a credit crisis all give us the perfect storm.
Add to that the ugly employment numbers, and the Dow drops almost 400 points. The S&P 500 violates all sorts of technical signals to the downside. The market sold off big at the close. Monday should be interesting.
Three quick points. I think oil is lower at the end of the year. Inflation in Asia and rising subsidies are going to force more and more Asian countries to allow the price of oil to rise and send the proper signals to consumers to use less oil. Over the next decade, oil will be much higher, but I think the pressure over the next year will be to the downside. But don't ask me how high it can go in the short term. Ask the margin clerks.
America on a Diet
Second, corn is going to go higher. Bad weather has meant that not enough got planted, and that will probably hurt yields in the fall. This is going to mean even higher meat prices and ethanol prices. Corn ethanol is such a bad idea. This is what happens when government decides to mess with the market.
Anecdotal inflation note: I eat two chicken fajita pitas without cheese from Jack-in-the Box for lunch about three times a week (after the gym!). I throw away the pita bread and just eat the chicken at my desk. The last three days the price has been the same, but the amount of chicken is noticeably smaller, perhaps 25% smaller. Where's the hedonic price adjustment in the BLS statistics for that? A friend of mine notes that the filet from his favorite steak house is now seven ounces instead of eight. But the steak is still the same price. Maybe portion control will finally get America to go on a diet.
Finally: George Friedman told me that the Saudis are taking in something like $10 billion a week! The entire gulf is awash in dollars. He thinks it may have nowhere else to go but to the stock markets of the world. We'll see. Unintended consequences.
http://www.safehaven.com/showarticle.cfm?id=10455&pv=1
Very good read George..allSee reply to
Don Coxe: Fridays weekly audio program.
http://events.startcast.com/events/199/B0003/#
Run time 58min w/q&a
"The next stage of the dollar bear market."
Chart faxed BKX.
MoneyTalk on the net with Bob Brinker
Brinker -KGO: http://www.kgoam810.com/listenlive.asp#
Show time is 4:00pm EDT Saturday sometimes pre-empted 4 local sports event. So l have listed KGO @ same time frame, a Ca station with strong signal.
Fed. Ops: 48.75B Matures this week.
Mon: 3.25B 3day
Wed: 20.00B 7day
Thu:
5.00B 14day
20.00B 28day
========================================================
Temp Ops:
Perm Ops:
========================================================
Public Debt:
Limit ~ $9,815 T
6/05 ~ $9,407 T
=========================================================
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed. 3day RP + 3.25B [ netDrain -8.00B ]
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed.(2)3) 7day RP + 20.00B [Net Add + 1.50B
Fed.(3( 1day RP + 4.25B
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed. 14day RP + 5.00B [ sofar
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Futures (2) + World Indices
http:// ww.cme.com/dta/del/globex.htm
http://money.cnn.com/data/premarket/
World Indices (2) Mini Charts
Updates every 60sec ~ Watch the dates!!
http://www.wwfn.com/commentary/oscharts.html
http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_stock_markets.html
Has been wrong and late more & more often. /e
Fed. 2day RP + 7.00B [Net all add ]
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed.(2)1day foward 28day + 20.00B [net add
This repo operation has 1 collateral tranche
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed. 2day RP + 18.50B [sofar
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
TY George /e
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Capstone Announces First Order for New C1000
Monday June 2, 8:00 am ET
CHATSWORTH, Calif.--(BUSINESS WIRE)--Capstone Turbine Corporation (www.microturbine.com) (NASDAQ:CPST - News), the world’s leading clean technology manufacturer of microturbine energy systems announced today that it has received an order from its Russian distributor Banking Production Center (“BPC”) for two C1000 MicroTurbine® systems to be installed in a new caviar farm in Russia. The order also included one C200 system to be installed in the Ukraine, and two C65 microturbines to be installed in Belarus. The total order value exceeded $2.0 million.
http://biz.yahoo.com/bw/080602/20080602005707.html?.v=1
Futures (2) + World Indices
http://www.cme.com/dta/del/globex.html
http://money.cnn.com/data/premarket/
World Indices (2) Mini Charts
Updates every 60sec ~ Watch the dates!!
http://www.wwfn.com/commentary/oscharts.html
http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_stock_markets.html
Fed. Ops: 48.75B Matures this week.
Mon: 7.75B 3day
Tue: 16.00B 5day
Thu:
5.00B 14day
20.00B 28day
========================================================
Temp Ops:
Perm Ops:
========================================================
Public Debt:
Limit ~ $9,815 T
5/29 ~ $9,391 T
=========================================================
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed. 3day RP + 7.75B [Net Drain -1.00B ]
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Fed.(2)3) 5day RP + 16.00B[Net sm Drain 0.25B] ]
Fed.(3) 1day RP + 8.75B
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Paulson to promote foreign investment in energy
Wednesday May 28, 6:31 pm ET
By Martin Crutsinger, AP Economics Writer
Paulson will tell Mideast officials of burden soaring oil prices placing on consumers
WASHINGTON (AP) -- Treasury Secretary Henry Paulson will tell officials of Saudi Arabia and other Middle East oil producing nations that soaring oil prices are putting a "significant burden" on the global economy, a senior Treasury official said Wednesday.
David McCormick, Treasury's undersecretary for international affairs, said that Paulson in an upcoming trip will be promoting increased foreign investment in oil production as a way of boosting supplies.
"The key message that he will highlight is that record high oil prices are putting a significant burden on the global economy. They are also putting a significant burden on families and consumers, not just in the United States, but around the world," McCormick said in a briefing to preview Paulson's weekend trip.
McCormick said Paulson would be urging "all countries to open up their oil markets to investment that boosts yields, exploration and production." He said that message would not be aimed at any specific country but to all oil producing nations because a significant number of them are "walled off to private investment."
Paulson will not make any specific request for nations to boost their production during the current period of soaring oil prices, McCormick said. On a trip to the Middle East earlier this month, President Bush said that a modest oil production increase by Saudi Arabia "doesn't solve our problem" because the United States must take its own actions in the energy area.
Paulson's first stop will be in Saudi Arabia for talks on Saturday with government officials and private sector investors. He will also visit Qatar and Abu Dhabi and Dubai in the United Arab Emirates. He will deliver a major speech on the importance of open investment policies on Monday in Abu Dhabi.
While in Abu Dhabi, Paulson will have a series of meetings with officials from large government investment funds, known as sovereign wealth funds.
McCormick said that Paulson would stress that the United States is committed to maintaining open investment policies in this country and would stress the benefits other nations will receive from removing investment barriers in their nations.
Sovereign wealth funds, in many cases bulging with revenues earned through the sale of oil, have raised concerns among members of Congress regarding their intentions in making investments in the United States and Europe.
The administration has sought to walk a fine line on the issue, reflecting the United States' dependence on foreign investment to finance its huge trade deficits.
The Abu Dhabi Investment Authority is estimated to have holdings of as much as $900 billion, making it the largest sovereign wealth fund in the world. This fund, which was set up more than 30 years ago to invest the Persian Gulf emirates oil wealth, late last year invested $7.5 billion in Citigroup Inc., giving it a 4.9 percent stake in America's biggest bank.
In 2006, a public furor over foreign investment blocked an effort by Dubai-owned DP World to manage six of the largest ports in the United States. The outcry triggered congressional passage of a law tightening security reviews of foreign investments.
Fed. 14day RP 5.00B [ SoFar
The Slosh Report:
http://www.gmtfo.com/RepoReader/OMOps.aspx
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Capstone Turbine Corporation Receives ISO 14001:2004 Certification
Wednesday May 28, 4:05 pm ET
CHATSWORTH, Calif.--(BUSINESS WIRE)--Capstone Turbine Corporation® (www.microturbine.com) (NASDAQ: CPST - News), the world’s leading clean technology manufacturer of microturbine energy systems, today announced that its facilities in Van Nuys and Chatsworth, California, have received ISO 14001:2004 Certification under Capstone’s 14001 Certification initiative.
http://biz.yahoo.com/bw/080528/20080528006348.html?.v=1
Son is working out a fix for that problem.