STOCK MARKET WATCH, Thursday 10 March

Inducing the American Public to accumulate $35 billion in credit card debt: $100 million

Bribing the Republican Party, a large chunk of the Democratic Party, both Houses of Congress to pass Debt Peonage laws: $40 million

Knowing that you have 250 million people by the balls: Priceless.

There are some things that money can't buy.

For everything else, there's Congress.

--p!

bribing the government? is that possible?

>sarcasm off
P.S. Thanks for the laugh......

March 10 (Bloomberg) -- The dollar dropped against the euro and the yen in Asia after Prime Minister Junichiro Koizumi said Japan ``in general'' needs to consider diversifying the investment of its foreign reserves.

The dollar weakened to $1.3438 against the euro at 11:26 a.m. in Tokyo from $1.3392 late yesterday in New York, according to electronic currency-dealing system EBS. Against the yen it fell to 103.85 from 103.93.

http://www.bloomberg.com/apps/news?pid=10000101&sid=aOJiA50Ol6sg&refer=japan

Japan may be poking at our underbelly as did South Korea to see how soft it has become. Look for Koizumi's statement to be "clarified" after the dollar takes a hit.

HANOVER, Germany (AFP) - Chancellor Gerhard Schroeder (news - web sites) said that the high-tech sector could help pull Germany out of its crippling economic slump, as the industry gave a bullish outlook on the eve of the world's biggest gadgets fair.

"The information and communication industry has become an important growth engine for Germany and the global economy," he told executives gathered for the CeBIT trade event in the northern city of Hanover.

"In the last year alone, German information and communication technology companies posted an increase of more than 10 percent in their exports."

The CeBIT fair has drawn more than 6,200 companies from 69 countries to the week-long event showcasing the future of cutting-edge work and entertainment devices.

snip..

Berchtold said German high-tech sales were set to rise 3.4 percent in 2005 to 135.2 billion euros (180.7 billion dollars) and another 3.1 percent in 2006.

He said the industry could create 10,000 sorely needed jobs this year. German unemployment hit a postwar high of 12.6 percent in February.

The chancellor said German economic growth -- currently forecast at an anemic 1.6 percent for 2005 -- would also receive a helpful kickstart from a high-tech sector on the rebound.

"Germany is currently the strongest export economy in the world," he said.

"That is due in part to the fact that it is a technological leader in many areas, particularly in information and communication technology."



http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=3&u=/afp/20050309/bs_afp/germanyitsector_050309191032

Any predictions on how soon the rest of the world will dump the dollar and bring on our economic collapse? Things are getting a bit scary here.

Thanks.

Love the toons!

My skill at prognosticating such catastrophic financial failure is a bit dodgy. I will bet that the rest of the world will not drop the dollar without securing a safety net. It will be a gradual process under the current economic and political climate. However, I would imagine the drop to be more sudden and severe if the U.S. hegemon were to start a war with either Iran or Syria.

We have seen a testing of the dollar two weeks ago when South Korea talked of diversifying its currency holdings. That sent shockwaves through our financial system - sudden drop in stock values and a spike through the bond markets. That was a test, I believe. The world wants to see how vulnerable the U.S. economy is. Or, in other words, the world wants to see how tight is their grip on our short hairs.

I'm back from my travels/travails :D

Looks like the world is looking at the cooked books a bit more closely these days.

It's MaeveDay!

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?siteid=mktw&guid=%7B8AD35783-6587-4762-8DDE-E8A633EE04E8%7D&

U.S. weekly jobless at highest level since early Jan.

WASHINGTON (MarketWatch) - Initial claims for state unemployment benefits rose 17,000 to 327,000 last week, the Labor Department said Thursday. This is the largest level of claims since the week ended Jan. 8. The rise was unexpected. Economists were expecting a drop in initial claims to about 309,000. A Labor Department official said some of the increase was due to the President's Day holiday. There was a surge in claims this week, after the holiday-shortened previous week. The four-week moving average rose 5,750 to 312,500.

Will be in and out - but will drop by when I can :hi:

:eyes: And any explanation in a storm...Presidents' Day, yeah, that's it! Couldn't be that the economy still isn't on the soundest of ground.

Well, you already got my favorite piece of news in there, so this is just a drive-by posting. I've got an out-of-town performance today and have to go soon (still waiting for news of the book--should be available this week or next, I'll let y'all know when I do).

They really are just making this shit up now, aren't they?.

OTOH, maybe they meant to blame it on "Presidents these days"? and some Proofreader "corrected" it. <G>

Your post is a salve for a very sore spot that resulted from your long absence. I look forward to hearing about your adventures.

:pals:

Ozy :hi:

:grouphug:

Six thousand miles later, I have to say that what I saw out there made my head spin.

I am so glad to be back in my quiet nest, in my own space, without the rush of traffic in my ears, that it will take a bit for me to sort out all of the thoughts that crowd around in my cranium.

I traveled highways and byways, places I had been before and places I had not.

It really does appear that the polarization of this country will rip it apart.

There were some places that were so in support of the dimson that I feared for my blood pressure and others where I saw that there was enlightenment and thought.

I read every local paper and came away with a feeling of disbelief in the lack of reporting of most of the important issues.

The editorial pages most made me puke - the letters to the editors were split and largely stupid, with a sprinkling of thought on occasion.

The amount of construction of housing was boggling - and where the geological formations were "favorable", there was a tremendous amount of new exploration going on.

The homeless population is booming in every locale that I saw - it was distressing.

Lots of military convoys and movement.

I will have to sort it all out.

love to here about your travels.

I saw this:
U.S. stocks opened to the upside Thursday morning as an unexpected rise in unemployment claims helped calm investor worries about inflation. The Dow Jones Industrial Average ($INDU) was up 26 points, or 0.3 percent, to 10,832 in the opening minutes of trade while the Nasdaq Composite Index ($COMPQ) added 5 points, or 0.3 percent, to 2,066 and the S&P 500 ($SPX) rose 3 points, or 0.2 percent, to 1,209.

So unemployment is a good thing now, I will never figure this out. :shrug:

DOLLAR, STOCKS AND BONDS...ALL LOWER TODAY

Overall, this has to go down as one of the nastiest days I have seen yet for U.S. assets as a whole, on a day when the Treasury is busy conducting another debt auction. I have stated many times in the past that it is highly unusual to see downside volatility on Treasury bond prices and the dollar on auction days, and today the Treasury sold $15 billion in five-year notes with a ten-year note auction of $9 billion scheduled for tomorrow. The dollar is currently trading lower versus the euro and yen, U.S. bond prices traded lower right from the open after some rumblings out of Germany, and U.S. stocks, especially some of the big caps in the Dow Industrials, have been bleeding red ink since the open. When the government needs to sell $15 billion, we normally see bonds and the dollar with a neutral to positive bias; not so today!

-cut-

To digress a moment, in the opening paragraph I said bond prices moved lower after some rumblings out of Germany. It turns out Germany’s economy may be picking up faster than was anticipated. Industrial Production in Germany was expected to gain 1.8%, but instead grew by 3.1% in January, the biggest gain in nearly a decade. There has also been more talk from European bankers about higher interest rates to slow the rate of inflation. Threats of higher inflation and big gains for industrial production caused European bonds to sell-off, and the ripple effect came across the Atlantic like a tsunami to the U.S. bond market. Oil also moved higher in Europe, and the combined effect of higher interest rates plus high oil prices sent U.S. stock futures decidedly lower before the opening of the U.S. markets. With strength coming out of Germany, Europe’s largest economy, investors sure didn’t seem to be attracted to U.S. assets…stocks, bonds and the dollar are all getting sold today.

Oil Gets Interesting!

After trading higher overseas last night, crude oil came into N.Y. trading 26 cents above yesterday’s close and just hovered in the early going as all traders waited patiently for the Energy Department to release their weekly inventory data. Crude was expected to build 1.7 million barrels, unleaded gas was expected to build 100,000 barrels, and distillate supplies which include heating oil anticipated a draw of 1.5 million barrels. It turns out crude had a much bigger build than was expected by adding 3.1 million barrels to inventory according to the Energy Department, but note the API reported an even bigger build of 6.2 million barrels. Gasoline stocks dropped 200,000 barrels per the government and dropped 269,000 barrels per the API report, both a bigger draw than expected. Distillate inventories fell less than expected with the government reporting a draw of 800,000 barrels and the API actually showing a build of 239,000. The big picture for oil inventories says we have more inventory than expected, but the price moved higher nonetheless. When the reports first came out crude sold down to a low of $54.16, but it didn’t last for very long. With about 45 minutes left in NYMEX trading, oil was higher by $0.80 to $55.40, but then sold off in the last half-hour to close the day six cents higher at $54.65. The last half-hour was also interesting because President Bush was on live on CNBC detailing his new energy plan for the USA.

The President said we need to lessen our dependence on foreign oil. They said that back in the Seventies and did nothing about it. President Bush says we need an up to date electricity grid to supply the country. How many new homes have been built in the last five years…millions!!!! They will need electricity from somewhere, but the President says we haven’t invested any money in the last twenty years to address our growing needs. He believes we will need to build more nuclear and coal-fired power plants to generate electricity. Some of the newer plants have been built to run on natural gas, but there isn’t enough gas at affordable prices to give us enough electricity for our future needs. I’m waiting to see a big heat wave this summer causing a huge draw on electricity needs to run air conditioners. We have built the new homes and office buildings, and now must find more ways to feed the growing energy demands. Yesterday the Energy Department released data showing demand for oil should grow by 2.5% this year, but there are some concerns as to whether suppliers can produce the incremental supplies needed. These are complex global issues, but suffice it to say the race is on to secure future energy supplies!

more...

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

Read the part about "why Iran is next". It sounds like we are in for an Iraq WMD redux.

Clark blames “unspoken macroeconomic drivers” for the U.S.’ determination to attack Iran, in particular the fact that the Tehran government plans to open a euro-based oil exchange in 2005 or early 2006, which—if successful—“would solidify the petroeuro as an alternative oil transaction currency, and thereby end the petrodollar’s hegemonic status as the monopoly oil currency.” This, says Clark, would deliver a devastating blow to U.S. corporations, which own both the London’s International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX), the main global oil traders.

All three current oil markers, the West Texas Intermediate crude (WTI), the Norway Brent crude, and the UAE Dubai crude are dollar-denominated. Iran, however, has required payment in euros for its European and Asian/ACU exports since spring 2003. “It would be logical to assume the proposed Iranian Bourse will usher in a fourth crude oil marker—denominated in the euro currency,” predicts Clark… a probable scenario in light of the fact that “the European Union imports more oil from OPEC producers than does the U.S., and the E.U. accounts for 45% of imports into the Middle East.”

In June 2004, the UK Guardian noted that “Some industry experts have warned the Iranians and other OPEC producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.” BP, Goldman Sachs and Morgan Stanley, proud owners of the IPE since 2001, refused to comment.”

Can't remember if I posted this the other day or just read it - sorry if it's redundant. I'm loosing track these days. Been busy with F-i-L a lot. I'm afraid he has taking a big turn and going down fast now. My time on-line will be getting more sporatic than it already has been.

http://www.prudentbear.com/internationalperspective.asp

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For Iraq is hardly the only country where American troops are risking their lives on a daily basis to protect the flow of petroleum. In Colombia, Saudi Arabia, and the Republic of Georgia, U.S. personnel are also spending their days and nights protecting pipelines and refineries, or supervising the local forces assigned to this mission. American sailors are now on oil-protection patrol in the Persian Gulf, the Arabian Sea, the South China Sea, and along other sea routes that deliver oil to the United States and its allies. In fact, as Michael Klare has noted (“Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum”), the American military is increasingly being converted into a global oil-protection service:

“Ever since the Soviet Union broke apart in 1992, American oil companies and government officials have sought to gain access to the huge oil and natural gas reserves of the Caspian Sea basin -- especially in Azerbaijan, Iran, Kazakhstan, and Turkmenistan. Some experts believe that as many as 200 billion barrels of untapped oil lie ready to be discovered in the Caspian area, about seven times the amount left in the United States. But the Caspian itself is landlocked and so the only way to transport its oil to market in the West is by pipelines crossing the Caucasus region -- the area encompassing Armenia, Azerbaijan, Georgia, and the war-torn Russian republics of Chechnya, Dagestan, Ingushetia, and North Ossetia.

American firms are now building a major pipeline through this volatile area. Stretching a perilous 1,000 miles from Baku in Azerbaijan through Tbilisi in Georgia to Ceyhan in Turkey, it is eventually slated to carry one million barrels of oil a day to the West; but will face the constant threat of sabotage by Islamic militants and ethnic separatists along its entire length. The United States has already assumed significant responsibility for its protection, providing millions of dollars in arms and equipment to the Georgian military and deploying military specialists in Tbilisi to train and advise the Georgian troops assigned to protect this vital conduit. This American presence is only likely to expand in 2005 or 2006 when the pipeline begins to transport oil and fighting in the area intensifies.

Or take embattled Colombia, where U.S. forces are increasingly assuming responsibility for the protection of that country's vulnerable oil pipelines. These vital conduits carry crude petroleum from fields in the interior, where a guerrilla war boils, to ports on the Caribbean coast from which it can be shipped to buyers in the United States and elsewhere. For years, left-wing guerrillas have sabotaged the pipelines -- portraying them as concrete expressions of foreign exploitation and elitist rule in Bogota, the capital -- to deprive the Colombian government of desperately needed income. Seeking to prop up the government and enhance its capacity to fight the guerrillas, Washington is already spending hundreds of millions of dollars to enhance oil-infrastructure security, beginning with the Cano-Limon pipeline, the sole conduit connecting Occidental Petroleum's prolific fields in Arauca province with the Caribbean coast. As part of this effort, U.S. Army Special Forces personnel from Fort Bragg, North Carolina are now helping to train, equip, and guide a new contingent of Colombian forces whose sole mission will be to guard the pipeline and fight the guerrillas along its 480-mile route.”

snip>

Growing US-Chinese tensions (fuelled in large part by this ongoing competition for global energy resources) also help to explain China’s less than enthusiastic support of US aims to discourage North Korea from developing its nuclear weapons program further. Indeed, in regard to the latter, the Chinese foreign minister, Li Zhaoxing, has recently expressed doubt about the quality of American intelligence on North Korea's nuclear program and said the United States would have to talk to North Korea one-on-one to resolve the standoff. Washington has repeatedly sounded the alarm about North Korea's nuclear efforts and has pressed China, North Korea's only significant ally, to be more active in seeking seek a solution. If the US insists on playing the “Taiwan card”, Beijing seems equally happy to play the “North Korea card”.

more...

I know how hard it is to watch someone go downhill like that and not be able to do as much as you want. I hope he doesn't suffer much and I am sure he is much better off with family like you caring for him. My thoughts are with you.:hug:

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38421.4166947917-832976820&siteID=mktw&scid=0&doctype=806&

WASHINGTON (MarketWatch) - Inventories of U.S. wholesalers increased 1.1 percent in January, led by stockpiling of farm products, groceries, clothing and cars, the Commerce Department said Thursday. Sales at wholesalers increased 0.5 percent, the smallest increase since June. The inventory-to-sales ratio rose to 1.15, matching a one-year high. Economists were expecting inventories to rise 0.6 percent.

9:59am 03/10/05 U.S. DEC. WHOLESALE INVENTORIES UNREVISED AT 0.4%

9:59am 03/10/05 U.S. JAN. WHOLESALE INVENTORY-SALES RATIO RISES TO 1.15

9:59am 03/10/05 U.S. JAN. WHOLESALE SALES UP 0.5%, 7-MONTH LOW

9:59am 03/10/05 U.S. JAN WHOLESALE INVENTORIES UP 1.1% VS 0.6% EXPECTED

10:30 ET Dow +11, Nasdaq -6, S&P -1.00
Market still struggling to gain traction as buyers find few catalysts to persuasively push the indices in either direction... Meanwhile, the Commerce Dept. has recently shown that Jan wholesale inventories rose 1.1%, nearly doubling expectations of +0.6%, as sales rose 0.5% to leave a larger inventory-to-sales ratio of 1.15 months... While the I/S ratio bottomed at 1.12 month nearly a year ago (last April), the lack of a significant rise over the year argues that wholesalers seem somewhat comfortable at these near record lows, as Jan's ratio matches the highs since the record low... However, this release has gone relatively unnoticed by investors as the sales figures say little about personal consumption... ..NYSE Adv/Dec 1528/1346. ..NASDAQ Adv/Dec 1295/1351.


10:00 ET Dow +28, Nasdaq -1, S&P +2.12
Major indices continue to fluctuate around the flat line in early action... Recovering some ground have been interest-rate sensitive areas like Homebuilding (+0.2%), Utility (+0.2%) and Financial (+0.3%), as bond yields continue to fall, while Health Care, Consumer Staples and Telecom Services have also traded higher... Technology remains mixed as modest gains in Semiconductor and Hardware struggle to offset weakness in Storage and Software... Pacing the way to the downside has been airlines, after Delta Air Lines (DAL 4.42 -0.47) said it expects to report a "substantial" net loss this year, while Energy has also tumbled amid falling oil prices and downgrades on notable names in the space... ..NYSE Adv/Dec 1374/1090. ..NASDAQ Adv/Dec 1267/1144.


09:40 ET Dow +38, Nasdaq +3, S&P +2.85
Stocks open on an upbeat note, in line with improved futures indications, upon further analysis of this morning's claims data... While jobless claims unexpectedly jumped to their highest level in two months, rising 17K to 327K (consensus 310K) and above 315K for the first time in five weeks, the new 4-week average is at a respectably low 313K, consistent with strong labor demand and improved monthly payrolls growth... More notably, the worse than expected data have been embraced by bond traders, as renewed buying interest in the 10-year note, which is up 8 ticks to yield 4.48%, has reversed early losses that had yields as high as 4.54%... At 10:00 ET, Jan Wholesale Inventories (consensus +0.6%) will be released... ..NYSE Adv/Dec /. ..NASDAQ Adv/Dec /.

I wish whatever is going to happen would go ahead already.

Naturally I won't say I wished it early after it happens.

What you should know about a bill that would make it tougher for consumers to clear their debts.

http://money.cnn.com/2005/03/09/pf/bankruptcy_bill/index.htm

NEW YORK (CNN/Money) – If you were thinking about filing for bankruptcy to clear your debts, you might think twice ... or act twice as quickly.

A bankruptcy reform bill, up for a vote in the Senate today and expected to become law, will make filing for bankruptcy more difficult. And it will give creditors more recourse in some instances.

Under current law, the majority of consumers who file for bankruptcy do so either under Chapter 7 or under Chapter 13.

In a Chapter 7 bankruptcy, your assets (minus those exempted by your state) are liquidated and given to creditors, and many of your remaining debts are canceled, giving you what's known as a "fresh start." In 2004, over 1.1 million people filed for Chapter 7, accounting for roughly 72 percent of non-business bankruptcies.

Since many Chapter 7 filers don't have assets that qualify for liquidation, credit card companies and other creditors sometimes get nothing. :eyes: Guess they don't count those huge fees, penalties and interest payments they charge folks who are down on their luck.

more...

http://www.nytimes.com/2005/03/10/opinion/10grant.html?pagewanted=1

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By the late 1990's, stocks had lost any connection to the value of the businesses in which they represented partial ownership. Picture an artful consumer settling into a discounted hotel room for the night. Now try to imagine this savvy individual formulating a calculated financial decision to make a meal of the $10 cashews and the $6 candy bars on sale in the hotel minibar. That was Wall Street a half decade ago.

And, to a lesser but still striking degree, it is still Wall Street today - and Main Street, too. The Federal Reserve did not stand idly by after the bubble burst. It radically reduced the interest rate it controls (the so-called federal funds rate), pushing it from 6.5 percent in May 2000 to 1 percent by June 2003. Alan Greenspan, the chairman of the Fed, had worried about a stock market bubble as early as 1995, had warned against "irrational exuberance" in 1996, and batted around the possibility that there might, indeed, be a stock-market bubble in discussions with his Federal Reserve colleagues as late as 1999.

But he was not the man to stick a pin in the bubble. Indeed, he himself became a vociferous booster of the "New Economy." In a speech he gave only four days before the Nasdaq touched its high, he sounded as if he were working for Merrill Lynch, cheering that "the capital spending boom is still going strong." Should the boom turn to bust, the chairman had testified before Congress less than a year before, the Fed would "mitigate the fallout when it occurs and, hopefully, ease the transition to the next expansion."

In so many words, Mr. Greenspan promised that the Fed would make money cheaper and more plentiful than it would otherwise be. He would override the market's judgment with his own. Nobody in earshot quoted the words of the German central banker Hjalmar Schacht, who protested in 1927: "Don't give me a low rate. Give me a true rate, and then I shall know how to put my house in order." Someone should have. Interest rates are the traffic lights of a market economy. To investors, they signal when to go and when to stop. Under the Fed's bubble recovery program, every interest-rate light turned green.

snip>

To hear Mr. Greenspan tell it in 1999, post-bubble damage control was as simple as cutting interest rates. He passed lightly over the possible consequences of the rates he cut. The list so far includes a bubble-like housing market (geographically localized but ferocious), an overheated debt market (this one spans the globe) and a steady depreciation in the foreign exchange value of the dollar. Consuming much more than it produces, the United States emits hundreds of billions of greenbacks into the world's payment stream every year - about $600 billion in 2004. The recipients of these dollars willingly invest them in American assets if the price is right. On the evidence of the dollar's decline, the price - the available rate of return - is too low.

more...

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You would not know it from the US consumer, who went farther into debt by $11.5 billion in January. To make matters worse, the $3.5 billion debt increase reported for December was revised up to $8.5 billion. Let's see here: There are about 160 million adults that went farther into debt by a collective $20 billion in two months, for an average increase in indebtedness of $125 each. Now in the last two months the Treasury has increased national indebtedness by $100 billion, so on a per capita basis, the average American adult is now on the hook to pay another $750 each! In just two months! Hahahaha! No wonder people on other planets come here in flying saucers to laugh at us! This is crazy!

- Axel Merk, of Merk Investments writes, "The latest numbers available put the (trade) deficit at a record $60.3 billion, an annualized $724 billion, over 6% of the GDP." As an aside, the Economist magazine puts the trade deficit at $666 billion for the last year, which is a number that has all kinds of significances and overtones that remind one of the Biblical Book of Revelations, and now we are on track for another $60 billion higher next year? Wow! Spooky, huh?

Paul Van Eeden at Kitco has also looked at this trade deficit fiasco, and opines that "The US trade deficit is pumping hundreds of billions of additional dollars into their coffers every year. Even if these countries keep all the dollars they currently own but just not keep as high a percentage of the new dollars they continuously receive, the dollar will plummet. There really isn't any way around it. Either the dollar falls sufficiently to eliminate the trade deficit, or the trade deficit will continue to put pressure on the dollar." Sort of like the old Mogambo Conundrum (MC): People hate me because I am a hateful, and I am hateful because they hate me. Hacking through the confusion, we are now sure of two things, namely 1) the dollar will be lower, and 2) I will be more hateful and more heavily armed. From this we learn two additional valuable lessons. 1) gold and oil and imported things will go up in price, as will everything else when domestic producers get wind of the high prices we are paying, and 2) stay away from me, as I am armed to the teeth and in a real bad mood about these high prices, among many other things.

Marshall Auerback of PrudentBear.com says essentially the same thing, only without that Mogambo Conundrum thing, when he writes, "With the government and external deficits both so large and the private sector so heavily indebted, it is said that satisfactory growth in the US cannot be achieved without a large, sustained and discontinuous increase in net export demand. After perusing the trade data from last year, it is doubtful whether this will happen spontaneously through a continuous fall in the external value of the dollar, and it certainly will not happen without a cut in domestic absorption of goods and services by the US " and then, after a pause, he goes on to show us the result of that, "which would impart a deflationary impulse to the rest of the world." Which could explain why the rest of the world is suicidally stuffing money into our economy.

more...

http://www.321energy.com/editorials/schiff/schiff030905.html

With oil prices consolidating above $50 per barrel, forming a base upon which future price increases will likely be built, there is no shortage of Pollyannas willing to dismiss the toll higher oil prices will exact on the U.S. economy. The most recent of these is The Wall Street Journal columnist Thaddeus Herrick, who in his March 8th article entitled "Retooling Keeps Economy Growing despite Steep Increases in Oil Prices" postulates that even sustained oil prices of $70 per barrel would not push the U.S. economy into recession. His familiar, yet extremely naive conclusion rests on the argument that as oil now constitutes a significantly reduced percentage of U.S. GDP, oil prices have a minimal impact on the economy. Wall Street analysts are only too eager to accept this flawed logic, as it allows them to sweep yet another major economic problem under an already lumpy rug.

First of all, Herrick's claim that U.S. manufacturers have "retooled" and "streamlined" is somewhat misleading. The reality is they have "de-tooled" and shut down, as the U.S. economy itself has de-industrialized. The result, as he correctly points out, is that energy expenditures have declined from about 14% of GDP in 1980 to only 7% today. However, to argue that this makes the U.S. economy less dependent on oil is overly simplistic, and leads to a fallacious conclusion.

Just because America now imports many of the goods that it formerly produced domestically does not mean that it is now less dependent on the oil necessary to manufacture them. In fact, due to the increased energy now required to transport these goods to America, the U.S. economy is more vulnerable than ever to rising oil prices. Though foreign oil consumption does not directly factor into U.S. GDP, oil remains a necessary component in the manufacturing process, the cost of which is increasingly indirectly included in the price of imports.

snip>

Further, Mr. Herrick's claim that the dominance of non energy-intensive sectors, especially financial services, protects the over-all economy from suffering adverse consequences from higher energy costs, is also false, as it ignores the impact rising energy costs will have on interest rates, upon which financial services are highly dependant.

One of the main ways that the Fed has been able to keep interest rates low is by ignoring over-all CPI data in favor of the "core" rate, which excludes energy. The theory has validity only if one assumes that recent price increases are temporary, and are likely to be reversed in the coming years. However, if as Mr. Herrick correctly points out, high oil prices are not only permanent, but headed significantly higher, the Fed will no longer be able to ignore the headline number. When the Fed is forced to admit that it had its eye on the wrong ball, it will have to be far more aggressive in raising short-term interest rates.

more...

http://www.bullnotbull.com/bull/modules.php?op=modload&name=News&file=article&sid=3&mode=thread&order=0&thold=0

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2.3 Concentration of Wealth

Ravi Batra's book "The Great Depression of 1990" has excellent discussions on a number of different cycles that lead to depressions, including social cycles, cycles of monetary growth, government regulation, as well as concentration of wealth. The book is well worth the read, in spite of its title (and very cheap at used book stores because of it). Batra points out that there is a large body of economic literature upholding the theory that recessions are caused by unequal distribution of incomes and concentration of wealth.

It works like this: As savings rise, consumption falls. Since the rich save more money than the poor, the concentration of wealth in fewer hands increases savings and decreases consumption. As demand drops, and economic growth fails to keep pace with growth in the labor force, unemployment rises. Classically, this is a self-correcting process; labor costs eventually adjust, excesses are flushed out of the system, and growth begins anew. But in a depression, the above process is accompanied by a collapse of the financial system. A recession is a normal, necessary part of the business cycle and will not, in itself, cause a healthy financial system to collapse. However, as wealth becomes concentrated, it has a detrimental effect on the financial system. As Batra goes on to explain, in a sound financial system, banks make loans only to credit-worthy customers who are unlikely to default on their loans. But when wealth becomes concentrated, the number of less affluent people increases, as well as their borrowing needs. These less affluent people, who now make up the majority, have fewer assets and are thus less credit worthy. Even in such an environment, banks cannot afford to be choosy -- they must make loans in order to stay "competitive" with their peers and simply to stay in business. Thus, as the concentration of wealth rises, the number of unhealthy banks with shaky loans also rises in a dangerous spiral, increasing the possibility of systemic failure.

A perverse side effect of the growing wealth disparity is the rise in speculative investments. As a person becomes wealthy, his aversion to risk declines, so the number of risky investments by the rich also increases. Money doesn't mean so much to the rich, so they're willing to take a wild chance on a flyer, if it will double, triple or quadruple their money. As Charles Kindleberger puts it:

The object of speculation may vary from one mania or bubble to the next. It may involve primary products, or goods manufactured for export to distant markets, domestic and foreign securities of various kinds, contracts to buy or sell goods or securities, land in the city or country, houses, office buildings, shopping centers, condominiums, foreign exchange. At a late stage, speculation tends to detach itself from really valuable objects and turn to delusive ones. A larger and larger group of people seeks to become rich without a real understanding of the process involved. Not surprisingly, swindlers and catchpenny schemes flourish.

Sound familiar? We've seen bubbles in each of the securities he mentioned over the last two decades, and the last few years have shown us that even huge, multinational companies such as Enron and WorldCon can also be swindlers and catchpenny artists. Everyone wants to be rich quick and with the minimal amount of effort. In spite of these signs of the times, it has yet to lead to a second great depression.

4. Not if, When

more...

http://www.house.gov/paul/tst/tst2005/tst030705.htm

snip>

Lew Rockwell of the Ludwig von Mises Institute offers a very simple test for any tax reform proposal: Does it reduce or eliminate an existing tax? If not, then it amounts to nothing more than a political shell game that pits taxpayers against each other in a lobbying scramble to make sure the other guy pays. True tax reform is as simple as cutting or eliminating taxes. No studies, panels, committees, or hearings are needed. When reform proposals seem complicated, they almost certainly don’t cut taxes.

The reform debate is strictly about politics and not serious economics. Both sides use demagoguery but don’t propose truly significant tax reductions. Both sides use the outrageous expression “cost to government” when talking about the impact of tax legislation on revenues. This implies that government owns everything, and that any tax rate less than 100% costs government some of its rightful bounty.

Government spending is the problem! When the federal government takes $2.5 trillion dollars out of the legitimate private economy in a single year, whether through taxes or borrowing, spending clearly is out of control. Deficit spending creates a de facto tax hike, because deficits can be repaid only by future tax increases. By this measure Congress and the president have raised taxes dramatically over the past few years, despite the tax-cutting rhetoric. The real issue is total spending by government, not tax reform.

Who wants a 40% flat tax? Who wants a national sales tax if it adds 35% to the retail price of everything we buy? In other words, why change the tax structure if spending stays the same? Once we accept that Congress needs $2.5 trillion from us-- and more each year-- the only question left is from whom it will be collected. Until the federal government is held to its proper constitutionally limited functions, tax reform will remain a mirage.

more...

Dow 10,790.62 -15.00 (-0.14%)
Nasdaq 2,044.72 -16.57 (-0.80%)
S&P 500 1,203.08 -3.93 (-0.33%)
10-yr Bond 45.10 -0.04 (-0.09%)
30-yr Bond 48.14 -0.06 (-0.12%)
NYSE Volume 633,650,000
Nasdaq Volume 758,363,000

11:30AM: Sellers show some resolve and push the indices to session lows as market breadth continues to deteriorate... Decliners on the NYSE hold a 19 to 11 advantage over advancers while declining issues on the Nasdaq hold a 2 to 1 edge over advancing issues... A 2 to 1 ratio of down to up volume also holds a similarly bearish bias at both the Big Board and the Composite, as total volume remains well below average levels... Adding to the waning sentiment has been a retreat from earlier lows in both bond yields and oil prices...NYSE Adv/Dec 1135/1911, Nasdaq Adv/Dec 941/1897
11:00AM: More of the same for the averages as the blue chips and Nasdaq continue to trade in opposing directions... The Composite, which is down roughly 5.5% in 2005 compared to a modest 0.4% gain on the Dow, has failed to hold initial support around the 2056/2054 level, as mixed sentiment in the chip sector has been worsened by broad-based weakness in technology...

Further upside in Semiconductor has arguably been capped in the short-term following solid mid-quarter updates from ALTR (-0.6%) and XLNX (+0.5%) and the fact that prior strength in Intel (INTC 24.53 -0.31) shares, ahead of its anticipated mid-quarter update tonight, has already been priced into the group... Also, today marks the fifth anniversary of the Nasdaq's record of 5048.62, before the tech-bubble burst and sent tech stocks tumbling 78% before the Composite bottomed out at 1114.11 (Oct. 9, 2002)...SOX -0.1, NYSE Adv/Dec 1323/1650, Nasdaq Adv/Dec 1175/1570


Advances & Declines
NYSE Nasdaq
Advances 1037 (31%) 971 (32%)
Declines 2044 (62%) 1892 (62%)
Unchanged 183 (5%) 166 (5%)

--------------------------------------------------------------------------------

Up Vol* 174 (30%) 176 (24%)
Down Vol* 375 (66%) 519 (73%)
Unch. Vol* 16 (2%) 10 (1%)

--------------------------------------------------------------------------------

New Hi's 37 33
New Lo's 19 41



The buck's on a bit of a rebound from its low though

Last trade 81.59 Change -0.04 (-0.05%)

Settle 81.63 Settle Time 00:36

Open 81.53 Previous Close 81.63

High 81.69 Low 81.37

...

The market is becoming increasingly sensitive to these releases. On Friday, February 18, stock futures indicated an up open until the PPI data was released. Futures dipped and the market managed a resilient performance as it ended near unchanged. On February 28, the jump in the core PCE led to a significant market decline.

Then yesterday, the Federal Reserve released their Beige Book report on economic conditions covering mostly February (it is released eight times a year). It stated, Retail prices were generally flat or up modestly; however, businesses continued to face rising input costs, and a number of Districts indicated greater ease in passing along price increases. There were a number of cautionary notes about inflationary pressures. The stock market reacted negatively to the report.

...

The market reacts to economic releases when those series are at turning points, or when the future trend is highly uncertain. When it was not clear whether this was a jobless recovery or not, the market was focused on the weekly new claims data and the Challenger reports. Now that job growth is clearly on track, those releases have little impact. When consumer spending trends were in doubt, the consumer sentiment numbers and same-store data were closely watched.

The key swing factor for the stock market right now is inflation. The economic trends are clear. Real GDP has risen at an average 4.5% rate for the past six quarters. Consumer spending and business spending trends are strong. If one month's data is weak, it will be considered aberrant against the strong trend.

The trend in the core inflation numbers noted above is not so clear. There are now sporadic signs of inflation in the data.

If the core PPI does not slow down, or the core CPI takes a jump, it change expectations for the trend, and send shock waves through the stock market.

http://www.briefing.com/GeneralContent/Silver/Active/ArticlePopup/ArticlePopup.aspx?PageId=109&SiteId=0&ArticleId=NS20050310102110TheBigPicture

NEW YORK (Reuters) - The dollar weakened on Thursday against most currencies on concerns over global central bank reserve diversification, a widening U.S. trade deficit and tumbling bond prices

"We're just in a general dollar downtrend right now," said Sophia Drossos, currency strategist at Morgan Stanley in New York.

Having slumped to multi-month lows against its major counterparts on Wednesday, the dollar suffered another blow on Thursday after Japanese Prime Minister Junichiro Koizumi told parliament that, generally speaking, diversity in foreign exchange reserves was a good thing.

The Ministry of Finance, which manages the world's largest foreign reserve holding of $840.6 billion, quickly clarified that it has no plans to shift funds out of the dollars.

But the specter of diversification was raised again, putting pressure on the dollar again, much like had happened after South Korea (news - web sites)'s central bank mentioned the subject in a report last month.

more..






http://story.news.yahoo.com/news?tmpl=story&cid=580&e=1&u=/nm/20050310/bs_nm/markets_forex_dc

The U.S. was getting poked in the ribs after all.

I found this in looking for a poke in the stomach picture.

http://cbs.marketwatch.com/news/story.asp?guid=%7BA3A7BAE1%2DA6D1%2D4942%2D86B8%2D8C4A789A01A5%7D&siteid=mktw

WASHINGTON (MarketWatch) - The U.S. federal government ran a deficit of $113.9 billion in February, the Treasury Department said Thursday.

This is a record budget deficit for the month of February. It is up from $96.7 billion in the same month a year ago.

Receipts were up 8.8 percent year-over-year to $100.9 billion, while outlays grew 12.2 percent to $214.8 billion.

Last week, the Congressional Budget Office had estimated February's deficit would be about $115 billion.

So far in fiscal 2005, the government has run a deficit of $223.4 billion, about $5.1 billion less than last year at this time, the Treasury said.

For all of 2005, the CBO projects a deficit of $394 billion. The administration is projecting a deficit of $427 billion.

Interest on the public debt totaled $15.9 billion in February and $151.4 billion so far this fiscal year. This is up from $143.2 billion in the same period last year.

...more...

1:59pm 03/10/05 U.S. FEB BUDGET DEFICIT $113.9 BLN VS $96.7 BLN YR AGO

http://money.cnn.com/2005/03/10/markets/markets_newyork/index.htm

In the early afternoon, National Semiconductor (up $0.54 to $20.53, Research) released higher-than-expected quarterly earnings, that fell from a year ago. The chipmaker also authorized a new $400 million stock buyback program. Shares rose 2 percent and pulled up other chip stocks.

In addition, optimism about Intel (down $0.12 to $24.72, Research)'s mid-quarter update, expected after the bell, also supported the chip sector.

...

However, the indexes remained vulnerable near the end of a choppy, trying week.

After closing at its highest level since June of 2001 last Friday, the Dow has fallen each day this week. The broader S&P 500 peaked Monday, closing at its highest point since July 2001, and has fallen since then.



updated to add animation that Maeve had last week, today it is appropriate