STOCK MARKET WATCH, Monday 26 June

WHAT WILL THE FED MEETING BRING?

By the time the Fed actually meets next week, there will be plenty of chapped hands in the house from all the hand wringing going on in Wall Street. Although the futures indicate that the Fed is certain to raise rates yet again (#17 and counting) and has a near certainty for yet another hike in August, there is a divide between economists about whether the Fed is going too far or not far enough.

Certainly much ink has been spilt about the weak housing data, housing inventories and the prices of housing stocks. This week we got additional data about the economy that still indicated a generally weaker economy. Durable goods, without the volatile aircraft orders, were up a nice 1%, however much of that came from building of inventories and not final demand. Some earnings reports this week, specifically from Federal Express, indicated that the global economy remains relatively strong. (If shipping activity is high – economic activity is high).

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Let’s look back at what happened at the last Fed meeting and subsequent events. At that meeting, as was expected, they raise interest rates yet again and put language into their release giving them the latitude to do as they wished at the next meeting – from raising again to actually pausing for the first time in two years. By the way, this tightening cycle is unusual in the fact that there has not been at least one pause along the way, or for that matter, a hike of 50bp. (So maybe the complacency in the markets are warranted??). Initially, the implication from the Fed release was that they would pause at the June meeting as economic growth was slowing. So investors began watching the economic reports that would indicate whether economic growth was slowing or speeding up.

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

10:00 AM New Home Sales May
Briefing Forecast 1160K
Market Expects 1150K
Prior 1198K

10:00 AM ET 6/26/06 U.S. MAY NEW HOME INVENTORY 5.5 MONTHS VS. 5.8 MONTHS

10:00 AM ET 6/26/06 U.S. NEW HOME SALES DOWN 5.9% IN PAST 12 MONTHS

10:00 AM ET 6/26/06 U.S. APRIL NEW HOME SALES REVISED LOWER TO 1.180MLN

10:00 AM ET 6/26/06 U.S. MAY MEDIAN HOME PRICE UP 3.1% Y-O-Y AT $235,300

10:00 AM ET 6/26/06 U.S. MAY NEW HOME INVENTORY FALLS 0.7% TO 556,000

10:00 AM ET 6/26/06 U.S. MAY NEW HOME SALES UP 4.6% TO 1.23MLN. VS 1.15 EXPECTED

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BD232C672%2D41C3%2D435A%2DAA7F%2D958FB5017791%7D&dist=newsfinder&symbol=&siteid=mktw

WASHINGTON (MarketWatch) - Sales of new homes unexpectedly increased 4.6% to a seasonally adjusted annualized rate of 1.234 million in May, the Commerce Department estimated Monday. Sales were running at the fastest pace since December after three straight increases, confounding experts looking for housing sales to slump. Sales are down 5.9% in the past year. Economists were looking for about a 2% decline in sales in May to a 1.15 million pace. The number of new homes on the market fell 0.7% to 556,000 in May from a record 560,000 in April. The inventory fell to a 5.5-month supply from 5.8 months in April. The median price of a new home was $235,300 in May, up 3.1% in the past year.

Are the foreclosure sales on the Courthouse steps included in this number? :crazy:

If you build them they will buy.

on edit: the field of homes, just don't look at the other field of foreclosures ;)

SINGAPORE (Reuters) - Oil edged down on Monday after signs of improved Iraqi production, but held near $71 a barrel as demand from the United States and China is still growing despite near-record prices while traders worry over supply disruptions.

U.S. crude traded down 7 cents at $70.80 a barrel by 0436 GMT, after a rise of 3 cents on Friday that took gains for last week to 1.4 percent. London Brent crude slipped 8 cents to $69.85.

Iraq's oil minister Hussain al-Shahristani offered an optimistic forecast for the country's industry on Sunday, saying daily output has reached 2.5 million barrels and that Iraq hoped to rival top exporter Saudi Arabia within a decade.

Iraq issued a tender for 6 million barrels of Kirkuk crude on Sunday, the second tender this month after a halt of nearly a year in exports from its northern oilfields due to sabotage.

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CAMARILLO, Calif. - U.S. gas prices declined in the past two weeks, but hardly enough to provide relief for summer travelers, a nationwide survey released Sunday showed.

The average price for self-serve regular gas on Friday was down 4.5 cents to $2.89 a gallon, according to the Lundberg Survey of 7,000 gas stations across the country.

That's just 6 cents less than this year's peak price of $2.95 a gallon in early May, but still 68 cents higher than last year's average.

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I got home Fri. night and was on "E" and, of course, just like 2 weeks ago, gas had shot up $0.20 to $2.95. But, this morning, everyone's back down to $2.79.

We're just being conditioned to think of $2.50-$2.60 as being cheap so that $3/gal will become the new norm.

NEW YORK - Although Wall Street now sees higher interest rates as a foregone conclusion, stocks are likely to continue drifting until there are clearer signals about the economy's direction in the coming months.

Since late last year, investors have been increasingly uncertain about the
Federal Reserve's plan to prevent the economy from overheating and fight inflation by gently nudging short-term lending rates higher.

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Fed Chairman Ben Bernanke has made it clear the Fed will keep lifting rates even at the risk of stunting growth. That's prompted the market to worry that the central bank could overshoot its target and trigger an economic slide.

For now, it's a game of wait and see. The Fed is almost guaranteed to raise the nation's key interest rate by a quarter-percentage point to 5.25 percent at its two-day meeting Wednesday and Thursday, and Wall Street is strongly considering the possibility that another increase could be coming in August.

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NEW YORK – It could be a summer of rising interest rates.

That's the sobering prospect for the US economy following news that the inflation rate is running at a quickening pace. Higher prices for such things as airline tickets, housing, healthcare - and of course, gasoline - are now starting to eat into consumer pocketbooks.

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"The Fed is going to have to raise rates more out of a desire to keep the market from thinking the new sheriff in town is not serious about fighting inflation," says Anthony Chan, chief economist at JP Morgan Private Client Services in Columbus, Ohio. "Prices are rising against a backdrop of weakening housing and other parts of the economy."

Economists are most concerned that rising prices seem to have moved beyond the energy sector. Removing food and energy - typically the most volatile prices - from the inflation rate indicates that "core" prices in May rose 0.3 percent. Over the past three months, the core rate of inflation is up to an annual rate of 3.8 percent, the fastest pace in more than a decade.

http://www.csmonitor.com/2006/0615/p01s01-usec.html

WASHINGTON - Orders to U.S. factories for big-ticket manufactured goods fell in May, reflecting a second straight month of weakness in demand for commercial aircraft.

The Commerce Department reported Friday that orders for durable goods dropped by 0.3 percent last month after an even bigger 4.7 percent plunge in April. The weakness in both months was led by big declines in orders for commercial aircraft, an extremely volatile category that had been enjoying large gains at the beginning of the year.

It was the first time that total orders have registered back-to-back declines in two years and provided further evidence that the U.S. economy is slowing under the impact of rising interest rates, soaring gasoline prices and a cooling housing market.

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SEATTLE, June 25 (Reuters) - Microsoft Corp. (MSFT.O: Quote, Profile, Research) unveiled plans on Sunday to work with hardware manufacturers to deliver on the company's ambitions to use its software to simplify how workers communicate with one another.

Microsoft aims to use new technologies available in its Office 2007 business applications and server products to remove the complexity of communication for workers bogged down with e-mail, instant messaging, Web and wireless telephony.

The software giant announced partnerships with Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research), Motorola Inc. (MOT.N: Quote, Profile, Research) and other device makers to provide the necessary hardware designed to work with its software to integrate communication systems.

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Much of the new technology will come in the various Office 2007 server and applications due out in Microsoft's coming business year starting July 1.

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

Last trade 86.51 Change -0.30 (-0.35%)

Counting Down to FOMC - Dollar Bulls Still in Control

http://www.dailyfx.com/story/dailyfx_reports/daily_fundamentals/Counting_Down_to_FOMC___1151096049129.html

As we head closer and closer to the Federal Reserve’s end of June monetary policy meeting, the US dollar has continued to gain strength. The clear monetary policy divergence between the US and many other countries around the world such as the UK and Japan has benefited the US dollar significantly. However whether this benefit can be sustained will be contingent upon the tone that the Fed sets for the weeks ahead. Many traders believe that 5.25 percent rates, which includes the upcoming hike will be the highest that the Fed will go, but there are also a small number of analysts calling for 6 percent rates, suggesting that the Fed could continue their tightening cycle until October. If they are still tightening in September, this would already overshoot the expectations of most traders, which means that position adjustments could push the dollar even higher. As of Friday, the market has fully priced in a quarter point rate hike. The forecast for another dose of tightening in August is now also above 50 percent. Therefore quite a bit of volatility could stem from the FOMC statement due for release on Thursday regardless of whether the central bank alters its tone. Typically we get some quiet market activity prior to the FOMC meeting, but this time, things could different. We start the week off with the new home sales report followed by consumer confidence on Tuesday. Both pieces of data will shed more light on how much damage the previous rate hikes have done to the economy and help traders position themselves for the rate decision. Weak housing and consumer confidence numbers could mean that the economy as a whole may not be strong enough to handle another 50 to 100bp of tightening while stronger numbers may give the Fed’s hawkish stance more validity. The only piece of US data released today were durable goods orders for the month of May. The headline number was weak with total orders falling by 0.3 percent, but the components were not as pessimistic as orders excluding transportation rebounded by 0.7 percent.

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Strength in a Sea of Turmoil

http://www.dailyfx.com/story/strategy_pieces/trade_or_fade/Strength_in_a_Sea_of_1151301149060.html



Economics didn’t matter this week. To be sure modestly better than expected housing data did help the greenback at the beginning of the week, however, neither the putrid LEI number which printed –0.6% vs. –0.5% expected nor the lackluster Durable Goods report which hobbled in at –0.3% vs. 0.4% expected hurt the dollar as it gained better than a 100 basis points against all of the majors. The source of its strength was the escalating conflict with North Korea which continued to move along with preparation to fire an intermediate range missile across the sea of Japan, eliciting very harsh rhetoric from Japan which sent its navy ships streaming towards the destination. With diplomacy apparently getting nowhere despite unified calls to stand down by US, China and Russia, traders flocked to the safety of the largest and most liquid unit in the market, pushing the dollar higher until its was finally able to take out the 1.2500 barrier in New York trading on Friday.



Meanwhile, intelligence reports say fuel tanks have been seen around a missile at the North's launch site on its northeastern coast, but officials say it's difficult to determine from satellite photos if the rocket is being fueled. Pyongyang has said it is willing to talk to the United States about its missile concerns, repeating its long-held desire for direct meetings with US. Washington, however, has refused, insisting it will only meet the North amid six-nation talks aimed at ridding Pyongyang of its nuclear weapons program. The longer the delay however, the less impact this story will exert on the FX market, as most participants will conclude that North Koreans are bluffing and will move on.


Next week, the other main pillar of dollar strength – interest rates – will move to the forefront as the FOMC holds its two day meeting with market in nearly universal agreement that rates will rise to 5.25%. One of the key concerns voiced by many analysts on Wall Street is that Fed may be overshooting its tightening campaign by focusing exclusively on CPI rather than wage growth which has been tepid. Many economists argue that sustained inflation cannot occur without rising wages, and Fed’s campaign may succeed in nothing more that tipping the US into a recession – an outcome that would hurt the greenback regardless of the interest rate its carries.

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http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B4FE740A4-2831-4ABF-896A-B4EA3EEECD19%7D&siteid=google

NEW YORK (MarketWatch) -- The dollar traded mostly lower against major foreign-exchange counterparts Monday, weighed down by news that the United Arab Emirates would shift its foreign-exchange reserves away from the U.S. currency and as traders await the Federal Reserve's interest-rate decision later this week.

The central bank of U.A.E. said it would shift 10% of its reserves from dollars to euros. The country's reserves stood at around $23 billion at the end of 2005. It did not say when it would do it.

"It seems unreasonable to expect the market to react every time this talk surfaces, which it has on more than one occasion over the past few months. However, it does play on concerns that with other current account deficit countries under pressure, the US imbalance -- and how it is financed -- make the dollar vulnerable," said Marc Chandler, senior currency strategist at Brown Brothers Harriman, in a note.

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"The diversification story has been one of the euro's greatest props this year, but going in to this week it is questionable just how much support it will provide for the single currency as traders focus shifts to the rate decision ."

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http://www.kitcocasey.com/displayArticle.php?id=800

Good day... Well... This is FOMC meeting week... Whoop-dee-do! I'm so excited! NOT! Aren't you? Oh, wait, you're not? You must be one of the few left on the face of the earth that are concerned that the Fed rate hikes are going to bring your economy to a screeching halt!

Welcome to this week, a week where I'm convinced that I'll be at my smart-alecky best! I can't wait to hear what Big Ben has to say on Thursday... I'll bet a dollar to a Krispy Kreme that he'll be so full of baloney, a local deli will be wondering what happened to their stash!

The Bank for International Settlements issued their annual report today, and they sound like they have been reading the Pfennig! Recall when I screamed at the wall regarding how the Fed took too long to begin raising rates, and how they should have nipped inflation in the bud with larger rate hikes? Well... The BIS agrees... Here's a snippet..."It could be that monetary policy should have been tightened more and earlier. More disruptive effects could still materialize."

OK... Currencies... Yeah, that's what I need to talk about now... The dollar had the euro on the run Friday, until The Durable Goods for May printed and showed more rot on the economy's vine. Durable Goods in May fell .3% when they were forecast to rise .4%... When is someone at the Fed going to stand up and point out all this proof that the economy is slowing? Anyway, focus, Chuck... Anyway, the euro had actually fallen below 1.25 before the report printed, but turned on a dime after the printing. It has gained a bit more in the overnight markets...

So... How the euro goes pretty much dictates how the rest of the currencies behave... Oh, be-have! Sorry, couldn't pass up that Austin Powers bit... Anyway, I'm surprised to see the euro gaining ground this morning, given the fact that it had been sold leading up to the FOMC meeting week... But now that we're here... It gets bought... Strange days indeed!

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http://www.321gold.com/editorials/gnazzo/gnazzo062606.html

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The Land of Make Believe Wealth
Nothing exemplifies this better than the Bank for International Settlements most recent publication of the values of existing derivative contracts. Presently the total stands at $284 TRILLION as denominated in U.S. Dollars or Federal Reserve Notes.



If that is not enough to make your stomach queasy, there is the following that should do the trick. Pay close attention to not only the notional dollar amounts, but also the time in which they occurred: the first quarter or 3 months of 2006.

That means the yearly totals, if they continue at the same pace - would be4 times the total numbers indicated. That is a significant amount of money - even for paper fiat debt-money.




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terrorism they are worried about? Terrorist hitting our cities, buildings, etc isn't a direct threat to the plutocrats/kleptocrats - but pulling the rug out from under the buck that this mal-admin has so over extended? That's worth data mining for. Maybe it's to determine the loss of confidence in the buck? :tinfoilhat:

Bank data mined by U.S. to halt terrorists
http://www.iht.com/articles/2006/06/23/america/web0623intel.php

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The program is limited, government officials say, to tracing transactions of people suspected of having ties to Al Qaeda by reviewing records from the nerve center of the global banking industry, a Belgian cooperative that routes about $6 trillion daily between banks, brokerages, stock exchanges and other institutions. The records mostly involve wire transfers and other methods of moving money overseas and into and out of the United States. Most routine financial transactions confined to this country are not in the database.

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That access to large amounts of confidential data was highly unusual, several officials said, and stirred concerns inside the administration about legal and privacy issues.

"The capability here is awesome or, depending on where you're sitting, troubling," said one former senior counterterrorism official who considers the program valuable. While tight controls are in place, the official added, "the potential for abuse is enormous."

The program is separate from the National Security Agency's efforts to eavesdrop without warrants and collect domestic phone records, operations that have provoked fierce public debate and spurred lawsuits against the government and telecommunications companies.

But all the programs grew out of the Bush administration's desire to exploit technological tools to prevent another terrorist strike, and all reflect attempts to break down longstanding legal or institutional barriers to the government's access to private information about Americans and others inside the United States.

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While many of those transactions have occurred entirely on foreign soil, officials have also been keenly interested in international transfers of money by individuals, businesses, charities and other groups under suspicion inside the United States, officials said. A small fraction of Swift's records involve transactions entirely within this country, but Treasury officials said they were uncertain whether any had been examined.

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http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2356671

http://www.ledger-enquirer.com/mld/ledgerenquirer/news/politics/14905622.htm

WASHINGTON - President Bush on Monday sharply condemned the disclosure of a program to secretly monitor the financial transactions of suspected terrorists. "The disclosure of this program is disgraceful," he said.

"For people to leak that program and for a newspaper to publish it does great harm to the United States of America," Bush said, jabbing his finger for emphasis. He said the disclosure of the program "makes it harder to win this war on terror."

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"Congress was briefed and what we did was fully authorized under the law," Bush said, talking with reporters in the Roosevelt Room after meeting with groups that support U.S. troops in Iraq.

"We're at war with a bunch of people who want to hurt the United States of America," the president said. "What we were doing was the right thing."

"The American people expect this government to protect our constitutional liberties and at the same time make sure we understand what the terrorists are trying to do," Bush said. He said that to figure out what terrorists plan to do, "You try to follow their money. And that's exactly what we're doing and the fact that a newspaper disclosed it makes it harder to win this war on terror."

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http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2356921

http://news.yahoo.com/s/nm/20060626/ts_nm/security_swift_belgium_dc

BRUSSELS (Reuters) - Belgium's government said on Monday it was investigating the legality of counter-terrorism searches by U.S. officials of thousands of private records held by Brussels-based international bank cooperative SWIFT

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Belgium's central bank distanced itself from the outcry, saying it had a limited role as head of SWIFT's oversight body.

"The monitoring of SWIFT's activities that do not affect financial stability is not a matter for the oversight group and therefore the U.S. Treasury subpoenas of SWIFT were outside the purview of central bank oversight," it said in a statement.

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"This could be another case of citizens' privacy being invaded. We are already familiar with the illegal role of the CIA in so-called rendition flights," said Jan Marinus Wiersma, vice-president of the parliament's Socialist group.

"It appears that President (George W.) Bush has crossed the red line, abusing his executive powers as president," said Jean-Marie Cavada, a Liberal member of the parliament who is chairman of the civil liberties committee.

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Don't they know that you reward white collar crime? You only execute poor people.

do to today's trading? :donut::hi:

Dow 10,997.67 +8.58 (+0.08%)
Nasdaq 2,128.14 +6.68 (+0.31%)
S&P 500 1,245.14 +0.64 (+0.05%)
10-Yr Bond 5.224 -0.04 (-0.08%)

NYSE Volume 222,304,000
Nasdaq Volume 166,667,000

09:40 am : Kicking off a week sure to be governed by Fed policy, as evidenced by the lack of an even stronger start for stocks, a batch of merger activity valued at more than $90 bln has provided just enough of a punch to lift stocks at the open. In similar fashion to Anadarko Petroleum's (APC 44.11 -0.79) bold move on Friday to scoop up two companies at once, Phelps Dodge (PD 76.48 -6.47), a recommended holding in our Active Portfolio, has followed suit by agreeing to acquire Inco Ltd. (N 65.75 +7.49) and Falconbridge Ltd. (FAL 52.30 +3.00) for $40 bln. Also offering some reassurance about the health of corporate balance sheets, Johnson & Johnson (JNJ 59.50 -1.82) has emerged victorious with a $16.6 bln all-cash bid for Pfizer's (PFE 23.29 +0.65) consumer unit while Mittal Steel (MT 29.75 -2.42) has finally got its hands on Arcelor for about $33 bln. DJ30 +17.13 NASDAQ +8.31 SP500 +1.24 NASDAQ Vol 78 mln NYSE Vol 62 mln

http://www.nypost.com/business/crybaby_crusade_business_christopher_byron.htm

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Eighteen months ago, a new SEC rule intended to crimp short selling, Regulation SHO, went into effect. We'll look at one of its unintended consequences: the creation of a huge new speculative bubble in otherwise worthless companies - many of them penny stocks - that are being propped up by the regulation.

First, however, a brief review of what short selling is all about, and why it's important to the orderly functioning of the market - or at least, let us say, to the orderly functioning of a market that is based on more than just the relentless upward march of stock prices to attract investors.

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When short seller Manuel Asensio of Asensio & Co. published the first in a series of well-researched and insightful attacks on the business fundamentals of an overpriced nanotech outfit called NVE Corp. in early 2004, he earned the ire of Wall Street's increasingly noisy anti-short selling crowd for popping the balloon in a stock that had soared from $6 to $66 in the previous six months on momentum trading alone. The stock has since collapsed back to about $13.

The SEC's Regulation SHO, which went into effect in January of last year, makes it increasingly difficult for short sellers to practice their craft. The rule requires the Nasdaq and the various exchanges to publish a daily list of stocks based on a complex set of calculations involving the number of shares that are sold short but wind up never actually being delivered to the buyers. Under the rule, any such stock on the SHO list cannot be sold short unless the broker can affirmatively state that he has obtained borrowed shares for the seller.

The idea behind the rule is to prevent the short sale of more shares in a company's stock than actually exist, which would, of course, destroy the market for any company's shares.

In practice, the rule has removed the downward pressure on the shares of a number of doubtful companies and sent their prices soaring the very instant they turn up on the SHO list, which momentum traders watch like hawks.

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http://www.kitco.com/ind/laird/jun262006.html

This paper looks at some kind of estimate of the economic losses/damages the world would incur if the USD went to zero next week. The conclusion is that it is inconceivable that any world central bank would ever even think of allowing a total USD collapse because of the financial and economic Armageddon that would follow for every nation in the world regardless of how much they like or hate the US and the USD….

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Basically, the vast majority of the world’s wealth is now inextricably tied to the USD. This means that world central banks will not willingly permit its uncontrolled collapse. But there is another alternative which will be looked at in the end of this piece. That is an unforeseen or accidental financial meltdown that destroys the USD anyway.

A US treasury official in the 1970’s talked to a world central banker about the banker’s complaints that the US had a free ride, and was taking advantage of the de facto USD world currency standard. The Treasury official’s response?

“Hey, it’s our dollar, but its your problem!”

Wow.

No doubt the world is reliving that conversation at this time. China, Japan, Russia, the Middle East oil kingdoms, Korea, Taiwan, and all the other major industrial powers of the world today are locked in a no win situation of having to take USD’s for all their goods, and having to allow the US to run ruinous fiscal and trade deficits. They really have little choice because every industrial and commercial process from banking to making TV sets is cost based in USD and paid for predominately in USD.

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http://www.thepeoplesvoice.org/cgi-bin/blogs/voices.php/2006/06/21/war_crimes_and_world_domination

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The Bush regime has broken virtually every one of the Geneva Conventions. They have committed crimes for which there are not yet laws written. Crimes against the earth and the environment. His father before him was the first to use depleted uranium weapons, but the son, Dubya, has far exceeded the senior Bush, by spreading over 1000 metric tons of the deadly U238-isotope, America’s nuclear waste, over Iraq and Afghanistan, making childhood leukemia and spontaneous abortions commonplace, dooming the people of both countries to endless suffering and premature death. According to a UN Sub Commission report, cancer in Iraq has increased 1000%, and deformities 600%. Depleted Uranium has rendered Iraqi lands infertile, entered the food chain, and contaminated the ground water. With a half-life of 4.5 billion years the Uranium 238 dropped on Iraq and Afganistan by Bush and his father have rendered much of the two countries permanently unfit for human habitation.

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When was the last time an American president was openly called a 'war criminal'? It had never happened before this regime took over, but it has since become a common occurrence for Bush, Rumsfeld, and Cheney to be called war criminals by members of the world community.

As the U.S. presidential election approaches a grave danger may be looming over the American people. It seems that the neocons have gone beyond the point of return. They have more than proven their ruthlessness and willingness to do what ever it takes to hold onto power. They have trampled on both international law and the constitutional laws of the land. They cannot risk that a Kucinich or a Kennedy might obtain the office of president in this country ever again lest they face prosecution for their many crimes against America, humanity, and the planet. They cannot even pass their power to another republican, so terrible and dark are their crimes.

The neocons have gotten themselves and the American people into this mess because they live by a lawless philosophy of, 'me, my, what I can get for myself'. They abide by no laws other than the laws of profit and power. For them the Constitution is a meaningless inconvenience, or as George W. Bush has said, "It's just a god damned piece of paper".

The neocons may orchestrate another even bigger 9-11 event. They have many options which they can explore. Their favorite option is war and terror. To make matters infinitely worse for the American people it is rumored that the debt ridden American dollar is about to collapse. After all, the regime is burning the candle at both ends and in the middle with massive permanent tax cuts for the wealthy, a two trillion dollar 'never ending war', and the largest trade deficit in history, just to name a few things.

The collapse of the dollar would cause tremendous chaos and should cause the end of the Bush regime if America were still a country of laws. The regime may do some very unpleasant things to the American people in the event of the dollars collapse, particularly if it coincides with the presidential election. They intend to remain in power and continue their PNAC, Project for the New American Century, secret strategy for US global domination. To survive, a dollar collapse as a Scottish Socialist Voice article stated, "the US, needs to generate a trade surplus to get out of this one. To do that they must force US workers into near slavery, to get paid less than Chinese or Indian workers." This was speculation on the part of the writer as he was simply illustrating the hopelessness of America's economic situation from his point of view.

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http://www.financialexpress-bd.com/index3.asp?cnd=6/22/2006§ion_id=4&newsid=28528&spcl=no

ACCORDING to the Bank for International Settlements, share prices have been falling and commodity prices have been volatile, not because of a deteriorating outlook for companies or worries over inflation, interest rates or growth, but because of greater nervousness about holding risky assets, particularly in emerging market equities and bonds. On the other hand, the European Central Bank, in its June Financial Stability Review, still puts the main sources of risk and vulnerability as "global financial imbalances", which is code for the risk of a plunge in the dollar.

So when a friend suggested I look at the global implications of a serious dollar collapse I jumped at the idea. Asking about the implications of a dollar collapse is a different ball game from predicting its likelihood or timing. Instead of hopeless crystal ball gazing we can ask what this event would mean and what kind of policies should be adopted in response.

Let us define a dollar collapse as a dollar depreciation of at least 20 per cent within a period of weeks. Initially the drop would be mostly against the euro, but such a drastic fall in the dollar's external value could well be the signal for Asian authorities to cease stockpiling assets and even start dumping them.
Most important, however, are the circumstances in which the crash occurred. As one who has been sceptical of the talk of international imbalances and even more sceptical of some of the supposed remedies, maybe I will be forgiven for beginning with a relatively benign scenario.

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But I must say a bit more to satisfy the demand for pessimism. Suppose that the price of oil rose to $100 a barrel or more. Central banks might have to rein in demand even while there was a physical surplus of industrial capacity and little sign of overfull employment. The US could be more severely affected because US energy imports are greater per dollar of gross domestic product than in other parts of the developed world.

The worst scenario goes well beyond conventional economics and could occur if, for example, the Straits of Hormuz at the mouth of the Persian Gulf were to be closed. The action would then move to the political and military front. But the world financial community could be forgiven if it reacted with a horse laugh to any Pentagon talk of a quick, clean strike to reopen the Straits.

In these circumstances the dollar would be the least of our worries. As in similar crises in the past, one might expect a shift from currencies into gold, land, jewellery, cowrie shells and other such assets. But the dollar would be likely to suffer relative to the euro and sterling. Is there a chance that Congress will take fiscal measures against gas-guzzling before it is forced to by such events?

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Iran warns it may use oil as a weapon if its interests attacked

http://www.forbes.com/finance/feeds/afx/2006/06/25/afx2838311.html

TEHRAN (XFN-ASIA) - Iran's oil minister has warned that the country will use oil as a weapon if its interests are attacked, state television reported.

'If the country's interests are attacked, we will use all our capabilities and oil is one of them,' Kazem Vaziri-Hamaneh said on Saturday, the television reported.

Iran is currently locked in a standoff with the international community over its nuclear program, facing the threat of sanctions if it does not accept a US-backed offer and halt sensitive nuclear work.

Vaziri-Hamaneh warned about impact any sanctions on Iran would have in the oil market, saying the price of crude, currently around 70 usd a barrel, risks going up to 100 usd.

more...

http://www.thehindubusinessline.com/2006/06/20/stories/2006062002071000.htm

The world is either to witness a global meltdown of the dollar or allow a controlled dollar devaluation. A calibrated multilateral exchange rate adjustment programme may offer a solution. The IMF may be best suited to put this through.


The global trade, finance and investment architecture seems to be fast spiralling out of control. For some time now economists are engaged in the mother of all debates: Whether the US dollar will collapse by as much as 40 per cent of its present value (some are even betting on the dollar going belly-up) or if there will be an orderly devaluation — that is, revaluation of other currencies. In effect, the question that is confronting us is not "whether" but "when" and by "how much."

Consider these facts: The basic structure of the US economy is that the deficit of the government is 4 per cent of GDP and the household sector 6 per cent, which are offset by a domestic savings of 3 per cent, largely from corporates, leaving a substantial national deficit of 7 per cent to be covered by the capital flows from the rest of the world. With its size and in an integrated world, this asymmetry of the US gets translated into a skew in the global economy.

snip>

Surely, the emperor is without clothes. And it may take a currency trader sitting in a remote corner of the world to push the global economy into an abyss through a click of a mouse. We are either to witness a global meltdown of the dollar or allow a controlled dollar devaluation (read revaluation of other currencies). Either way we are damned, experts nevertheless agree that while the former will result in difficult adjustments, the latter may allow for a "soft-landing" of the global economy, if handled adroitly.

Speaking on this subject at the 39th Annual General Meeting of the Asian Development Bank in Hyderabad, the Prime Minister, Dr Manmohan Singh, stated: "The present level of global imbalance cannot be sustained forever. It, therefore, calls for action from both countries having current account surpluses and those having current account deficits. A coordinated effort is necessary to correct the imbalances to prevent a sudden down turn. International financial institutions need to play a proactive role in this regard."

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:hide:

Dow 11,001.34 +12.25 (+0.11%)
Nasdaq 2,129.96 +8.49 (+0.40%)
S&P 500 1,246.12 +1.62 (+0.13%)
10-Yr Bond 5.237 +0.09 (+0.17%)

NYSE Volume 700,745,000
Nasdaq Volume 525,576,000

11:00 am : 11:30 am : Stocks are still mired in relatively tight trading ranges and probably will until the Fed's decision Thursday. Even though there is little chance of any substantial change in the wording of the statement, the lack of clarity until then on just how far the Fed is going to raise rates will continue to act as an overhang. DJ30 +14.01 NASDAQ +9.50 SP500 +2.02 NASDAQ Dec/Adv/Vol 1118/1711/530 mln NYSE Dec/Adv/Vol 1285/1690/494 mln

Range-bound trading persists for stocks as investors show little reaction to crude oil futures ($70.53 per barrel -$0.34) slipping to session lows. With crude oil imports at their highest levels since August, offering consumers some comfort about supplies being adequate to meet summer driving demand, the absence of leadership from Energy removes some of the enthusiasm behind the sector's strong earnings contribution for the broader market. DJ30 +15.42 NASDAQ +9.70 SP500 +1.54 XOI -0.4% NASDAQ Dec/Adv/Vol 1077/1700/420 mln NYSE Dec/Adv/Vol 1152/1769/399 mln

10:30 am : Little has changed since the last update, as investors sift through today's only scheduled economic release. At 10:00 ET, the Commerce Dept. reported that new home sales unexpectedly rose 4.6% in May to a stronger than expected annual rate of 1.23 mln units. While the increase offers some assurance that the most interest-sensitive sector of the economy is still holding up reasonably well in the face of rising interest rates, the reality that Fed rate increases are slowing economic growth and another hike is widely anticipated for Thursday is stalling initial excitement for the data. To wit, bonds have weakened since the report as the 10-yr note is down 2 ticks to yield 5.23%. Another reason for the somewhat muted reaction is that existing home sales data, which comprise a much larger base of sales and are typically released before new home sales, are out tomorrow morning.DJ30 +16.01 NASDAQ +9.79 SP500 +1.83 NASDAQ Dec/Adv/Vol 986/1723/318 mln NYSE Dec/Adv/Vol 956/1867/296 mln

The WTO is entering the last stages of talks to determine the rules of the global economy for the next 20 years. The developing world is set to suffer.

http://commentisfree.guardian.co.uk/john_hilary/2006/06/crunch_time_at_the_wto.html

snip>

The endgame currently being played out by trade diplomats tends to be portrayed as a showdown between the established powerhouses of the west and the emerging nations of the global south. There is some truth in this. We are indeed witnessing a changing of the guard in international economic relations, as countries like China, India and Brazil flex their muscles and demand their rightful place at the negotiating table.

Yet this picture fails to take into account the vast number of other countries that remain marginalised in the talks. While the negotiations may have been expanded to include the next generation of economic superpowers, the poorest countries still find themselves totally excluded. Many of the ministers who fly in to Geneva in the coming week will have to content themselves with sitting in the WTO cafeteria waiting for news as to what is being decided for them. Hardly surprising, then, that their needs will receive short shrift.

It wasn't meant to be like this. Those of us who were present at the birth of this round of trade talks in Doha five years ago listened to the promises that this would be the first ever "development round". The focus would be on redressing the damage done in previous negotiations, which had forced developing countries down the road of free market economics without much concern as to the impact this would have on them. In addition, the EU and US would finally do something to address their obscene farm subsidies, which have caused such damage to agricultural producers in developing countries.

Instead of this, the much-hyped "Doha development agenda" has been replaced by an unapologetic round of business as usual. Even British government officials now admit that any mention of development is for public consumption only. The real battle is over how much new market access the most powerful countries can extract for their own exporters, and devil take the hindmost.

So who's responsible for this global failure of will? Commentators are in little doubt that the EU and US shoulder most of the blame for turning the trade talks away from development and back to their own self-interest. For us Europeans, Peter Mandelson, in his role as EU trade commissioner, is the villain of the piece, arguing that any pain to be experienced through loss of subsidies in Europe must be matched by equal pain in developing countries. That's despite the fact that the main losers in the EU are landowners such as the Duke of Westminster and the royal family, while those feeling the pain in developing countries include some of the world's poorest and most vulnerable people. Thanks, Peter.

more...

http://inhome.rediff.com/money/2006/jun/24wto.htm

A new WTO draft to finalise the formula for tariff cuts in agriculture could divide the developing world, with larger economies like India and Brazil ranged against their poorer counterparts in Africa and elsewhere.

Commerce ministry officials say the draft is an attempt to divide the developing world on the crucial issue of market access in agriculture. India's formal response to the text would be ready next week.

The text, which runs into 72 pages, has 750 brackets (each of these are conditions and numbers that have not been finalised), reflects the continuing differences on agriculture.

Even the chairman of the WTO committee on agriculture Crawford Falconer, who prepared the text, mentions the divide in the covering letter.

"This document is not, in a formal sense, agreed to by the members, even as a draft. It is not an elegant document. But it reflects the reality of where we are," it says.

more...


WTO draft offers little scope for optimism
http://news.moneycontrol.com/india/news/breakingnews/wtogeneva/wtodraftofferslittlescopeforoptimism/market/stocks/article/223001

snip>

Agriculture remains the main hurdle with the US not budging from its stated position. And much of the draft is in square brackets meaning those issues are disputed.

"Agriculture is non negotiable," said GK Pillai, Special Secretary, Commerce. Many WTO watchers feel that if this round of negotiations does not yield concrete results the entire WTO process could flounder.

Commerce Ministry officials say that while that is perhaps too radical a scenario. An inconclusive round could indeed push back negotiations by three years.

That's because the US remains the most critical player in the WTO and the way it negotiates could determine the direction the WTO takes. The mandate of trade promotion authority of the US ends next year and a new US President will be elected in 2008.So if the WTO misses the 2006 bus there is unlikely to be any significant movement before 2009.

more...


WTO draft farm text jumbled up, reflects no movement
http://www.zeenews.com/znnew/articles.asp?aid=304678&ssid=50&sid=BUS

snip>

"It (the draft text) is jumbled up... And in a way there is no forward movement as practically all the views of member countries have been put in the text with several square brackets, meaning there is no agreement on these issues," a Commerce Ministry official told news agencies.

The official said there were also a few areas of concern in the text, particularly those relating to Special Products, which are of interest to developing countries like India.

Developing countries can designate certain items as Special Products but only on the basis of one or more of the 18 possible indicators suggested in the text.

Countries like India would have to negotiate to remove some of the negative indicators from the list to get greater flexibility. Moreover, the text suggests putting a cap on the list of `Special Products`, he said.

The draft is also being seen as another attempt to divide the developing nations. The text has suggested steeper tariff cuts by developing countries for products that have higher import duty. But developing countries with homogeneous low bound tariff rates would have the flexibility to undertake overall average reduction only.

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Dow 11,006.64 +17.55 (+0.16%)
Nasdaq 2,130.28 +8.81 (+0.42%)
S&P 500 1,247.56 +3.06 (+0.25%)
10-yr Bond 52.41 +0.13 (+0.25%)
30-yr Bond 52.74 +0.17 (+0.32%)
NYSE Volume 1,048,176,000
Nasdaq Volume 813,830,000


1:00 pm : Market regains some upside momentum but not nearly enough to make a significant change in the standings. Sure, the Dow and SnP 500 are back in positive territory, but the latter's modest gain still leaves the broader market in the red for the year while the Dow's paltry 0.12% gain is largely the result of ExxonMobil (XOM 58.59 +0.49) hitting session highs as oil prices pare early losses and hit their best levels of the day (+1.2%), inching closer to $72 per barrel. DJ30 +13.95 NASDAQ +7.67 SP500 +2.59 NASDAQ Dec/Adv/Vol 1266/1647/772 mln NYSE Dec/Adv/Vol 1421/1683/700 mln

12:30 pm : No real change to market conditions as the afternoon session gets underway. Health Care remains the biggest drag among the five sectors posting losses, due in large part to weakness across the medical device group (-2.7%), while an analyst downgrade on LLL Communications (LLL 73.09 -1.97) is weighing on the Aerospace/Defense group within the Industrials sector. Utilities, one of the least influential SnP 500 sectors, is turning in the best performance but is only up 0.26%, having no impact on the broader market whatsoever.DJ30 -5.75 NASDAQ +3.99 SP500 -0.07 NASDAQ Dec/Adv/Vol 1251/1637/702 mln NYSE Dec/Adv/Vol 1401/1663/640 mln

12:00 pm : The major averages now trade in split fashion midday, as investors weigh the impact of another Fed rate hike and accompanying policy statement against a batch of merger activity valued at more than $90 bln. Five sectors are trading higher and five sectors are trading lower.

Before the bell, Phelps Dodge (PD 76.15 -6.80), a recommended holding in our Active Portfolio, said it will merge with Inco Ltd. (N 65.46 +7.20) and Falconbridge Ltd. (FAL 52.19 +2.89) in a three-way deal worth roughly $40 bln. Johnson and Johnson (JNJ 59.79 -1.53) emerging victorious with a $16.6 bln all-cash bid for Pfizer's (PFE 22.95 +0.31) consumer unit also reminded investors about the health of corporate balance sheets while Arcelor finally agreed to be taken over by Mittal Steel (MT 30.71 -1.46) for about $33 bln.

Better-than-expected earnings reports keeping the SnP 500 on pace for a 12th straight quarter of double-digit profit growth were also providing some early support. Walgreen Co (WAG 43.82 +0.21) reported 14.9% earnings growth on record Q3 sales while Lennar's (LEN 45.76 +1.22) Q2 earnings surged 33%. Even though Lennar became the latest to cut its FY06 profit forecast, homebuilders are embracing an unexpected 4.6% rise in May new home sales to a better than expected annual rate of 1.23 mln units.

Be that as it may, with investors in search of some clarity on Fed policy that they aren't likely to get, and strong housing data only adding to concerns of the Fed going too far with its tightening, sellers have recently stepped in, underscoring the sense of nervousness surrounding a market that will be subject to continued volatility until the picture on inflation and interest rates becomes clearer. DJ30 -2.80 NASDAQ +5.20 SP500 +0.08 NASDAQ Dec/Adv/Vol 1235/1626/606 mln NYSE Dec/Adv/Vol 1348/1686/574 mln

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

June 26 (Bloomberg) -- The Wall Street juggernaut that just produced the best six months of earnings in the history of the securities industry isn't about to stumble because of a seven- week market slump.

Morgan Stanley has a bigger lineup of takeover assignments than it did three months ago; Goldman Sachs Group Inc. is hiring about 2,000 people this year; Lehman Brothers Holdings Inc.'s pipeline of pending stock and bond sales is chock-a-block after a record first half; and Bear Stearns Cos. is defying rising interest rates with a boom in revenue from mortgages.

Never mind that the Morgan Stanley Capital International World Index, which tracks 23 equity markets, declined 10 percent since May 9. The outlook for trading revenue and investment- banking fees has never been better, and analysts predict second- half net income at the five biggest U.S. securities firms -- Goldman, Merrill Lynch & Co., Morgan Stanley, Lehman and Bear Stearns -- will increase 10 percent to $12.2 billion.

``We're still in a relatively good long-term market,'' Larry Wieseneck, 40, Lehman's co-head of global finance, said in an interview at the firm's New York-based offices. ``The backlog is very strong, and much of that backlog is steady throughout the year. Most of it is not price-dependent.''

Wall Street's transformation into an industry dominated by trading means the market swoons that used to trigger losses are now opportunities to hedge and speculate, said Chris Meyer, an analyst at Morgan Stanley in New York. In the tumult since early May, copper prices fell 13 percent and short-term interest rates rose worldwide.

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Dow 10,991.56 +2.47 (+0.02%)
Nasdaq 2,126.22 +4.75 (+0.22%)
S&P 500 1,246.19 +1.69 (+0.14%)
10-yr Bond 52.43 +0.15 (+0.29%)
30-yr Bond 52.77 +0.20 (+0.38%)
NYSE Volume 1,282,237,000
Nasdaq Volume 992,947,000

2:00 pm : Indices continue to trade sideways as investors find few catalysts to push the indices more aggressively to the upside. Meanwhile, investors are digesting details of Warren Buffett's $30 bln gift to the Bill & Melinda Gates Foundation. However, the apprehension attributed to worries surrounding the FOMC meeting and what the Fed's policy directive will imply about the need for further tightening remains much more of a focal point for investors than Buffett's heartfelt generosity.DJ30 +15.42 NASDAQ +7.50 SP500 +2.89 NASDAQ Dec/Adv/Vol 1313/1632/930 mln NYSE Dec/Adv/Vol 1373/1771/840 mln

1:30 pm : Stocks settle back into a narrow trading range as not much has changed within the last 30 minutes. Aside from Energy now turning in the best performance and helping the blue chip indices cling to small gains, the resilience of the rate-sensitive Financials sector (+0.5%) ahead of Thursday's FOMC meeting and as continued weakness in Treasuries lifts bond yields to multi-year highs, is worth noting. The yield on the 10-yr note (-04/32) is now at 5.24%, only one basis point from where policy makers are expected to raise the overnight lending rate on Thursday. Providing the biggest lift to the sector has been the Life and Health Insurance group (+1.1%), which just broke into the top ten best performing SnP industry groups on the day.DJ30 +14.17 NASDAQ +7.93 SP500 +2.36 NASDAQ Dec/Adv/Vol 1232/1709/864 mln NYSE Dec/Adv/Vol 1291/1831/774 mln


Advances & Declines
NYSE Nasdaq
Advances 1786 (53%) 1644 (52%)
Declines 1399 (42%) 1325 (42%)
Unchanged 140 (4%) 149 (4%)

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

Up Vol* 694 (56%) 539 (56%)
Down Vol* 512 (42%) 397 (41%)
Unch. Vol* 13 (1%) 23 (2%)

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

New Hi's 34 54
New Lo's 151 77

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

snip>

And best of all, the model works. At least it worked from 1968 through 1989. We know this because Baylor professors William Reichenstein and Steven Rich did the research and found that, yes indeed, the model was a good predictor of stock market returns over that period. As Hulbert explains, the pair published their results in the Journal of Portfolio Management in 1993.

The professors’ timing, however, wasn’t so great. The late 1990s proved to the model’s Michael Jackson period – a tough time when things just didn’t work out as expected. High and rising short rates, along with increasingly nutty valuations, steered the model toward predicting below average returns for an extended period. Instead, stocks delivered monster returns before crashing in 2000.

But as you can see from the New York Times graph, the model’s predictions have been more or less on track since the bubble peak. And now? Now, the model is again signaling that below average returns are just over the horizon.

Miami of Ohio professor Dan Seiver publishes a stock market newsletter and makes market predictions, based in part, on this three-input model. He told Hulbert that these days, the model is signaling one its most bearish readings ever.

Sure, there are plenty of bulls arguing that stocks are reasonably valued. But based on trailing earnings, the earnings incorporated in all those long term studies that come up in the average P-Es that bulls are comparing today’s P-Es to, stocks remain expensive. Standard and Poor’s, for example, prices its S&P 500 index at almost 21 times operating earnings, 17 times core earnings and 19 times reported earnings (based on the March quarter EPS). Likewise, the model’s dividend yield measure, another proxy for stock market valuation, is no bargain either. Couple that with high short term rates, and you get a smaller difference between risk free returns and those projected by Value Line analysts for the stocks they follow.

more...

http://www.bloomberg.com/apps/news?pid=10000086&sid=a823kgVOs5Zo&refer=latin_america

June 26 (Bloomberg) -- Jean-Marie Messier lost billions of euros turning the world's biggest water company into entertainment conglomerate Vivendi Universal SA. He should have stuck with water.

The lack of usable water worldwide has made it more valuable than oil. The Bloomberg World Water Index of 11 utilities returned 35 percent annually since 2003, compared with 29 percent for oil and gas stocks and 10 percent for the Standard & Poor's 500 Index.

From hedge fund manager Boone Pickens to buyout specialist Guy Hands, the world's biggest investors are choosing water as the commodity that may appreciate the most in the next several decades. The United Nations estimates that by 2050 more than 2 billion people in 48 countries will be short of water.

``There is only one direction for water prices at the moment, and that's up,'' said Hans Peter Portner, who manages a $2.9 billion Water Fund at Pictet Asset Management in Geneva. The fund jumped 26 percent last year, and Portner forecasts annual returns from water of 8 percent through 2020.

General Electric Co. Chairman Jeffrey Immelt says ``scarce'' clean water worldwide will more than double the revenue he gets from water purification and treatment to $5 billion by 2010. ``This will be a big and growing market for a long time,'' as governments struggle to bring water to 4 billion people who live in areas of profound shortage, Immelt, 50, said at the company's annual meeting in Philadelphia in April.

more...

http://www.hussmanfunds.com/wmc/wmc060626.htm

snip>

Despite the increase in May housing starts, the relevant cyclical component of housing starts has already rolled over, and such rollovers have historically tended to continue (1995 was an exception). Given current economic and interest rate conditions, a continuation appears likely here. Also, though not all periods of housing weakness have resulted in recessions (so a downturn in housing isn't a “sufficient” condition), new recessions have always been preceded or accompanied by a drop in the stochastic to zero (so it does appear to be a “necessary” condition). I expect to be presenting this graph again in the months ahead.

Housing, gross domestic investment, and the current account

From a broader economic perspective, I continue to view the enormous U.S. current account deficit as a major challenge to U.S. economic growth ahead. This deficit reflects the combination of huge U.S. fiscal deficits combined with a historically low domestic savings rate. With no net growth in U.S. gross domestic savings since 1998, the U.S. has depended on large and growing inflows of foreign savings in order to finance our domestic investment (housing, factories, capital spending, etc). We observe those inflows as a current account deficit.

To understand what's happening here, it's important to recognize that by accumulating what is now more than half of the entire float of U.S. Treasury securities, foreign countries have implicitly funded the entire U.S. budget deficit in recent years. This has allowed us to run fiscal deficits without crowding out domestic investment (which is nice while it lasts). In fact, foreign capital inflows have actually financed more than the entire U.S. fiscal deficit. The result is that all of the growth in U.S. gross domestic investment since 1998 has been financed by foreign capital inflows. The chart below tells the story (a good portion of the recent spike represents the U.S. housing boom). The huge and growing gap between domestic investment and domestic savings represents foreign capital inflows (i.e. the current account deficit).



In a reasonable world, one would look directly at the huge U.S. government deficit and paltry U.S. savings rates, combined with a housing boom that's creating a growing inventory of unsold houses, and say, “Wow, we're not saving enough, and we're investing in the wrong stuff, and as a result, we're becoming dangerously dependent on foreign savings that will be hard to repay with future productivity.” Unfortunately, we're living in a world with no introspection, so we actually see analysts arguing with a straight face that our current account deficit reflects – I'm not making this up – a “foreign savings glut.” That's like the Garth Brooks song where he looks at the beer he's holding and sings “lo-ooong neck bottle, let go of my hand…”

Ultimately, the cause of the current account deficit doesn't matter as much as its sustainability does. The concern here is that even a stabilization – not a reversal, but just a plateau – in foreign capital inflows (i.e. a failure of the current account deficit to continue growing indefinitely) will be enough to halt the growth of U.S. gross domestic investment here, including growth in things like housing investment, factory expansion, capital spending, and so forth.

more...

More than $90 billion in deals show M&A keeping momentum

http://www.marketwatch.com/News/Story/Story.aspx?siteid=mktw&dist=moreover&guid={7601D3C4-178F-449C-8D68-B9967DE7BBBE}

NEW YORK (MarketWatch) - The biggest year on record for mergers and acquisitions just got bigger, a lot bigger.
More than $90 billion in deals were announced in the last 24 hours. It's a merger Monday that, with five full days to go, already stands as the biggest week by volume since the second week of March. That's when $120 billion in deals were announced - the ninth biggest week all time, according to Dealogic.

Three deals alone comprised $90.25 billion in value: Mittal Steel's $33.65 billion takeover of Arcelor (FR:005786: news, chart, profile) , Phelps Dodge Corp.'s $40 billion agreement to buy Inco Ltd. and Falconbridge Ltd. and Johnson & Johnson's $16.6 billion acquisition of Pfizer Inc.'s consumer products unit.

The deals came three industries, two continents, five countries and involved more than a dozen investment bank advisers.

"Not a bad day in anybody's market," said Louis Bevilacqua, an M&A partner with Cadwalader Wickersham & Taft, the firm that provided legal advice to Pfizer. "There have been robust economic conditions on a worldwide basis."

Among the conditions are the need to supply China, India and other countries with needed commodities, the billions in sidelined private equity funds and low interest rates. Though he concedes that Monday's $90 billion in dealmaking is "fortuitous", Bevilacqua said there remains significant momentum for the M&A cycle.

more...

http://www.law.harvard.edu/programs/olin_center/corporate_governance/MediaMentions/NYTimes_June.6.2005.pdf

New York Times
By Gretchen Morgenson
June 5, 2005

To most investors, mergers are the stock market's equivalent of catnip. Takeover bids typically provide a nice boost to investors' portfolios and confirm their stock-picking smarts. And to hear the executives orchestrating them tell it, they always produce greater profits at the combined company down the road. Business publications and newspapers, including The Times, celebrate the deals with breathless tales of how they came together, complete with photographs of smiling executives shaking hands in front of a crowd.

This year, with the stock market moving sideways, buyouts and the gains they generate are prized all the more. There have been a lot of them, too. This year, according to Thomson Financial, the first quarter's combinations were valued at $308.2 billion, up 17 percent from the value of deals announced in the same period in 2004. If this activity continues, 2005 will be the fourth-largest year in deal size.

And yet, for all the profit and promise that mergers seem to hold, the truth about companies combining their operations is a darker one. Academic research suggests that few mergers add up to significantly more prosperous or successful companies and also that acquisitions during buyout booms, like the one we are in now, are more likely to fail than those made in other periods. And when one company acquires another using its own stock as currency, as commonly happens today, shareholders' stakes in the acquiring firm typically decline.

What's worse, there is a disturbing trend among some of the most aggressive corporate acquirers to use deals to mask deteriorating financial results at their companies and to reap outsize executive pay. The complexity of folding companies into one another makes it more difficult, whether by accident or by design, for investors to fathom what's really going on. Because mergers require the extensive use of estimates on matters like job cuts and asset write-offs, for example, deals represent an opportunity for management to throw everyday expenses into the merger cost bucket and make operating results look better than they actually are. It'sprobably no coincidence that some of the biggest frauds in recent years have involved serial deal makers like Tyco International, Waste Management and WorldCom. (Long before a jury found him guilty of securities fraud in federal court in March, Bernard J. Ebbers, the chief executive of WorldCom, entertained himself and his friends aboard his 118-foot yacht called the Aquasition.)

Perhaps the biggest downside to mergers, however, is their human toll. Deals that combine companies are becoming a bigger factor behind large-scale layoffs across the nation.

more...

Here are the sectors to watch as 2006 shapes up to be one of the biggest years on record.

http://money.cnn.com/2006/06/26/markets/mergers/index.htm

NEW YORK (CNNMoney.com) -- The recent wave of big mergers has been focused on basic materials like oil or steel, but experts say a host of other sectors are ripe for consolidation as 2006 shapes up to be one of the hottest years in the history of corporate deal-making.

snip>

There's no doubt the high price of commodities has helped drive deal-making in the basic materials sector.

"It's the capability to pay for these deals," said Richard Peterson, a researcher at Thomson Financial. "Companies have a lot of cash."

Peterson said mergers and acquisitions have jumped 30 percent worldwide so far this year, to $1.75 trillion worth of deals, putting them on track to surpass the record $3.4 trillion racked up in 2000.

But he said it's not just oil and commodities that are helping tip the scales.

more...

4:20 pm : The market closed on an upbeat note as a batch of merger and acquisition activity valued at more than $90 bln got investors back in buying mode. Nonetheless, stocks were mired in relatively tight trading ranges throughout most of the session, as uncertainty about Thursday's FOMC meeting and what the Fed's policy directive will imply about the need for further tightening loomed. As a result, investors didn't show any sense of overwhelming excitement until limited participation during the last 30 minutes of trading helped the indices close near session highs. To wit, the NYSE did not see 1.0 bln shares exchange hands until there was only a half hour remaining in the session.

Before the opening bell, Phelps Dodge (PD 76.23 -6.72), a recommended holding in our Active Portfolio, said it will merge with Inco Ltd. (N 64.21 +5.95) and Falconbridge Ltd. (FAL 51.80 +2.50) in a three-way deal worth roughly $56 bln. Aside from supporting our Overweight rating on Materials, the multi-billion dollar deal also played into our positive position on investment banks. Goldman Sachs (GS 149.90 +1.98) helped advise acquiree Inco and was also the lead adviser for Mittal Steel's (MT 31.44 -0.73) $33 bln takeover of Arcelor, a five-month battle which finally came to an end today.

Also serving as a reminder that corporate balance sheets remain healthy was Johnson and Johnson's (JNJ 60.21 -1.11) $16.6 bln all-cash bid for Pfizer's (PFE 23.01 +0.37) consumer unit.

With regard to industry leadership, Energy turned in the best performance. While sector gains were attributed to crude oil futures surging 1.4% to $71.85 per barrel -- a concern still fresh in investors' minds ever since the Fed said at its last meeting on May 10 that "elevated prices of energy and other commodities, have the potential to add to inflation pressures," the Energy sector's potential earnings contributions eventually took precedence. The rate-sensitive Financial sector's resilience ahead of another widely anticipated rate hike, and as continued weakness in Treasuries lifted bond yields to multi-year highs, was also worth noting.

The yield on the 10-yr note (-04/32) closed at 5.23%, only two basis points from where policy makers are expected to raise the overnight lending rate on Thursday. Even though higher rates continue to spark valuation concerns among growth stocks, encouraging news from some market leaders renewed enthusiasm for the underperforming Technology sector as well. Microsoft (MSFT 22.82 +0.32), which was in focus after billionaire Warren Buffett announced the largest charitable commitment in history by saying he will donate $30 bln of his fortune to the Bill & Melinda Gates Foundation, surged 1.4% after unveiling a broad move into the communications market. Intel Corp. (INTC 18.28 +0.28) was another influential tech giant to attract bargain hunters, gaining 1.6% after announcing its first new-architecture chip in five years in an attempt to reclaim lost market share from rival Advanced Micro Devices (AMD 24.66 -0.48).

Unfortunately for the bulls, a sell-the-news reaction that typically drags down the share prices of acquirers was felt more so than usual today since JNJ is the eighth most influential component on the SnP 500. The stock's 1.8% pullback, which was exacerbated by a slew of Justice Dept. subpoenas handed out to medical device makers like SYK, ZMH, BMET (and JNJ's DePuy unit), which weighed on Health Care, prevented blue chips from staging an even stronger performance. BTK +0.4% DJ30 +56.19 DJUA +0.5% DOT +0.7% NASDAQ +12.20 NQ100 +0.3% R2K +1.2% SOX +0.7% SP400 +0.6% SP500 +6.06 XOI +1.3% NASDAQ Dec/Adv/Vol 1197/1859/1.41 bln NYSE Dec/Adv/Vol 1265/1994/1.26 bln

especially in the shadow of Thursday's FED meeting?

few well placed buys by some well connected people? Who knows what makes the market go round these days? 10:00 and the final hour have been "magical" again this year. :shrug:

3:30 pm : Stocks are hanging in there with modest gains but split industry leadership continues to dictate late-day action. Meanwhile, the Nasdaq continues to outpace its blue chips counterparts, but after closing lower 10 of the last 11 Mondays, it remains to be seen if such a losing streak can be snapped with 30 minutes left in the trading day and so much uncertainty about Fed policy still hanging in the balance, in particular, the toll that rising rates continue to have on growth stocks.DJ30 +32.89 NASDAQ +9.69 SP500 +4.34 NASDAQ Dec/Adv/Vol 1272/1730/1.16 bln NYSE Dec/Adv/Vol 1422/1807/1.02 bln

3:00 pm : The blue chip averages have recently broken out of their ranges and are hitting their best levels of the afternoon. However, the fact that much of the move has come at the expense of crude oil prices closing near session highs -- a concern that continues to act as an impediment to consumer spending -- Energy's leadership is only providing a bit of a lift. After all, the market is more concerned about inflation, especially after the Fed said at its last FOMC meeting on May 10 that "elevated prices of energy and other commodities, have the potential to add to inflation pressures," than potential earnings contributions from refiners, explorers and drillers.DJ30 +25.29 NASDAQ +8.46 SP500 +4.02 NASDAQ Dec/Adv/Vol 1292/1706/1.07 bln NYSE Dec/Adv/Vol 1418/1792/935 mln

2:30 pm : Equities continue to run in place just above the flat line. The market's holding pattern has been further evidenced in the A/D line, as advancers outpace decliners on the NYSE by a slim 17-to-14 advantage while those on the Nasdaq hold a 16-to-13 edge. It is also worth noting that total volume is running well below average, as 1.0 bln shares have not been traded on either the Big Board or the Composite, suggesting even less conviction behind today's modest move to the upside.DJ30 +11.21 NASDAQ +6.25 SP500 +2.55 NASDAQ Dec/Adv/Vol 1335/1637/998 mln NYSE Dec/Adv/Vol 1402/1782/902 mln