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Schiff: A Nightmare Before Christmas
By Peter Schiff
Euro Pacific Capital, Inc.
Friday, 12 December 2008
Like many pragmatic economists I have always warned that rapid expansions of government debt would result in inflation and higher interest rates. The explanation was always simple: rising supply of government debt inflates the money supply and weakens the government’s ability to service its debt through legitimate means.
But in recent months, government has flooded the market with hundreds of new Treasury obligations and telegraphed its intention to increase the deluge even more. In response, both bond prices and the dollar have risen. This benign reaction has led many to the happy conclusion that the doom and gloomers are wrong and that bailouts and economic “stimuli” can be financed with deficit spending without any adverse consequences on interest rates or consumer prices. Recent action in the foreign exchange markets suggests these hopes will prove illusory. The renewed strength in gold, together with the long overdue rupture of the correlation between the movements of foreign currencies and U.S. equities, is further evidence that recent market dynamics are changing.
When the financial crisis of 2008 kicked into high gear in September, the U.S. dollar began to rally furiously. While America’s economic ship was sinking from stem to stern, its currency was becoming the must have asset for public and private investors around the world. The dollar benefitted from the positive flows that result from massive global deleveraging. Treasuries got an added boost from a reflexive flight to “safety.” As a result, politicians were able to fill out their Christmas wish lists with complete confidence that Santa would deliver. However, as these dollar-positive forces appear to be giving way, the Grinch is about make an unwanted appearance.
Last weekend Barack Obama announced his intention to implement a New Deal-style stimulus and public works program. What he somehow forgot to mention is that the United States is wholly dependent on the willingness of foreign creditors to supply the funds. But a weakening dollar makes continued foreign purchase of U.S. Treasuries a much more difficult decision.
Once the dollar begins to collapse beneath the weight of all this new deficit spending, accumulation of contingency liabilities, and the socialization of our economy, commodity prices and interest rates will head skyward. In addition, once all the going out of business sales at U.S. retailers are over, and excess inventories have been reduced, watch for big price increases at the consumer level as well.
Once the government runs out of foreign and private sector bidders for new treasuries, the Federal Reserve will be the only buyer, and the hyper-inflation cat will be completely out of the bag. Sensing this, the Fed has recently indicated a desire to begin issuing its own bonds. However, since dollars are already recorded as liabilities on the Fed’s balance sheet (dollars are in actuality Federal Reserve Notes) the Fed already issues debt. The difference now is that they are proposing to issue interest bearing debt. Perhaps the Fed feels this will make holding its notes more appealing. However, since the interest will be paid in more of its own script, I do not believe this con will work.
In the end, rather than filling our stockings with Christmas goodies, our foreign creditors will likely substitute lumps of coal. Of course given how high coal prices will ultimately rise as a result of all this inflation, in Christmas Future perhaps our stockings will be stuffed with nothing but our own worthless currency. It might not burn as well as coal, but at least we will have plenty of it.
http://news.goldseek.com/EuroCapital/1229114501.php
Goldman slashes 2009 commodity price forecasts
Friday December 12, 2008, 9:25 am EST
By Pratima Desai
LONDON (Reuters) - Goldman Sachs (NYSE:GS - News) slashed its commodity price forecasts on Friday, citing a collapse in global economic growth and demand because of the credit crisis.
The U.S. bank which earlier this year predicted an oil price spike to $200 a barrel now expects to see crude average $45 a barrel next year.
Forecasts for industrial metals aluminum and copper traded on the London Metal Exchange were cut substantially to $1,410 and $2,950 a tonne next year from $2,310 and $5,230, respectively.
"As time goes on, evidence continues to mount that the collapse in September and October oil and other commodity demand was not only a transient impact of the credit paralysis," Goldman said in a note.
"But instead a prelude to the wider damage that the sharp deterioration in credit conditions has inflicted on economic activity around the world."
Fears of worse to come for the global economy can be seen in the problems of the global auto industry, particularly in the United States where the U.S. Senate rejected a bailout of the sector under threat of collapse.
Goldman expects economic activity to bottom in the middle of 2009 and a return to year-on-year growth in the fourth quarter of next year.
****Demand levels have fallen far below restricted supply levels and large surpluses will need to be controlled by sharp output cuts, fueled by tumbling prices in the spot market, it said.
The need to address large surpluses means spot rather than long term prices will dominate action next year, Goldman said.
"In some markets, particularly the industrial-related markets, such as steel, petrochemicals, base metals and petroleum refining, this process is already under way," it said.
"In other markets such as oil and gas the process is only just beginning."
CONTRASTS
The intensity of the global credit crunch threatens to push oil prices below $40 a barrel in the near term, Goldman said.
"We now expect oil demand to decline by 1.7 million barrels a day in 2009, driven by a 1.0 million barrels a day decline in the OECD countries.
"As inventories reach full storage either further OPEC cuts will be required to balance the market or prices will need to decline further to force non-OPEC producers to shut-in production."
To rebalance the oil market, Goldman said an additional 2 million barrels a day of OPEC supply cuts and 600,000 barrels a day reduction from non-OPEC producers will be needed.
The story for industrial metals also involves larger surpluses as prospects for metals-intensive sectors such as construction and transport get worse.
"We believe that fundamentals are strongest for zinc and weakest for aluminum, where inventories are set to climb to extraordinary levels," Goldman said.
Aluminum stocks in London Metal Exchange warehouses at above 1.9 million tonnes are at their highest since 1994.
In contrast, Goldman thinks demand for agricultural products will be relatively insulated, even though it has drastically cut forecasts for corn and wheat.
"Expected challenges to acreage expansion in the upcoming planting seasons, suggests less downside from current levels and the potential for a moderate price rebound in late 2009."
Global gross domestic product growth would have be outright negative in 2009 to see a real fall in demand, the bank said. "Further, grain stocks remain at critically low levels, creating a much quicker recovery path."
In precious metals, Goldman expects investors looking for safety from the financial and economic crisis and a weaker dollar will boost prices of gold and silver.
Gold is used by investors as a hedge against financial turbulence and as an alternative currency to the dollar."
(Additional reporting by Jonathan Leff, Jane Merriman, Julie Crust, David Brough and Jan Harvey; editing by James Jukwey)
Goldman slashes 2009 commodity price forecasts
Friday December 12, 2008, 9:25 am EST
By Pratima Desai
LONDON (Reuters) - Goldman Sachs (NYSE:GS - News) slashed its commodity price forecasts on Friday, citing a collapse in global economic growth and demand because of the credit crisis.
The U.S. bank which earlier this year predicted an oil price spike to $200 a barrel now expects to see crude average $45 a barrel next year.
Forecasts for industrial metals aluminum and copper traded on the London Metal Exchange were cut substantially to $1,410 and $2,950 a tonne next year from $2,310 and $5,230, respectively.
"As time goes on, evidence continues to mount that the collapse in September and October oil and other commodity demand was not only a transient impact of the credit paralysis," Goldman said in a note.
"But instead a prelude to the wider damage that the sharp deterioration in credit conditions has inflicted on economic activity around the world."
Fears of worse to come for the global economy can be seen in the problems of the global auto industry, particularly in the United States where the U.S. Senate rejected a bailout of the sector under threat of collapse.
Goldman expects economic activity to bottom in the middle of 2009 and a return to year-on-year growth in the fourth quarter of next year.
****Demand levels have fallen far below restricted supply levels and large surpluses will need to be controlled by sharp output cuts, fueled by tumbling prices in the spot market, it said.
The need to address large surpluses means spot rather than long term prices will dominate action next year, Goldman said.
"In some markets, particularly the industrial-related markets, such as steel, petrochemicals, base metals and petroleum refining, this process is already under way," it said.
"In other markets such as oil and gas the process is only just beginning."
CONTRASTS
The intensity of the global credit crunch threatens to push oil prices below $40 a barrel in the near term, Goldman said.
"We now expect oil demand to decline by 1.7 million barrels a day in 2009, driven by a 1.0 million barrels a day decline in the OECD countries.
"As inventories reach full storage either further OPEC cuts will be required to balance the market or prices will need to decline further to force non-OPEC producers to shut-in production."
To rebalance the oil market, Goldman said an additional 2 million barrels a day of OPEC supply cuts and 600,000 barrels a day reduction from non-OPEC producers will be needed.
The story for industrial metals also involves larger surpluses as prospects for metals-intensive sectors such as construction and transport get worse.
"We believe that fundamentals are strongest for zinc and weakest for aluminum, where inventories are set to climb to extraordinary levels," Goldman said.
Aluminum stocks in London Metal Exchange warehouses at above 1.9 million tonnes are at their highest since 1994.
In contrast, Goldman thinks demand for agricultural products will be relatively insulated, even though it has drastically cut forecasts for corn and wheat.
"Expected challenges to acreage expansion in the upcoming planting seasons, suggests less downside from current levels and the potential for a moderate price rebound in late 2009."
Global gross domestic product growth would have be outright negative in 2009 to see a real fall in demand, the bank said. "Further, grain stocks remain at critically low levels, creating a much quicker recovery path."
In precious metals, Goldman expects investors looking for safety from the financial and economic crisis and a weaker dollar will boost prices of gold and silver.
Gold is used by investors as a hedge against financial turbulence and as an alternative currency to the dollar."
(Additional reporting by Jonathan Leff, Jane Merriman, Julie Crust, David Brough and Jan Harvey; editing by James Jukwey)
Madoff - Did Your Trades Clear? by Karl Denninger
Friday, December 12. 2008
Posted at 07:23
Yeah, the SEC couldn't see that coming.
Uh huh.
Never mind that they were apparently warned several years ago in written communications that Madoff's "returns" were highly abnormal given the published strategies he was using and the numbers he was posting.
Investigate? What's that? Why, that's unamerican!
Now we have $50 billion in fraud and, apparently, $17 billion that is just plain old-fashioned missing. And Madoff's company, just so we're all in the know here, is a market maker on Nasdaq, which means that a lot of other people's money (and shares) pass through his hands.
T+3 will come, but will your shares be there when it does?
Oh by the way, SIPC protection doesn't cover fraud, never mind that its only good for $500,000 anyway, and most of this guy's clients had ten times that much or more with him.
Finally, let us never forget that there is never only one cockroach.
Who knew, who was and is complicit, and how many more cockroaches are behind the wall?
Uh huh.
TNX at 2.5% this morning. Gee, I wonder why?
Lots of, shall we say, inconvenient questions surrounding this one.
http://market-ticker.denninger.net/archives/687-Madoff-Did-Your-Trades-Clear.html
Futures (3) + World Indices
http://www.cme.com/trading/dta/del/globex.html
http://money.cnn.com/data/premarket/
http://quotes.ino.com/exchanges/futboard/current/
- Has links for quotes and charts.
World Indices (2) Mini Charts
Updates every 60sec ~ Watch the dates!!
http://www.wwfn.com/commentary/oscharts.html
$14B auto bailout dies in Senate
By JULIE HIRSCHFELD DAVIS and KEN THOMAS, Associated Press Writer Julie Hirschfeld Davis And Ken Thomas, Associated Press Writer
2 mins ago
WASHINGTON – A $14 billion bailout for Detroit's struggling Big Three has died in the Senate after failing on a procedural vote.
The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.
Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors and Chrysler have said they could be weeks from collapse. Ford says it does not need federal help now, but its survival is far from certain.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.
Senate Majority Leader Harry Reid said he was "terribly disappointed" about the demise of an emerging bipartisan deal to rescue Detroit's Big Three.
He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese carmakers.
Republican Sen. George V. Voinovich of Ohio, a strong bailout supporter, said the UAW was willing to make the cuts — but not until 2011.
Reid was working to set a swift test vote on the measure Thursday night, but it was just a formality. The bill was virtually certain to fail to reach the 60-vote threshold it would need to clear to advance.
Reid called the bill's collapse "a loss for the country," adding "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."
The implosion followed an unprecedented marathon set of talks at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.
"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.
Sen. Bob Corker of Tennessee, the GOP point man in the talks, said the two sides had been tantalizingly close to a deal, but the UAW's refusal to agree wage concessions by a specific date in 2009 kept them apart.
The autoworkers' contract doesn't expire until 2011.
"We were about three words away from a deal," said Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."
The stunning breakdown was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by President George W. Bush.
It wasn't immediately clear, however, how the auto aid measure might be resurrected.
Congressional Republicans revolted against a version that the Bush White House negotiated with congressional Democrats and the House passed on Wednesday.
The talks centered on wage and benefit concessions from the UAW as well as debt-restructuring by General Motors Corp., Ford Motor Co. and Chrysler LLC, and officials from the union and companies participated in the talks at one point or another.
Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.
Efforts to stitch together a rescue package for the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.
"There's a lot of hardship out there. People are losing their jobs, losing their homes, losing their cars and losing their patience," said Reid, D-Nev. "We don't need to pile on."
It was unclear how far the participants were willing to go to seal the federal aid that General Motors and Chrysler said was essential to keep them from bankruptcy. Ford is in better financial shape than its rivals, although its survival is not assured, either.
The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to the White House-backed rescue bill passed by the House on Wednesday.
He and other Republicans said wages and benefits for employees of Detroit's Big Three should be renegotiated to bring them in line with those paid by Japanese carmakers Toyota, Honda and Nissan in the United States.
Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.
GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.
Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package and the Senate dropped it from its package.
The negotiations marked the latest development in a long-running debate over bailing out the beleaguered auto industry. The issue gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.
The White House monitored the talks but was not directly participating. Administration officials had been deeply involved in recent days in drafting a compromise with House and Senate Democrats — the measure that McConnell and other Senate Republicans promptly repudiated.
Some Senate Democrats joined Republicans in turning against the House-passed bill — despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.
The White House said President George W. Bush was calling Republican lawmakers, while Obama told reporters at a news conference in Chicago an industry shutdown would have a "devastating ripple effect" on the already ragged economy."
The House-passed bill would create a Bush-appointed overseer to dole out the money. At the same time, carmakers would be compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.
McConnell said that measure "isn't nearly tough enough."
Pushing to convert skeptics in both parties, Democrats agreed to drop at least one unrelated provision that threatened to sink the measure, a congressional official said. They were eliminating a pay raise for federal judges after Democratic Sen. Claire McCaskill of Missouri, who represents an automobile manufacturing state, announced she would oppose the carmaker aid unless that provision was removed.
Supporters had an uphill battle pressing the rescue package on a bailout-fatigued Congress — particularly a measure designed to span the administrations of a lame-duck president and his successor. Before the late-day negotiations, patience had begun wearing thin at the Capitol as lawmakers looked ahead to adjourning for the holidays.
Reid at one point called for swift separate votes Thursday on compromise legislation backed by Democrats and the White House as well as the GOP proposal. "We have danced this tune long enough," he declared.
But with Republicans staunchly opposed to the rescue and some Democrats ill or absent from the emergency, postelection congressional session, bailout supporters acknowledged that getting the needed 60 votes to pass either would be very difficult.
The House approved its plan late Wednesday on a vote of 237-170. Supporters cited dire warnings from GM and Chrysler executives, who have said they could run out of cash within weeks.
A pair of polls released Thursday indicated that the public is dubious about the rescue plan.
Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.
In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.
___
Associated Press writers David Espo and Alan Fram in Washington and Kimberly S. Johnson in Detroit contributed to this report.
Prominent Trader Accused of Defrauding Clients
By DIANA B. HENRIQUES and ZACHERY KOUWE
Published: December 11, 2008
Bernard L. Madoff, a legend among Wall Street traders, was arrested on Thursday morning by federal agents and charged with criminal securities fraud stemming from his company’s money management business.
The arrest and criminal complaint were confirmed just before 6 p.m. Thursday by Lev L. Dassin, the acting U.S. attorney in Manhattan, and Mark Mershon, the assistant director of the Federal Bureau of Investigation.
According to the complaint, Mr. Madoff advised colleagues at the firm on Wednesday that his investment advisory business was “all just one big lie” that was “basically, a giant Ponzi scheme” that, by his estimate, had lost $50 billion over many years.
Related accusations were made in a lawsuit filed by the Securities and Exchange Commission in federal court in Manhattan. That complaint accuses Mr. Madoff of defrauding advisory clients of his firm and seeks emergency relief to protect potential victims, including an asset freeze and the appointment of a receiver for the firm.
“We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the S.E.C. enforcement division. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Another regulator, Andrew M. Calamari, the associate director of enforcement in the New York Regional S.E.C. Office, said the case involved “a stunning fraud that appears to be of epic proportions.”
Although not a household name among consumers, Mr. Madoff’s firm has played a significant role in the structure of Wall Street for decades, both in traditional stock trading and in the development of newer electronic networks for trading equities and derivatives.
The S.E.C.’s complaint, filed in federal court in Manhattan, alleges that Mr. Madoff informed two senior employees on Wednesday that his investment advisory business was a fraud. Mr. Madoff told these employees that he was “finished,” that he had “absolutely nothing .”
The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors. Mr. Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion, according to the regulatory complaint.
Mr. Madoff, 70, founded Bernard L. Madoff Investment Securities in 1960 and liked to recount how he had earned his initial stake by working as a life guard at city beaches and installing underground sprinkler systems. By the early 1980s, his firm was one of the largest independent trading operations in the securities industry.
The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation. Mr. Madoff ran the business with several family-members including his brother Peter, his nephew Charles, his niece, Shana and his sons Mark and Andrew.
Reached at his office, Peter Madoff declined to comment.
The alleged scheme apparently involved an asset-management unit of Madoff Securities, which Mr. Madoff started after the market-making business became difficult once stocks started being quoted in decimals instead of fractions
Mr. Madoff is currently on the board of Nasdaq OMX Group, formerly the Nasdaq Stock Market, and serves as the chairman of the Sy Syms School of Business at Yeshiva University. His son Mark Madoff served as the vice chairman of the Board of Directors of the National Association of Securities Dealers Inc., from 1993 to 1994 and was also an board member of brokerage firm A.G. Edwards.
His firm, which at one point was the largest market maker on the electronic Nasdaq Stock Market, employed hundreds of traders.
Banks Brace for Credit Card Pain
http://www.thestreet.com/_yahoo/newsanalysis/on-the-brink/10452410.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
8 really, really scary predictions
Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening.
1 of 8Nouriel Roubini Known as Dr. Doom, the NYU economics professor saw the mortgage-related meltdown coming.
We are in the middle of a very severe recession that's going to continue through all of 2009 - the worst U.S. recession in the past 50 years. It's the bursting of a huge leveraged-up credit bubble. There's no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it's all reversing right now in a very, very massive way. At this point it's not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we're having a global recession and it's becoming worse.
Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it's going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.
For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.
http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html
3 U.S. banks were net short 218% of the amount of deliverable gold
That is one hell of a dominant position in gold futures on the COMEX held by so few entities. For a little context, the net short positioning of the big U.S. banks represents a net short positioning of just under 6.4 million ounces (just under 200 tonnes). As of December 4, there were 2,918,028 ounces classed as “Registered” in COMEX warehouses. So, these 3 U.S. banks were net short 218% of the amount of deliverable gold from ALL COMEX members which use the COMEX warehouses.
For silver, it’s even more startling. On December 2, as silver closed at $9.57, exactly 2 U.S. banks held a net short positioning of 24,555 contracts. The CFTC reports that as of the same date all traders classed as commercial held a net short positioning of 24,894 contracts. So, the 2 U.S. banks, with one particular Fed member bank probably holding almost all of it, held a sickening 98.64% of all the collective commercial net short positioning on the COMEX, division of NYMEX in New York.
http://www.resourceinvestor.com/pebble.asp?relid=48524
courtesy Bruce Thompson
3 U.S. banks were net short 218% of the amount of deliverable gold
That is one hell of a dominant position in gold futures on the COMEX held by so few entities. For a little context, the net short positioning of the big U.S. banks represents a net short positioning of just under 6.4 million ounces (just under 200 tonnes). As of December 4, there were 2,918,028 ounces classed as “Registered” in COMEX warehouses. So, these 3 U.S. banks were net short 218% of the amount of deliverable gold from ALL COMEX members which use the COMEX warehouses.
For silver, it’s even more startling. On December 2, as silver closed at $9.57, exactly 2 U.S. banks held a net short positioning of 24,555 contracts. The CFTC reports that as of the same date all traders classed as commercial held a net short positioning of 24,894 contracts. So, the 2 U.S. banks, with one particular Fed member bank probably holding almost all of it, held a sickening 98.64% of all the collective commercial net short positioning on the COMEX, division of NYMEX in New York.
http://www.resourceinvestor.com/pebble.asp?relid=48524
courtesy Bruce Thompson
The latest from James Howard Kunstler.
He talks of oil, inflation, gold, and the last gasps of wanton, imploding "Happy Motoring" lifestyle before Apocalyptic breakdown.
Stimulus aimed at perpetuating mass motoring will be a tragic waste of our dwindling resources. We'd be better off aiming it at fixing the railroads (especially electrifying them), refitting our harbors with piers and warehouses in preparation to move more stuff by boats, and in repairing the electric grid. Unfortunately, our tendency will be to try to rescue the totemic touchstones of everyday life, things familiar and comfortable, regardless of whether they have a future or not.
The ominous forces gathering out there will defeat these efforts and everyday life will reorganize itself some other way consistent with the single greatest trend: the force of contraction. Every sign we see is pointing in that direction, from the inability of the earth's ecology to support more human beings, to the dwindling of mineral and energy resources, to the destruction of farmland, to mischief in the climate. We just don't know how badly things will fall apart in the meantime, or how kind (or cruelly) people will act in the process.
http://www.kunstler.com/
December 8, 2008
People Get Ready
In the twilight of the Bush days, in the twilight of the twilight season, a consensus has formed that we are headed into a long, dark passage leading we know not where. Even CNBC's Lawrence Kudlow has been reduced to searching for stray "mustard seeds" of hope on hands and knees in a bleak and tortured financial landscape. Half the enterprises in the land are lined up for some kind of relief bailout and a blizzard of pink slips has cut economic visibility to zero.
The broad American public voted for "change" but they thought that meant a "changing of the guard." Out with the feckless Bush; in with the charismatic Obama... and may this American life now continue just as it ever was. The change actually coming will be much more than they bargained for, namely our transition from a wealthy society to a hardship society. The sharp break is a product of our years-long failure to reckon with the energy realities of our time. We're still confused about that, but it's hard, otherwise, to ignore the massive disappearance of capital, asset values, livelihoods, domiciles, comforts, and necessities.
The price of oil is suddenly down to an astounding $40-odd per barrel. Those of us studying the Peak Oil story have said that the "bumpy plateau" years of peak production would be expressed in tremendous price volatility, and for exactly the reasons now evident -- that the high-price phase would mangle advanced economies, that they would fall back in paralysis, then respond anew to oil price collapses by straggling up again, only to be crushed again when a resumption in demand for oil drove the price back up.
What was not so generally anticipated was the wholesale destruction of global finance in the first phase of this period. This has now occurred so comprehensively that we know the banking business will never be the same again. It has also accelerated other plot-lines in the story. One affects the global oil industry itself: a lack of capital to go forward with the new oil projects that were designed to mitigate the present depletions in old oil fields. The result of this quandary is as likely to be oil shortages in 2009 as much as an extremely sharp snap-back in oil prices. The oil markets themselves are changing in the face of financial disruption. Between pirates lurking off the Horn of Africa, and a shortage in letters-of-credit that enable the shipping of anything for delivery between nations, the allocation system is impaired. This affects poorer nations the most, and when they don't get their oil shipments, conditions in these nations get worse. People lose incomes. Ethnic strife ramps up. All this will make it harder to move oil from the places where it is produced to the importing countries.
So much artificially-generated pixel "money" is being pumped into the system now that it will eventually overtake the quantity of capital currently vanishing in the form of exposed securities swindles, unwinding bad debt, and imploded worthless counter-party contracts. The pixel money will express itself as super or hyper inflation, lagging from 6 to 18 months from the time it was actually introduced in the form of bailouts. For the moment, money is moving into the presumed safety of US Treasury paper. Personally, the safety of this is not something I would presume. But in the current deflationary stage its hard to find any other place to park cash, and when asset values are crashing everywhere, cash is king. Gold is physically unavailable in the form that non-millionaires usually buy it in, ounce and half-ounce coins.
President-elect Obama has announced his intention to kick off a massive "stimulation" program when he hits the White House "running" in January. Early indications are that it will be directed at things like highway repair. If so, we will be investing long-term in infrastructure that we probably won't be using the same way in ten years. But I doubt there is any way around it. The American public can't conceive of living any other way except in a car-centered society. Anyway, some parts of our highway-bridge-and-tunnel system are already so decrepit that they pose a menace right now, and the clamor to direct "stimulation" there is already very strong -- backed by all the fraternities of engineers.
Stimulus aimed at perpetuating mass motoring will be a tragic waste of our dwindling resources. We'd be better off aiming it at fixing the railroads (especially electrifying them), refitting our harbors with piers and warehouses in preparation to move more stuff by boats, and in repairing the electric grid. Unfortunately, our tendency will be to try to rescue the totemic touchstones of everyday life, things familiar and comfortable, regardless of whether they have a future or not.
The ominous forces gathering out there will defeat these efforts and everyday life will reorganize itself some other way consistent with the single greatest trend: the force of contraction. Every sign we see is pointing in that direction, from the inability of the earth's ecology to support more human beings, to the dwindling of mineral and energy resources, to the destruction of farmland, to mischief in the climate. We just don't know how badly things will fall apart in the meantime, or how kind (or cruelly) people will act in the process.
Mr. Obama would be most successful if he could persuade the public how much more severe the required changes are than they currently realize, and inspire them to get with program of retrofitting American life to comply with these realities.
W@G2 QQQQ 12/10/08 for a 12/12/08 close
29.05 ronnies
28.45 bob3
Fleckenstein Shutting Down Short Hedge Fund
by CalculatedRisk on 12/05/2008 08:29:00 PM
http://calculatedrisk.blogspot.com/2008/12/fleckenstein-shutting-down-short-hedge.html
From Bill Fleckenstein's Daily Rap: (Here is Fleck's Site for the Daily Rap):
Note: reprinted with permission.
"After considerable thought and deliberation I have decided to make a major change in my life: I am going to close my hedge fund. I have several reasons for no longer wishing to run a short-only fund as I have for the past 12 years. First, my original reason for starting the fund was because of developments I saw occurring in the late 1990s that I wanted no part of. I felt that Greenspan was fomenting an environment that would lead to disaster, as consultants, financial advisors, and the public at large were losing all respect for risk. Of course, the reckless behavior carried far higher and lasted much, much longer than I ever imagined it could. However, the recent carnage in the stock market, real estate market and the financial system (as well as the job losses) has washed away those excesses to a large degree and it has violently demonstrated the risks associated with investing.
A future goal of mine, when I set up the fund in 1996 -- as I attempted to step aside from the madness -- was to return to the long side of the business at some point in time when I felt that investors had become more rational regarding risk and stocks offered a more favorable risk/reward proposition. I considered this option very briefly in 2002 after the stock bubble imploded, but the cleansing process was postponed due to the burgeoning real-estate bubble.
Second, though I think that the stock market still has unfinished business on the downside, I believe that 2009 is the year to prepare for a return to managing money in a more balanced fashion, with longs (and some shorts), as there are currently plenty of interesting ideas that appear to offer a margin of safety. On the flipside, compelling opportunities on the short side are not as abundant as they were just a few months ago (though there still are plenty.) The "value restoration project," to quote Jim Grant, has been brought about by the consequences of disastrous Fed policies and the madness of the crowd, both of which have concerned me for the last 15 or so years.
Lastly, on a personal note, I no longer want to run a short-only hedge fund, as it is very stressful, nerve-wracking and generally not very much fun, entailing an intense focus on the short term to effect risk control. In addition, one views the world differently when operating solely from the short side and I would like to widen my focus as I did when I managed money from 1982-1995. My wife is especially happy about this potential change.
My efforts in 2009 will be directed towards setting up an investment vehicle managed by Fred Hickey and me that won't be a hedge fund, which hopefully will be available to everyone. I feel that many (but certainly not everyone) in the "hedge" fund community have behaved in a disgraceful manner in the last couple years by taking huge fees along the way and then either running at the first sign of trouble (by giving money back to avoid having to recoup draw-downs from high watermarks), or locking people up and not giving them their money back at all. Consequently I'd rather not be part of that "industry" going forward. The Rap will continue as it has."
Job, well done. /
Dismal Jobs Report Is Only Part of the Story
By DAVID LEONHARDT and CATHERINE RAMPELL As bad as the headline numbers in Friday’s employment report were, they still made the job market look better than it really is.
December 6, 2008
Grim Job Report Not Showing Full Picture
By DAVID LEONHARDT and CATHERINE RAMPELL
As bad as the headline numbers in Friday’s employment report were, they still made the job market look better than it really is.
The unemployment rate reached its highest point since 1993, and overall employment fell by more than a half million jobs. Yet that was just the beginning. Thanks to the vagaries of the way that the government’s best-known jobs statistics are calculated, they have overlooked many workers who have been deeply affected by the current recession.
The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000.
Take these people into account, and the job market may be in its worst condition since the early 1980s. It is still deteriorating rapidly, too.
Already, the share of men older than 20 with jobs was at its lowest point last month since 1983, and very close to the low point of the last 60 years. The share of women with jobs is lower than it was eight years ago, which never happened in previous decades.
Liz Perkins, 24 and the mother of four young children in Colorado Springs, began looking for work in October after she learned that her husband, James, was about to lose his job at a bed-making factory.
But the jobs she found either did not pay enough to cover child care or required her to work overnight. “I can’t do overnight work with four children,” she said. She has since stopped looking for work.
The family has paid its bills by dipping into its savings and borrowing money from relatives. But Ms. Perkins said that unless her husband found a job in the next three months, she feared the family would become homeless.
Even Wall Street economists, whose analysis usually comes shaded in rose, seemed taken aback by the report. Goldman Sachs called the new numbers “horrendous.” Others said “dreadful” and “almost indescribably terrible.” In a note to clients, Morgan Stanley economists wrote, “Quite simply, there was nothing good in this report.” HSBC forecasters said they now expected the Federal Reserve to reduce its benchmark interest rate all the way to zero.
Such language may sound out of step with a jobless rate that, despite its recent rise, remains at 6.7 percent; the rate exceeded 10 percent in the early 1980s. But over the last few decades, the jobless rate has become a significantly less useful measure of the country’s economic health.
That is because far more people than in the past fall into the gray area of the labor market — not having a job and not looking for one, but interested in working. This group includes many former factory workers who have been unable to find new work that pays nearly as well and are unwilling to accept a job that pays much less. Some get by with help from disability payments, while others rely on their spouses’ paychecks.
For much of the last year, the ranks of these labor force dropouts were not changing rapidly, said Thomas Nardone, a Labor Department economist who oversees the collection of the unemployment data. People who had lost their jobs generally began looking for new work. But that changed in November.
Much as many stock market investors threw in the towel in early October, and consumers quickly followed suit by cutting their spending, job seekers seemed to turn darkly pessimistic about the American economy in November. Unless the numbers turn out to have been a one-month blip, large numbers of people seem to have decided that a job search is, for now, futile.
“It’s not only that there’s nothing out there,” said Lorena Garcia, an organizer in Denver for 9to5, National Association of Working Women, a group that helps low-wage women and women who are looking for work. “But it also costs money to job hunt.”
Just how bad is the labor market? Coming up with a measure that is comparable across decades is not easy.
The unemployment rate has been made less meaningful by the long-term rise in dropouts from the labor force. The simple percentage of people without jobs — including retirees, stay-at-home parents and discouraged would-be job seekers — can also be misleading, though. It has dropped in recent decades mainly because of the influx of women into the work force, not because the job market is fundamentally healthier than it used to be.
The Labor Department does publish an alternate measure of unemployment, which counts part-time workers who want full-time work, as well as anyone who has looked for work in the last year. (The official rate includes only people who told a government surveyor that they had looked in the last four weeks.)
This alternate measure rose to 12.5 percent in November. That is the highest level since the government began calculating the measure in 1994.
Perhaps the best historical measure of the job market, however, is the one set by the market itself: pay.
During the economic expansion that lasted from 2001 until December 2007, when the recession began, incomes for most households barely outpaced inflation. It was the weakest income growth in any expansion since World War II.
The one bit of good news in Friday’s jobs report, economists said, was that pay had not yet begun to fall sharply. Average weekly wages for rank-and-file workers, who make up about four-fifths of the work force, rose 2.8 percent over the last year, only slightly below inflation.
But economists said those pay gains would begin to shrink next year, if not in the next few weeks, given the rapid drop in demand for workers. “Wage increases of this magnitude will be history very soon,” said Joshua Shapiro, an economist at MFR Incorporated, a research firm in New York.
Schiff: Low Rates, Big Problems
by Peter Schiff
December 05, 2008
http://www.safehaven.com/article-12016.htm
Government and mainstream economists have erroneously concluded that the key to reversing the financial free fall can be found in stopping the plunge in home prices. (I would offer the corollary that the key to reducing injuries in auto accidents is to suspend the laws of inertia). But to accomplish the improbable task of re-inflating the housing bubble, the government appears ready to announce a coordinated plan to push down mortgage rates to just 4.5%. Of course, this is precisely the wrong solution to the housing crisis, but when it comes to bad ideas our government has been remarkably consistent.
The plan would require the newly created Federal agencies of Fannie Mae and Freddie Mac to lower rates to 4.5%, and then require the Fed to directly buy the loans after they were made. The idea is that by lowering mortgage rates, current homeowners will be able to afford to make their payments, and new buyers will be more likely to qualify for larger loans, provided of course they do not have to come up with a burdensome down payment. If 4.5% is not enough to convince reluctant borrowers then look for the mandated rate to drop further. Perhaps there may come a time where the interest flows to the borrower instead of the lender. Anything to get Americans borrowing again.
But artificially suppressing mortgage rates will encourage risk taking and debt assumption at a time when consumers and lenders should be acting prudently. By setting rates below market levels, and buying mortgages that no private funder would want to touch, the government is creating a mortgage entitlement. Given the size of the home mortgage market, the program could eventually become one of the largest entitlement program on the federal books.
The most obvious problem is that the Government has no money. All it has is a printing press. So the more money it provides for cheap mortgages, the higher the inflation tax will be for all Americans. Higher inflation will cause the difference between where rates should be and where the government sets them to grow wider, and the entitlement to become more costly to provide.
Assuming $5 billion in mortgages are refinanced at 4.5% in an environment where the unsubsidized rate would have been 10%. The annual cost to the government in such a scenario would be $275 billion. But the subsidy will have to be provided in perpetuity, as the minute it is removed, mortgage rates would surge and housing prices would plummet. Of course, the mere existence of the subsidy will continue to create demand for mortgage credit, which the government will be forced to provide by printing even more money. This would set into place a self perpetuating spiral of rising inflation and mortgage demand, with practically 100% of mortgage money being provided by the government. Ultimately the whole scheme would collapse, as run-away inflation would completely destroy what would be left of our shattered economy.
Some argue that since the government can now borrow for 30 years at 3%, issuing mortgages at 4.5% is a winning trade. There are three problems with this analysis. First, just because money is cheap does not mean we should borrow it-you think we would have at least learned that by now! Second, this analysis does not factor in default related losses. Finally, there is no way the government would be able to borrow that much money at the long end of the rate curve without driving interest rates much higher. The only reason long-term rates are so low now is that the government is concentrating its borrowing on the short end of the curve. So to pull of the trade, the government will have to finance it with treasury bills. If we turn the government into a massively leveraged hedge fund that cycles a multi-trillion dollar carry trade of short-term debt used to finance long term mortgages, then I think we already know how that movie ends.
In the final analysis the market must be allowed to function. If real estate prices are too high they must be allowed to fall, regardless of the consequences. Lower prices are the market's solution to housing affordability. Government attempts to artificially prop up prices will have much more dire economic consequences then letting them fall. Until we figure this out, there will be no escape from the economic death spiral the government is setting in motion.
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, read my just released book "The Little Book of Bull Moves in Bear Markets." Click here to order your copy now.
For an updated look at my investment strategy order a copy of my new book "Crash Proof: How to Profit from the Coming Economic Collapse." Click here to order a copy today.
Don Coxe conference call
http://events.startcast.com/events/199/B0003/code/eventframe.asp
Congress, White House talking $15B auto bailout
AP – House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., speaks during a hearing on the … WASHINGTON – Stunned by the loss of 500,000 jobs, congressional Democrats and the White House reached for agreement Friday on about $15 billion in bailout loans for the beleaguered auto industry. President George W. Bush warned that at least one of the Big Three carmakers might not survive the current economic crisis.
Several officials in both parties said a key breakthrough on the long-stalled bailout came when House Speaker Nancy Pelosi bowed to Bush's demand that the aid come from a fund set aside for the production of environmentally friendlier cars. The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they added.
The developments unfolded as desperate auto executives pleaded for a second day with lawmakers for loans to help them survive, and the government reported the worst single month's job loss in 34 years.
Pelosi's office issued a statement saying legislation would come to a vote in the House next week. The Senate is also scheduled to be in session to consider steps to aid Detroit's Big Three.
"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry," Pelosi's statement said.
In a subsequent statement, she added that the billions originally ticketed for development of more environmentally friendly cars would be repaid "within a matter of weeks." Democrats said her hope was to include the funds in an economic recovery bill that lawmakers are expected to prepare for President-elect Barack Obama's signature shortly after he takes office.
Officials in both parties also said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used by General Motors Corp., Ford Motor Co. and Chrysler LLC for their intended purpose. The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.
One senior Democratic aide also said Pelosi was seeking a provision that would bar the automakers from using any of the funds to pursue a legal challenge to states seeking to implement tougher auto emission standards. The aide spoke on condition of anonymity because the legislation was not yet drafted.
At the White House, Bush declared the economy was in a recession, and he urged a gridlocked Congress to act quickly on a multibillion-dollar industry bailout — with taxpayer protections.
"We are going to have to have some give here," replied Massachusetts Rep. Barney Frank, a senior House Democrat, expressing optimism that compromise might be possible. It wasn't clear whether he was prodding Bush or Pelosi with his comments, but Republicans said there had been no lessening in Bush's refusal to tap the $700 billion financial industry bailout fund to help the automakers.
There were also fresh calls during the day for the Federal Reserve to come to the rescue of the Big Three, possibly in the form of low-cost loans. And Frank said he had talked with Tim Geithner, President-elect Barack Obama's choice for treasury secretary, a possible sign of involvement by the incoming administration.
"I am concerned about the viability of the automobile companies," a somber Bush said as a fresh report showed that employers slashed 533,000 jobs in November.
The president added, "I'm concerned about those who work for the automobile companies and their families. And likewise, I am concerned about taxpayer money being provided to those companies that may not survive." Bush did not elaborate, but executives at both GM and Chrysler have warned that their storied corporations could collapse by year's end.
In addition to the November layoffs, GM announced it will cut shifts at factories in Lordstown, Ohio, Orion Township, Mich., and Oshawa, Ontario, in February as a result of slumping auto sales. About 2,000 jobs were involved, bringing the year's total to 11,000.
The chief executives of GM, Ford and Chrysler, testified for a second day before Congress in support of their plea for a $34 billion bailout in the form of loans. "We believe this is the least costly alternative," Chrysler LLC chief executive Bob Nardelli said.
For the day, at least, their appeals were overtaken by the severity of the job loss figures, the worst in 34 years.
Frank said repeatedly that the unemployment statistics had quieted talk of allowing one or more of the automakers to go bankrupt.
"I think it's fair to say that the jobs report today, this disastrous jobs report, has heightened the interest in doing something." With trademark wit, he added, "If we are lucky we will come out with a bill here that nobody likes, because any bill that any individual liked couldn't pass."
Bush renewed his call for Congress to rewrite an existing $25 billion program intended to help the industry make more fuel-efficient vehicles. But the president did not explicitly foreclose other options, and Republican aides said the White House might be open to some sort of compromise.
Congressional budget analysts have said tapping the fuel-efficiency program for a broader auto bailout would net only $7.5 billion in short-term cash but amended that to say adjustments were possible that could double that amount. Pelosi and environmentalists had opposed making use of those funds. Instead, they wanted the administration to take money from a $700 billion financial industry bailout that cleared Congress last fall.
Myself
get a larger napkin. lol
Debt Limit
http://www.treasurydirect.gov/NP/BPDLogin?application=np
you seem to have it all in control, if you can get before market...chichi would make all $$
weekend report usual updated late Sat...so many changes going on. l like 1)2)3) format for urgency.
being here free makes search out for me but You can go back to my older posts on this stuff....It's been working years.
The head of China's sovereign wealth fund says
he's lost the confidence to invest in U.S. banks, while China's central bank governor Zhou Xiaochuan didn't even stay in town. Instead, he flew to an international meeting chaired by Mr. Paulson's intended successor, Timothy Geithner.
Preceding Mr. Paulson's arrival in China was a sudden depreciation of the yuan against the dollar -- provoking concern in some quarters that China is prepared to backtrack on one of Paulson's achievements.
http://online.wsj.com/article/SB122846766539882535.html?mod=djemheard
Myself, nice work here keeping
trac of Fed #s...a Fine job !
2009 Recession Will Be Severe: 'There Is a Global Deflationary Risk,' Roubini Says
http://finance.yahoo.com/tech-ticker/article/138999/2009-Recession-Will-Be-Severe-%27There-Is-a-Global-Deflationary-Risk%27-Roubini-Says?tickers
Monthly Economic Calendar
Prepared by Dr. Scott Brown
Printer Friendly Version (PDF file)
http://www.rjf.com/econocal.htm
now to April
GM, Chrysler May Accept Bankruptcy to Receive Bailout (Update1)
By James Rowley and Linda Sandler
Dec. 4 (Bloomberg) -- General Motors Corp. and Chrysler LLC executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, said a person familiar with their internal discussions.
Auto executives have warned bankruptcy would lead to liquidation as customers abandoned the companies. Staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the industry without liquidation, a person familiar with that matter said.
“It’s essential for Congress to do due diligence on bankruptcy as an option so it gets a clear sense from independent people what the risks and possibilities are,” said Alan Gover of White & Case, who has been lead lawyer in $60 billion of corporate-debt restructurings.
more...
http://www.bloomberg.com/apps/news?pid=20601087&sid=adBazxCdli5Y&refer=home#
Beige Book
--------------------------------------------------------------------------------
Prepared at the Federal Reserve Bank of Minneapolis and based on information collected before November 24, 2008. This document summarizes comments received from business and other contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
--------------------------------------------------------------------------------
Overall economic activity weakened across all Federal Reserve Districts since the last report. Districts generally reported decreases in retail sales, and vehicle sales were down significantly in most Districts. Tourism spending was subdued in a number of Districts. Reports on the service sector were generally negative. Manufacturing activity declined in most Districts, and new orders were soft. Nearly all Districts reported weak housing markets characterized by reduced selling prices and low, but stable, sales activity. Commercial real estate markets declined in most Districts. Lending contracted, with many Districts reporting reductions in residential, commercial and industrial lending and tightening lending standards. Agricultural conditions were mixed with a relatively good harvest but concerns about profitability. Mining and energy production and exploration started to soften due to lower output prices.
District reports generally described labor market conditions as weakening. Wage pressures were largely subdued. District reports characterized price pressures as easing in light of some decreases in retail prices and declines in input prices, particularly energy, fuel, and many raw materials and food products.
Consumer Spending and Tourism
Consumer spending weakened during the reporting period. Retail sales were described as weak or down in the New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco Districts. In Kansas City, consumer spending slowed sharply. Recent retail sales were steady compared with early fall but were lower than a year ago in Philadelphia and were mixed in Boston. Some Districts reported decreased purchases of big-ticket items, including furniture, appliances, electronics and luxury items. Discount stores reported stronger sales volumes than department stores. Inventory levels were relatively stable, as many stores anticipated the recent slowdown in sales. District reports indicated that retailers were preparing for a relatively slow holiday sales season. New York noted that this season is likely to feature more price discounting than last year. Boston, Philadelphia, Cleveland and Dallas reported that some retailers have cut back capital expenditure plans for 2009.
District reports indicated that vehicle sales deteriorated since the last report. Sales of more expensive and less fuel efficient vehicles were particularly slow. However, Kansas City noted an increase in demand for used cars. Chicago, St. Louis, Minneapolis, Kansas City and San Francisco reported that a number of car buyers had difficulty obtaining financing.
Tourism activity was relatively slow. Fall tourism was down in New York, Atlanta, Chicago, Minneapolis, Kansas City and San Francisco, while tourism conditions were mixed in Richmond. Kansas City and San Francisco reported slower restaurant business. Atlanta noted that business travel was down, while San Francisco reported a rising incidence of canceled corporate meetings in Southern California. In contrast, reservations at a ski resort in the Richmond District were somewhat stronger for the Thanksgiving and Christmas holidays, and some tourism businesses in the Minneapolis District were cautiously optimistic for the winter season in part due to lower gasoline prices.
Services
Activity in the services sector generally contracted in most Districts since the last report. New York, Richmond, Chicago, Minneapolis, Dallas and San Francisco reported deteriorating conditions. Most of these Districts were seeing weakness across a wide range of services, including advertising, architecture, business support, information technology, legal services and temporary help firms. Boston reported mixed conditions for information technology services, ranging from declines of 10 percent to gains of 25 percent. Minneapolis and Dallas reported growing demand for bankruptcy services, and Richmond noted that telecommunications and CPA firms were facing strong demand.
Manufacturing
Manufacturing activity declined noticeably since the last report. All 12 Districts reported weaker manufacturing conditions, to varying extents. Boston, Philadelphia, Cleveland, Richmond and Kansas City reported reductions in orders. Almost all Districts noted reductions in exports. Philadelphia, Cleveland, Richmond, Chicago and Atlanta reported lower shipping volumes. Dallas reported weakness in most forms of transportation. Nearly every District reported decreased demand for construction materials; Cleveland and Chicago noted, in particular, decreased steel production. Several Districts reported multiple plant shut-downs, and expectations for capital expenditure were down. A few sectors saw increased activity. Boston, Chicago, St. Louis and San Francisco noted stronger demand for aerospace manufacturers. St. Louis, Dallas and San Francisco reported increases in food processing.
Real Estate and Construction
Residential real estate continued at a slow pace nationwide. Sales were down in most Districts, but mixed activity was noted in the Boston, Atlanta and Minneapolis Districts. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas noted decreases in housing prices. Inventories of unsold homes remained high in the New York, Atlanta, Kansas City and San Francisco Districts, but declined in Chicago and Minneapolis. Philadelphia, Richmond, Chicago and Kansas City reported relatively stronger demand for lower- and middle-priced "starter homes."
Commercial real estate markets weakened broadly. Vacancy rates rose in Boston, New York, Richmond, Chicago, Kansas City and San Francisco, but were mixed across markets in the St. Louis District. Leasing activity was down in almost all Districts. Rents fell in the Boston, New York and Kansas City Districts. Despite reductions in construction materials costs, commercial building activity declined in many Districts with tighter credit conditions as a factor.
Banking and Finance
Business and consumer lending activity continued to slow in most Districts. New York reported weakening loan demand in all categories, while Kansas City and San Francisco also witnessed substantial lending declines. Lending activity in other Districts was mixed among loan categories. In contrast, Philadelphia indicated that its banks saw loan volume rise in November, and some regional banks reported picking up new business borrowers. Cleveland reported that business loan volume has been steady to higher, and some bankers reported actively marketing their loan business.
Credit standards rose across the nation, with several Districts noting increases in loan delinquencies and defaults, especially in the real estate sector. Credit conditions remained tight. Chicago reported that FDIC actions and Federal Reserve lending had improved liquidity and slowed deposit outflows. Dallas indicated that government capital investments have led larger institutions to feel less constrained in their lending, while some smaller banks reported that scrutiny from regulators was making new deals more difficult to forge.
Agriculture and Natural Resources
Districts reported mixed results in agriculture. Chicago, St. Louis, Minneapolis, Kansas City and Dallas expected decent harvests. However, Richmond, Chicago and Minneapolis reported delays in harvests due to wet weather. Atlanta, Chicago, Minneapolis, Kansas City, Dallas and San Francisco reported decreases in several crop and/or cattle prices. Chicago, Kansas City, Dallas and San Francisco noted that cattle producers' profits were squeezed. Tightening credit conditions for agricultural producers were noted in the Kansas City, Dallas and San Francisco Districts. The bankruptcy of a large ethanol producer created uncertainty for crop producers near its Midwest plants.
Activity in the energy and mining sectors decreased since the last report. Atlanta, Minneapolis, Kansas City, Dallas and San Francisco reported softening in oil and gas activity due to lower prices and, in some cases, weather disruptions. Meanwhile, mining activity decreased in the Minneapolis District.
Labor Markets
Signs of labor market slowing were evident in several District reports. Boston, Richmond, Chicago and Dallas reported that demand for temporary staff decreased. Boston and Cleveland noted that seasonal hiring has been scaled back at retail stores. Several businesses in the Atlanta District reported that layoffs accelerated and hours declined. Chicago noted that further weakness in the demand for labor was expected in a number of sectors. Dallas reported that job cuts were particularly pronounced in the manufacturing sector. San Francisco reported job cuts and hiring freezes across a wide range of industries. However, demand for skilled labor remained strong in Chicago, contacts in Boston reported difficulty filling open positions in some professions and Minneapolis cited difficulty finding skilled workers in some areas.
Wage pressures were largely subdued. Richmond reported that wages for temporary employment remained unchanged, while wages in the retail sector declined. Aside from health care and other high-skill technical positions, most contacts in Atlanta suggested that wage pressures continued to diminish. Business operators in the Minneapolis District indicated that they expect only modest wage increases in their communities during 2009. Chicago, Kansas City and Dallas reported minimal wage pressures. In San Francisco, the region's few open positions have been attracting large numbers of applicants, thereby alleviating upward wage pressures.
Prices
District reports characterized price pressures as easing in light of some decreases in retail prices and declines in input prices, particularly for energy, fuel, and many raw materials and food products. In the New York District, firms across a wide range of industries reported that their selling prices have leveled off, while prices paid have decelerated. Philadelphia noted that reports on input costs and output prices showed a general decline. Cleveland reported that transportation surcharges were removed for some contacts. In Atlanta, most District contacts reported that they did not plan to raise output prices due to lower input costs and weaker demand. A manufacturer in Minneapolis noted success in passing along input cost increases to customers, but will likely lower prices going forward. Manufacturers in Kansas City reported a sharp deceleration in raw materials prices. Many contacts in Dallas reported that they resisted price-cutting pressures from their customers, but that they expected to lower prices over the next several months. San Francisco noted declines in the prices of transportation services. A number of District reports mentioned that retailers were widely discounting prices in anticipation of a slow holiday sales season.
http://www.federalreserve.gov/FOMC/BeigeBook/2008/20081203/default.htm
Pirates fire on US cruise ship in hijack attempt
http://news.yahoo.com/s/ap/20081202/ap_on_re_af/piracy
Bush Administration Weakened Lending Rules Before Crash
http://www.huffingtonpost.com/2008/12/01/bush-administration-weake_n_147311.html
WASHINGTON — The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
More...
China’s Manufacturing Contracts by Record on Exports (Update3)
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By Nipa Piboontanasawat
Dec. 1 (Bloomberg) -- China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing major economy.
The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e- mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction.
Export orders, output and new orders all shrank by the most since the surveys began as the global financial crisis sapped demand for the nation’s toys, textiles and computers. The CSI 300 Index of stocks has fallen 68 percent from a record in October last year and President Hu Jintao describes the economic situation as a test of the Communist Party’s ability to govern.
“Another grim month for China manufacturing,” said Eric Fishwick, the head of economic research at CLSA. “Export orders will weaken further and we expect further cuts in production and employment.”
The yuan fell the most since a fixed exchange rate ended in 2005, sliding 0.7 percent to close at 6.8848 a dollar, as the government sought to help exporters. The CSI 300 rose 1.9 percent on a government plan to boost consumer spending.
The government-backed PMI started in 2005, the CLSA study in 2004.
Deepening Slowdown
The government last month announced a $586 billion stimulus package and the biggest interest-rate cut in 11 years to revive the economy and counter the risk of spiraling unemployment and social unrest. The key one-year lending rate fell 108 basis points to 5.58 percent.
“Dismal PMI calls for more immediate policy help” was the heading on a Citigroup Inc. report today.
The figures suggest that export growth may decline sharply and industrial output may fall, said Ken Peng, a Shanghai-based economist for Citigroup. He expects a 54 basis-point rate cut before the end of the year, along with more speculation that the yuan is set for “large-scale depreciation.”
A weaker currency helps exporters by keeping down the prices of their goods in overseas markets.
China’s economy, the world’s fourth largest, expanded 9 percent in the third quarter from a year earlier, the slowest pace since 2003. The nation is very exposed to the global crisis, President Hu said Nov. 29.
Export Orders, Output
An export order index dropped to 29 in November from 41.4 in October, the government-backed survey showed. A reading above 50 reflects an expansion, below 50 a contraction.
The output index fell to 35.5 from 44.3, while the index of new orders dropped to 32.3 from 41.7.
Fired workers seeking more compensation from a toy factory in Guangdong province clashed violently with police on Nov. 25.
“It’s a very challenging time for policy makers -- they definitely need to do more in terms of fiscal and monetary stimulus,” said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong. “There will be more aggressive interest-rate cuts.”
A slump in property sales and building work is also undermining growth. Construction of homes, offices and factories contracted at least 16.6 percent in October after a 32.5 percent expansion a year earlier, according to Macquarie Securities Ltd.
Slowdown ‘Getting Worse’
Baosteel Group Corp., China’s biggest steelmaker, is facing its “most difficult” period since the company was founded 30 years ago as output, sales and profit plunge, an executive said last month.
“The slowdown of the Chinese economy is getting worse,” Zhang Liqun, a senior research fellow at the State Council’s Development Research Center, said in a statement today. Government efforts to revive growth “still need some time to show their full effect, which will be after spring 2009,” Zhang said.
The World Bank slashed last week its growth forecast for China to 7.5 percent in 2009 from a 9.2 percent estimate in June. That would be the weakest pace since 1990.
The government-backed Purchasing Managers’ Index is based on a survey of more than 700 companies in 20 industries, including energy, metallurgy, textile, automobile and electronics.
The survey tracks changes in output, new orders, employment, inventories and prices.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net
Last Updated: December 1, 2008 05:37 EST
Some Positive Signs
by Mary Anne & Pamela Aden
The Aden Sisters
Nov 28, 2008
http://www.321gold.com/editorials/aden/aden112808.html
AIG to Remove Its Name From U.S. Auto Unit
Tuesday, November 25, 2008; D08
American International Group, the insurer bailed out by the government, will remove AIG from the name of a U.S. auto unit and cut 6.6 percent of jobs there to improve chances of finding a buyer for the operation.
In January, AIG will start calling its aigdirect.com business 21st Century Insurance, reverting to the brand of a California-based car insurer acquired last year, said Nicholas Ashooh, a spokesman for AIG. The company also will close offices in 12 cities, AIG said in an Oct. 21 letter to workers. The unit had about 5,500 employees as of September 2007.
AIG is selling businesses including auto insurance, U.S. life coverage, and a plane-leasing unit to repay the government loan that saved it from bankruptcy in September. Rebranding the auto unit will make the business more attractive to a prospective buyer, Tony DeSantis, head of AIG's personal auto group, said in a Nov. 17 letter. Ashooh confirmed the facts in the letter today in an interview.
AIG will launch new television commercials, a revamped logo and Web site on Jan. 5, according to the letter.
AIG, which has owned a stake in 21st Century since 1994, acquired the remaining 39 percent of shares for $813 million in September 2007.
-- Bloomberg News
All Fall Down
By THOMAS L. FRIEDMAN
November 26, 2008
Op-Ed Columnist
I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.
Why? Because in searing detail it exposed — using Citigroup as Exhibit A — how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.
So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.
Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.
These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion. We probably had no choice. Just letting Citigroup melt down could have been catastrophic. But when the government throws together a bailout that could end up being hundreds of billions of dollars in 48 hours, you can bet there will be unintended consequences — many, many, many.
Also check out Michael Lewis’s superb essay, “The End of Wall Street’s Boom,” on Portfolio.com. Lewis, who first chronicled Wall Street’s excesses in “Liar’s Poker,” profiles some of the decent people on Wall Street who tried to expose the credit binge — including Meredith Whitney, a little known banking analyst who declared, over a year ago, that “Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust,” wrote Lewis.
“This woman wasn’t saying that Wall Street bankers were corrupt,” he added. “She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale... For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.”
Lewis also tracked down Steve Eisman, the hedge fund investor who early on saw through the subprime mortgages and shorted the companies engaged in them, like Long Beach Financial, owned by Washington Mutual.
“Long Beach Financial,” wrote Lewis, “was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, Calif., a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.”
Lewis continued: Eisman knew that subprime lenders could be disreputable. “What he underestimated was the total unabashed complicity of the upper class of American capitalism... ‘We always asked the same question,’ says Eisman. ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.”
That’s how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins. I used to say our kids will pay dearly for this. But actually, it’s our problem. For the next few years we’re all going to be working harder for less money and fewer government services — if we’re lucky.
http://www.nytimes.com/2008/11/26/opinion/26friedman.html?pagewanted=print
ot: Somali pirates hijack 1 ship, release another
Friday November 28, 10:21 am ET
By Katharine Houreld, Associated Press Writer
Somali pirates hijack tanker with Indian crew on board, release a Greek vessel and crew
NAIROBI, Kenya (AP) -- Somali pirates hijacked a chemical tanker with dozens of Indian crew members Friday and a helicopter rescued three security guards who had jumped into the sea, officials said.
Greek authorities, meanwhile, said a Greek-owned cargo ship seized by Somali pirates more than two months ago was released Thursday and that all 25 crew members are unharmed. No details were immediately released.
more: http://biz.yahoo.com/ap/081128/af_piracy.html?.v=9
Happy Thanksgiving to ALL
4God
go back into posts, share with ChiChi & Myself...
illness has me in battle of life, l know that you will say a bit for me @ your Church.
you have been a Good friend for many years, Thank you.
Bob
Generic, Thank You.
I am watching you guys only 1 thing
busted with wheelchair, sofar.
chichi...u have mail