STOCK MARKET WATCH, Wednesday June 3

Source: du

STOCK MARKET WATCH, Wednesday June 3, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 2

AT THE CLOSING BELL ON June 2, 2009

Dow... 8,740.87 +19.43 (+0.22%)
Nasdaq... 1,821.76 +8.12 (+0.44%)
S&P 500... 944.74 +1.87 (+0.20%)
Gold future... 984.40 +4.40 (+0.45%)
10-Yr Bond... 3.62 -0.06 (-1.52%)
30-Year Bond 4.49 -0.04 (-0.91%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie and Silver

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Read more: du

Trader's Toolkit
by Frank Barbera

...
Over the last few weeks the Foreign Currencies, Commodities, and Equities markets have behaved once again as ‘all one market’ -- just the kind of behavior as was seen between much of the time period 2003 to 2007.

-charts-

This is a potential alert to investors, that when markets do correct to the downside, the likelihood is that like 2007 and 2008, hiding places will be difficult to come by. To a very large degree, the animal spirits of speculation, driven by the all powerful investment performance gods have linked markets in a manner never really seen in years gone by. Today, the investment markets are almost uniformly aloft on the sea of investment liquidity, and for smaller investors, understanding when that sea of liquidity is rolling in versus when it is about to roll out is the overwhelming name of the game. The idea of markets ‘decoupling’ proved to be a huge fiction in 2008, and over the last few days we hear the same kind of discussions taking place as were making the rounds in July 2008 when Crude Oil was over $140. Speaking of Crude Oil, anyone notice the new VIX Index for Oil and Gold? In both cases, the recent rally has caused the VIX Index to plunge, with the VIX Index for Oil all the way back down right now to where it was when Oil was trading above $100 last August with the new Gold VIX also back down to the lows.

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

08:15 ADP Employment Change May
Briefing.com -520K
Consensus -525K
Prior -491K

10:00 Factory Orders Apr
Briefing.com 0.5%
Consensus 0.9%
Prior -0.9%

10:00 ISM Services May
Briefing.com 45.0
Consensus 45.0
Prior 43.7

10:30 Crude Inventories 05/29
Briefing.com NA
Consensus NA
Prior -5.41M

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

http://www.reuters.com/article/bondsNews/idUSNYS00511520090603

NEW YORK, June 3 (Reuters) - U.S. mortgage applications fell last week, reflecting a plunge in demand for home refinancing loans as interest rates surged to their highest levels since late-January, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications <USMGM=ECI>, which includes both purchase and refinance loans, for the week ended May 29 decreased 16.2 percent to 658.7.

Tom Marano, chief executive of mortgage operations at GMAC, in an exclusive interview with Reuters on Tuesday, said home loan volume at GMAC is about 75 percent lower now than when mortgage rates hit record lows several months ago. For details, double-click on

"Up until the past week and a half, the Federal Reserve had been successful at bringing interest rates on mortgages down," he said.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.25 percent, up 0.44 percentage point from the previous week, its highest level since the week ended Jan. 30.

It was also significantly higher than the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990. Interest rates, however, were well below year-ago levels of 6.17 percent.

...more...

only thought this was important because yesterday's info re: pending home sales suggested something different :shrug:

http://market-ticker.denninger.net/authors/2-Karl-Denninger


You have to love the National Association of Realtards:

Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.

Really?

Someone forgot to tell those people to lock the rates, right? Oh, and that "its too late" now.

Here's the current chart of the TNX, which is the most-closely correlated index for mortgage rates on 30 year fixed money:

Now let's dissect their statement:

The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.

In APRIL.

This report is, again, from APRIL.

April was right after the "QE" announcement and rates went to historic lows almost immediately. But they didn't stay there.

Now we have May, which you'll note hasn't been announced yet, and in addition these are pending (not closed) sales.

If the pending buyers did not lock rates, they are about to come to the closing table and find out that they cannot qualify any more with the more than one percent increase in rates (from ~4.75% to ~5.75%) over the last week.

New buyers of course (for June) must contend with this as well.

Oh, and the Realtors are still pumping overleveraged conditions and ignoring the principles of sound buying:

A median-income family, earning $60,900, could afford a home costing $296,800 in April

No. A median-income family can afford a home costing $180,000; the 3:1 ratio is not off the financed amount, it is off the purchase price.

Their cited "25% principal and interest" ratio is unreasonably aggressive as well - the proper front-end ratio is 28% and covers all housing expenses, not just principal and interest. They are (conveniently) leaving out property taxes, insurance and utility costs, none of which (of course) are able to be left out.

Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. “In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” he said. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”

No kidding. A 60-day closing schedule makes it impossible in most cases to lock rates for the entire period at any sort of economic price, meaning that your deal is subject to blowing up when the expected financing cost suddenly jumps up.

How much difference does this make?

That's easy to figure out.

At $4.75% a $100,000 financed amount for 30 years produces a P&I of $519.59. That same payment at a rate of 5.75% produces a financed amount of $89,462.75, amounting to a devaluation of roughly 10.6% for every home in the nation.

So if you financed up to the maximum you could borrow and did not lock at 4.75%, you are now forced to demand either a 10% price concession from the seller (unlikely to be granted) or your deal blows up.

It's that simple.

It would be nice if we had "trade groups" that presented news in a balanced fashion. That, however, would be unrealistic.

After all, they are salesmen.

Just like their former spokesman was a realistic and an excellent prognosticator of what real estate was going to do. Remember these books and their veracity?

Same shit, different day. We are still lambs to be slaughtered.

There is NO respect for the customer whatsoever. Meaning that there will be no customers. You'd be amazed how many people can live without the accoutrements, and for how long.

http://www.marketwatch.com/story/corporate-layoff-plans-drop-16-in-may

WASHINGTON (MarketWatch) -- Planned corporate layoffs declined 16% in May from April to 111,182, the lowest total since September, according to an unscientific tally released Wednesday by outplacement firm Challenger Gray & Christmas.

Job-reduction announcements were up 7.4% compared with May 2008.

So far in 2009, planned layoffs of 822,282 as tallied by Chicago-based Challenger Gray are more than twice as high as they were over the first five months of 2008, with layoffs having peaked in January at 241,749.

The figures are not seasonally adjusted.

"This decline in job cuts could be short-lived," said John Challenger, CEO of the outplacement firm. He noted that the second quarter of the year is typically the slowest for layoffs; the fourth quarter ranks as the busiest.

In particular, more layoffs could be coming in state and local governments, auto manufacturing and retailing, he said.

May's downsizing announcements were led by cuts by governments and nonprofit organizations for the third month in a row. In May, governments and nonprofits announced 15,384 job cuts.

...more...

had to change the headline to reflect reality :crazy:

here's the always dependable poo report!

http://www.marketwatch.com/story/private-sector-cuts-532000-jobs-in-may-adp

WASHINGTON (MarketWatch) - The U.S. private sector eliminated 532,000 net jobs in May, the fewest jobs lost since November, according to the ADP employment index released Wednesday. Goods producing industries cut 267,000 jobs while services cut 265,000. The index comes two days before the government releases its estimate of May nonfarm payrolls. Economists surveyed by MarketWatch are looking for payrolls to drop by 500,000 in the government survey, which would be the smallest decline since October. Including government jobs not counted in the ADP report, the ADP index implies total nonfarm payrolls may have fallen by 545,000 in May, close to the number of jobs lost in April.

I wonder how many hundreds of thousands it is missing in its forecast this time?

fixed info (missed the first line) on edit

NEW YORK (Reuters) – The United States may have hit a bump on the road to economic recovery, according to data released on Wednesday, with half a million private sector jobs lost in May and mortgage applications falling last week in the face of rising interest rates.

...

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 29 decreased 16.2 percent to 658.7.

In the labor market, U.S. companies axed 532,000 jobs last month, more than economists had expected, according to ADP Employer Services. Huge job losses are unlikely to lend support to the housing market or to an economy that has been overwhelmingly driven by consumer spending in recent years. Worse yet, April's ADP figures were revised to show more job cuts than previously estimated, meaning May's job losses were smaller, but highlighting the ongoing deterioration in an economy that may have difficulty living up to expectations that it will resume economic growth in the second half of the year.

...

In the services sector, the Institute for Supply Management's non-manufacturing index edged up to 44.0 in May -- its strongest since October 2008 but was still a contractionary reading at 43.7 in April.

...

New orders received by U.S. factories rebounded less than expected in April, government data also showed, and the previous month's figure was revised sharply downward.

The weak economic data left Wall Street unimpressed, with U.S. stocks down more than 1.0 percent midsession (.SPX).

/... http://news.yahoo.com/s/nm/20090603/bs_nm/us_usa_economy;

U.S. May ISM services rises to 44% vs. 43.7%
10:01am Today

U.S. April factory shipments fall 0.2%
10:00am Today

U.S. April core capital equipment orders fall 2.4%
10:00am Today

U.S. April factory orders rise 0.3% ex-defense
10:00am Today

U.S. April factory orders rise 0.1% ex-transport
10:00am Today

U.S. April factory orders rise 0.7%
10:00am Today

Crude supplies up 2.9 million barrels: EIA
10:32am Today

Gasoline stocks down 0.2 million barrels: EIA
10:32am Today

Distillate stocks up 1.6 million barrels: EIA
10:32am Today

SINGAPORE – Oil prices hovered above $68 a barrel Wednesday in Asia near a seven-month high as investors sought a safe haven in commodities from a weaker U.S. dollar and inflation.

....

Oil prices have doubled since March amid signs that the worst of a severe recession in the U.S. may be over. Some investors are also concerned that the massive fiscal and monetary stimulus package unleashed this year will spark inflation and undermine the dollar, which has fallen sharply against the euro.

....

Analysts expect a fall of 2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Stocks dropped last week for a third straight week after rising for the previous 10 weeks.

....

In other Nymex trading, gasoline for June delivery rose 1.48 cents to $1.94 a gallon and heating oil was steady at $1.80 a gallon. Natural gas for June delivery gained 1.5 cents to $4.14 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

Here I was, with a nice polite post set to print, when I read the related links to this article at Naked Capitalism. And what do they all say? "Oil is surging because the dollar is tanking."

So excuse me, but I have to toss the politeness out the window and shout, "IT'S NOT THE DOLLAR, STUPID!!!"

-chart-

OK, smartypants, if it's all about the dollar, then why is the price of Oil surging in EVERY CURRENCY??? And don't give me that "Peak Oil" cr**....

http://www.economicpopulist.org/?q=content/oil-dollar-and-speculation

---

The chart is highly supportive of the position that oil is rising in every currency. It makes sense. If the dollar is getting clobbered when paired against the euro then oil purchased in euros should fall in price.

June 3 (Bloomberg) -- Federal Reserve officials surprised bankers in the past week by demanding they raise specific amounts of new capital before repaying taxpayer funds, applying a more stringent assessment than the stress tests in May.

JPMorgan Chase & Co. and American Express Co. were told they need to boost common equity, less than four weeks after being informed they had enough to withstand a deeper economic slump. Morgan Stanley was directed to raise more funds after already selling stock to cover its stress-test shortfall. One firm was told June 1, people with direct knowledge said.

The central bank’s further scrutiny signals concern at the political and economic dangers of having a bank boomerang back to government aid once it leaves the program.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajQ3cx_jGULI

link

Well, once in a while the authorities exceed my low expectations, and this is one of those instances. The Fed is insisting that the bank recipients of TARP fund meet a higher standard, in terms of balance sheet strength, than set in the stress tests. The banks are grumbling that this is not what they expected.

This is again industry posturing. The powers that be have been pointedly non-committal on the repayment of TARP funds, saying they were studying the matter. The idea that it should be the same as the standards for the stress tests, which were a minimum threshold to determine if they needed to raise MORE money, did not mean that "passing" it implied a bank was strong enough to escape from the extra supervision that came with being a TARP recipient.

Of course, there is an obvious reason for the Fed being a bit bloody-minded here. It would undermine its credibility completely if a bank repaid the TARP and went into the crapper any time in the next ten years, barring an unforeseen disaster like the Yellowstone caldera blowing up (or ones the great unwashed think could conceivably come to pass but the officialdom deems to be impossible, like a dollar crisis).

This interview was published at the U.K.'s Telegraph. Oddly, the story has vanished. - ozymandius


You can read the rest of the "disappeared" interview at Zero Hedge

Would that it cared about people to that degree....

NEW YORK (Dow Jones)--U.S. stock futures edged lower Wednesday ahead of testimony from Federal Reserve Chairman Ben Bernanke and a wave of economic data, with one leading brokerage arguing that bonds are a better place to be than stocks.

S&P 500 futures slipped 5.7 points to 936.90 and Nasdaq 100 futures fell 5.5 points to 1473.00. Futures on the Dow Jones Industrial Average shed 41 points.

....

Also of note, Bernanke is testifying before the House Budget Committee. "He is unlikely to signal a further expansion of unconventional measures at this stage, though the measures to date have clearly been beneficial," said Paul Donovan, an economist at UBS AG (UBS), in a note to clients.

http://online.wsj.com/article/BT-CO-20090603-703744.html

LONDON (Reuters) - European stocks fell and Wall Street was set for a weaker start on Wednesday as investors turned cautious after economic optimism pushed world stocks to fresh 7-1/2 month highs and sterling to 2009 peaks earlier. The dollar rose against European currencies after officials told Reuters Asia's richest central banks would shrug off losses from a possible U.S. sovereign credit rating downgrade and continue to buy Treasuries to keep markets stable.

Expectations the worst may be over for the world economy grew after a survey showing improvement in the euro zone and UK service sector and data showing surprise first-quarter growth in Australia.

However, investors are reluctant to push the risk asset rally further before getting more solid evidence of an economic turnaround. A private-sector survey on U.S. employment and factory orders data later will provide more pointers. "Return to growth ... is good but the question is how sustainable it is going to be, how rapidly the economy is going to grow from here," said Peter Dixon, UK economist at Commerzbank. "The data today did not give us any insight how far and quickly we are going to grow. There are still a huge number of structural issues in the economy which might prevent growth from picking up." MSCI world equity index (^MIWD00000PUS - News) fell 0.4 percent rose having risen as high as 255.16, its highest since mid-October. The index has risen 12 out of past 13 weeks and is now up around 12 percent this year.

The FTSEurofirst 300 index (^FTEU3 - News) fell 1.1 percent while emerging stocks (^MSCIEF - News) were steady on the day.

...

The euro zone purchasing managers index was revised higher to 44.8 in May from a flash estimate of 44.7, and 43.8 in April. In the UK, the services sector staged a surprise return to growth last month with the PMI index rising to 51.7 from 48.7.

FAITH IN DOLLAR

/blah blah... http://finance.yahoo.com/news/Stocks-under-pressure-dollar-rb-15422862.html?.v=6

June 3 (Bloomberg) -- Toll Brothers Inc., the largest U.S. luxury homebuilder, reported a narrower second-quarter loss after writedowns for land, developments and options shrank by almost $170 million.

The net loss for the three months ended April 30 shrank to $83.2 million, or 52 cents a share, from $93.7 million, or 59 cents, a year earlier, the Horsham, Pennsylvania-based company said in a statement today. Toll was projected to post a loss of 45 cents a share, according to the median of 12 analysts in a Bloomberg survey.

Toll, the third-worst performing U.S. homebuilding stock this year, has lost almost a third of its value since 2006 as the housing slump and the recession have cut demand. Toll reduced the price of its homes and offered buyers incentives in an effort to halt a slide in revenue.

....

The cancellation rate for the second quarter improved to about 22 percent from 25 percent a year earlier. The company last month paid $304 million to redeem all but $50 million of its debt maturing in 2011.

http://www.bloomberg.com/apps/news?pid=20601103&sid=ab21Lhq0Q274&refer=us

This morning’s outrage comes to us via the WSJ, and it discusses how our elected representatives rolled over for their overlords, the bankers, in grateful genuflection to their largesse: Huge heaps of lobbying monies:


There was little surprise that FASB, like so many other organizations in the current mess, failed to show any testicular fortitude whatsoever. They rolled over in the face of intense lobbying and congressional pressure, so their masters could rub their bellies.

http://www.ritholtz.com/blog/2009/06/how-congress-betrayed-investors/

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

Last trade 78.798 Change +0.313 (+0.40%)

Euro, British Pound Falter on U.S. Dollar Strength, All Eyes on Chairman Bernanke

http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Euro__British_Pound_Falter_on_1244024366092.html

The Euro pulled back after reaching an intraday high of 1.4339 during the overnight on U.S. dollar strength, and the single-currency may continue to fall lower over the remainder of the session as investors weigh the outlook for future policy. The economic calendar showed producer prices in the Euro-Zone fell at a record-pace in April, and the drop in inflation could lead the European Central Bank to take additional steps to shore up the economy as the central bank maintains its one and only mandate to ensure price stability. As the Governing Board holds a dovish outlook for price growth, expectations for further easing could lead the EUR/USD to retrace the advance from the beginning of the week, and may fall back below the 1.4100 level to test 1.4052, last week’s high, for support.

The preliminary GDP reading showed the economy contracted 2.5% in the first quarter, which was in-line with expectations, while the annual rate of growth plunged 4.6% from the previous year amid forecasts for a 4.6% drop. The breakdown of the report showed household consumption fell 0.5%, with business investments tumbling 4.2%, while government spending held flat from the previous quarter. In addition, the final services PMI reading unexpectedly ticked higher to 44.8 from 44.7, with the composite index increasing to 44.0, and the data suggests economic activity is falling at a slower pace as policymakers take unprecedented steps to soften the landing of the economy. Moreover, the producer price index 1.0% in April, while the annualized rate plunged 4.6% to mark the biggest drop on record, and the weakening outlook for inflation could lead the ECB to hold a dovish outlook going forward as price pressures falters. As a result, the central bank is surely to adopt unconventional tools at the policy meeting tomorrow, and mounting risks for deflation could lead the board to purchase more than EUR 60B in euro-denominated bonds to stem the downside risks for inflation.

The British pound pulled back from a fresh trend high of 1.6664 to hold near 1.6545 even as service-base activity increased for the first time since April 2008. The U.K. services PMI jumped to 51.7 in May from 48.7, which topped forecasts for a reading of 49.5, and the data encourages an improved outlook for future growth as service-based activity accounts for nearly two-thirds of the economy. At the same time, market participants speculate the Bank of England to expand its asset purchase program at the rate decision tomorrow as Governor Mervyn King projects a slow and protracted recovery later this year, and long-term expectations for higher interest rates in the U.K. may continue to drive the Sterling higher as economic activity improves. As a result, the GBP/USD may continue to push higher over the week, and is likely to make another attempt to test 1.6700.

The U.S. dollar strengthen across the board during the overnight as India, China, and South Korea raised support for the greenback as the reserve currency for the global economy however, expectations for a 0.9% jump in factory orders paired with a rise in the ISM Non-Manufacturing index could lead investors to raise their appetite for risk as growth prospects improve. At the same time, the ADP employment report is expected to show a 525K drop in private payrolls, which could instill a dour outlook for the Non-Farm Payrolls report due out on Friday, and a rise in risk aversion should lead the dollar higher as the reserve currency continues to benefit from safe-haven flows. Meanwhile, Fed Chairman Ben Bernanke is scheduled to testify before the House Budget Committee at 14:00 GMT today, and encouraging comments from the central bank head could weigh on the exchange rate as risk trends continue to drive price action in the financial markets.

...more...

Bank of Canada Could Force Canadian Dollar Losses

http://www.dailyfx.com/story/bio1/Bank_of_Canada_Could_Force_1243982544226.html

The Bank of Canada is virtually guaranteed to leave interest rates unchanged at its upcoming meeting, but the Canadian Dollar may nonetheless see volatility on the official statement.

In their decision to cut interest rates to 0.25 percent, Bank of Canada officials made it surprisingly clear that rates would remain unchanged through the second quarter of 2010. The Bank made it plainly obvious that they were attempting to set a ceiling on more medium-term interest rates, and a virtual guarantee of persistently low target rates led to a commensurate correction in Canadian Dollar money market rates.



Given such exceptional clarity on interest rates, what else could the Bank of Canada possibly do to move markets? Quite simply: Quantitative Easing.

Deputy BoC Governor John Murray recently published an article in which he outlines the justification, the mechanics, and the relative success rates of “Unconventional” monetary policy measures—strongly hinting that the Bank of Canada needed to look beyond interest rates to continue boosting money supply. Murray establishes target rates of 0.25-0.50 percent as the “Effective Lower Bound” of interest rates and explicitly highlights three mechanisms that banks may use beyond interest rates. (His statement is available here)

1. “Conditional statements about the future path of policy rates”: This quite clearly makes reference to the Bank of Canada’s recent announcement that explicitly says the central bank will leave rates unchanged until Q2, 2010.

2. “Quantitative Easing”: The key buzzword for any major central bank, Quantitative Easing involves a central bank’s purchase of private or public debt that expands its monetary base.

3. “Credit Easing”: A mechanism in which the central bank purchases private debt in especially distressed credit markets—also expanding its monetary base.

The BoC has clearly used the first mechanism and quite clearly reserves the right to use the next two, but why should we believe that they are likely to do so?

He goes on to highlight the “Four Guiding Principles” behind these unconventional measures, and explicitly says, ”Any decision to use them necessarily involves some risk and uncertainty. To deal with these challenges, the Bank of Canada has identified four key principles that would guide its actions whenever these unconventional measures are employed.” This is clearly not a guarantee that the Bank of Canada will use Credit or Quantitative Easing as a tool in its monetary policy arsenal, but we would argue it greatly increases the odds of such an announcement. The key question remains as to the timing of any such announcement.

...more...

Canada's banks are in remarkably good shape. I credit their insistence in keeping banking boring for this.

And good morning UpInArms! Nice to have some company here. :hi:

:donut: :donut: :donut:

my .... errr birthday present to myself ... the now 15 week old puppy ... helped me to be awake and stay awake this a.m.

:)

Now am just working on being alert :donut:

I went to bed early last night, and missed all my late night reading.

A puppy. That's a good idea. I swung by the ASPCA yesterday, but they were closed. I need another to keep The Fudd on his toes during his last days.

stone deaf - but adorable

what kind?

double blue merle sheltie

and oh so very very special

:loveya:

puppies are good for the soul, and best thing is they grow into dogs.


Tansy Gold, who is ALWAYS in need of unconditional love and adoration and gets it from the four critters.

LONDON, June 3 (Reuters) - The dollar on Wednesday rebounded from its lowest levels this year against the euro after Asian monetary sources said they would keep buying U.S. Treasuries even if the U.S. credit rating were to be downgraded.

The remarks by sources from China, Japan, India and South Korea , which were compiled by Reuters rather than being a joint statement, helped to stem recent selling that has driven the dollar's trade-weighted index .DXY to its lowest this year and down more than 7 percent since the start of May.

Traders viewed the comments as an expression of support for dollar-denominated assets from the nations which control about half of the world's currency reserves. Dollar weakness would erode the value of U.S. investments.

"It is highly rational that you would have comments like these from the main reserve holders in Asia -- they are the people with a natural interest in providing supportive comments for the dollar," said Simon Derrick, head of currency research at Bank of New York Mellon in London. "It is in their interests for the dollar to restabilise or strengthen ... They are sending a strong signal to the market that they are not going to dump dollars."

/... http://www.reuters.com/article/marketsNews/idINL3101146920090603?rpc=44

heck all the banks that received bail out money should just wipe our bad credit away so we can go into debt all over again so we can keep the bubble going.Heck the bank can't loose rinse and repeat.:D :D :D :evilgrin: :evilgrin: :party: :toast: :bounce: :crazy:

Nearly a month ago, back on May 5th, I highlighted some testimony by Federal Reserve Chairman Ben Bernanke before congress in a post labelled, “Bernanke expects recovery later this year“. In his testimony, Bernanke used the phrase ‘Scylla and Charybdis’ to describe the Federal Reserve’s policy challenge regarding deflationary and inflationary forces. I would like to highlight this characterization because I believe it goes to the core of the debate as to how the global economy and asset markets will fare over the next 5-10 years. In my view (and apparently in Bernanke’s), both inflationary forces and deflationary forces will be at work for some time to come. This will present policy makers with a problem as the reflation trade comes good, and the resulting policy responses will have serious implications on the medium term outlook for the economy and asset markets.

Deflationary forces

The problem is this: we have just witnessed one of the most serious asset bubbles in history. In fact, I would call the great housing bubble an ‘echo bubble’ that was merely a continuation of the bubble forces that created the technology bubble of the late 1990s. So, the world saw asset price inflation of the most severe kind for over a decade – from the mid 1990s when Alan Greenspan first voiced concern about ‘irrational exuberance”’ to 2007 when the housing bubble imploded. What results from the implosion of such a significant bubble is deflation.

Actually, more crisply put, what results is ‘the D-process,’ an outcome highlighted by Ray Dalio of Bridgewater Associates (see my post “A conversation with Bridgewater Associates’ Ray Dalio” for more detail). This process involves the three D’s of deleveraging, deflation and depression (outlined in my post “We are in depression“).

http://www.creditwritedowns.com/2009/06/central-banks-will-face-a-scylla-and-charybdis-flation-challenge-for-years.html

then it wouldn't have to worry. And the swings in the market would damp out. It is because the Fed and the other regulators and Congress subverted their missions that we are in the bad way now.

If the Fed is found to have operated outside the authority of its charter, what constitutes a circuit breaker? And what happens when the breaker is tripped?

(Mixed today. Public debt goes up while FICA side goes down. Later in week, debt may go back down as it has sometimes in the past, or, maybe it won't.)

= Held by the Public + Intragovernmental(FICA)
= 7,097,861,677,672.01 + 4,282,104,511,903.04
UP 78,540,152,146.76 + DOWN 20,173,867,928.11

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.79, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,559,142 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $37,121.6.
A family of three owes $111,364.8. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 19 reports in the last 30 to 31 days.
The average for the last 19 reports is 9,046,841,961.82.
The average for the last 30 days would be 5,729,666,575.82.
The average for the last 31 days would be 5,544,838,621.76.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 89 reports in 132 days of Obama's part of FY2009 averaging 0.23B$ per report, 0.17B$/day so far.
There were 164 reports in 244 days of FY2009 averaging 8.26B$ per report, 5.55B$/day.

PROJECTION:
There are 1,329 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.8T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
06/01/2009 11,379,966,189,575.05 BHO (UP 753,089,140,661.97 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,355,241,292,662.60 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
05/07/2009 +027,679,213,817.18 ------------**********
05/08/2009 -000,216,334,016.92 ---
05/11/2009 -000,029,759,155.68 ---- Mon
05/13/2009 -000,207,515,478.68 ---
05/14/2009 +013,927,016,419.76 ------------**********
05/15/2009 +013,064,365,189.63 ------------**********
05/18/2009 -000,012,816,531.74 ---- Mon
05/19/2009 +000,244,659,127.63 ------------********
05/20/2009 +000,422,183,214.17 ------------********
05/21/2009 +016,742,591,292.36 ------------**********
05/22/2009 +000,007,301,981.46 ------------******
05/26/2009 +000,178,213,075.69 ------------******** Tue
05/27/2009 +000,332,821,919.42 ------------********
05/29/2009 +019,434,324,960.50 ------------**********
06/01/2009 +078,540,152,146.76 ------------********** Mon

170,106,417,961.54 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,715,334,386,315.98 in last 256 days.
That's 1,715B$ in 256 days.
More than any year ever, including last year, and it's 169% of that highest year ever only in 256 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 256 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3903638&mesg_id=3903680

(Both up, just not by much.)

= Held by the Public + Intragovernmental(FICA)
= 7,098,404,965,958.73 + 4,284,332,749,966.50
UP 543,288,286.72 + UP 2,228,238,063.46

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.79, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 306,566,342 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $37,129.77.
A family of three owes $111,389.31. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 20 reports in the last 30 to 32 days.
The average for the last 20 reports is 8,733,076,181.23.
The average for the last 30 days would be 5,822,050,787.49.
The average for the last 32 days would be 5,458,172,613.27.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 90 reports in 133 days of Obama's part of FY2009 averaging 0.20B$ per report, 0.16B$/day so far.
There were 165 reports in 245 days of FY2009 averaging 8.23B$ per report, 5.54B$/day.

PROJECTION:
There are 1,328 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.7T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
06/02/2009 11,382,737,715,925.23 BHO (UP 755,860,667,012.15 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,358,012,819,012.80 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
05/08/2009 -000,216,334,016.92 ---
05/11/2009 -000,029,759,155.68 ---- Mon
05/13/2009 -000,207,515,478.68 ---
05/14/2009 +013,927,016,419.76 ------------**********
05/15/2009 +013,064,365,189.63 ------------**********
05/18/2009 -000,012,816,531.74 ---- Mon
05/19/2009 +000,244,659,127.63 ------------********
05/20/2009 +000,422,183,214.17 ------------********
05/21/2009 +016,742,591,292.36 ------------**********
05/22/2009 +000,007,301,981.46 ------------******
05/26/2009 +000,178,213,075.69 ------------******** Tue
05/27/2009 +000,332,821,919.42 ------------********
05/29/2009 +019,434,324,960.50 ------------**********
06/01/2009 +078,540,152,146.76 ------------********** Mon
06/02/2009 +000,543,288,286.72 ------------********

142,970,492,431.08 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,718,105,912,666.16 in last 257 days.
That's 1,718B$ in 257 days.
More than any year ever, including last year, and it's 169% of that highest year ever only in 257 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 257 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3905319&mesg_id=3905396

Background - Indiana's pension funds have filed suit to block Chrysler sale to Fiat. ZeroHedge has been following this
http://zerohedge.blogspot.com/search/label/chrysler
edit to add this must-see video
5/26/09 Insight on Chrysler's bankruptcy sale, with Richard Mourdock, Indiana state treasurer and CNBC's Maria Bartiromo.
http://zerohedge.blogspot.com/2009/05/indianas-richard-mourdock-makes-his.html


Denninger:
6/3/09 Automakers: "Green Sharts"?

Are we finally seeing the potential for sanity in response to Obama's arm-twisting?

June 2 (Bloomberg) -- A bankruptcy judge who approved the sale of most of Chrysler LLC’s assets to a group led by Fiat SpA said the carmaker may take a creditors’ appeal of his decision directly to a federal appeals court to save time.

The appeal was made by a group of Indiana pension funds. The request to skip a usual stop at U.S. District Court in New York was made by Chrysler and Fiat. Turin-based Fiat can walk away from the sale if it isn’t completed by June 15, not counting a one-month extension for any antitrust approvals.

So what? Expediency is usually a code-word for "we're going to screw somebody, and we want to make sure this is all wrapped up before you figure it out."

The problem in the original opinion denying the petitioner's motion is here:

The U.S. and Canada “have made the determination that it is in their respective national interests to save the automobile industry, in the same way that the U.S. Treasury concluded that it was in the national interest to protect financial institutions,” Gonzalez said in a 47-page opinion.

It doesn't matter what The US and Canada have determined is in their national interest if that national interest requires violating black-letter law, and it certainly appears that it does in more than one area.

If Congress wants to change the law they're free to do so, but absent a specific law that changes preference in bankruptcy this move is a problem.

Hopefully, with the appeal now going into a court where the judges have a lifetime appointment and thus cannot be retaliated against by The Admnistration, we will see this thing called "justice" show up!

Another Bloomberg article laid forth part of the problem - bondholder "sacrifice":

The government’s approach to the bankruptcies of General Motors Corp. and Chrysler LLC illustrates how this new, unstated policy works: Bondholders are told to give up legal rights, and cash, as part of a government-mandated tradeoff that favors a politically connected special-interest group.

The big threat is that this policy will extend to all bonds, including Treasury and municipal debt, not just corporate obligations.

That's part of the problem - but only part.

Another is what appears to be a rank violation of ERISA, the black-letter Federal Law that prohibits companies from dipping into employee pension funds - except when The Obama Administration wants to re-write that law to favor certain constituencies from the executive office!

The ERISA problem ought to scare everyone; it was put into effect as a direct consequence of prior abuses where pensioners had their retirement funds withheld from their paychecks literally stolen by their employers. ERISA put a stop to that with black-letter law making clear that once pension or other retirement funds are withheld they are segregated and belong to the employee, with the employer having a fiduciary duty. Now that's under attack as well - not through Congressional action in the form of a new law, but rather by a lawless taking orchestrated by the executive!

Think about this possibility, as raised by David Einhorn:

“When teachers and firefighters are losing jobs and benefits, will municipal bondholders be asked to share in the collective sacrifice?” he asked. “Might the shared-sacrifice theory eventually extend into the U.S. Treasury market during a crisis?”

Yep.

One of the reasons that I bailed off on municipal investments over a year ago was not just the default risk. It was the risk that the government would meddle with preference if there was a default so as to peddle favor to certain constituencies. My fear was that such preference would of course be extended to municipal employees with overly-fat employment agreements that are grossly out of line with private industry and which would be reviewed or even canceled in a review that came out of a municipal insolvency.

But with the government willing to ignore black-letter preference rules and in fact the rule of law when it comes to creditors, who knows what could happen?

Municipal "GO", or general-obligation, debt is widely thought of as nearly completely-safe, even without a coveted "AAA" rating or "bond insurance." Why? Because it is backed by the taxing authority of a state or other government arm, and that's about as good as it gets.

But if the government can (and will) re-write the priority rules from the executive office then there's a problem - I can no longer count on the black-letter rule of law that has (and should) protect me from capricious actions, and my investment is no longer safe.

As I have repeatedly noted this is a new risk that nobody had agreed to take when they bought these investments:

“The UAW gets a recovery of five times the bondholders’ under reasonably upbeat scenarios,” CreditSights Inc. analyst Glenn Reynolds wrote in a research note. “This is just the fact.”

So bondholders now know how the Obama administration’s “shared-sacrifice” policy will work out for them. After GM, they can’t say they weren’t warned.

Yep.

So you want to buy some bonds eh? Better think again.

http://market-ticker.denninger.net/archives/1084-Automakers-Green-Sharts.html

FRANKFURT, June 3 (Reuters) - European stocks fell on Wednesday, led by banking, energy and mining shares, as disappointing U.S. macro data raised doubts about a return to economic growth soon and a recovey in corporate earnings. The pan-European FTSEurofirst 300 index .FTEU3 closed unofficially down 2.0 percent at 867.92 points.

Credit Suisse downgraded equities to "benchmark" from "overweight", saying in a strategy note: "Performance in many sectors has been consistent with normalization, which now appears premature."

The U.S. Institute for Supply Management's non-manufacturing index for May and U.S. new factory orders for April came in below market expectations.

...

Banks .SX7P, a sector which outperformed the broader market during the recent rally, took most points off the benchmark index on Wednesday, with Barclays (BARC.L) falling 5.0 percent, UBS (UBSN.VX) down 4.2 percent and Deutsche Bank (DBKGn.DE) dropping 3.9 percent.

Among oil and gas stocks .SXEP, which lost ground on the back on a 3-percent drop in the price of crude oil CLc1, Repsol (REP.MC) fell 3.3 percent, Total (TOTF.PA) shed 3.0 percent, ENI EI.MI lost 2.3 percent and BP (BP.L) closed down 2.2 percent.

Basic resources stocks .SXPP, notably miners and steelmakers, gave up some recent gains as copper MCU3 and gold prices <XAU=> fell. Anglo American (AAL.L) fell 6.0 percent, ArcelorMittal (ISPA.AS) was down 5.3 percent, Rio Tinto (RIO.L) lost 4.6 percent and BHP Billiton (BLT.L) sank 4.1 percent.

/.. http://www.reuters.com/article/marketsNews/idCAL3103958820090603?rpc=44

6/3/09
Green Shoots, Red Ink, Black Hole
Truly terrifying data about the real state of the U.S. economy.
By Eliot Spitzer

I have an unfortunate sense that the "green shoots" in the economy that everyone is talking about are nothing but dandelions. Sure, forcing $1 trillion of taxpayer money—in direct capital, guarantees, and diminished cost of borrowing—into the banking sector has permitted the major banks to claim solvency for the moment. Yet we should not forget that this solvency has come not through a much needed deleveraging of the banking sector but rather from a massive transfer of the obligations of private banks to the public, with the debt accruing to future generations. And overall loan quality at U.S. banks is still the worst in 25 years and deteriorating at the fastest pace ever.

It's a terrible mistake to confuse the momentary solvency of the financial sector and the long-term health of our economy.
.
.
So, despite trillions in public spending, we are short millions of jobs, are rapidly sliding further into debt, are losing our capacity to borrow at a manageable cost, and are producing fewer of the goods that will generate real wealth.

The remarkable payments to the financial services sector and the auto industry—a quarter-trillion-dollar investment in AIG and GM alone—have produced no structural change at all. We are rebuilding the same edifice—fragile as before.

Where does this leave us? We have had a fundamentally misguided industrial policy over the past decade. Yes, industrial policy is a dirty phrase to many, some of whom would argue that we haven't had one, and indeed shouldn't. But the truth is we did have one: to leverage up and guarantee the bets of a financial services sector that has now collapsed and left nothing of value in its wake.

What would be a better approach? A policy to support those sectors that actually create goods and value. Investment in transformational technology and infrastructure are core national needs. So why not start with a government order for 500,000 electric cars, subject to an RFP two years from now, by which time a true electric car prototype will have been developed? It should be open to any manufacturer, as long as 75 percent of the value of the car is domestically produced. I don't care if the name on the plate is GM or Toyota, as long as the value added is here. (I prefer a "Toyota" produced in Tennessee to a "GM" produced in China. Why struggle to save the shell of a company—GM—that intends to ship jobs overseas anyway?) Guaranteeing an order of 500,000 will give manufacturers the needed scale to generate profits and reassure private customers that service and support will be around for the long haul. And the federal government could also issue an RFP for recharging stations, to be built by private companies, along the interstate highway system, wherever there is a traditional filling station, so that recharging will be possible.

Second, why not take an amount equal to the AIG bailout (more than $180 billion) and invest in a product that would be truly worthwhile: high-speed rail along our major economic corridors? If we transform the L.A.-San Francisco corridor with high-speed rail, and D.C.-Boston similarly, the savings and technological advances would be enormous. The $8 billion dedicated to high-speed rail in the stimulus package will accomplish little.

Wouldn't these be dollars better spent than those dedicated to propping up GM and AIG? The longer we fight the creative destruction of the marketplace by resuscitating dying companies, the slower our ability to shift capital to truly creative sectors in the economy will be.

http://www.slate.com/id/2219599/

http://www.cuckoodesign.com/blog/

:shrug:

for society as a whole; it would be nice if that process would also include consultation and participation of citizens in general. Spitzer proposes policy to invest in electric road transport and electric high speed rail projects, in this example.

Current policy considers what's best for Oligarchs and Vested Interests, it appears. Existing wealth and new debt-based funding are channelled towards war spending and the upper echelons of the shadow financial system, in so many recent examples.

It's the latter policy that's being propped up and is intended by TPTB to prevail.