STOCK MARKET WATCH, Friday 20 May

Mr. Market Discounts More Debt for the US Consumer
Is It Possible?

As of Wednesday evening, the US stock market posted its largest 3-day gain for several months, and the leadership is clearly the US consumer stocks including Winnebago’s, homebuilders, department stores, specialty retailers, hardware stores, restaurants, electronics, boat manufactures, computers, and truckers to deliver all this chattel from China to the US malls and stores. Similar to August of 2004, after a lackluster low volume start to the rally, Wednesday’s action intensified in volume and turned the rally decisive with the US consumer leading the way. Also in the lead are speculative stocks such as airlines, which were UP over 5.5% on Wednesday. Given their almost century-long failure to deliver any real value to shareholders, when a rally is led by such a sector, I’m skeptical.

It’s astounding to see that the stock market is discounting another round of US refinancing and home purchases and even more debt on the part of the US consumer. The fuel for this spending has been creative loan packages available to US consumers and historically low interest rates which are being reduced even more by the recent decisive bond market rally. But what is different in this bond market rally is that the Fed continues to raise short term rates while the long term rates are moving down. The result is a flattening yield curve – an event that typically portends economic slowing; however, this phenomenon is being ignored by the stock market which only sees another round of consumer purchases and debt on the way. You can’t necessarily blame the stock market for acting on the good times in bonds – that’s the general relationship that exists between the stocks and bonds in non-deflationary times. What’s good for bonds is good for stocks. But in deflationary times, bonds rally while stocks swoon. Is it time to look at the stock and bond market rally and determine that Mr. Greenspan has taken the US economy to safe waters? Similar to today’s stock market, they also partied on the Titanic after the iceberg scraped a fatal gash through the bottom of the ship.

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Is Bernanke the One?

If that goes off without a hitch, Mr. President will soon have the task of replacing John Law and this will be an extremely difficult task considering the unique talents of the retiring Fed Chairman. If the conventional wisdom is that his replacement will be Ben Bernanke, consider me a contrarian. Consider Bernanke’s statement about “Helicopter Money.” This was a flippant remark that shows a lack of the basic wisdom in what it takes to be a successful Fed Chairman. With only “trust” and paper behind our currency, the Fed Chairman has to project trust and confidence in their manner of speaking, and expressions, as well as how they say what they say. (It’s best to keep what they say a partial mystery though.) Without trust and confidence, money is only paper. Unlike Bernanke, I think that Mr. Greenspan could have made a helicopter money statement without using the inappropriate word (“helicopter”) and all the while having a room full of adoring congressman letting out a knowing and admiring “ahh” after the statement was made. Indeed, unlike the President, the Fed Chairman has to look like a smart person at all times - no exceptions. When before congress, he needs the talent of staring down a senator who asks a tough question with an expression that both intimidates while he also avoids speaking directly to the question. In this regard Mr. Greenspan is a modern day Babe Ruth.

Let us not forget that as chief bubble blower, the Fed chairman appointee needs to be intelligent enough to know the gravity of what current John Law policies are doing to the US society in the long term while implementing these policies all with a straight face. So the person needs a level of intelligence and ethics together that may be difficult, if not impossible to find.

Is Bernanke the man for the job? You decide!

more...

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

Storm Watch Update
May 20, 2005

Economists are calling it a “soft patch,” a temporary slowdown in economic growth. This reflects a regression from earlier euphemisms of a “Goldilocks” economy. I’m sure before long the “soft patch” will turn into a “soft landing.” However, I’ve yet to see a “soft landing” in my 30 years in the investment business. Soft landings are as rare as the dodo bird. It is surprising to see this term resurface every time we are about to head into a recession. Perhaps economists think it has a more palatable sound than recession and depression, which are more frightening terms to investors.

What we can say with a certain degree of confidence is that the Fed will keep raising interest rates until they arrive at a "neutral rate," i.e. an interest rate that is neither stimulative nor contractive for the economy. Reality is something different. The Fed can never truly arrive at a neutral rate. They habitually raise rates until something breaks—usually either in the economy or the markets, but in most cases it's both. The days in which the Fed could fine-tune the economy ended several decades ago with the emergence of the financial economy. Today, even more money is injected into the economy and the investment markets outside the traditional banking sector. Last year the US economy added $2,718 billion in debt. However, the broadest measure of the money supply (M3) expanded by only $587.5 billion. For those who are relieved that money supply growth has slowed down, as shown in the table below, take no comfort. Credit expansion in the US is rampant as reflected in last year's total credit expansion of $2,718 billion.

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The 'flation Debate Continues

Along with the redundant talk over the current “soft patch” in the economy, we have benign talk of inflation. The investment markets believe that the Fed will keep inflation contained through its successive rate hikes and there is more talk about deflation in the air. Never before have I seen such abuse of language as it pertains to inflation and deflation. Total credit expansion of $2,718 billion is inflationary not deflationary. A $10 trillion increase of total credit to $36.2 trillion is inflationary. Derivative growth of $50 trillion is inflationary. It is why commodity prices are rising around the globe. It is why the US trade deficits are worsening, and it is why McMansion prices keep going up in the suburbs. The National Association of Realtors reported this week that median prices for previously occupied homes rose at double-digit rates in 66 out of 136 metropolitan areas that it surveys. In Florida, California, Nevada, and New Jersey prices have risen 46%, 33%, 29%, and 23% respectively. This is asset inflation not a bull market.

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The Yield Curve Is Flattening

There are a number of issues, which the United States faces today. Each one looms larger as the year progresses. Whether it will be one or a combination of issues that tip the balance is hard to say. But I believe the following tipping points should be red flags to the investor as we head closer to the cliff, leading to a fall...

1. Leveraged Carry Trade
2. Growing Trade Deficit
3. U. S. Consumer Debt
4. Banking Crisis
5. Reliance on Foreign Investment
6. The Rogue Wave

more...

http://www.financialsense.com/stormwatch/2005/0520.html

night, but it might deserve another looksie. Put this together with that deflation piece from Russell and it gets a bit un-nerving.

(Edit to add Deflation piece)

Why You'll Feel Hedge Funds' Pain
http://www.thestreet.com/_tsccom/funds/supermodels/10224193.html

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From the time of their invention through the mid-1990s, hedge funds were primarily partnerships limited to investments by rich people that focused on profiting from both positive and negative moves in stocks, bonds, currencies and commodities. There are dozens of different types of specialist funds, but the purpose of most is to provide steadfast returns uncorrelated with the trend of the market on which they focus. The funds' members, or limited partners, pay managers up to a third of the profit for annually delivering the holy grail of investing: great results in good times or bad.

In the early part of this decade, amid a raging bear market, a handful of major corporations -- led by General Motors (GM:NYSE - news - research), ironically enough -- grew concerned that their pension funds would never meet their investment goals if they continued to focus strictly on long-only stock-and-bond strategies. So they directed their pension managers to put billions of dollars on behalf of their retired blue-collar workers into "alternative investments," which is a term of art for hedge funds.

Broadly speaking, pension funds try to maintain a balanced allocation of 60% stocks and 40% bonds. The idea of that split is that they'll get more bang for their buck out of stocks -- and yet if equities are soft, returns will be cushioned by nice, safe bond yields. The problem has been that the Federal Reserve's expansive money policy of the past few years created a financial regime in which bond yields were extremely low -- and yet stock returns haven't been too hot, either.

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Fallout -- and Bankruptcy?
Funds are required by contract to provide "liquidity" -- that is, cash -- to members either at the end of a month or a quarter. So, many in the investment community are holding their breath now, waiting to see how many funds need to liquidate stock and bond portfolios in order to meet a flood of redemptions.

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If we see big up days in the market followed by big down days, you can be sure that funds are using every uptick to unload inventory to meet their obligation and avoid bankruptcy. At times like this, the Federal Reserve and other central banks have learned to flood the system with money to avoid big disruptions. So from now until the end of the month, or quarter, there may be an interesting battle between the private forces of fear and the public forces of balance. Stay tuned: It could be your money.

Would that would explain the huge repos we've been seeing this week and last? Is this another "liquidity crisis" for Greenspin?



Here's that Deflation piece:

http://321energy.com/editorials/russell/russell051605.html

May 13, 2005 -- Question -- If deflation is almost impossible, since the Fed can neutralize any deflation simply by increasing the money base, why is the Fed so worried about deflation -- or, as the Fed puts it, "insufficient inflation"?

Answer -- If there's a credit collapse, it seems to me that the situation could change very quickly and soon get out of hand -- in which case we'd have deflation.

Look, we don't have to get into the theory of why deflation can or cannot occur. I go by what I see in the markets and in chart action. The fact is that the stock market has been deflating all year. Now the stock market has been joined by oil, commodity prices, copper, steel, aluminum, gold, Goldman Sachs Natural Resources Index, materials in general. I don't know what you want to call it, but I call it some kind or variety of deflation.

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In the meantime, the hottest item around is the US dollar. Why is the dollar at a high for the year? Good question, and I haven't read about or seen the definitive answer yet. Of course, the market answer is "more buyers than sellers," but how does that help us?

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Now I'm wondering if what we're seeing is a sudden demand for dollars. I'm wondering if what we're seeing is a short squeeze against the dollar brought on by hints of deflation. Remember, in deflation dollars become scarcer -- and in deflation debt becomes a dirty word.

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the Fed really cares about. That's wage inflation - the cost for the same jobs, on an hourly scale, over time. This is the most closely watched form of inflation by the Fed.

Given that this is the case - this story should have the Fed worried. Because the Greenscam's Fed has no one to blame but themselves. They, the Fed, are the enablers to those who have so sorely mismanaged the U.S. economy.

Mixed Forecasts for U.S. Economy

AccountingWEB.com - May 16, 2005 - Economists see reduced growth in the US economy according to the Wall Street Journal’s online forecasting survey for May. They are predicting the slowdown will continue in the second quarter but rebound in the third and fourth quarters of 2005.

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Economists cut their expectations for annual growth to 3.2% from the 3.7% forecast in last month’s survey. This follows a 3.1% actual growth rate for the first quarter of 2005. The growth rate for the same quarter in 2004 was 4.4%. Rising energy costs in the opening quarter are blamed for the decline.

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Last month’s conditions reveal signs of economic strength aided by falling crude-oil prices. Retailers and the automakers also posted improved sales. Workers are taking home larger paychecks because they’re working more hours and payroll hiring is expanding.

All is not rosy though. According to current reports, long-term hiring is expected to be flat. There is also concern that any wage gains are going toward filling the gas tanks despite lower energy prices and higher worker incomes. The potential threat of slower growth combined with rising inflation has economists looking darker. Continued federal deficits also give rise to inflation concerns. A minority of those surveyed felt the slowing growth alone was the biggest worry.

more...

http://www.accountingweb.com/cgi-bin/item.cgi?id=100907&d=815&h=817&f=816&dateformat=%25B%20%25e,%20%25Y

I love that toon Ozy, isn't it the truth!

Been pretty busy at work lately, boy the markets have been on fire.

Deflation is starting to happen (IMO) but I think we are in a spot where we have never been before. The dollar is surprising many, I think a lot of people want it to go down to make the trade deficit better. It is very interesting watching everyone try to guess what is going to happen.

:popcorn:

just for the "weekend"???

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=8559288§ion=investing

NEW YORK, May 20 (Reuters) - The Federal Reserve said on Friday it added temporary reserves to the banking system through over-the-weekend system repurchase agreements.

Fed funds last traded at 3.00 percent, the Fed's target for the rate on overnight loans between banks.

Further details of the operations are available at: http://www.ny.frb.org/markets/omo/dmm/temp.cfm

http://www.reuters.com/printerFriendlyPopup.jhtml?type=businessNews&storyID=8532802

WASHINGTON (Reuters) - The Bush administration is considering whether to ask Federal Reserve Chairman Alan Greenspan to stay in office a few months past the end of his Fed board term, which expires on Jan. 31, The Washington Post reported on Wednesday.
The newspaper said the delay would give the White House more time to conduct the search for a successor, which could include corporate leaders.

However, a close associate of Greenspan's said the Fed chairman intends to step down when his term expires.

Asked about the Washington Post account, White House spokesman Scott McClellan said: "We don't speculate on any personnel matters."

If Greenspan stayed in office until June 9, 2006, he would become the longest-serving Fed chairman, exceeding the 18 years, nine months and 29 days served by William McChesney Martin from April 1951 through January 1970.

more...sorry if this was already posted this week.

http://www.fallstreet.com/may1805.php

One phrase or word from the second most powerful man in America, Federal Reserve Board Chairman Alan Greenspan, can send the global financial markets into a hysterics. Such was the case on December 5, 1996 when Greenspan uttered ‘irrational exuberance’ and the global financial markets, albeit temporarily, shuttered.

But Greenspan doesn’t waste many words trying to talk the financial markets down. Rather, with the traditional threat of price inflation seemingly under control in a post-Volcker world, Greenspan’s voice has remained largely optimistic during his tenure. As for the untraditional challenges - including the S&L crisis, Mexican peso crisis, LTCM, Asian Crisis, the 2000-2002 stock crash, and the housing bubble - with the exception of the unresolved 'housing bubble' in America these threats have been handled in short order. Legend has it that Greenspan was, and still is, the magical cook.

Suffice to say, the Fed’s bailout and pro-asset inflation policies while under Greenspan’s control have awarded Sir Alan the nickname ‘Easy Al’, and brought to light the idea that a ‘Greenspan Put’ is in the marketplace. And while some - including Roach, Fleckenstein, Faber, Grant, North, Noland, and now Ravi Batra – have balked at laying roses around Greenspan’s bubble-building-bailout legacy, one factoid is not open for debate: failing a complete meltdown before he retires next year the US economy and financial markets have performed exceptionally well during Greenspan’s tenure. To be sure, if monetary policy was scored like a baseball game Greenspan’s team would be a dynasty.

Unfortunately, with regime change at the Fed drawing near, cheerleading for team Greenspan on the ebb since the 1990s stock bubble went bust, and the Fed not sure of how many more ‘measured’ helpings it can doll out before something in the markets or economy cracks, an increasingly uncertain monetary policy outlook lurks. Add to this the fact that the US economy has grown even more reliant on rising asset prices (houses) and foreign investment than it was before the stock bubble peaked, and one ominous observation surfaces: Greenspan’s policies have, at least for the foreseeable future, locked the Fed into a dangerous game of asset bubble management.

more...

http://www.321energy.com/editorials/willie/willie051905.html

My greatest fear is that the USGovt and US Fed will actively pursue and promote a recession in order to prevent ongoing energy demand from creating a series of oil price spikes. Recession uses less oil than war!!! Somewhere wisdom might be purported that war is useful at the supply source, but recession or economic stall within the civilian zones might be more than tolerated. On the other side, if crude oil settles below $50 per barrel for even a few weeks, expect to hear some drill projects to be put on hold and delayed. An energy train wreck lies ahead. Don't be lulled into a false sense of security by the move below $50 per barrel. This is but a calm of man-made style. The Federal Reserve has caused severe damage by keeping interest rates so low for so long. Now the damage has begun to come to light, with slower retail sales among low-income households, with bond market hidden crises, with flattened money supply growth.

Within the energy sector, my personal analysis points to natural gas outperforming crude oil, but uranium besting the bunch. Natural gas production is in decline in key fields across North America. But uranium demand exceeds supply by 40%, and is heading for depletion, fast.



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Large energy companies reluctantly commit new funds to budget exploration projects. They tend to commit when very large deposits are in view, which is rare nowadays. They are more content in granting dividends and completing stock buybacks than in discovering new oil deposits. That is the first round, as they evaluate their alternative plans. Such a passive approach has its value. Next comes a merger & acquisition spree, not limited to just the leader, but also to the merged Seven Sisters. The Duke Energy wedding plans for Cinergy is an early warmup. The mergers are sure to continue in an attempt to exploit some synergy. The acquisition phase will soon begin to replace reserves already exhausted to output and production. In January and February of 2004, $202 billion in M&A was either agreed upon or completed among US corporations. We are sure to see large acquisitions of small and mid-sized energy firms. Note the report that Chevron Texaco is on track to acquire Unocal. Could it be that USGovt officials tugged the shirts of energy giants to use their cash to stymie Chinese efforts to grab US energy properties??? Methinks yes, and recall that Secy of State Condy Rice hails from Chevron. Danger might be sensed from Chinese encroachment. If it is not, it should be. Perhaps some concessions were given to Chevron by the USGovt, on taxes, on properties, on information.

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It is amazing that economists and analysts rely on backward looking methods, and overlook future supply & demand trends!!! The brokerage houses must be liars, lords or lunatics. My bet is "liars" without doubt, due to clear vested interest. Perhaps they expect a big worldwide economic recession to reduce crude oil demand, but sustain corporate profits generally??? Analyses based upon data from past decades and past dynamics are irrelevant and useless in today's world. Depletion is much farther along. Demand is much higher from the new kids on the block, and more wasteful US lifestyles.

Regardless of the reality of speculative influence of crude oil price movement, the underlying fundamentals are outrageously bullish. Marshall Auerback in his "Higher Energy Prices are Here to Stay" at the Prudent Bear website provides an excellent survey on the topic.

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

Last trade 86.15 Change +0.06 (+0.07%)

BOJ keeps its target and eats it, too
Liquidity flexibility is technical move, not a tightening

http://www.marketwatch.com/news/print_story.asp?print=1&guid={C733A64B-B9B7-49D1-87BB-20C295BA29B0}&siteid=mktw

TOKYO (MarketWatch) -- The Bank of Japan said Friday it will maintain its liquidity target for the outstanding balance of current account deposits held by private financial institutions at the central bank, but as expected, it also said it would allow liquidity to fall below the target level.

The apparently contradictory move -- keeping a target, and then saying it's OK if the target isn't met sometimes - underscores the bank's determination to convince markets that this really isn't a policy tightening, but rather just a technical tweak.

"The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the bank at around 30 to 35 trillion yen," the BOJ said in a statement released at the conclusion of its two-day policy board meeting.

"When it is judged that liquidity demand is exceptionally weak considering such factors as responses of financial institutions to the bank's funds-supplying operations, there may be cases where the balance of current accounts falls short of the target," the statement went on to say.

"With this decision, the Bank will not have to force liquidity into the financial system (as much), and they can still technically maintain that policy has not changed," J.P. Morgan economist Ryo Hino wrote after the decision.

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Dollar Holds Its Ground Despite Weak Philly Fed

http://www.dailyfx.com/index.php?option=com_content&task=view&id=1164&Itemid=39

US Dollar
To the befuddlement of traders, the dollar held onto to its gains in face of very weak economic data. For the fourth month in a row, leading indicators forecasted further deterioration in the US economy while the Philadelphia Fed Survey of manufacturing conditions plunged from 25.3 to 7.3 in May. Coming on back of the biggest drop in the Empire State manufacturing survey, we now know with near absolute certainty that the national ISM survey will experience an equally sharp decline. One of the most popular questions that we have been asked today was why the dollar rallied on the weak Philly Fed report. Our answer is a repeat of what we have stressed over the pass few months, that is each piece data is scrutinized for its implications on Fed Policy. The weak Empire State survey and the benign inflation report has already notched down the higher post payrolls expectations formed in the markets over the past few weeks. Even without today’s data, we know that there are at least 2 rounds of tightening left in the pipeline. The Philly Fed survey does little to change that fact. By no means is the release significant enough to cause the Fed to cut short their plans for tightening. Yet from a longer-term perspective, we do find the report discouraging and leaves us skeptical about the prospects for the US dollar in general. A few months ago, we published a piece titled, the “The Fate of the US Dollar,” and we still stand behind our belief that the bigger negative factors weighing on the dollar, such as reserve diversification, implications of Chinese revaluation and the twin deficits will return to the forefront once the Fed is done tightening. For the time being though, the dollar could still muster a rally according to our weekly FXCM Speculative Sentiment Index. The ratio of longs to shorts in USDCHF is –1.03, which is within the extreme +/- 3 range. Shorts have gained a marginal control over longs, with the ratio flipping from net long to net short over the past week. We have been waiting for a flip in the ratio to signal the prospect of further gains in USDCHF, but the narrow margin that shorts have captured reduces the significance of the flip. Nevertheless, the fact that the ratio did flip is still a bullish signal for USDCHF and for as long as shorts continue to retain control over longs, our contrarian indicator tells us that we should see further gains in the pair.

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Japanese Yen
Over today’s session, the yen slowly lost its ground once again and floated back up to 107.65 against the dollar by the end of the day. Today, a monthly government report was released for May and it basically echoed last month’s outlook for a moderate economic recovery with improvements in business profits and investment while private consumption picks up. The only significant change was the upgrade of the export situation to “flat” as opposed to “weakening”. This mediocre statement failed to save the yen as a separate report on international securities transactions over the week of May 8-14 revealed that net foreign purchases of Japanese stocks moved into the red with -¥36.5B from a figure of ¥67.0B in the previous week. Meanwhile, domestic investors bought a net of ¥156.4B worth of foreign securities. Including stocks, bonds and notes, as well as money market instruments, this would be the 5th consecutive week where Japan registered a net capital outflow in terms of portfolio investment. On average, ¥657.3B has been leaving the country each week over the past five weeks. Combined with a “flat” outlook for exports, this is not a good trend in terms of the impact on the currency. Fortunately for the yen, yesterday’s Hong Kong Monetary Authority’s announcement of a widening of their currency peg is lending its support as it potentially represents Hong Kong’s preparation for an upcoming revaluation from China. On the other hand, South Korean authorities said that yesterday’s statement from the governor was misunderstood when it was interpreted to mean that there would be no further intervention or foreign reserve accumulation from the country. Reportedly, the central bank bought dollar-denominated assets as recently as this morning.

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No Reports Today.

Have a Great Day Marketeers!

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2005/IO+May-June+2005.htm

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Because that conclusion nearly mandates a continuation of our artificially low U.S. and global interest rates fostered at the expense of the yield insensitive Chinese and Japanese Bretton Woods II (BWII) “cartel,” it might seem that all we as bond investors have to do is to head for the bar to get a tall cool one. But that would neglect the potentially reflationary impact of this artificially low yield environment. Surely, near 0% real short-term rates here and abroad have got to stimulate an inflationary resurgence. Au contraire. China has opted into BWII for one reason only – to employ hundreds of millions of unemployed workers in its interior. And it is those same workers, requiring only 5-10 cents per U.S. wage dollar that have kept inflation competitively low nearly everywhere in the global economy. What inflation we do have – 3% in the U.S., 2% in Euroland, 0% in Japan – is due to asset inflation – higher commodity prices, higher housing prices, and higher stock prices – creating artificial wealth and immediate purchasing power through what we described at our Secular Forum as the “Pump.” In some secular stretches, real, not artificial wealth is generated by productivity surges and the advancement of new technologies. The 1990s was such an example, but during the past five years wealth has come more from finance-based miracles than those based on productivity.

Nearly everyone knows that oil prices, housing prices, and even stock prices are up in the past few years and in some cases spectacularly. Not everyone knows why. Enter the “Pump.” The pump in its purest sense – sans the risk premium, and the P/E, P/Rents multiple changes of stock and home prices – can best be explained via the price action of a good old inflation protected Treasury, a 5-year maturity TIPS shown in both yield and price terms in Chart III.



This asset has been “Pumped” over the past 4 years to the tune of 14% price appreciation by the low interest rate policy of Alan Greenspan. Its 4% real yield has been lowered to 1% real yield with a resultant 14% price pop. That increase is reflective of the wealth creation pump for more well known asset classes – our homes, our stocks, our corporate bonds with their CDO structures and so on, except in these cases, the asset pop has been more than 14% because they are risk assets and in many cases levered ones.



Now this concept of the “Asset Pump” (which in combination with fiscal deficit spending and associated tax cuts has been the primary U.S. induced policy to keep consumption up and the recovery going) is important to understand because it gives us a strong hint about our economic and investment future and allows us to describe our King’s seamstress as having done a rather poor job of sewing. That seems evident because her creations have been put together not based on savings and domestic investment but on finance-based consumption fed from asset appreciation based on the Pump.



Future finance-based consumption, however, is limited by our ability to keep pumping lower and lower yields, which in the past have led to higher and higher TIPS, home, stock, and associated asset prices. Let me do the TIPS math for you and then you can draw the implications for other asset classes. The 14% 5-year TIPS capital gain over the past few years that Alan Greenspan has been able to manufacture probably can only go up by 5 more points, because a 0% real yield for a 5-year maturity TIPS serves as a practical limit that investors will tolerate during deflationary, and most low inflationary environments. A 5-year TIPS moving lower in yield from 1% to 0% goes up 5 points. Even if the Fed continues to “Pump,” then, we are ¾ of the way complete in terms of the Fed’s ability to continue to stimulate asset prices, because its 21st century journey started at 4%, we are now at 1%, and 0% is the practical limit. That doesn’t mean that the housing “bubble” can’t keep going because it likely will if the Fed “Pumps” real yields closer to 0%. But there are limits, and we are heading down the home stretch of this U.S. race towards prosperity based on asset price appreciation.



Our point on the “Pump” then, is to suggest that in combination with a globalized free trade-based economy exhibiting a surfeit of cheap Asian labor, it will be difficult to generate U.S. inflation higher than our current 3% even if interest rates fall further. If 3% inflation is all we can get from the past 5-years’ asset inflation, it’s hard to believe that we get more from what’s left. The potential to reflate via interest rates is nearly over. We draw the same conclusion for Euroland and Japan. Japan, of course, is the primary example of how 0% nominal yields can fail to generate any inflation whatsoever, is it not? Continued disinflation not reflation, then, will rule our fragile future kingdom, with the potential for 1-2% CPI prints in most years between 2006 and 2010 throughout much of the global economy. Readers may remember our past few years’ Secular Forum descriptions of the tug-of-war between disinflation and reflationary forces. We have proclaimed a winner based on our observation of massive fiscal and monetary global stimulation described above, the limited inflationary response, and the lack of further ammunition. Long live our disinflationary King.

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.....If we had to forecast (and we do), we believe a range of 3 - 4½% for 10-year nominal Treasuries will prevail during most of our secular timeframe and that yields on Euroland bonds will be slightly lower due to their structural unemployment problems, disinflationary incorporation of new Central and Eastern European countries into their existing family of nations, and more growth-inhibiting demographics. This bullish scenario is not without its risks, be they geopolitical, trade, oil, or internal budget popping related in the U.S. or Euroland. In addition, anything that threatens BWII or resembles a “helicopter money” monetary response described by Ben Bernanke could ultimately be bond market destructive.

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quiet report day. Sh*t, jawbonin' is all they got left aside from "Chopper money".

http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=8555549&pageNumber=1

WASHINGTON (Reuters) - Three months after Federal Reserve Chairman Alan Greenspan described peculiarly low long-term U.S. borrowing costs as a "conundrum," 10-year rates are now even lower and there is little more clarity as to why.

Most experts agree it is hard to justify such low rates given a robust U.S. economy and rising Fed interest rates.

While the persistence of such cheap borrowing is likely to buoy the economy by underwriting robust spending, many fear the long-term effects of supercharging already red-hot house prices and keeping savings-shy households in the shops.

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Now at 4.1 percent, 10-year T-bond yields are lower than just before Greenspan's "conundrum" speech on Feb. 17, half a percentage point below subsequent peaks in March and 70 basis points below when the Fed first started raising rates in June.

Many experts reckon Greenspan's "conundrum," a word he has since said he regretted using, mirrors the "irrational exuberance" phrase he used to describe rising equity prices late in 1996.

Then, it took almost 4 years for equities to peak in what is widely considered to have been a bubble. Whether bond markets are experiencing something similar is unclear.

more single sentence paragraphs...

http://www.marketwatch.com/news/story.asp?guid=%7B06E2B70E%2D976B%2D4DC4%2DB7DD%2DBC347E4C38C5%7D&siteid=mktw

NEW YORK (MarketWatch) - Treasury prices gave back a small portion of their recent steep gains Friday, as corporate bonds which were severely punished in a recent rout returned to favor.

The lower prices pushed the yield on the 10-year in late trade up to 4.125% from 4.081% Thursday.

On Thursday, the Treasury market broke an energetic rally linked to worries about shaky hedge funds and deteriorating corporate bond ratings.

The slight weakening of Treasury prices from their recent highs was accompanied by a redirection of funds back into the corporate market.

"This is just a little consolidation," said Miller Tabak bond market analyst Tony Crescenzi. "No one actually believes that there will be a big reversal. This is just a bit of a correction."

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The Fed chairman's remarks were monitored by market players, but had little influence on trade.

...more...

Maybe more people are onto the lying thieving neo-con hack than we think.

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

May 20 (Bloomberg) -- China would be ``foolish'' to let the yuan strengthen, said Steve Hanke, an economics professor at Johns Hopkins University. Failure to do so may lead to a trade war with the U.S., according to Goldman Sachs Group Inc.

``There is no way China is going to abandon'' the yuan's peg to the dollar, said Hanke, who has advised governments from Indonesia to Argentina on currency policy. ``China would be foolish to consider revaluing,'' he said in an interview in Washington yesterday.

China is under pressure from the Bush administration to ease the fixed exchange rate of the yuan, which has been pegged at about 8.3 to the dollar for a decade. The Commerce Department on May 18 sided with petitions from U.S. textile companies to cap imports of Chinese clothing and yarn, a day after the Treasury Department said China risks being branded a currency manipulator.

Hanke is in the minority. Treasury Secretary John Snow, Federal Reserve Chairman Alan Greenspan, Japanese Vice Finance Minister Hiroshi Watanabe and banks including Goldman, Deutsche Bank AG and UBS AG all say China is preparing to alter course.

Why does that list of characters make me suspicious of all this yuan rising talk?

more...

see a yu-an arising.
I see trouble on the way.
I see trade wars and fightnin'.
I see bad times today.

CHORUS:
Don't bet on the buck tonight,
Well, it's bound to take your life,
There's a yu-an on the rise.

I hear chopper blades ablowing.
I know the end is coming soon.
I fear M-3 over flowing.
I fear the Feds will lead ruin.

Don't go around tonight,
Well, it's bound to take your life,
There's a Yu-an on the rise.

Hope you got your things together.
Hope you are quite prepared to die.
Looks like we're in for nasty weather.
One eye is taken for an eye.

Don't go around tonight,
Well, it's bound to take your life,
There's a Yu-an on the rise.

Don't go around tonight,
Well, it's bound to take your life,
There's a trade war on the rise.

http://www.bloomberg.com/apps/news?pid=10000080&sid=apG6l0j8nydY&refer=asia

May 20 (Bloomberg) -- China will raise export tariffs on textiles, seeking to avoid U.S. government and European Union limits on shipments of Chinese shirts, trousers and underwear.

China's textile exporters will have to pay a tax of as much as 4 yuan (48 U.S. cents) per item to sell their goods abroad, up from a maximum of 0.3 yuan, the finance ministry said today on its Web site. The new duties, imposed on 74 product types from June 1, are five times higher than previous taxes for most items.

``It's a gesture of goodwill from China,'' said Qu Hongbin, an economist at HSBC Plc in Hong Kong. ``Everything is symbolic because China's exports are very competitive.''

snip>

China's plan to raise tariffs ``means that in this little round of arm wrestling that pits the Americans and the Europeans against the Chinese, the Chinese have decided to slow their exports of textile products,'' said Pascal Lamy, nominated on May 13 to be the World Trade Organization's next chief. ``The bottom line is that the Chinese are slowing their exports to avoid the Americans and Europeans slowing their imports,'' the Frenchman said in an interview on the French radio station Europe 1.

more...

forever!

:applause:

:donut: I have had a little problem with my pc (operator failure), I could read but not post....bummer. The blather comming off the street lately has been so entertaining. Imagine all those 'shocked' economist. I am leaning toward the deflation theory because I don't see ANY fiscal responsibility coming out of the WH any time soon. The pending pension fiasco will be a flash point. Remember, this is happening to the Boomers-they WILL hit the streets over this breach of trust.
I stopped all but 1% of my salary contribution to 403B. The rest goes to debt reduction. I am scoping out a part time summer job to further reduce debt. My goal is to be debt free in 2 yrs. After that, who knows.

http://www.reuters.com/financeNewsArticle.jhtml?type=governmentFilingsNews&storyID=8560678§ion=investing

NEW YORK, May 20 (Reuters) - Insurer Ace Ltd (ACE.N: Quote, Profile, Research) said on Friday that Don Kramer, an executive in the office of president and chief executive, has retired.

Kramer, 67, has held his current position since May 2004 following his retirement from ACE's board of directors.

ACE said on Thursday it fired three employees and suspended two others in its excess casualty business in connection with previously disclosed investigations into underwriting practices.

I certain that the insurance industry would never do anything that would cause financial harm to policyholders (home, business, commercial, medical, malpractice, etc) :eyes:

http://www.marketwatch.com/news/story.asp?guid=%7B03992B0B%2DB6C6%2D41A3%2DB3B3%2D2F9457D7D27F%7D&siteid=mktw

excerpt:

The report said it was unclear whether the grand jury is considering charges against the company or individuals. However, Spitzer said in April that a civil settlement with AIG was likely. But he hasn't ruled out criminal charges against former AIG Chief Executive Maurice "Hank" Greenberg.

Spitzer is presenting evidence to the grand jury and AIG Senior Vice President Joseph Umansky has testified in exchange for immunity from charges that may stem from the proceedings, Bloomberg News reported.

Spokesmen for AIG (AIG: news, chart, profile) , Spitzer and Greenberg's legal team declined to comment. Seth Rosenberg, Umansky's lawyer, didn't return a call seeking comment.

Spitzer's reported use of a grand jury is the latest development in the AIG saga. Spitzer and other regulators, including the Securities and Exchange Commission, are investigating whether AIG and other companies have used reinsurance contracts to manipulate their financial statements.

...more...

Now let’s take a further look at how seemingly desperate our officials are in keeping the system afloat. Have you ever wondered why the Fed does not think it’s necessary to regulate hedge funds? For quite a long time now I have speculated that the Feds have their own “hedge” accounts set up around the globe. This is the first writer I have seen call it like it is…but it will come as no surprise if you know Mr. Bill Murphy of GATA.org. I was especially humored by the title of his Monday missive, “Caribbean Pirates Holding US Financial Markets Together.” Here are some excerpts from his market recap on Monday as they pertain to foreign capital flows. The manufacturing report was bad on Monday, but the March TICS report of diminishing investment in the U.S. was the worst news of the week so far. Here is how Bill Murphy reported on capital flows:

March TICS.

Expect: $70 bil.
Actual: No typo here. $45.7 bil.
This looks to be the case for the low-ball result:
Apparently, US investors unloaded foreign securities to the tune of $14.4 bil, just like
they did in February. At the same time, foreign central banks blew out of $14.98 bil of US securities (the bulk of that is govvies).
Please note that NET FOREIGN PURCHASES OF GOVVIES WERE $42.9 bil in
March. Now look at the specifics:
*Caribbean banking centers: +$32.5 bil
*UK: +$12.2 bil
Korea: +$4 bil
Germany: +$3 bil
China and Japan: both negative at $1.4 bil and $800 mil, respectively.
*Fast money oriented.
So between the Caribbean and UK alone, they purchased $44.7 bil.
There is something way too weird here.

However, foreign official institutions were net sellers of $14.98 billion worth of Treasuries, or 15 times as much as the last dip in 2003.The last time foreign official institutions were net sellers of Treasuries was almost two years ago, when they sold $963 million of Treasuries. Hail to the Caribbean Pirates who came to the rescue.

In other words if it were not for the Caribbean Pirates interest rates would be much higher than where they are today. Who knows where the dollar would be?

snip

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

Somebody is running mega cash thru the Caribean....??? Who could that be?

is (remember the Pentagon's bad accounting?)

http://www.cbsnews.com/stories/2002/01/29/eveningnews/main325985.shtml

The War On Waste

excerpt:

"According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted.

$2.3 trillion — that's $8,000 for every man, woman and child in America. To understand how the Pentagon can lose track of trillions, consider the case of one military accountant who tried to find out what happened to a mere $300 million.

"We know it's gone. But we don't know what they spent it on," said Jim Minnery, Defense Finance and Accounting Service.

Minnery, a former Marine turned whistle-blower, is risking his job by speaking out for the first time about the millions he noticed were missing from one defense agency's balance sheets. Minnery tried to follow the money trail, even crisscrossing the country looking for records.

"The director looked at me and said 'Why do you care about this stuff?' It took me aback, you know? My supervisor asking me why I care about doing a good job," said Minnery.

He was reassigned and says officials then covered up the problem by just writing it off.

"They have to cover it up," he said. "That's where the corruption comes in. They have to cover up the fact that they can't do the job."

...more...

fund 'private investors' and was very interested when I read this article on Monday:

Foreign investors sell U.S. assets

International investments in U.S. securities dropped to $45.7-billion (U.S.) in March from $84.1-billion in February, the U.S. Department of Treasury said Monday, further evidence that foreign central banks may be diversifying their holdings away from U.S. assets.

The March inflows fell well short of the $70-billion economists polled by Bloomberg had expected. Moreover, it is below the $65-billion to $75-billion that is needed to cover the U.S. current account deficit and outflows of foreign direct investment, according to a report by Adam Cole, senior currency strategist at RBC Capital Markets in London.

Overseas central banks were net sellers of U.S. assets for the first time since September 2002, he wrote. March's selling of U.S. dollar-denominated assets by official holders was the largest since August 1998, he said.

snip

On the other hand, foreign private investors, such as hedge funds, flocked to U.S. assets in March.

more

http://www.theglobeandmail.com/servlet/story/RTGAM.20050516.wusdollar0516/EmailBNStory/Business

Edited to correct typos

The million dollar question is? Where is it coming from? His printing presses are already at physical full capacity, unless he's built a new printing building somewhere? OR is he buying his own T-Bills using Social Security taxes?
On top of this, it also looks like the "Hedge Fundsters" are liquidating their dollar funded "Carry" trades, which will aid the US dollar for the period that their positions are being unwound. Might help explain why US dollar is where it is against all the economic data?
One further worry! - Having recently finished studying "Bankruptcy Law" here in OZ, i am facinated with the consequences of America going Bankrupt, and being left in the hands of their creditors. Would one of their creditors be "The World Bank", by chance? Who has been recently appointed as head of this organization?

briefing.com

9:15AM: S&P futures vs fair value: -3.0. Nasdaq futures vs fair value: -3.5.

9:00AM: S&P futures vs fair value: -3.2. Nasdaq futures vs fair value: -4.0. Still shaping up to be a lower open for the indices as the futures market languishes below fair value... Software, however, could be a bright spot today after UBS raised its rating on the sector to Overweight from Neutral... Retail should be in focus after Gap (GPS) beat expectations by a penny and issued encouraging FY06 guidance last night while CarMax Group (KMX) has lowered its Q1 EPS outlook and Prudential has downgraded ANF, AEOS and PSUN

8:31AM: S&P futures vs fair value: -3.6. Nasdaq futures vs fair value: -3.5. Buyers still showing some reserve in pre-market trading, as futures indications continue to point toward a lower open... Meanwhile, with no notable economic or earnings data scheduled to potentially set a more definitive tone to trading, market participants may focus on Fed Chairman Alan Greenspan's speech on energy at 12:30 ET and any reaction in oil prices

8:00AM: S&P futures vs fair value: -3.8. Nasdaq futures vs fair value: -4.0. Futures market versus fair value suggesting a lower open for the cash market as investors look to consolidate gains following a four-day rally... Also contributing to a deteriorating sentiment heading into the weekend has been a modest rebound in oil prices after OPEC said there was no reason to cut output even if inventories build too fast...

ino.com

The June NASDAQ 100 was slightly lower overnight due to light profit taking as it consolidates some of Thursday's rally, which tested the 50% retracement level of this year's rally crossing near 1524.54. Stochastics and the RSI are bullish but overbought hinting that a short-term top might be in or is near. If June extends this month's rally, the 62% retracement level of this year's decline crossing at 1554.62 is the next upside target. Closes below the 10-day moving average crossing at 1484.24 would signal that the short covering rally off April's low has come to an end. The June NASDAQ 100 was down 2.50 pts. at 1522 as of 5:49 AM ET. Overnight action sets the stage for a steady to lower opening by the NASDAQ composite index later this morning.

The June S&P 500 index was slightly lower overnight as it consolidates some of Thursday's rally but remains above the 50% retracement level of this year's decline crossing at 1186.60. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If June extends this week's rally, the 62% retracement level of the March- April decline crossing at 1196.54 is the next upside target. Closes below the 20-day moving average crossing at 1168.51 would confirm that a short-term top has been posted. The June S&P 500 Index was down 1.70 pts. at 1189.60 as of 5:51 AM ET. Overnight action sets the stage for a steady to lower opening when the day session begins later this morning.

http://www.nytimes.com/2005/05/20/business/20norris.html

SEVEN years ago, two financiers who were among the most respected and feared in America sat down to make a deal that turned out to be disastrous for almost everyone involved.

Everyone, that is, except for the men most directly involved. Long after the public investors toted up their losses, Ronald O. Perelman and Albert J. Dunlap are doing fine. The biggest loser appears to be an investment bank that lost a lot of money financing the deal and now must pay much more to Mr. Perelman.

:pity: Morgan Stanley

In early 1998, Mr. Dunlap was among the most revered and most reviled chief executives in the country. Credited with having turned around Scott Paper in 1994 and 1995, he then appeared to have done the same thing for Sunbeam, a maker of small home appliances. Its profits had soared and so had its shares.

He relished the nickname Chainsaw Al, bestowed for his willingness to fire people. His memoirs had been a best seller in hardcover and were selling well in the paperback edition.

snip>

The former public owners of Coleman stock were not in the lawsuit, and will get nothing from it. If this verdict stands, Mr. Perelman will have a large profit, but public investors who followed his lead will have lost nearly everything they invested.

more...

Dow 10,467.11 -26.08 (-0.25%)
Nasdaq 2,037.31 -5.27 (-0.26%)
S&P 500 1,188.13 -2.95 (-0.25%)
10-Yr Bond 4.121 +0.13 (+0.32%)

NYSE Volume 103,707,000
Nasdaq Volume 94,254,000

The world oil price could grow to $80-100 per barrel by late August, Vasily Petrov, an expert from the Russian Center of Strategic Developments said on Friday, May 20. The forecast was published in Russia’s Independent Gazette (Nezavisimoya Gazeta) political daily.

The oil industry is experiencing a bear market, as oil prices plunged to their three-month low in secondary trading. Oil prices reached their first peak in September 2004, after which they declined. A second peak was registered in March. Petrov says that the third peak could come in late summer, as China is expected to sharply increase its demand for electric power and will require a large amount of oil to process it into diesel fuel.

Alexei Belashov from the Barrel investment company is more moderate in his forecasts. “The demand in China is strong and growing and its economy is developing. However, it is necessary to take into account the fact that the United States is introducing quotas on Chinese products, like textiles. Nevertheless, the United States is trying in every possible way to restrain the upsurge in China’s growth,” he said.

According to Belashov, the Saudi Arabian Energy Minister Ali bin Ibrahim Al-Naimi has said that oil reserves are sufficient and oil-producing nations would be able to meet the demand. “That is why I do not see any strong prerequisites for growth, like in the situation when oil prices leaped to $60 per barrel. At that time, there was uncertainty in the Far East and the dynamics of China’s demand was unclear. Besides, the U.S. petroleum stocks had declined significantly. Today they are growing and there are no reasons for any anxiety,” Belashov said.

The world oil market is now looking for a fair oil price, expected to hover between $45 and $50 per barrel. “The only thing that could prompt rapid growth is the start of a U.S. military campaign against Iran. This event would cause a swift rise in oil prices. However, this is unlikely to happen. The U.S. is bogged down in Iraq,” the expert added.


http://mosnews.com/money/2005/05/20/oilprice.shtml

Dow 10,462.97 -30.22 (-0.29%)
Nasdaq 2,037.20 -5.38 (-0.26%)
S&P 500 1,188.25 -2.83 (-0.24%)
10-Yr Bond 4.127 +0.19 (+0.46%)

NYSE Volume 293,592,000
Nasdaq Volume 286,845,000

10:00AM: Equities still on the defensive as the bulk of sector leadership remains negative... The Materials sector has again paced the way lower, under pressure from a strengthening dollar, while Financial and Health Care have been influential leaders to the downside... Technology has been weak across the board while losses in Retail, amid several analyst downgrades, have weighed on the Consumer Discretionary sector...

Energy, however, has eked out a gain amid a modest rebound in oil prices while Airline stocks have surged following confirmation that America West (AWA 5.17 +0.36) will merge with U.S. Airways...NYSE Adv/Dec 832 /1622, Nasdaq Adv/Dec 851/1385

-cut to the economic issues-

Peasantization of Workers

Over the past five years we have seen the biggest transfer of wealth in the history of money. The already wealthy have become mind-numbingly rich under George Bush. Where did the money come from? It came right out of the pockets of working Americans and the poor.

-cut-

What the right has accomplished in just five years is the creation of a low-wage economy -- a management wet dream -- a country filled with high-skilled workers so desperate for jobs they will work for peanuts. Once powerful labor unions have been powerless to stop the flow of once high-paying blue and gray-collar jobs to cheap overseas venues. The jobs that replaced those lost to outsourcing pay an average of ten grand a year less. (As I said above, the money came straight out of workers' pockets.)

Deflating Inflation

-cut-

WASHINGTON -- Consumer prices jumped again last month, primarily reflecting sharp increases in food and energy costs, the government reported today. But prices for items other than food and energy were flat in April, while oil and gas prices have fallen since then, the Labor Department said, boosting hopes in financial markets that the recent inflation flare-up may be fading. Food prices climbed 0.7 percent last month, largely because of the rising costs of fruits and vegetables. But the so-called core-CPI, which excludes food and energy costs, was unchanged in April and is up 2.6 percent from April of last year.

-cut-

How much of that is going on in calculating the CPI? Plenty. And if you shop you know it. They keep saying inflation is in check, but the checks I have to write for everything from my utilities to the food keep getting larger.

more...

http://www.alternet.org/story/22057/

that actually give a bit of a clue

Schroders reduces equities to neutral

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.4271855787-835700678&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

NEW YORK (MarketWatch) - Schroders Friday reduced equities to a neutral rating "as the risks to markets increase." The investment bank cited recent indications of U.S. economic deterioration, "although the picture is not uniformly gloomy." Schroder said it had anticipated what it considers to be a current soft phase in the economy, and that it is increasingly worried about the prospect of higher oil prices.

for a bit of background:

http://www.offshore-banks-directory.org/schroder_sitemap.htm

are these some of the Pirates of the Carribean?

http://www.lawfulpath.com/ref/federal_reserve.shtml

see Chart 2

10:38
Dow 10,454.47 -38.72 (-0.37%)
Nasdaq 2,036.71 -5.87 (-0.29%)
S&P 500 1,187.10 -3.98 (-0.33%)
10-Yr Bond 41.27 +0.19 (+0.46%)

NYSE Volume 437,472,000
Nasdaq Volume 435,120,00

10:30AM: Sellers remain in control of the early action, as the major averages continue to chalk up losses... While the indices have so far remained mired in relatively tight trading ranges, bear in mind that today is an options expiration day, which can invite increased volatility... As an aside, total volume so far is running above the pace of the last several sessions, arguably suggesting even more conviction behind today's broad-based move to the downside...NYSE Adv/Dec 975/1780, Nasdaq Adv/Dec 897/1587

Dow 10,450.63 -42.56 (-0.41%)
Nasdaq 2,037.57 -5.01 (-0.25%)
S&P 500 1,187.54 -3.54 (-0.30%)
10-Yr Bond 4.127 +0.19 (+0.46%)

NYSE Volume 532,482,000
Nasdaq Volume 542,696,000

11:00AM: While the blue chip indices continue to trade sideways, the Nasdaq has recently halved early losses, led by a nice recovery effort in chip stocks... The Semiconductor Index (SOX +0.6%), which had been under pressure since the open amid reports that N. American chip makers suffered a 37% drop in April orders, has recently broken through a key resistance level (422), benefiting from upbeat comments out of Barron's regarding Applied Materials (AMAT 15.85 +0.13) and a recent turnaround in shares of Intel (INTC 26.06 +0.05)... NYSE Adv/Dec 962/1918, Nasdaq Adv/Dec 928/1701

http://www.newratings.com/analyst_news/article_834147.html

LONDON, May 20 (newratings.com) – Zimbabwe’s central bank on Thursday devalued the country’s currency in a bid to raise foreign exchange to fund vital food imports.

The Governor of the Reserve Bank of Zimbabwe, Gideon Gono, devalued the Zimbabwe dollar to 9,000 to the US dollar, from 6,200 previously. In the black markets, 18,000 Zimbabwe dollars are exchanged for one US dollar. Zimbabwe is suffering from its worst economic crisis since its independence in 1980. The country, in recession for the past six years, has been affected by a severe drought, resulting in a shortage of food. The country’s central bank has revised upwards its inflation target for 2005 from 20%-35% to 50%-80%. The growth forecasts for the current year have been revised downwards from 3%-5% to 2.0%-2.5%.

Not certain that it is related to the African Rand - but here is that chart:

11:10am 05/20/05 BUSH: WILL VETO STEM CELL BILL IF EMBRYOS DESTROYED

Bush warns veto on stem cell bill

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.4729795602-835703343&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

WASHINGTON (MarketWatch) -- President Bush said Friday he would veto a bill to allow federal funding of research on stem cells if the research could destroy human embryos. Bush made his remarks in a question-and-answer session with reporters after a meeting with the Danish prime minister. Congress is expected to vote as soon as next week on a bipartisan bill to lift Bush's 2001 ban on the use of federal dollars for research using any new embryonic stem cell lines.

I guess there was only one question and answer in that "session". :eyes:

(edited to add link and blurb)

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.4822074537-835703791&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

SAN FRANCISCO (MarketWatch) -- Moody's Investors Service on Friday downgraded the senior unsecured debt ratings of Verizon Communications' (VZ) subsidiaries in New Jersey, Pennsylvania, Maryland and Virginia, to A1 from Aa3. Moody's also downgraded the senior unsecured non-guaranteed debt ratings of Verizon-New England to A3 from A2 and the senior unsecured debt ratings of GTE-Southwest to A3 from A2. Moody's said about $9.1 billion of debt are affected by the downgrades. It said the action is based on its expectation that inroads made by competitors will cause the companies' operating performance to deteriorate faster than previously anticipated. Moody's said the ratings on Verizon's operating companies' remain on review for possible downgrade, pending the resolution of its assessment of Verizon's planned acquisition of MCI (MCI) . It also said the operating companies' ratings could be cut further if it downgrades Verizon Communications' senior unsecured rating as a result of the MCI deal, or if its individual operating performance deteriorates beyond other expectations by Moody's.

Don't you just love those M&As!

http://today.reuters.com/investing/FinanceArticle.aspx?type=bondsNews&storyID=URI:urn:newsml:reuters.com:20050520:MTFH68635_2005-05-20_15-17-38_WBT003148:1

WASHINGTON, May 20 (Reuters) - Richmond Federal Reserve Bank President Jeffrey Lacker said on Friday it was "hard to justify" the level of services the U.S. central bank provides for banks, particularly for clearing retail payments.

"My sense ... is that there are far less by way of economies of scope than would be needed to justify, on economic efficiency grounds, the current scale of Federal Reserve service provision, particularly in clearing 'retail' payments such as checks and (Automated Clearing House)," he told a Bank of England payments conference in London. A copy of his remarks was posted on the Richmond Fed's Web site.

Huh?

http://www.marketwatch.com/news/story.asp?guid=%7B60A44446%2DEDBA%2D473E%2DAD38%2D0908045CACFE%7D&siteid=mktw

LOS ANGELES (MarketWatch) -- Legislation pending in the U.S. Senate that would tighten requirements on paid tax preparers would create a new class of preparer subject to IRS testing and licensing, according to Frank Degen, president of the National Association of Enrolled Agents.

Initial interpretation of the bill's provisions made it appear that the IRS would only allow enrolled agents, certified public accountants and attorneys to become certified to commercially prepare returns for taxpayers. See previous Tax Watch.

But Degen said last week a new tax-professional category is being created -- the enrolled preparer. Tax professionals who are not enrolled agents, CPAs or attorneys will have to demonstrate competency by passing an IRS-administered test in order to be licensed as enrolled preparers and meet the laws requirements.

Those who only prepare individual tax returns will likely face just one test; those who prepare partnership, corporate or other types of returns will likely have to take a second examination. The requirements are not likely to be onerous for those who only handle individual returns, Degen said.

...more...

Wonder if someday we will have to have a license to prepare our own taxes :eyes:

don't give them any ideas of new ways to generate new income.

as soon as a child is born into this country today, it owes $26,000+ - just for the joy of getting to breathe our polluted air and perhaps (unless born into old wealth) it will have the luxury of growing up and going to work at Squal-Mart so as to pay off the debt it had no hand in creating.

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=8557515§ion=investing

WASHINGTON, May 20 (Reuters) - Federal Reserve Governor Donald Kohn on Friday called for improvements in inflation modeling, saying a pick-up in core U.S. inflation in 2004 and 2005 caught him and many other forecasters by surprise.

In remarks prepared for delivery to a monetary policy forum in Frankfurt, Kohn said policy-makers would profit from more knowledge about how firms and workers set wages and prices and how inflation expectations affect that process.

"We use proxies -- most often surveys of economists, whose projections may be influenced by their knowledge of other economists' projections, and of households, who may or may not understand the question or have a realistic view of what to expect," Kohn said.

"Readings from the financial markets are helpful, but they are also muddied by changing premiums for inflation risk and liquidity, and they are not necessarily representative of the attitudes of households or businesses," he added.

...more...

Then he goes on to say that it only matters if it flows into increased labor costs. :puke:

Dow 10,450.40 -42.79 (-0.41%)
Nasdaq 2,039.70 -2.88 (-0.14%)
S&P 500 1,187.20 -3.88 (-0.33%)
10-Yr Bond 4.117 +0.09 (+0.22%)

NYSE Volume 750,058,000
Nasdaq Volume 722,372,000

12:00PM: Market remains under pressure midday as investors consolidate gains following the biggest four-day rally in six months... While weekly gains of 3.4%, 3.1% and 3.2% on the Dow, S&P and Nasdaq, respectively, had substantially trimmed year-to-date losses of 6.0%, 4.8% and 9.1%, the opportunity to lock in some profits heading into the weekend has arguably been too tempting to keep sellers at bay...

The lack of any notable economic or earnings data to perhaps set a more definitive tone to trading has also stalled follow-through buying interest, as all ten economic sectors remain in negative territory... Pacing the way lower for the second straight day has been Materials (-1.1%), as a strong dollar has again weighed on Gold (-1.8%) and other commodities... Financial (-0.5%), under pressure after Morgan Stanley trimmed FY05 earnings estimates on Citigroup (C 47.46 -0.38), as well as Health Care (-0.2%), have been influential leaders to the downside...

Technology (-0.2%) has also traded lower, as weakness in Hardware and Storage has offset relative strength in Semiconductor and Networking, while losses in Retail, amid several analyst downgrades, have weighed on Consumer Discretionary (-0.6%)... Even Energy (-0.6%) has lost ground, amid a recent reversal in crude oil prices to below $47/bbl ahead of Fed Chairman Alan Greenspan's speech on energy at 12:30 ET... The Auto Parts & Equipment (+3.0%) group, however, has surged amid reports that Visteon (VC 5.87 +0.81) is closer to selling as many as 15 of its plants to its former parent Ford Motor (F 9.96 -0.05)...

but then, bad news is good news and good news is good news :crazy:

http://www.reuters.com/financeNewsArticle.jhtml?type=marketsNews&storyID=8559757§ion=investing

NEW YORK, May 20 (Reuters) - Used car seller CarMax Inc. (KMX.N: Quote, Profile, Research) on Friday cut back its quarterly earnings and sales outlook, saying high gasoline prices appear to be hurting demand for cars, sending shares down more than 10 percent.

For the fiscal first quarter ending May 31, the Richmond, Virginia, company said it now expects earnings of either 35 cents or 36 cents per share with comparable-store used vehicle unit sales growth of 6 percent.

That compares with previous expectations of 9 percent to 12 percent growth in unit sales.

...more...

but..but...but.... the consumers are doing just fine with higher gas prices so quit saying that!

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.5210270718-835705703&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

WASHINGTON (MarketWatch) -- Fed chief Alan Greenspan gave himself a pat on the back for his correct forecast in April that the spike in oil prices might not be long-lived. At the time, Greenspan said the current price frenzy might cool as inventories were likely to build because of technical market factors. "Indeed, since early April, private crude oil inventories in the United States have been accumulated at a seasonally adjusted rate of around 250,000 barrels a day," Greenspan said in a speech to the Economic Club on New York. "Inventory accumulation is likely to continue unless demand rises, output declines or we run out of storage capacity," he said. Since the end of 2003, higher oil prices have acted as a tax on U.S. residents - "of about 3/4 percent of GDP," Greenspan said. "But, obviously, the risk of more-serious negative consequences would intensify if oil prices were to move materially higher," he said.

12:30pm 05/20/05 GREENSPAN DOES NOT DISCUSS MONETARY POLICY IN TEXT

12:30pm 05/20/05 GREENSPAN: ECONOMIC RISKS GROW IF OIL PRICE MOVES UP

12:30pm 05/20/05 GREENSPAN: HIGHER OIL PRICE A TAX OF ABOUT 3/4% OF GDP

12:30pm 05/20/05 GREENSPAN SEES OIL INVENTORY BUILDUP CONTINUING

12:30pm 05/20/05 GREENSPAN: OIL INVENTORY RISE EASES PRICE AS EXPECTED

1:25pm 05/20/05 GREENSPAN: FED FUNDS RATE IS NOT ABOVE NEUTRAL LEVEL

1:16pm 05/20/05 GREENSPAN: CHINA REVALUE TO BOOST U.S. DOMESTIC PRICES

1:17pm 05/20/05 GREENSPAN: PRESSURE BUILDING ON CHINA TO REVALUE YUAN

1:15pm 05/20/05 GREENSPAN: CHINA REVALUE WILL NOT CUT U.S. TRADE GAP

1:14pm 05/20/05 GREENSPAN: CHINESE YUAN WILL BE REVALUED AT SOME POINT

Ya think???

The average American is working harder and smarter than ever.
But on payday, that's not making much difference.

U.S. wage growth isn't keeping up with rising prices for everything from gas to groceries to medical care. Strong productivity gains and an improving job market are not helping as they did in the past.

Adjusted for inflation, real weekly wages are down 0.3% vs. a year earlier. That's despite a slight monthly gain in April, Labor Department figures show.

more...

http://biz.yahoo.com/ibd/050519/general.html

Dow 10,455.14 -38.05 (-0.36%)
Nasdaq 2,038.57 -4.01 (-0.20%)
S&P 500 1,187.06 -4.02 (-0.34%)
10-Yr Bond 4.125 +0.17 (+0.41%)

NYSE Volume 937,917,000
Nasdaq Volume 890,121,000

1:00PM: Little changed since the last update as the major averages continue to vacillate in roughly the same ranges... Meanwhile, Fed Chairman Greenspan has recently said that energy will "remain central" to the economy's health and that inventory accumulation is likely to continue... However, even though oil prices have inched back into positive territory above $47/bbl, the fact that he also said energy use is likely to decline relative to GDP has prevented the Energy sector from taking advantage... NYSE Adv/Dec 1119/2016, Nasdaq Adv/Dec 1086/1751

12:30PM: Stocks improve their stance somewhat but selling remains widespread across most areas... Bucking the bearish bias, however, has been the dollar... The greenback has climbed to its highest level since Oct. 20 against the euro (1.2553) after opinion polls showed that France and the Netherlands may reject the EU constitution... The dollar has also been strong against other currencies, like the yen (108.17), amid speculation by traders that the dollar's three-year bear market may be over... NYSE Adv/Dec 1019/2081, Nasdaq Adv/Dec 1059/1732

Dow 10,472.86 -20.33 (-0.19%)
Nasdaq 2,041.95 -0.63 (-0.03%)
S&P 500 1,188.76 -2.32 (-0.19%)
10-Yr Bond 4.115 +0.07 (+0.17%)

NYSE Volume 1,075,951,000
Nasdaq Volume 1,010,041,000

2:00PM: Buyers show some resolve as oil prices fall more than 1.0% within the last half hour... After closing below $47/bbl for the first time in three months yesterday, renewed selling pressure in crude oil futures has recently pushed the commodity to $48.25/bbl ($0.49)... Note that open interest and total volume is now greater in the July contract, which closed at $48.75/bbl (-$0.33) last night, as the June contract ($46.45/bbl -$0.47) expires this afternoon...NYSE Adv/Dec 1258/1914, Nasdaq Adv/Dec 1222/1677

1:30PM: Indices pull back a bit but then almost as quickly level off as investors digest more of Greenspan's speech at the Economic Club of New York... Most recently, Greenspan has said that, while he does not perceive there to be a national bubble, there may be some regional housing bubbles, news that has pushed the PHLX Housing Sector (HGX -0.7%) to session lows... But he has also added that he sees considerable unlikelihood of home price decline...NYSE Adv/Dec 1265/1901, Nasdaq Adv/Dec 1200/1666

and here are the miracle thing's press releases:

Greenspan: Fed funds rate is not already above neutral

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.5662402431-835708159&siteID=mktw&scid=0&doctype=806&

WASHINGTON (MarketWatch) -- Fed chief Alan Greenspan said he does not agree with economists who might argue that the Fed funds rate has already risen above the so-called neutral level. "At the moment, we are not in agreement with those who you quote," Greenspan said when asked to comment on the arguments from some economists that the string of eight straight quarter point rate hikes has brought the Fed funds rates above neutral. The neutral rate is the level of interest rates that allows for steady growth without inflation. The Fed stated after its latest meeting on May 3 that the Fed funds rate remains accommodative, or below the neutral level.

Crude, oil products turn lower on Greenspan comments

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38492.575289375-835708640&siteID=mktw&scid=0&doctype=806&

NEW YORK (MarketWatch) -- June crude futures and oil products turned lower Friday afternoon, after Federal Reserve chairman Alan Greenspan said he expects energy demand to contract as a result of recent high prices. "The market had been looking for bearish sentiment and I guess they got it from that quarter," said John Kilduff, senior vice president of energy risk management at Fimat USA. Greenspan was speaking at an economic lunch in New York. Futures were last trading down 0.5% at $46.70 a barrel. The July contract, which becomes the lead contract from Monday, was last down 0.5% at $48.50 a gallon. June heating oil also came off its highs to trade down 0.5% at $1.3730 a gallon.

Guess we'll have to wait 'til crude actually closes for the day to see if those lips passes pearls or spit :eyes:

Dow 10,480.26 -12.93 (-0.12%)
Nasdaq 2,044.81 +2.23 (+0.11%)
S&P 500 1,189.80 -1.28 (-0.11%)
10-Yr Bond 4.119 +0.11 (+0.27%)

NYSE Volume 1,173,684,000
Nasdaq Volume 1,092,332,000

2:30PM: Market now trades in spilt fashion, as leadership in technology helps the Nasdaq inch above the flat line... While strength in Semiconductor (+1.0%) has provided the bulk of buying interest behind the Technology sector's turnaround, relative strength in Software (+0.3%) has also contributed to the recent reversal, due in large part to a sector upgrade - to Overweight from Neutral - at UBS...

Offsetting overall software gains, however, has been a sell-the-news reaction in response to better than expected Q1 earnings and upside guidance from AutoDesk (ADSK 35.91 -0.65), which has surged nearly 15% from late-April lows... NYSE Adv/Dec 1357/1835, Nasdaq Adv/Dec 1306/1608

http://www.marketwatch.com/news/story.asp?guid=%7B054A658E%2D01D1%2D40DD%2D8AB5%2D2639F876ECCB%7D&siteid=mktw

excerpt:

Nevertheless, John Caldwell, investment strategist at McDonald Financial Group, said investors should be encouraged by the fact that the market traded up this week without a whole lot of news.

"Everybody sort of came to the realization that earnings were good; growth is going to be revised higher next week from a GDP standpoint; the inflation picture is still mixed and if it moves a little bit higher it's not as bad as they anticipated; and maybe the Fed keeps raising rates but now there's more talk that maybe they'll take a pause and that does seem to have put people in a buying mood," Caldwell said.

2:18pm 05/20/05 N.A. WEEKLY VEHICLE PRODUCTION SEEN AT 337,120 -WARD'S

2:17pm 05/20/05 N.A. WEEKLY VEHICLE PRODUCTION SEEN DOWN 3.7% - WARD'S

http://www.wnct.com/servlet/Satellite?pagename=WNCT/MGArticle/NCT_BasicArticle&c=MGArticle&cid=1031782834049&path=

Another hit to the state textile industry. Lexington Home Brands is cutting 40 more jobs. The company says imported furniture is forcing them to cut. In the past four years, six plants have closed sending almost 2,200 people to the unemployment line. In 2000 imports accounted for 30 percent of furniture sold in the US. That number is now up to 75 percent.

...very short newsblurb...

I guess a little itty-bitty paragraph about a small community in North Carolina losing 2,200 jobs in 4 years doesn't merit much :eyes:

2:58pm 05/20/05 JUNE CRUDE CLOSES UP 0.7% AT $47.25 A BARREL

2:59pm 05/20/05 JULY CRUDE ENDS DOWN 4C AT $48.70 A BARREL

2:59pm 05/20/05 JUNE HEATING OIL DOWN 1% AT $1.3673 A GALLON

So much for that magic drooling mouth of the washed-up has-been partisan hack :puke:

Dow 10,470.28 -22.91 (-0.22%)
Nasdaq 2,043.73 +1.15 (+0.06%)
S&P 500 1,188.54 -2.54 (-0.21%)
10-Yr Bond 4.125 +0.17 (+0.41%)

NYSE Volume 1,282,435,000
Nasdaq Volume 1,196,819,000

3:00PM: More of the same for the averages as the blue chips and Nasdaq continue to trade in opposing directions... On the Dow, ExxonMobil (XOM 54.09 -0.74) has fallen after it was ordered by a federal judge to pay damages to more than 10,000 gas station owners for overcharging... DuPont (DD 47.10 -0.51) has extended losses amid further strengthening in the dollar while 3M Company (MMM 77.02 -0.84) has been under pressure after Smith Barney suggested investors switch MMM shares for GE...

Reports indicating a potential criminal indictment of one or more individuals at American International Group (AIG 53.86 +0.86), however, have helped the insurer pace a limited list of advancers... General Motors (GM 32.96 +0.21) has also been strong amid reports that it plans to cut back on production and streamline its product offerings... NYSE Adv/Dec 1391/1815, Nasdaq Adv/Dec 1346/1585

(edited for html)

3:09
Dow 10,470.88 -22.31 (-0.21%)
Nasdaq 2,043.58 +1.00 (+0.05%)
S&P 500 1,188.72 -2.36 (-0.20%)
10-Yr Bond 4.125% +0.02

NYSE Volume 1,286,393,000
Nasdaq Volume 1,200,731,00

It put into a picture all of the things the Marketeers say on this thread on a daily basis. Nobody knows what the hell is going on!!! How could they? Down is up, bad is good, red ink is black ink....it's enough to make ya crazy!!

Great thread today, Marketeers! Lots of laughs.... and it sure helps to laugh, these days!! :rofl: :applause:

Have a GREAT WEEKEND, everyone!! :hi:

:kick::kick::kick:

:thumbsup:

:D

dp

Dow 10,471.91 -21.28 (-0.20%)
Nasdaq 2,046.42 +3.84 (+0.19%)
S&P 500 1,189.28 -1.80 (-0.15%)
10-Yr Bond 4.125 +0.17 (+0.41%)

NYSE Volume 1,631,743,000
Nasdaq Volume 1,528,858,000

Close: The market closed the day in mixed fashion, as investors booked profits, but each major index still finished the week with hefty gains of roughly 3.0%... As widely expected, market participants consolidated some of their gains following the biggest four-day rally in six months... But while the Dow and S&P posted modest losses, as eight out of ten economic sectors closed lower, the Nasdaq recorded its sixth straight advance, getting a boost from Technology...

On a more positive note, while the move to the downside was broad-based, below average volume suggests little conviction behind the weakness... Perhaps also providing a slight boost to stocks going into the close, that closed the indices at improved levels, was some "double-witching," option-related expiration activity late in the day... Meanwhile, the lack of any major economic or earnings data to set a more definitive tone to trading perhaps also prevented a much larger sell-off... Pacing the way lower, amid falling oil prices and comments from Fed Chairman Greenspan, was the Energy sector (-1.0%)...

After closing below $47/bbl for the first time in three months yesterday, the June contract, which expired this afternoon, closed at $46.80/bbl (-$0.12) while the July contract closed down -$0.09 at $48.65/bbl... Greenspan's prepared remarks noted that, while energy will "remain central" to the economy's health, the current "price frenzy" is likely to cool as inventory accumulation continues and energy use is likely to decline relative to GDP... The Materials sector (-0.8%) was a not far behind, as a strengthening dollar again weighed on commodities...

Have a Great Weekend Everyone :hi:

That seems to be some kind of round number barrier. I am surprised it didn't fall faster and farther (only 22 points today). Monday could be very interesting.