STOCK MARKET WATCH, Wednesday 2 February

Sounds just about right.

What's really scary is, some eighth grader won first prize in a creation "science" fair by putting dirt in a mason jar and observing life not emerging therefrom. Seriously. I got that in an email the other day.

ago to demonstrate why life evolved, and didn't just spring from nowhere. The "dirt-in-the-jar" demonstration is stupid in either case. There must be something seductive about dirt in jars.

had my child (if i had one) grow mushrooms in a jar and stand next to the "dirt-in-the-jar" kid, then lecture him on how stupid he was. or just sneak over and put a worm in that jar of dirt. :)

By Glenn Somerville

WASHINGTON (Reuters) - With a sixth straight U.S. interest rate rise seen a near certainty, Federal Reserve policy-makers on Wednesday will wrap up a two-day meeting to consider how to shelter the economic expansion from inflation.

In the first of eight annual meetings, and one of just two extended sessions each year, the Federal Open Market Committee started meeting on Tuesday and was set to begin again on Wednesday morning before announcing a decision on rates at about 2:15 p.m.

Financial markets took it as a foregone conclusion that the Fed will add another quarter percentage point to the federal funds rate levied on overnight loans to banks, raising it to 2.5 percent

snip..

"The only interesting part of the meeting will be a preliminary discussion of inflation targeting, but we will not learn much about that discussion until the minutes are released," Lehman said.

PREPARE FOR CONGRESS

The two-day Fed session gives policy-makers a chance to discuss the economy's performance ahead of Fed Chairman Alan Greenspan's semiannual testimony before Congress on the state of the expansion, scheduled for Feb. 16 and 17.




http://today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2005-02-02T094659Z_01_N02338492_RTRIDST_0_BUSINESS-ECONOMY-FED-DC.XML

IMHO, I would rather see a .5 raise that would shake some of the crap out of the markets and housing bubble.

LONDON (Reuters) - The dollar drifted lower against the euro and the yen on Wednesday as investors waited for the Federal Reserve to deliver an expected interest rate hike and give clues on the future outlook for monetary tightening.

The Fed is expected to raise rates by a quarter point to 2.5 percent in its sixth tightening since June when it announces its decision at 2:15 a.m. EST. Markets are keen to see if the Fed signals a shift in its campaign of "measured" tightening in the statement.

snip..

"The Fed's policy is well directed and it meets expectations so the statement will be crucial. They are likely to be pleased with the labor market and they could voice concern a bit about inflation, but it's hard to see how they can become more hawkish."

The euro was up over a quarter percent from the U.S. close at $1.3070 at 5:40 a.m. EST, after hitting 6-day highs of $1.3095 earlier. It also rose to its highest level in nearly three weeks at 135.80, partly bolstered by buying by Japanese investors of European bonds.

The dollar was at around 103.56 yen, slightly down from late U.S. levels.

Euro zone producer prices fell more than expected in December, driven down by declining energy costs.

German unemployment rose in January to its highest recorded level since 1933 as government labor market reforms and seasonal effects added more than half a million people to the tota




http://today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2005-02-02T110233Z_01_L0217594_RTRIDST_0_BUSINESS-MARKETS-FOREX-DC.XML

maybe we can encourage some more saving.

Feb. 2 (Bloomberg) -- German unemployment jumped to the highest since World War II in January as new rules added welfare recipients to the jobless register, clouding the outlook for Chancellor Gerhard Schroeder in elections this month.

The number of people out of work rose by 227,000 to 4.71 million in seasonally adjusted terms, boosted by 230,000 people formerly on social welfare, the Nuremberg-based Federal Labor Agency said today. The adjusted unemployment rate rose to 11.4 percent, a seven-year high, while the unadjusted jobless total passed 5 million for the first time since the war

snip..

Labor Costs

Even before the labor-market changes, German unemployment had risen for 11 straight months, as companies moved jobs to countries with lower labor costs and stagnant domestic demand deterred hiring. Retail sales fell for a third month in four in December, the Federal Statistics Office said today.

Germany's rising unemployment contrasts with the U.S., where the jobless rate probably remained unchanged at 5.4 percent in January as 200,000 jobs were created outside farming, a Bloomberg survey of 70 economists showed. The Labor Department releases the report Friday

snip..
Growth Forecast Cut

While the German economy resumed expansion in 2004 after three years, there's been no corresponding growth in job numbers.

The government last week pared its forecast for economic growth in 2005 to 1.6 percent from 1.7 percent. That's too little to boost the hiring of full-time workers who also contribute to the social-security system.

Germany is losing 1,200 full-time jobs a day, Juergen Thumann, head of the BDI industry federation, said last week. Unemployment won't decline unless taxes and labor costs are cut, he said.

Siemens AG, Germany's largest engineering company, plans to shed about 700 jobs at its fixed-line networks unit in Munich and Berlin, the company said Jan. 28. T-Mobile International AG, Deutsche Telekom AG's wireless unit, plans to eliminate as many as 1,200 jobs in Germany by the end of 2006 to cut costs.

``The modest economic recovery hasn't reached the labor market yet,'' said Andreas Rees, an economist at HVB Group in Munich. He said 2.75 percent growth is needed to create full-time jobs in Germany, ``so job losses will continue until the second half of the year.'

http://www.bloomberg.com/news/economy/economies.html

8:30AM: S&P futures vs fair value: +1.3. Nasdaq futures vs fair value: +6.0. Still shaping up to be a higher open for the indices as investors sift through another round of solid earnings reports... ROH, FOX, EQR and DVN have been the latest S&P 500 components to beat expectations, joining CVS, CMI, HET and PBI which reported earlier, while NOC, PPL and RL have matched analysts' estimates... CFC has been the only large-cap name so far to miss analyst forecasts

8:00AM: S&P futures vs fair value: +1.6. Nasdaq futures vs fair value: +6.5. Futures market suggesting a higher open for the cash market as investors await the Fed's latest decision on monetary tightening, which is widely expected to be a 1/4% interest rate hike (2:15 ET)... Stronger than expected Q4 earnings from Google (GOOG) have provided a boost to tech stocks while solid results and an encouraging FY05 and FY06 outlook from Boeing (BA) have helped blue chips find early buying interest

6:21AM: S&P futures vs fair value: +1.2. Nasdaq futures vs fair value: +4.5.

6:21AM: FTSE...4914.10...+7.90...+0.2%. DAX...4293.27...+13.30...+0.3%.

6:21AM: Nikkei...11407.14...+22.74...+0.2%. Hang Seng...13555.80...-22.46...

http://finance.yahoo.com/mo

Feb. 2 (Bloomberg) -- U.S. Treasury notes may decline on speculation a jobs report this week will encourage the Federal Reserve to keep raising its benchmark interest rate.

Fed policy makers will today lift the key rate for a sixth time since June, pushing it to 2.5 percent, according to all but one of 86 economists surveyed by Bloomberg. A Labor Department report on Feb. 4 is expected to show U.S. employers added 200,000 jobs last month, the median forecast in a separate poll.

``We're expecting a rate increase from the Fed today,'' said Jose Sarafana, a fixed-income strategist in Paris at Societe Generale SA, France's third-largest bank. ``Yet we think the bigger negative for Treasuries this week could come from the employment report.''

The benchmark 4 1/4 percent note due in November 2014 was little changed at 100 29/32 to yield 4.14 percent at 9:03 a.m. in New York, according to New York-based bond broker Cantor Fitzgerald LP. The 3 1/8 percent note due in January 2007 was also little changed, yielding 3.28 percent.
Fed policy makers last year raised the federal funds rate target to 2.25 percent from 1 percent. Societe Generale expects the Fed to raise its interest-rate target for overnight loans between banks to 3.75 percent by the year-end, pushing the yield on the 10-year note to 5 percent.

snip..

Fed and Inflation

Minutes from the Fed's Dec. 14 meeting, released on Jan. 4, showed policy makers concluded borrowing costs were too low to prevent inflation from accelerating. The fed funds target is 1.05 percentage point lower than the rate of consumer price inflation. In the past 10 years it averaged 1.6 percentage points higher than inflation.

Since then, two measures of inflation, the consumer price index and prices of goods and services bought by consumers, fell in December. In their statement released after the Dec. 14 meeting, policy makers said ``inflation and longer-term inflation expectations remain well contained.''

Deficit

President George W. Bush will deliver his State of the Union address to Congress today, and may highlight plans to reduce the budget deficit, five days before he sends lawmakers his annual request for the budget.

The White House last week said the 2005 gap would reach a record $427 billion, almost $100 billion higher than the shortfall it anticipated six months ago.

``Measures to reduce the budget deficit may be negative for the economy'' and boost demand for Treasuries, said Irene Cheung, head of Asian sovereign and foreign-exchange strategy at ABN Amro Bank in Singapore. ``Fiscal tightening could hurt consumption.'' The U.S. unit of ABN Amro is one of 22 primary U.S. government securities dealers that trade with the Fed's New York branch

snip..

``The U.S. government has little incentive to really tackle the budget deficit, while Asian central banks continue to fund the deficit at a little over four percent,'' said Adam Cole, a currency strategist in London at RBC Capital Markets.



http://www.bloomberg.com/news/markets/bonds.html

duplicate deleted

http://www.thestreet.com/_tsccom/funds/jubak/10206674.html

This week we should learn if the Federal Reserve's nervous economic tick has turned into a full-blown, inflation-fueled panic attack.

The first signs of anxiety surfaced in the minutes from the Fed's December meeting, where it boosted short-term interest rates to 2.25%. On Wednesday, the Fed's Open Market Committee will release another statement after its two-day meeting in Washington, D.C. That statement and the subsequent minutes will tell me more about the Fed's state of mind than any incremental interest-rate change.

That's because the current, extremely low yields on 10-year Treasury notes depend on the bond market's faith that the Fed has inflation under control. And it's that low, long-term bond yield that supports stocks at their current prices. A hint that the economy and inflation just might be getting away from the Fed would raise the odds that the bond market will begin a selloff. The resulting increase in long-term yields could then send stock prices down as well.

Fed Dissenters' Three Worry Points
By and large, the minutes from the Dec. 14 FOMC meeting are full of reassuring self-congratulations. Activity in the housing market remains strong -- and the increase in housing prices has made consumers confident enough to keep spending. Orders and shipments of capital goods are on the rise, showing that the corporate sector continues to invest. The economy is growing at a moderate pace and consumer-price inflation, which ticked up thanks to higher energy prices, will decline in 2005 as energy prices drop back.

more...

When President Bush delivers his State of the Union address tonight, his prescriptions for Social Security are likely to vault that issue to the front of the nation's political agenda. But Social Security's financial problems are a relatively small sliver of the far larger challenges posed by an aging population, economists say.

snip..

In just 10 years, spending on the elderly will total nearly $1.8 trillion, almost half the federal budget, according to new Brookings Institution and Congressional Budget Office projections. That is up from 29 percent in 1990 and 35 percent in 2000.

The bulk of that growth is spending on the federal government's two largest health care programs, Medicare and Medicaid. Their combined costs are projected to more than double, to a combined total of $1.2 trillion in 2015 from $473 billion last year. . Social Security spending is expected to rise to $888 billion from $492 billion in that span.

snip..


Demographic crunch
No challenge "is as certain as global aging," said the Center for Strategic &International Studies in another recent study, "and none is as likely to have as large and enduring an effect -- on the size and shape of government budgets, on the future growth in living standards, and on the stability of the global economy and even the world order."

Some economists and interest groups say such fears are overblown. The real problem, they say, lies not so much in demography but in a health care system that is the world's most expensive and least efficient. The cost of Bush's Medicare prescription drug benefit alone -- $8.1 trillion in 75 years -- dwarfs the $3.7 trillion estimated shortfall in Social Security in that stretch.

Get control of federal health care costs -- through better use of technology and better management of chronic illnesses and disabilities -- and the problem of an aging population will look a lot less intractable, said John Rother, policy director at AARP, the advocacy group for retirees and near-retirees.

More..


http://msnbc.msn.com/id/6896596/

Dow 10,555.85 +3.91 (+0.04%)
Nasdaq 2,072.31 +3.61 (+0.17%)
S&P 500 1,190.02 +0.61 (+0.05%)
10-Yr Bond 41.42 +0.06 (+0.15%)
NYSE Volume 95,469,000
Nasdaq Volume 195,653,000


9:40AM: Market opens on an upbeat note as better than expected quarterly results adds to the optimism that earnings growth is sustainable even as interest rates rise... While the Fed is broadly expected to raise interest rates by 25 basis points for the sixth time in as many meetings, investors today will be more focused with the precise wording of the accompanying policy statement regarding the pace of future Fed tightening...

Briefing.com, which believes there will be little change from the previous statement (Dec. 14), as economic growth has cooled and inflation remains well contained, notes that the market has rallied to end the day with good gains four out of five of the last times the Fed has raised rates...

9:15AM: S&P futures vs fair value: +1.1. Nasdaq futures vs fair value: +5.5.

9:00AM: S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: +5.5. Expectations remain set for a slightly higher open for the cash market, as futures indications hold steady above fair value... Reports suggest that Fiat's mediation period with General Motors (GM) over their alliance has ended without a deal while IBM (IBM) has served Intel (INTC) with a subpoena requesting documents to aid in its defense against SCO Group (SCOX)

http://finance.yahoo.com/mo

http://news.ft.com/cms/s/26f086d8-7444-11d9-a769-00000e2511c8.html

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The dollar firmed across the board, rising 0.2 per cent against both the yen and sterling, to Y103.89 and $1.8792 respectively, and a similar amount to $1.3015 against the euro, having risen 4.3 per cent against the shared currency in January, the dollar's best monthly peformance since May 2001.

The US Institute for Supply Management's manufacturing index for January came in marginally below expectations, but dollar bulls were excited by a jump in the employment component to 58.1 from 53.3 in December ahead of Friday's non-farm payrolls data.

"The sharp rise in the employment component bodes well for the January jobs report, but it is worth noting that it has over-estimated the pace of manufacturing jobs growth over recent months," said Mitul Kotecha, global head of forex strategy at Calyon.

The dollar also drew support from the comments of Sadakazu Tanigaki, the Japanese finance minister, who said Tokyo would have to be very careful about how it manages its $844bn of forex reserves, the bulk of which is in dollars.

"Everyone will be in trouble if the elephant changes direction," he said, suggesting Japan will tread lightly in any future shifting of reserves out of the dollar.

more...

Feb. 2 (Bloomberg) -- The dollar can add the world's two richest men to its list of detractors, something that's raising eyebrows here in Asia.

Bill Gates, chairman of Microsoft Corp., left no doubt of that, telling television host Charlie Rose ``I'm short the dollar.'' The world's wealthiest man called the record $7.62 trillion federal debt ``a bit scary'' and lamented that the U.S. is in ``uncharted territory'' fiscally.

And he's right. Just ask Warren Buffett, the world's No. 2 moneyman, who has been buying foreign currencies since 2002, citing concerns about the U.S. deficit. The bet is paying off, too. Buffett's Berkshire Hathaway Inc. reaped a $412 million pretax gain on the trade in the third quarter of 2004.

Gates and Buffett may not be reading from the same playbook as George Soros, though their investments bear some similarities. Financier Soros has long since given up on the world's reserve currency, and U.S. President George W. Bush's competence on economic matters.

more..


http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=anG6GRlMcrz8

`Reasonable Level'

``Please leave it to us,'' Li Ruogu, deputy governor of the People's Bank of China, said in Davos, Switzerland, when it was suggested a stronger yuan would help China. ``We are happy and willing to listen, but don't ask us to practice what you say,'' he said.

Huang Ju, who directs China's finance policy as deputy prime minister, threw even more cold water on speculation the yuan will rise. ``We have to maintain the exchange rate at a reasonable level,'' said Huang, who also was attending the World Economic Forum in Davos.

Yet it's Chinese officials further down the political food chain that seem to sympathize most with Gates and Buffett. ``The U.S. should take the lead in putting its own house in order,'' said Chinese central bank adviser Yu Yongding.

It's breathtaking, really, to see the U.S. being chastised by Chinese policy makers. Perhaps it's payback for all the lecturing Treasury secretaries from Robert Rubin in the 1990s to John Snow today have done here in Asia. More likely, though, Chinese officials are getting antsy about their own U.S. dollar holdings.

"Still, the U.S.'s biggest challenge isn't keeping Gates or Buffett happy; it's persuading the central banks of China and the rest of Asia not to dump their roughly $1.1 trillion of U.S. Treasury holdings. If they do, the world's two richest men also may be two of its most prescient currency speculators."

chinese officials getting antsy, and the us getting antsy about the chinese getting antsy. check mate game over.

the one that tells it all.

http://www.thestreet.com/stocks/banking/10206879.html

Countrywide's (CFC:NYSE - news - research) fourth-quarter earnings slid 39% from a year ago, as the company's hedging strategy failed to predict the refusal of long-term interest rates to rise in step with federal funds.

The mortgage company earned $343 million, or 56 cents a share, in the quarter, compared with earnings of $564 million, or 94 cents a share, last year. The decline reflected a 67% plunge in pretax mortgage banking earnings to $220 million.

Analysts had been forecasting earnings of 81 cents a share in the quarter. The shares fell $4.03, or 10.6%, to $34 in premarket Instinet trading.

snip>

The company blamed $140 million of earnings reduction on a decline in the value of derivatives apparently pegged to short end of the yield curve. Short rates rose in the quarter thanks to a 50-basis-point increase in fed funds.

"This adverse effect represents a decline in the value of hedge instruments that was not offset by a corresponding increase in the carrying value of the MSRs, which would have been expected to occur given the decline in volatility, the tightening of spreads and an increase in Treasury rates during the quarter," Countrywide said.

more...

http://story.news.yahoo.com/news?tmpl=story&cid=66&ncid=749&e=11&u=/bw/20050201/bs_bw/nf20050116686db065

Economic juggernaut, factory of the world, emerging superpower: When it comes to China's ascendancy, the journalistic cliches come fast and furious. And there's no denying that China's hypergrowth wave is a wondrous thing. But another, darker dimension to China's prosperity exists. The country is fast becoming an ecological wasteland, home to some of the world's smoggiest cities as well as rampant water shortages, soil erosion, and acid rain.


It's not a pretty picture. Moreover, judging by the spike in respiratory diseases and other ailments in recent years, China's wonder growth is taking a toll on public health.


Chinese officials have acknowledged a problem in the past, but quickly termed it a necessary side effect of rapid industrialization and catch-up economic growth, not unlike what Japan experienced in the 1960s. What's more, China is now a net importer of oil and relies heavily on coal, much of it dirty, high-sulfur stuff, for about 70% of its domestic-energy needs. Unless China can secure significantly more oil supplies from abroad and ramp up cleaner domestic-energy sources such as nuclear power and hydroelectric plants, Chinese President Hu Jintao and his Communist colleagues will face a nasty policy dilemma.


BETTING ON DENIAL. Runaway economic growth with little thought of environmental side effects at some point can provoke societal backlash. It's difficult to tell whether Beijing understands this challenge, but signs indicate it may be starting to. Last month, China's State Environmental Protection Administration (SEPA) Vice-Director Pan Yue announced the suspension of 30 large projects that have failed to meet environmental standards. The list includes 26 hydropower stations, including a $5 billion megaproject in an area skirting the borders of Sichuan and Yunnan provinces.

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Last trade 83.35 Change -0.10 (-0.12%)

Settle 83.45 Settle Time 23:37

Open 83.33 Previous Close 83.45

High 83.61 Low 83.24


The March Dollar was lower overnight in subdued trading as it consolidates above the 20-day moving average crossing at 83.32. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 83.32 would confirm that a short-term top has been posted while opening the door for a larger-degree decline during February. Multiple closes above the 25% retracement level of the May- December decline crossing at 83.71 are needed to extend the short covering rally off December's low. Overnight action sets the stage for a steady to weaker tone in early-day session trading.

The March Euro was slightly higher overnight and is breaking out above the 20-day moving average crossing at 130.802. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near- term. Multiple closes above the 20-day moving average crossing at 130.802 are needed to confirm that a short-term low has been posted and would open the door for a test of broken support crossing at 132.095. If March renews January's decline, the 50% retracement level of the April- December rally crossing at 127.290 is the next downside target. Overnight action sets the stage for a steady to firmer tone in early-day session trading.

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The March Canadian Dollar was higher overnight and is breaking out above the 10-day moving average crossing at .8103. Stochastics and the RSI are oversold and are turning bullish signaling that a low is in or is near. If March extends January's decline, the 38% retracement level of the May-November rally crossing at .7988 is the next downside target. From a broad perspective March needs to close above .8369 or below .7988 to confirm a breakout of this winter's trading range. Overnight action sets the stage for a steady to firmer tone in early-day session trading.

The March Japanese Yen was higher overnight as it extends Tuesday's short covering rebound off the 25% retracement level of last year's rally crossing at .9629. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. Closes below the 25% retracement level of last year's rally crossing at .9629 would open the door for a possible test of January's low crossing at .9549 later this winter. Closes above the reaction high crossing at .9773 would temper the near-term bearish outlook in the market. Overnight action sets the stage for a steady to firmer tone in early-day session trading.



Markets Await FOMC, Bush Speech

At 2:15 PM US FOMC Interest Rate Announcement (exp 2.5%, prev 2.25%) At 9:00 PM
President Bush Delivers Annual State of the Union Address

Currencies continued to consolidate within recent ranges as traders look ahead to today’s FOMC monetary policy meeting and President Bush’s State of the Union address later in the evening. The dollar was slightly softer overnight, slipping toward 1.3092 versus the euro and 103.39 against the yen.

With markets already pricing in a 25-bp rate hike when the Fed announces its decision at 2:15 PM EST, the key focus will be the subsequent statement. Traders will scrutinize the FOMC statement for further insight on coming policy decisions, as well as any discrepancies from previous statements, namely its ‘moderate pace’ line. The FOMC is forecasted to lift its benchmark-lending rate to 2.50%, up from 2.25%.

Also on the agenda today will be President Bush’s State of the Union address. While the speech usually has a minimal impact on currency markets, any comments from the President suggesting greater resolve in reducing the twin deficits may provide the dollar a near-term boost. President Bush’s State of the Union address is scheduled for later this evening at 9:00 PM EST. PIEHOLE ALERT :evilgrin:

Euro Edges Higher Despite Sluggish German Data

more...


edit to add:
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7511252

Gold firms in Europe, market eyes Fed rate decision

LONDON, Feb 2 (Reuters) - Gold prices firmed in Europe on Wednesday but are seen holding in well-worn ranges ahead of an expected rise in U.S. interest rates, dealers said.

Market participants were also awaiting U.S. President George W. Bush's State of the Union address later in the day for signals on what Washington might do to tackle its ballooning deficits

snip>

Markets were keen to see if the central bank would make any changes in its campaign of measured tightening to combat inflation.

Aggressive monetary tightening would lure money into U.S. dollar deposits and boost the currency -- dulling gold's appeal.

Investors were also awaiting the release of U.S. jobs data on Thursday and a meeting of the Group of Seven rich nations due later in the week.

more...

Speculators must be getting a bit antsy before the Fed meeting today. Then again, maybe they're just betting on the Groundhog.:shrug:

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s

http://www.bloomberg.com/apps/news?pid=10000103&sid=ahRB84qoXy9Q&refer=us

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The Fed may lift its target rate by a quarter percentage point to 2.5 percent, a Bloomberg survey of economists shows. The dollar's rally from a record low may stall should the Fed keep a plan to raise rates gradually, said Michael Rottman at HVB Group in Munich. The yield advantage on 10-year U.S. debt compared with Germany has narrowed from the four-year high reached on Dec. 27.

``Now is not a good time to be aggressively buying the dollar,'' said Rottman, head of currency and fixed-income research at HVB, Germany's second-largest bank. ``I have my doubts that the Fed will signal any intention to act more aggressively in raising interest rates.''

snip>

``A statement with no change to the `measured' language could see the dollar weaken,'' said Callum Henderson, head of currency strategy at Standard Chartered Plc in Singapore. ``The prospect of faster rate hikes'' had helped fuel the U.S. currency's 3.9 percent rally against the euro in January, the biggest monthly gain since May 2001, Henderson said.

The Fed increase predicted today by all but one of 86 economists surveyed by Bloomberg has failed to enhance the 10- year Treasury note's yield advantage over German 10-year bunds. The yield gap has narrowed to 61 basis points, or 0.61 percentage point, from 68 basis points on Dec. 27, which was the widest in four years.

snip>

Hedge funds have turned less positive on the dollar this month, according to a survey by Van Hedge Fund Advisors International Inc. The Nashville-based company is an adviser to hedge funds that manage $30 billion in assets.

Forty-eight percent of hedge fund managers surveyed said they were ``bullish'' on the U.S. currency, down from 61 percent last month, the firm said in a statement dated yesterday and posted on its Web site.

more....

Looks like Greenspin's jawboning last week didn't work quite the way he intended - Got the currency rallying, but the bond vigilantes didn't really bite. Wonder what he'll try this time? :shrug:

The Outstanding Public Debt as of 02 Feb 2005 at 03:19:05 PM GMT is:


01/31/2005 $7,627,742,597,775.41
12/31/2004 $7,596,165,867,424.14
11/30/2004 $7,525,209,508,979.45
10/29/2004 $7,429,677,448,545.04


Prior Fiscal
Years

09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/28/2001 $5,807,463,412,200.06

Pre-BeezleBush
Years

09/29/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43
09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32
09/30/1993 $4,411,488,883,139.38
09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
09/29/1989 $2,857,430,960,187.32
09/30/1988 $2,602,337,712,041.16
09/30/1987 $2,350,276,890,953.00

http://www.financialsense.com/Market/daily/tuesday.htm

DJIA: As long as the 10380 continues to hold, and so far it has, it is good news for the bulls

SP500: As long as the 1170 continues to hold, and so far it has, it is good news for the bulls.

NASDAQ: As long as the 2000-1970 zone continues to hold, and so far it has, it is good news for the bulls

US Dollar: It has more room to rally. If it can get above 85, the next upside target is 87-87.5

snip>

In my view, the overall picture remains mixed, with neither the bulls nor the bears firmly in control. However, the bulls have made small progress against the bears, the indices are still holding above support, and some of the technical indicators are showing positive divergences, which explains the "pop" this week, but it would be a mistake to assume that it is certain. At this point I assume that either scenario #2 or scenario #3 is unfolding, and I see no good reason to change our position, that for the time being, cash or hedged, is the best place to be.

more...

Dow 10,566.86 +14.92 (+0.14%)
Nasdaq 2,069.19 +0.49 (+0.02%)
S&P 500 1,190.87 +1.46 (+0.12%)
10-yr Bond 4.144% +0.01
30-yr Bond 4.595% 0.00
NYSE Volume 353,453,000
Nasdaq Volume 545,638,000


10:30AM : Equities continue to bounce around the flat line as buying remains selective in the early going... Energy (+0.8%) has shown strong follow through in the wake of better than expected earnings from DVN and an upgrade on VLO, while software has maintained respectable gains following strong Q1 guidance from ADBE... Materials, utility, airline and telecom services have also found modest buying interest while semiconductor, hardware, networking and biotech have shown weakness... Also under pressure has been financial (-0.3%) on the heels of disappointing Q4 results from CFC... NYSE Adv/Dec 1498/1324, Nasdaq Adv/Dec 1213/1430
10:00AM : Major indices now trade in split fashion but continue to hover around the unchanged mark... With regards to notable earnings reports this morning, shares of Google (GOOG 212.75 +20.85) have surged following stronger than expected Q4 results, growing earnings sevenfold as sales more than doubled to $1.0 bln... GOOG's solid report, which has prompted several brokerage firms to upwardly revise estimates, has also provided modest buying support for technology...

Boeing (BA 51.98 +0.94), despite posting an 84% decline in Q4 net income, beat street expectations, turning in earnings of $0.11 as it also guided FY05 and FY06 earnings in line with analysts' forecasts... Meanwhile, crude oil futures remain relatively stable around $47/bbl ahead of weekly oil inventories data... At 10:30 ET, the Energy Dept. is expected to show a 2 mln barrel rise in weekly crude supplies and show a draw of 2.25 mln barrels in distillates... NYSE Adv/Dec 1275/1276, Nasdaq Adv/Dec 1243/1166

http://www.freep.com/money/business/bankrupt2e_20050202.htm

BOSTON -- Costly illnesses trigger about half of all personal bankruptcies, and most of those who go bankrupt because of medical problems have health insurance, according to findings from a Harvard University study to be released today.


Researchers from Harvard's law and medical schools said the findings underscore the inadequacy of many private insurance plans that offer worst-case catastrophic coverage, but little financial security for less severe illnesses.


"Unless you're Bill Gates, you're just one serious illness away from bankruptcy," said Dr. David Himmelstein, the study's lead author and an associate professor of medicine. "Most of the medically bankrupt were average Americans who happened to get sick."

snip>

Out-of-pocket medical expenses covering co-payments, deductibles and uncovered health services averaged $13,460 for bankruptcy filers who had private insurance at the onset of illness, compared with $10,893 for those without coverage. Those who initially had private coverage but lost it during their illness faced the highest cost, an average of $18,005.


"We need to rethink health reform," said Dr. Steffie Woolhandler, a study coauthor and associate professor of medicine at Harvard. "Covering the uninsured isn't enough. We also must upgrade and guarantee continuous coverage for those who have insurance."

more...

http://www.freep.com/money/business/tompor2e_20050202.htm

snip>

More rate increases, while not great for borrowers, will help savers regain their footing.

Consider: One-year CDs had an average yield of 5.33 percent before the Fed began slashing rates on Jan. 3, 2001.

Now, the average one-year CD yields 2.19 percent, according to Bankrate.com. It's up, but not much, since the Fed began raising rates on June 30, 2004. A one-year CD was yielding 1.51 percent last June.

So big deal. Who'd be tempted to lock up any cash for a measly 2 percent?

"On CD yields, we're still in the early innings for improvement," said Greg McBride, senior financial analyst for Bankrate.com.

more...

http://www.forbes.com/home/services/2005/01/31/cz_bc_0131banks.html

NEW YORK - With the stock market valuing one dollar of their earnings at $15, are shares in U.S. regional banks set to fall?

Legg Mason analyst Adam Barkstrom thinks so. He says that these banks are drawing far too much earnings from yields on mortgage bonds and other securities they've bought recently--and far too little from commercial loans. The problem is, banks borrow money to buy these securities and, while that cost is increasing, the yields on those securities are not rising to compensate. In Wall Street parlance, the yield curve is flattening, which means banks have to make more loans, or buy more bonds, to get the same kick to their earnings.

"There is pressure on margins--and we've already seen this in the fourth quarter," says Barkstrom. Yet regional banks "are still trading at a full valuation."

Barkstrom has drawn up a list of 16 regionals he thinks are especially vulnerable. What these banks have in common are big holdings of securities. They also rely on short-term loans to fund themselves--that is, borrowings coming due in a year or less, which have rates that are likely to increase upon renewal. He notes that his table--based on third-quarter financial statements--does not consider the effect of any hedging with derivatives that might protect against interest-rate moves.

Set To Fall?

more...

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_gilbert&sid=ay1kQECp2v50

snip>

There's plenty of angst to go around. The U.S. looks at the moribund European economy and sees a gaggle of work-shy French and German underperformers relying on state handouts, and accuses Asian nations of stealing American jobs by manipulating currency rates to prop up their exports.

Europe sees the U.S. as an overspending economic bully trying to use an undervalued dollar to reverse its $60 billion trade deficit, threatening to bankrupt the 12 nations sharing the euro in the process. Japan, in the meantime, is terrified that a renewed slump in the U.S. currency will snuff out its own nascent recovery as a surging yen crimps exports.

As G-7 president for 2005, the U.K hosts this week's meeting, which runs Feb. 4-5. While geographically part of Europe, it remains out of the single currency, and is politically more aligned with the U.S. than its neighbors.

Breaking Taboos

That may provide an opportunity to break some of the taboos that seemed to enshroud recent G-7 gatherings, with Britain playing the role of honest broker. At a November U.K. government committee meeting, Bank of England Governor Mervyn King said the global financial system is in a ``potentially very awkward'' situation, with some countries tying their currencies to the dollar while others are freely floating.

With the U.K. at the helm of the G-7, ``there will be an opportunity to start to talk again about a set of issues that have not been talked about for a long time, such as `How does the international monetary system operate?,''' King said. ``The central bankers already do this in their fora and I think we need to involve finance ministers, as well.''

more...

http://news.ft.com/cms/s/7fe89fb0-73c1-11d9-b705-00000e2511c8.html

Standard & Poor's on Monday raised its credit rating on Russia from "junk" to investment grade in a move that brings S&P into line with the other two leading ratings agencies.

snip>

"The upgrade reflects recent, crucial improvements in the government's debt level and external liquidity," said Helena Hessel, S&P analyst. "These improvements are so significant that they now outweigh the serious and growing political risk that continues to be a key ratings constraint on Russia."

Helped by a rising oil price, the Russian government became a net creditor at the end of last year, with a net external asset position of almost 11 per cent of current account receipts, compared with a net debtor position of more than 17 per cent a year earlier.

This was "an important rating consideration in the context of the continued political, institutional and structural weaknesses the country faces", said Ms Hessel. "At this point, the financial flexibility afforded by the government more than offsets these other challenges." The Russian government's break-up of Yukos, the oil company, and its pursuit of VimpelCom, a mobile phone company, for back taxes have dented investor confidence.

more...

http://news.ft.com/cms/s/925edcf4-747f-11d9-a769-00000e2511c8.html

General Motors announced a new round of production cutbacks on Tuesday at its North American assembly plants after it and several other carmakers reported disappointing January sales.

According to Autodata estimates, total US car and light truck sales dropped to a seasonally adjusted annual rate of 16.3m units last month, from 18.4m in December and 16.4m in January 2004.

In a rare setback, Toyota's sales shrank by 2 per cent. Honda was down by almost 10 per cent. Among those bucking the trend was Nissan, which reported a 6 per cent improvement over January 2004.

Car and truck sales in December reached the second highest monthly total on record, due partly to stepped-up incentives offered by several Asian carmakers, including Toyota. "We expected some payback", said Paul Ballew, GM's chief sales analyst. January is traditionally the weakest month of the year.

Both Mr Ballew and his counterpart at Ford, George Pipas, forecast stronger sales later in the year, reflecting the sturdy US economy. :eyes: Tomorrow, tomorrow, I love ya tomorrow...

more...

MONEY, they can't buy their damned cars and other junk??

Then they whine because their sales are down....DUH!???

:kick::kick::kick:

Miners lead the way, fueled by Smith Barney's forecast for strong earnings growth in the industry.

http://money.cnn.com/2005/02/01/news/international/markets_europe.reut/index.htm

LONDON (Reuters) - European stocks extended their march to new multi-year highs Tuesday, led by mining shares, while Swiss chemical group Ciba fell 7 percent after providing disappointing numbers and a muted 2005 outlook.

French utility Suez added 2 percent as it beat 2004 sales forecasts, driven by strong international demand for electricity and gas.

Miners Rio Tinto and BHP Billiton gained 3 percent each after brokerage Smith Barney forecast strong earnings growth in the industry. Anglo-American rose nearly 4 percent.

The FTSEurofirst 300 index of pan-European blue chips added 0.8 percent to close at 1,070.1 points, its highest level since mid-2002. It is up nearly 3 percent from its December closing levels.

Strategists said strong global corporate earnings were supporting the markets, while investors had feared the worst.

more...

http://www.bloomberg.com/apps/news?pid=10000103&sid=a1fwiJ2zEJYY&refer=us

Feb. 2 (Bloomberg) -- Boeing Co., the world's second-biggest commercial-aircraft maker, said fourth-quarter profit fell because of costs to halt production of its 717 and the U.S. Air Force's delay in awarding a refueling-plane contract.

snip>

Chief Executive Officer Harry Stonecipher completed his first year on the job by canceling the slow-selling 717, Boeing's smallest commercial plane, and recording spending to develop a refueling tanker. Last year, the company fell further behind Airbus SAS, which delivered more jetliners than Boeing for a second straight year.

``To maintain investors' interest, more will have to come from the commercial side,'' said Richard Aboulafia, aerospace consultant for Teal Group in Fairfax, Virginia, before the statement was released.

snip>

Stonecipher, 68, made repairing Boeing's reputation as a defense contractor his top priority for 2004. Defense sales surpassed commercial sales for the first time in 2003.

snip>

Congress rejected Boeing's $23 billion tanker proposal last year after former Chief Financial Officer Michael Sears and former Air Force purchasing official Darleen Druyun were convicted of violating federal conflict-of-interest laws. Druyun met Sears in late 2002 for a job interview while she was representing the military in contracts involving Boeing.

Druyun admitted last year that she favored Boeing for some contracts because the company hired her daughter, causing U.S. Defense Secretary Donald Rumsfeld to order more investigations into favoritism in past Boeing contracts.

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http://www.gold-eagle.com/editorials_05/willie020105.html

Wait a minute!!! Isn't that backwards???
Welcome to today's world, where the financial sector has turned everything upside down. Most past effects are working in opposite fashion nowadays. Back in summer 2003, an irreverently titled series of articles was put forth, "Ass-Backward Economics, part I, part II, part III, and part IV." The foundation mindset for US Economic policy and direction, well, has its head squarely up its derriere. It is no surprise that various traditional relationships are no longer working. The entire system is twisted so badly, it can hardly be recognized from past cycles. In many ways, the business cycle is broken. It should come as no surprise that certain consumer prices are actually being pushed down as a result of the utter desperation that is Fed policy. Assumptions should not be made. Dynamics of forces are exerted in very bizarre and atypical ways, ways the press & media fail to report adequately. The CPI bears little resemblance to an indicator of prices within the US Economy. It is indeed a strange mix.

The Federal Reserve is surely stimulating, but its policy stimulus is feverishly assisting Asia while it tragically crushes the real economy within the USA, of tangible businesses outside the financial framework. New application of money and credit is actually putting DOWNWARD pressure on prices which comprise the Consumer Price Index. That is not to say prices across the spectrum are national falling, no way. Cost inflation is raging rampant rampaging. These lost relationships and many other related topics are discussed and analyzed in the Hat Trick Letter issues, along with investment opportunities which profit from the grand commodity bull market.

We will not venture down the tired road of hedonic distortion in aggregate economic statistics. Quality improvements are legendary in the Consumer Price Index, Gross Domestic Product, income, savings, productivity, and elsewhere. In the CPI to be sure, such self-serving improvements have been made to justify lower adjusted prices for numerous product items. Faster central processors (CPU), faster disk storage access, and faster connectivity for both personal computers and larger servers enable wizards in the USGovt ministries to claim that computer & network system expenditures are 10 to 12 times larger than reality. This practice goes hand in hand with associated lower price adjustments, from greater speeds. Anti-lock brake systems are a critical enhanced feature in automobiles. So presto, car prices are suppressed to account for greater functionality and quality. Additional television backplane connectivity and other features enable end product prices to be adjusted downward here too. Hedonic adjustments turn an economic stall into strong growth in the GDP, notwithstanding chronic containment of the deflator (price inflation offset). For instance, Q3 of 2004 conveniently avoids all reference to higher energy prices!!! Hedonics keep the CPI down by directly lowering prices for a raft of products. The deception is blatant, obvious, and shameful. Let us put the wonders of hedonics aside. The other side of the CPI deception is intentional weighting of large items in order to suppress the index itself.

Inflation factors which push the Consumer Price Index down are many:

* Ample low-cost mortgage funds have lifted housing prices, but have smothered the housing rental market where bargains are commonplace.
* Zero percent deals for car sales have kept new car sales on "life support" for so long that easy financing and rosy incentives have become the norm, thus smothering the used car market, and their prices.
* Dollar supply explosion has provoked a falling US$ and rising systemic cost inflation, which causes more business failure, more liquidations, more bankruptcies, and accompanying distressed lower prices.
* Credit explosion is directed toward Asian imported products, which has forced a monstrous trade gap, thus enabling a massive Asian industrial expansion, followed by continued flood of low priced goods inside the USA.

more..

Dow 10,586.45 +34.51 (+0.33%)
Nasdaq 2,072.38 +3.68 (+0.18%)
S&P 500 1,192.44 +3.03 (+0.25%)
10-Yr Bond 41.50 +0.14 (+0.34%)
NYSE Volume 581,227,000
Nasdaq Volume 795,184,000



11:00AM: Market improves its stance as oil prices fall following mixed weekly inventory data... Crude oil futures, which had traded relatively unchanged ahead of the EIA report, have fallen to $46.85/bbl (-$0.27) and provided just enough momentum to push equities back into positive territory... Distillate stockpiles fell 2.9 mln barrels, roughly in line with forecasts of a 2.1 mln barrel decline due to cold weather in the Northeast, while crude oil supplies fell 300K barrels, missing expectations of a 2.1 mln barrel increase...

Gasoline inventories, however, rose 1.6 mln barrels to a total 216.3 mln, much better than the 700K rise anticipated by analysts since refiners had shut down some units and repaired some others last month...NYSE Adv/Dec 1619/1325, Nasdaq Adv/Dec 1328/1422

10:30AM: Equities continue to bounce around the flat line as buying remains selective in the early going... Energy (+0.8%) has shown strong follow through in the wake of better than expected earnings from DVN and an upgrade on VLO, while software has maintained respectable gains following strong Q1 guidance from ADBE... Materials, utility, airline and telecom services have also found modest buying interest while semiconductor, hardware, networking and biotech have shown weakness... Also under pressure has been financial (-0.3%) on the heels of disappointing Q4 results from CFC... NYSE Adv/Dec 1498/1324, Nasdaq Adv/Dec 1213/1430

10:00AM: Major indices now trade in split fashion but continue to hover around the unchanged mark... With regards to notable earnings reports this morning, shares of Google (GOOG 212.75 +20.85) have surged following stronger than expected Q4 results, growing earnings sevenfold as sales more than doubled to $1.0 bln...

http://finance.yahoo.com/mo

http://www.gold-eagle.com/editorials_05/rostenko013105.html

snip>

Oh yes, I know. The gains are justified. GDP grew at a healthy 4.4% last year. That is, if you believe the GDP figures. Bear in mind that official GDP numbers are calculated with official inflation numbers (among other data, of course). Unless your purchases over the past ten years have been limited to "made in China" toothbrush holders and generic pancake mix, you're undoubtedly aware that inflation is running at a substantially higher clip than official figures belie. When you understate inflation, you overstate GDP. So take that 4.4% with a very large grain of salt.

But let's give our fine feathered friends, the feds, the benefit of the doubt. Let's say the economy isn't nearly as bad as we crusty bears incessantly insist. Then where are the jobs? There aren't more of them today than four years ago. And if the economy is growing at such a healthy clip, where are the wage increases?

Wages are up 2.5% over the past year. That's the lowest increase on record. Meanwhile, official figures put inflation at around 3.3%. Even if this figure were anywhere near reality, you can see that the American worker is growing poorer. The cost of living is rising faster than wages. That's not a recipe for a healthy consumer-driven economy.

snip>

IT'S NOT WEALTH, FOLKS! IT'S INFLATION. It's the polar opposite of wealth. It is the very stuff that corrodes, sullies and diminishes wealth but somehow the average American has been led to believe that the two are one and the same. (By a brilliant and obviously effective long-term program of brainwashing by the Fed, the same folks who brought you the idea that unbacked pieces of colored paper are "money".)

That's a long way of getting around to my point, and surprisingly enough, I do have one. (Please allow me the luxury of diverging from my purpose in order to slam the Fed. I'm a simple man and I live for this one pleasure.) And here it is: Fundamental economic conditions OBVIOUSLY continue to deteriorate even while the headline numbers continue to look "healthy." Meanwhile our "wealth" is fleetingly asset-bubble-dependent. And the stock market remains TEMPORARILY decoupled from economic reality as is typical in big bear market rallies.

more...

http://www.dallasnews.com/sharedcontent/dws/bus/columnists/all/stories/020205dnbusdimartino.bfab8.html

As the Federal Reserve prepares to raise short-term interest rates a sixth time today, it does so with the realization that long-term rates have remained wholly unaffected by its campaign.

At some point you have to ask: Are we headed toward an inverted yield curve, in which short-term rates exceed their long-term brethren?

You'd better hope not.

"In that we typically have inverted yield curves right before the onset of a recession, you could say they are about as rare as recessions," said Steven Wood, chief economist at Insight Economics.


Uncharted waters

snip>

Market experts are confounded. Mr. Wood decided to look to history for a precedent. What he found was quite unsettling, unless you're as comfortable with uncharted waters as Christopher Columbus was.

"I went back to the 1950s and could not find a period of time that long-term rates did not start to rise when the Fed started raising rates," he said.

more...

http://www.bloomberg.com/apps/news?pid=10000087&sid=aWK36ZCK_zHo&refer=top_world_news

Feb. 2 (Bloomberg) -- German unemployment jumped to the highest since World War II in January as new rules added welfare recipients to the jobless register, clouding the outlook for Chancellor Gerhard Schroeder in elections this month.

The number of people out of work rose by 227,000 to 4.71 million in seasonally adjusted terms, boosted by 230,000 people formerly on social welfare, the Nuremberg-based Federal Labor Agency said today. The adjusted unemployment rate rose to 11.4 percent, a seven-year high, while the unadjusted jobless total passed 5 million for the first time since the war.

Schroeder's government brought in the labor-market changes in an attempt to get more people into work in Europe's largest economy, which returned to growth last year after the longest period of stagnation since the war. The chancellor is campaigning today in Schleswig-Holstein, where his Social Democratic Party is trying to hold on to power in the Feb. 20 state elections.

``The psychological significance of 5 million unemployed could be very damaging for the government,'' said Hans-Juergen Hoffmann, managing director of Hamburg-based opinion-research company Psephos GmbH. ``The rise in unemployment will make the campaign more difficult.''

more...

:puke: alert - reads like a cheerleading section for old Ben

http://quote.bloomberg.com/apps/news?pid=nifea&&sid=aov6ijWO8QHU

Feb. 2 (Bloomberg) -- After he joined the Federal Reserve Board as a governor in August 2002, Ben Bernanke reached out to junior researchers with an unconventional tool: a lunch tray.

Bernanke began joining staff economists in conversation around cafeteria tables, a break with protocol at the insular Fed. The talks evolved into a series of informal luncheon seminars that allowed the researchers to trade ideas with a top policy maker outside their regular, twice-monthly briefings with the seven Fed governors.

Opening up debate has been Bernanke's mission throughout his time at the Fed. He has differed with Chairman Alan Greenspan and provoked other colleagues into a rare public discussion on whether to set numerical goals for inflation. He encouraged policy makers to cut in half the time they take to release meeting minutes. And with his bold, unfiltered speeches, he's moved bond markets more than any Fed official except Greenspan.

snip>

Just how Bernanke's style and economic convictions mesh with Washington politics may be a consideration for President George W. Bush, who nominated him to the Fed position. On Jan. 23, the New York Times reported, citing unidentified people, that Bernanke is a candidate to replace Gregory Mankiw as chairman of the Council of Economic Advisers, which helps the president formulate policy.

``It's been pretty political under Bush,'' Greg Valliere, chief political strategist at Washington-based Stanford Washington Research, says of the council. ``It has been used much more than before to support the president's policies rather than provide economic analysis.'' That would be an adjustment for Bernanke, who was chairman of Princeton University's economics department from 1996 to 2002.

No Sycophant

``Bernanke has to be careful not to be viewed as a political sycophant,'' Valliere said of the Fed governor, whose only previous public office was as a member of the Montgomery Township, New Jersey, Board of Education. ``That could damage his standing down the road if he were considered for Fed chairman.''

more...

http://www.bloomberg.com/apps/news?pid=10000085&sid=a6NcStFqsE5E&refer=europe

Feb. 2 (Bloomberg) -- OAO Rosneft, Russia's state-owned oil producer, and Vnesheconombank said a $6 billion loan from Chinese banks to finance oil deliveries to China wasn't used to buy the company that was once OAO Yukos Oil Co.'s biggest unit.

Russian Finance Minister Alexei Kudrin yesterday said Rosneft borrowed $6 billion from Chinese banks via state-run Vnesheconombank to fund the purchase of OAO Yuganskneftegaz in December. Russia sold Yugansk for $9.3 billion at an auction to help recover back taxes from Yukos. Rosneft has repeatedly declined to say how it funded the Yugansk purchase.

``Rosneft in fact agreed to supply oil to China through 2010 for an advance payment of $6 billion, and the transaction in fact involves Russian and Chinese financial institutions, including Vnesheconombank,'' Rosneft said today in an e-mailed statement. ``But this money, which has been received already, isn't linked to the Yuganskneftegaz acquisition.''

Russia, the world's second-biggest oil producer, seized and sold Yugansk to help collect on $28 billion of back taxes levied on Yukos. Government attacks on Yukos, Russia's biggest oil exporter last year, disrupted crude sales to China and helped drive up world oil prices to a record in October.

The Finance Ministry said in a statement on its Web site that Kudrin never directly linked the Chinese loan to the purchase of Yugansk. At yesterday's press conference, Kudrin told journalists about the loan when asked how Rosneft paid for Yugansk.

more...

http://news.ft.com/cms/s/cff8cf5c-7533-11d9-9608-00000e2511c8.html

The New York Stock Exchange on Wednesday made public a controversial internal report on events leading to the debacle over the $200m pay and compensation package given to Richard Grasso, its former chief executive.


The report, prepared for the exchange after Mr Grasso’s resignation, concluded that his compensation was “grossly excessive” in particular in 2000 and 2001, when it reached $26.8m and $30.6m respectively. This, the report found, was “approximately three to four times what was reasonable”.

“A conservative estimate of what Grasso’s yearly compensation should have been in this period if $4-6m, based on the median level of an appropriate peer group”.

Mr Grasso's compensation of almost $200m has been at the centre of a legal battle since he was ousted from the chairmanship in 2003.

Eliot Spitzer, New York state attorney general, filed a lawsuit in 2004 against Mr Grasso, arguing that his compensation package represented excessive remuneration for the head of a not-for-profit organisation. Kenneth Langone, who headed the exchange’s compensation committee between June 1999 and June 2003, was also sued.

more...


NYSE Report on Grasso's Pay Calls It `Far Beyond Reasonable'
http://quote.bloomberg.com/apps/news?pid=10000103&sid=a93Z06J2WhiI&refer=news_index

snip>


In response, Grasso sued the NYSE and John Reed, his successor as chairman. Reed referred the pay case to Spitzer's office. Grasso accused the exchange of violating his employment contract and accused Reed of using the Webb Report ``to wage a one-sided war of words.''

Webb was voted the nation's top white-collar criminal defense lawyer in a 2003 survey of attorneys earlier this year by Washington D.C.-based Corporate Crime Reporter, a national weekly legal newsletter. His submission to the NYSE was entitled ``Report to the New York Stock Exchange on Investigation Relating to the Compensation of Richard A. Grasso.''

Judge Ramos said the report wasn't privileged because it doesn't contain legal advice or analysis.

A former federal prosecutor, Webb handled former General Electric Chief Executive Officer Jack Welch's divorce and defended Microsoft Corp. in 2002 against antitrust claims brought by state and federal regulators. He defended Altria Group Inc.'s Philip Morris in civil suits brought by smokers and state regulators in 1998 and 1999.

Indexes are now overbought.

I sold all QQQQ this morning and put everything into USPIX, a double-short NASDAQ fund. Possibly for the rest of the year; definitely after April. 2005 is likely to be a down year.

http://www.forbes.com/business/feeds/ap/2005/02/02/ap1799610.html

The European Union admitted Wednesday that its listless economic performance had derailed plans to become the world's most dynamic economy by 2010 and set out on a less ambitious pro-business course to create more jobs.

The reasons for abandoning the ambitious goals set out five years ago belong both in the past - sluggish growth - and the future, whose promise seems primarily in Asia.

"The simple truth from the last five years is that we have to get our economy moving," European Commission President Jose Manuel Barroso told the European Parliament after painting a bleak picture of the EU's performance.

Having failed to rein in high unemployment, fully harness a borderless EU economy and remove labor restrictions, the 25-nation EU lags far behind the global ambitions it set out at a summit in Lisbon in 2000.

"Lisbon has been blown off course by a combination of economic conditions, international uncertainty, slow progress in the member states and a gradual loss of political focus," the Commission said in a statement.

snip>

Instead of setting a target to become the global No. 1, Barroso said Wednesday that "the real issue is not about facts and figures." Instead, he said, it was about "how we pay for our education, pensions, social services and health care."

more...

edit to add
Could this be more evidence of the world planning forward movement without as much regard for the US? Competing with the US on her terms just ain't worth the trouble and ain't working - let's re-evaluate and move in another direction. :shrug:

....I hope not.

too well though. Then again, it is from the AP so the comments from the socialist legislator's are buried at the end. Let's hope they have a little more voice than this article leads one to believe.

Perhaps one of our "lurkers" from overseas can give us a better idea of what's going on.

http://business.timesonline.co.uk/article/0,,19149-1459741,00.html

Socialism, said Nye Bevan, is the language of priorities. If this is true, then maybe it explains why Tony Blair no longer describes himself as a socialist.

In his opening speech at Davos, Mr Blair said his priorities for the G8 presidency would be to win the war on terror, to bring democracy to Iraq and to settle the conflict between Israel and Palestine, in addition to his previously announced "top priorities" of Africa and climate change.

For the many listeners who were left wondering about what exactly would be done to act on this lengthy shopping list in the six months between now and the G8 summit in Britain, the Prime Minister offered greater detail on Thursday morning. In the keynote session of the day, Mr Blair had the opportunity to present his plans to a panel of Africa’s most important movers and shakers - Presidents Thabo Mbeki, of South Africa, and Olesegun Obusanji, of Nigeria, as well as former President Clinton, Bill Gates and Bono, the charismatic Irish singer who has devoted himself to campaigning on African poverty and AIDS.

Mr Blair was asked what specifically he hoped to achieve on Africa at the G8. This is how he replied: "Increasing aid, debt relief, trade, improving Africa governance and dealing with killer diseases – those are our priorities".

The African leaders, by contrast, seemed to have a much clearer understanding of what the word "priority" means. President Obusanjo, asked by the shell-shocked interviewer to compare his priorities for the year ahead with those of Mr Blair, was admirably specific: "The concrete priority is first of all to achieve peace and security in as much of Africa as possible. Without peace and security we have no ability to do any other thing."

snip>

What were the most important challenges identified for the urgent attention of world leaders? The winner by a huge margin was poverty, with 64 per cent support. The second priority was equitable globalisation, with a 55 per cent vote and the third was climate change with 51 per cent. Europe, by contrast, came last with less than 5 per cent support with China, world trade, the global economy and Islam also bringing up the rear.

What does this tell us about the real priorities of the global plutocracy? Mainly, I suspect that poverty and equity is what they feel the need to talk about, in order to help justify the enormous wealth and inequality which they enjoy.

more...

http://www.washingtonpost.com/wp-dyn/articles/A36779-2005Jan25.html

Dear Klaus Schwab,

I wanted to let you know I won't be able to make it to this year's schuss-and-schmooze in Davos.

What with the Renaissance Weekend and the Alfalfa Dinner, my calendar has been kind of tight. Herb Allen has already sent out the save-the-date card for the annual moguls meeting in Sun Valley, which I'll have to sandwich in between Bohemian Grove and the Fed's retreat at Jackson Hole. And with Conrad Black on the injured reserve list, a lot of the Bilderberg planning has fallen to me.

To tell you the truth, Klaus, I have to admire how our CEO friends can attend all these sessions, serve on four or five boards and still run $50 billion companies. You have to wonder whether they spend as much time talking to their customers and front-line employees as they do talking to one another.

Even without me, however, it looks like Washington will be well represented at Davos this year.

I see from the Preliminary Programme that you'll have nearly enough U.S. senators for a quorum call (Shelby, Hatch, Smith, Sununu, Dodd, Chambliss, Frist, Biden and McCain).

And even though the priorities of Davos Man -- climate change, corporate social responsibility, global governance, income equality -- don't quite line up with those of Crawford Man, you've managed to snare a respectable crew from the Bush administration: Chao (Labor), Aldonas (Commerce), Taylor (Treasury), Zoellick (USTR), Forbes (CEA), Donaldson (SEC) and Powell (FCC). I'm sure the boss will want them all to attend tomorrow's session on "Does God Love Democracy?"

more...

http://hosted.ap.org/dynamic/stories/T/TOWER_BANKRUPTCY?SITE=AZTUS&SECTION=HOME&TEMPLATE=DEFAULT

DETROIT (AP) -- Auto parts supplier Tower Automotive Inc., facing lower auto production volume and high steel prices, filed for bankruptcy protection from its creditors Wednesday as part of a debt restructuring effort, the company said.

Tower, which makes auto body structures and suspension components for every major automaker and is a major supplier to Ford Motor Co., said the filing would help it reorganize its debt while continuing normal business operations.

In documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York, Tower reported $787.9 million in assets and $1.3 billion in debts.

Tower is one of many auto suppliers feeling the squeeze from automakers, who are demanding lower prices to offset incentives and other costs in a highly competitive market. At the same time, suppliers are expecting no relief in the coming year in the high price of steel and other raw materials.

Tower President and CEO Kathleen Ligocki said the company also was hurt by the termination of early-pay programs by automakers. The programs, established in 2001, allowed automakers to pay suppliers early for products and therefore get a discount. Now that the programs are ending, Tower found itself millions of dollars in debt.

more...


Gotta run for the day :hi:

http://biz.yahoo.com/ap/050202/nyse_grasso_10.html

snip>

Former New York Stock Exchange Chairman Richard A. Grasso had too much control in setting his controversial $187.5 million compensation and took advantage of personal connections with a board of directors that had unusually high turnover, the NYSE claimed in a previously confidential report released Wednesday.


The NYSE released the so-called Webb report, named for attorney Daniel Webb who compiled it, after a judge overseeing New York Attorney General Eliot Spitzer's suit against Grasso ruled last week that the report was not subject to attorney-client privilege. Webb was retained by the NYSE's new leadership in late 2003 to investigate Grasso's pay

<snip

I wish I could set my compensation.

<snip>

"Raising rates by more than 25 basis points would shock the market so much that the Fed's credibility would vanish," said Jack Ablin, chief investment officer with Harris Private Bank. There are 100 basis points in one percentage point.

The Fed has painstakingly telegraphed its moves on rates for the past year. So investors will be paying close attention to the statement that accompanies the rate decision. If the Fed reiterates its "measured" stance toward raising rates, as it has since May, that would be a sign that no bigger hikes are coming in the near future.

"Before the Fed went ahead and raised by a half-point, it would probably choose to eliminate the measured language," said Oscar Gonzalez, an economist with MFC Global Investment Management.

In addition, there just doesn't seem to be enough evidence yet to suggest the economy is in danger of overheating.

Mark Vitner, chief economist of Wachovia, said the Fed would probably like to see the federal funds rate at about 4.25 percent by the end of the year, in order to achieve a so-called "neutral" rate that would combat inflation without curtailing economic growth.

In order to get there, the most reasonable scenario would be for the Fed to raise rates a quarter-point at every meeting this year, he said.

But if the Fed were to move more rapidly to get to this target, Vitner argued, that might cause a spike in delinquencies on both residential and commercial mortgages, which would obviously have a negative impact on banks. And the Fed would probably like to avoid that.

"The Fed has to conduct a bit of a high wire act. If rates were to rise quickly that would put part of the economic expansion at risk, particularly residential construction and commercial development." Vitner said.

<snip>


http://money.cnn.com/2005/02/01/news/economy/fed_preview/index.htm

NEW YORK (CNN/Money) - The Federal Reserve increased a pivotal short-term interest rate that banks use to determine rates for many loans by a quarter-point Wednesday to 2.5 percent.

The rate hike -- the sixth since June -- came at the conclusion of a two-day Fed meeting and was widely expected on Wall Street.

The Fed's Open Market Committee added in a statement that it plans to maintain a "measured" stance towards boosting rates, which market observers interpret to mean that the Fed is likely to keep raising rates at quarter-point increments as opposed to taking more drastic action to combat inflation.






http://money.cnn.com/2005/02/02/news/economy/fed_rates/index.htm

Wow! Look at the NASDAQ Spike!


http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B9CF59762%2D76B5%2D4AB6%2DBAF5%2D28EB7254411C%7D

Gold for April delivery last traded at $423.60 an ounce in the after-hours session, up 60 cents.

Futures barely budged ahead of the rate announcement, prompting prices to close out the regular session at $423 an ounce, up 10 cents -- off the contract's intraday high of $424.10. The contract lost $6.20 over the previous four trading days.

The Federal Open Market Committee increased its target for overnight interest rates by a quarter of a percentage point Wednesday afternoon, in line with market expectations. The Fed didn't make major changes to its policy statement, once again concluding that policy "accommodation" could be removed at a "measured" pace. See full story.

The "Fed did as expected," and its policy statement was "absent of any hawkish statements," said Charles Nedoss, an analyst at Peak Trading Group.
<snip

Dow 10,586.45 +34.51 (+0.33%)
Nasdaq 2,071.24 +2.54 (+0.12%)
S&P 500 1,191.96 +2.55 (+0.21%)
10-Yr Bond 41.40 +0.04 (+0.10%)
NYSE Volume 1,422,331,000
Nasdaq Volume 1,751,245,000



3:30PM: As was the case so often in January, investors sell into strength during the final hour of trading, as the broader averages now trade mixed... The Nasdaq has most recently relinquished modest gains while the S&P 500 continues to test its 50-day simple moving average (1189)... Tomorrow marks the largest day of the week for earnings reports, as quarterly results are expected from 23 S&P constituents (i.e. G, PEP, CMCSA, FON, WHR and RTN) before the bell...

January same store sales will be a focal point tomorrow morning as well while investors will also sift through a handful of economic reports... At 8:30 ET, initial claims (consensus 330K) and a preliminary read on Q4 Productivity (consensus +1.8%) will be released while Jan ISM Services (consensus 61.0) and Dec Factory Orders (consensus +0.6%) will be out at 10:00 ET...NYSE Adv/Dec 1938/1363, Nasdaq Adv/Dec 1573/1503

3:00PM: Choppy trading persists in late day action, but the indices remain resilient heading into the last hour of trading... Treasuries, however, which had under modest pressure ahead of the Fed's remarks, rebounded slightly in the last half hour to push the 10-year note up 2 ticks to yield 4.12%, but gains have just as quickly disappeared as many traders have shaken off the bounce and resumed the move lower, simply avoiding treasuries in a rising interest-rate environment...

Meanwhile, the dollar has weakened somewhat against both the euro (1.3038) and the yen (103.78), but hold modest gains, as there was yet again no mention of the greenback (via a budget deficit comment) in the policy statement...

http://finance.yahoo.com/mo

Dow 10,596.79 +44.85 (+0.43%)
Nasdaq 2,075.06 +6.36 (+0.31%)
S&P 500 1,193.19 +3.78 (+0.32%)
10-Yr Bond 41.40 +0.04 (+0.10%)
NYSE Volume 1,586,233,000
Nasdaq Volume 1,962,476,000

Close: The market opened higher following another round of strong earnings reports and strengthened into the close, despite a 1/4 point rate hike, after the Fed kept its policy statement unchanged... As widely expected, the Fed raised the fed funds rate by 25 basis points to 2.5% and maintained balanced risk assessment, with declaration that it believes policy accommodation can be removed at a pace that is likely to be measured...

Meanwhile, the major indices closed higher for the third consecutive session for the first time in 2005, with the S&P 500 rising for the sixth time in seven sessions as nearly 2/3 of its constituents, having already reporting quarterly results, have beaten forecasts... The majority of S&P components (9 of 14) again turned in better than expected quarterly results today, with Boeing's (BA 52.27 +1.23) Q4 earnings of $0.11 (consensus $0.04) and encouraging FY05 and FY06 outlook laying the groundwork for broad-based buying in blue chips...

Strong Q4 results and upside FY05 guidance from Rohm & Haas (ROH 47.22 +2.86) boosted chemicals (+1.3%) as oversold conditions in shares of Merck (MRK 28.50 +0.67) pushed the drug maker higher and helped the pharmaceutical sector (+0.9%) maintain respectable gains... Airline (+2.3%) was also strong after several air carriers posted strong Jan traffic figures while gains in Internet, following robust Q4 earnings from Google (GOOG 213.04 +21.14), coupled with strength in software (+0.8%), in the wake of encouraging Q1 guidance from Adobe Systems (ADBE 62.29 +4.39), helped offset weakness in semiconductor, hardware and networking...

Dow 10,596.79 +44.85 (+0.43%)
Nasdaq 2,075.06 +6.36 (+0.31%)
S&P 500 1,193.19 +3.78 (+0.32%)
10-Yr Bond 41.40 +0.04 (+0.10%)
NYSE Volume 1,586,233,000
Nasdaq Volume 1,961,873,000

Close: The market opened higher following another round of strong earnings reports and strengthened into the close, despite a 1/4 point rate hike, after the Fed kept its policy statement unchanged... As widely expected, the Fed raised the fed funds rate by 25 basis points to 2.5% and maintained balanced risk assessment, with declaration that it believes policy accommodation can be removed at a pace that is likely to be measured...

Meanwhile, the major indices closed higher for the third consecutive session for the first time in 2005, with the S&P 500 rising for the sixth time in seven sessions as nearly 2/3 of its constituents, having already reporting quarterly results, have beaten forecasts...

The majority of S&P components (9 of 14) again turned in better than expected quarterly results today, with Boeing's (BA 52.27 +1.23) Q4 earnings of $0.11 (consensus $0.04) and encouraging FY05 and FY06 outlook laying the groundwork for broad-based buying in blue chips...

Strong Q4 results and upside FY05 guidance from Rohm & Haas (ROH 47.22 +2.86) boosted chemicals (+1.3%) as oversold conditions in shares of Merck (MRK 28.50 +0.67) pushed the drug maker higher and helped the pharmaceutical sector (+0.9%) maintain respectable gains... Airline (+2.3%) was also strong after several air carriers posted strong Jan traffic figures while gains in Internet, following robust Q4 earnings from Google (GOOG 213.04 +21.14), coupled with strength in software (+0.8%), in the wake of encouraging Q1 guidance from Adobe Systems (ADBE 62.29 +4.39), helped offset weakness in semiconductor, hardware and networking...

Energy took full advantage of solid earnings from Devon Energy (DVN 42.56 +1.04) and an analyst upgrade on Valero Energy (VLO 59.01 +2.05) despite crude oil prices losing nearly 1.0% ($46.69/bbl -$0.43) following a mixed weekly oil inventory report... Crude oil inventories fell 300K barrels (consensus +2.1 mln barrels, distillates only fell 2.9 mln barrels (consensus -2.1 mln) while gasoline inventories rose 1.6 mln barrels, (consensus +700K)...

An earnings miss from Countrywide Financial (CFC 35.95 -2.08) was really the only notable earnings disappointment, keeping financial underwater all day, while a warning from Cummins (CMI 72.79 -6.25) that FY05 earnings will fall short of expectations, despite nearly tripling Q4 profits, left the engine maker among the biggest laggards on the NYSE... Treasuries, despite rebounding slightly following the Fed's remarks, finished relatively unchanged, as the benchmark 10-year note closed flat, yielding 4.13%...

The dollar was closed relatively flat, after clinging to modest gains against both the euro (1.3038) and the yen (103.78) as there again was no mention of the greenback (via a budget deficit comment) in today's policy statement... SOX -0.6, NYSE Adv/Dec 2023/1321, Nasdaq Adv/Dec 1679/1410
...

to come in the financial sector. Lot of articles come up when you google "inverted yields". Looks like UIA and myself aren't the only ones thinking about that possibility. :shrug:


http://cbs.marketwatch.com/news/story.asp?guid=%7BE9FAFF2E-9B19-4BF9-B89C-4BB20D431E3E%7D&siteid=google&dist=google
Underperform, or just plain decline
Commentary: Banks feel the pinch of flattening curve

NEW YORK (CBS.MW) -- An important event occurred in the bond market in late January, something that hadn't happened since the spring of 2001.

The spread between the yields on the 10-year Treasury note ($TNX: news, chart, profile) and the 2-year note fell below 1 percentage point, and it hasn't gone back above it since.

While this may not appear to be too threatening on the surface, there may be significant repercussions for the banking sector in February, and perhaps the rest of the year.

The yield curve -- the spread between yields of short-term and long-term Treasury bonds -- has been seen by many, including members of the Federal Reserve, as the Great Predictor. It's the only thing that cleanly quantifies investor expectations of whether the economy will get better (long-term rates above short-term rates) or worse (short-term rates are higher). Read more.

The curve has been flattening ever since the Fed started raising rates in June 2004, but is still far from being inverted (long rates below short rates).

The last time it did invert was in late 1999, when the yield on the 30-year bond ($TYX: news, chart, profile) fell below the overnight rate. About a month later the Dow topped out and the 3-year bear market was launched.

The curve started to normalize (longer rates topped shorter rates) by Spring 2000, yet stocks continued to tumble.

more...

NEW YORK (CNN/Money) - Amazon.com Inc. on Wednesday posted a fourth-quarter profit that fell short of Wall Street estimates but logged better-than-expected sales for the period.

The Web's largest retailer reported fourth-quarter earnings excluding one-time items of $149 million, or 35 cents a share, down from $125 million, or 29 cents a share, a year earlier.

Analysts had forecast a profit of 40 cents a share, according to Thomson Financial.



http://money.cnn.com/2005/02/02/technology/amazon/index.htm