STOCK MARKET WATCH, Thursday June 11

Source: du

STOCK MARKET WATCH, Thursday June 11, 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 10, 2009

Dow... 8,739.02 -24.04 (-0.28%)
Nasdaq... 1,853.08 -7.05 (-0.38%)
S&P 500... 939.15 -3.28 (-0.35%)
Gold future... 954.70 0.00 (0.00%)
10-Yr Bond... 3.95 +0.10 (+2.52%)
30-Year Bond 4.77 +0.12 (+2.56%)

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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

Staying Grounded
by Chris Puplava

Back in April a piece was penned that looked at how oversold the market was on a statistical basis (“Possible vs. Probable”). The basis for the article was to look at the percent deviation of the S&P 500 from its 200 day moving average (200d MA) and how many standard deviations it was below the mean, comparing the current experience to prior bear market sell offs. The image below was shown displaying how the percent deviation from the 200d MA followed the typical bell-shaped curve and that the low seen in November of 2008 marked a major statistical extreme.

-see graph-

....

Now that we have indeed reached the 200d MA, where do we go from here? To help answer that question a comparison was made to the 1929/1930 sell off and recovery, which so far displays a fairly close resemblance to the current market. To highlight the analogy, the following chart was shown back in April.

-see chart-

While a top was not seen in May, the markets still show a similar path to the 1929-1930 analogy, which witnessed a second peak that was slightly below its 200d MA, and would call for a sell off here that would lead the market to roughly 20% below its 200d MA, which would correspond to a move to roughly 732 on the S&P 500.

....

Could this time be different?

The question is posed because we have two clear forces at work in the present situation. The economy is clearly coming back from the brink as it fell off a cliff last fall, with many economic numbers and credit spreads returning to pre-Lehman levels, the so called “less bad” or second derivative improvement. Moreover, the government stimulus passed earlier this year will slowly be pouring into the economy, lifting economic activity.

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

Well, all signs point to it being so very much worse that even thinking about cutting the safety net further should be punishable by stoning.

I often feel like a troll posting the daily dose of MO.

After all they are ROLLING in Our Money!

as in rocks thrown at them, or as in firing up a doobie?

08:30 Retail Sales May
Briefing.com 0.3%
Consensus 0.5%
Prior -0.4%

08:30 Retail Sales ex-auto May
Briefing.com 0.0%
Consensus 0.2%
Prior -0.5%

08:30 Initial Claims 06/06
Briefing.com 610K
Consensus 615K
Prior 621K

10:00 Business Inventories Apr
Briefing.com -0.8%
Consensus -1.0%
Prior -1.0%

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

US weekly initial jobless claims fall 24K to 601K
8:30am Today

US 4-week average claims fall 10,500 to 621,750
8:30am Today

US ongoing jobless claims rise 59K to record 6.82M
8:30am Today

US 4-week avg ongoing claims up 57K to record 6.8M
8:30am Today

U.S. May retail sales rise 0.5% vs 0.7% expected
8:30am Today

U.S May retail sales ex-autos rise 0.5% vs. 0.4%
8:30am Today

U.S. May retail sales ex-gas rise 0.2%
8:30am Today

U.S. April retail sales revised to -0.2% vs. -0.4%
8:30am Today

U.S. May vehicle sales up 0.5%
8:30am Today

U.S. May retail gasoline sales up 3.6%
8:30am Today

compared to May of last year? And is +0.5% enough of a rise in retail sales to make the overall GDP for May increase?

SINGAPORE – Oil prices climbed above $72 a barrel Thursday in Asia as investor optimism about a global economic recovery pushed crude to fresh highs for the year.

Benchmark crude for July delivery rose was up 72 cents at $72.05 by early afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Wednesday, it rose $1.32 to settle at $71.33.

....

"Investors are expecting a quick turn around," said Ben Westmore, an energy analyst with National Australia Bank in Melbourne. "If the data in the coming months shows there isn't a quick rebound, the oil price should fall."

The Energy Department's Energy Information Administration said Wednesday that crude inventories fell 1.6 million barrels in the week ended June 5. Analysts had expected a build of 800,000 barrels.

....

In other Nymex trading, gasoline for July delivery rose 1.01 cents to $2.03 a gallon and heating oil gained 1.15 cents to $1.82. Natural gas for July delivery was up 1.4 cents at $3.72 per 1,000 cubic feet.

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

.... IF the economy were ACTUALLY recovering, oil prices and interest rates will have the paradoxical effect of choking that recovery.

The situation involving oil, I believe, is about making a fast dollar. Interest rates evidence the lack of recovery and the high levels of risk associated with even the most creditworthy of borrowers.

Recovery? I'll believe it when unemployment initial claims retreat from "oh shit" territory and millions of jobs are created every month, pulling the minimum wage higher with it.

What will be the peak in $/barrel before the inevitable -pop-?


Since the %-age seems to be tracking (almost exactly) the %-age of the recent rally of the Financial Sector... I'm going to say it's pretty close.

My initial bid is $110/barrel.

WASHINGTON – The Federal Reserve threatened to force the ouster of Bank of America CEO Kenneth Lewis if he didn't follow through with plans to buy Merrill Lynch & Co., Republicans said Wednesday after reviewing internal documents.

Republicans also said there was evidence that the government tried to restrict information related to the merger from being publicly released.

....

The House Oversight and Government Reform Committee is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, urged Lewis to go through with the acquisition and not disclose to shareholders the details of Merrill Lynch's deteriorating financial state.

....

As proof, Republicans cite several documents including an e-mail by an employee at the Richmond Federal Reserve who said Bernanke had made it clear that if Bank of America backed out and needed financial assistance, "management is gone."

http://news.yahoo.com/s/ap/20090610/ap_on_bi_ge/us_fed_subpoena

Fed Unveils Lending Details After Lawmaker Pressure

June 10 (Bloomberg) -- The Federal Reserve unveiled its most detailed picture yet of its record $1 trillion expansion of credit, as Chairman Ben S. Bernanke responds to congressional pressure for greater transparency from the central bank.

For the first time, the Fed announced details on the number of borrowers and the ratings of securities pledged as collateral for loans. The data come in a new monthly report released by the central bank today in Washington.

The Fed said a total of 378 banks borrowed from its discount window in May or got funds from auctions of cash aimed at combating the liquidity crisis. Officials still stopped short of identifying the firms, a measure called for by some lawmakers and the subject of freedom-of-information requests and lawsuits.

....

Senator Bernie Sanders, the Vermont independent who sponsored an April 2 resolution that urged the Fed to identify borrowers and passed by a 20-vote margin, said today’s Fed report is “completely insufficient.”

“It is time for the Fed to name names,” Sanders said in a statement. The money “belongs to the American people,” and disclosure would show whether banks that are repaying the government’s capital injections are getting loans from the Fed, the senator said.

more...

This may well mark the end of the Federal Reserve, which a lot of people have advocated, without anyone having to lift a finger. I have no convictions on that, yet. But the times, they are a changing.

This weekend the WE will celebrate with a Flag Day/3 Stooges theme. There's Nothing more American than the 3 Stooges! Join us as we watch those lovable clowns: Larry (Summers), Moe (Geithner) and Curly (Bernanke) wreak havoc on the world stage, with guest appearances by Shemp (Paulson).

I'm not yet sure who would parallel Sonja Henie, who played Snow White in "Snow White and the 3 Stooges". Your suggestions are welcome.

The banks are still up to their eyeballs in debt, but they paid off the payday lender with money from a loan shark.

"Peter, how you doin'? I'll be your mugger this evening."

Whereas we taxpayers play both parts. Isn't it so lovely, how polite and well-mannered they are when they mug us?

Sonja Henie should not be the only one.

For me, I'll take Abbott and Costello over the Three Stooges any day. Although, thematically, the analogy for the WE thread could not be more apt.

I showed my son the video of "Who's on First?" That is truly an immortal bit. My son, seven years old, laughed and laughed. I have seen that skit dozens of times and still it tears me up with laughter.

and the Kid recognized it...I raised her well.

I was going to suggest a more cerebral weekend of Sun Tzu... But, maybe it's better that we clean the pipes first. ;)

The Art of (Class) War

and I'm going to be extremely busy this weekend, and need all the help from my Stooges...readership that I can get.

Mortgage Applications Fall as Interest Rates Jump (Update1)

June 10 (Bloomberg) -- U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Federal Reserve Chairman Ben S. Bernanke’s efforts to cap rates is stalling.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance dropped 7.2 percent to 611 in the week ended June 5, from 658.7 the prior week. The refinancing gauge fell 12 percent. The purchase index gained 1.1 percent.

Fixed U.S. mortgage rates jumped to the highest level this year last week, threatening to deepen the housing slump and sideline prospective home buyers. An improving economic outlook spurred an increase in rates even as a rising jobless rate is contributing to record home foreclosures. Still, lower property values are helping the housing market stabilize.

.....

The yield on the benchmark 10-year Treasury note rose to 3.90 percent last week as volatility in government bonds hit a six-month high, according to Merrill Lynch & Co.’s MOVE Index of options prices. Thirty-year fixed-rate mortgages jumped to 5.45 percent from as low as 4.85 percent in April, according to Bankrate.com in North Palm Beach, Florida. Costs for homebuyers are now higher than in December.

more...

Government debt prices tumble as $19 billion of reopened 10-year notes comes to auction and Russia says it will sell some of its holdings.

NEW YORK (CNNMoney.com) -- Treasury yields soared - with the benchmark 10-year yield briefly touching 4% - after the government sold $19 billion of 10-year notes and Russia said it would reduce its share of U.S. debt.

The government has been selling large amounts of debt to fund various stimulus programs aimed at boosting the economy. On Wednesday, $19 billion in a reopened 10-year hit the auction block. Would-be buyers bid nearly $50 billion for the debt for a bid-to-cover ratio of 2.62.

....

Yields for longer-term Treasurys have been flirting with seven- and eight-month highs in recent weeks as investors become hesitant to park their money in traditional "safe havens" for longer periods of time amid a rising threat of inflation.

http://money.cnn.com/2009/06/10/markets/bondcenter/credit/?postversion=2009061105

Had they gone up in Sept-Oct, we could have saved a bundle in prepayment penalty when we converted from co-op to condo and paid off the blanket mortgage.

I am a chronic victim of bad timing.

It's all Greenspan's fault. He broke the capital-debt markets when he pulled that stunt cutting Fed Funds Rates back in '87, and again in '91, and again in '2001 (well, THAT one might have been justified, but not for 8 F-ing years!).

:hi:

posted at Calculated Risk:


-more at link-

June 11 (Bloomberg) -- Investors in bonds that packaged $62 billion of debt for U.S. offices, hotels and shopping malls are bracing for more loan defaults through 2010 as Bank of America Merrill Lynch says landlords’ monthly payments may jump 20 percent or more.

Principal is coming due on the so-called partial interest- only loans as an 18-month-old recession saps demand for commercial real estate. About $179 billion of such loans were written between 2005 and 2007 and bundled into bonds, according to data from Bank of America Merrill Lynch.

With soaring vacancies and falling rents, some cash- strapped borrowers will fail to cover the higher costs, said Andy Day, a commercial mortgage-backed securities analyst at Morgan Stanley in New York. About 87 percent of mortgages sold as securities in 2007 allowed owners to put off paying principal for several years or until maturity, compared with 48 percent in 2004, Morgan Stanley data show.

“The worst is yet to come,” MetLife Inc. Chief Investment Officer Steven Kandarian said yesterday in a Bloomberg Television interview. “Typically there’s a lag between when the economy softens and when the defaults actually occur.”

.....

The yield gap, or spread, relative to benchmark interest rates on top-rated bonds backed by commercial real estate has fallen 3.8 percentage points to 7.8 percentage points since the Federal Reserve said on March 23 that it would lend to investors to purchase securities sold before Jan. 1, 2009, as part of its $1 trillion program to unlock credit, according to Bank of America Corp. data. Spreads on the debt have widened 1.5 percentage point since before S&P said on May 26 that it may cut ratings on top-ranked commercial mortgage-backed debt, rendering the bonds ineligible for the program.

http://www.bloomberg.com/apps/news?pid=20601109&sid=atG9p97hR9KU

---

Just like the stress tests - the scenario is deteriorating faster than the programs parameters anticipated under previously "worst case scenario" conditions. The bank stress tests have been proven farcical. Now the CRE bond relief backstop program is now shot full of holes.

.....

About 1 million option ARMs are estimated to reset higher in the next four years, according to real estate data firm First American CoreLogic of Santa Ana, California. About three quarters of those loans will adjust next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, the data show.

Option ARM borrowers hit with unaffordable monthly payments are another threat to the housing recovery and the economy, said Susan Wachter, a professor of real estate finance at the University of Pennsylvania’s Wharton School in Philadelphia. Owners who surrender properties to the bank rather than make higher payments for homes that have plummeted in value will further depress real estate prices and add to the inventory of properties on the market, she said.

“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,” Wachter said in an interview. “The option ARMs will be part of the reason that the path to recovery will be long and slow.”

http://www.bloomberg.com/apps/news?pid=20601109&sid=aQ_ZgC75Zfyw

---

How big is the issue? The issue is worth $750 Billion worth in mortgages that are due to reset and in danger of default.

(Debt moves up .025B$. That's small again.)

= Held by the Public + Intragovernmental(FICA)
= 7,109,972,049,499.36 + 4,281,487,205,929.59
UP 25,670,087.48 + UP 1,179,475,614.37

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: $9.78, ABOUT TEN BUCKS for a 1B$ 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 306,616,742 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 $37,152.11.
A family of three owes $111,456.33. (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 6,638,272,998.59.
The average for the last 30 days would be 4,425,515,332.39.
The average for the last 32 days would be 4,148,920,624.12.
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$/day.
There were 95 reports in 140 days of Obama's part of FY2009 averaging 0.01B$ per report, 0.04B$/day so far.
There were 170 reports in 252 days of FY2009 averaging 8.04B$ per report, 5.42B$/day.

PROJECTION:
There are 1,321 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.6T$.
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)
06/09/2009 11,391,459,255,428.95 BHO (UP 764,582,206,515.87 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: 1,366,734,358,516.50 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
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 ------------********
06/03/2009 -000,003,266,733.82 -----
06/04/2009 +011,755,789,483.75 ------------**********
06/05/2009 -000,226,149,345.97 ---
06/08/2009 +000,015,040,049.19 ------------******* Mon
06/09/2009 +000,025,670,087.48 ------------*******

127,999,803,013.60 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,726,827,452,169.88 in last 264 days.
That's 1,727B$ in 264 days.
More than any year ever, including last year, and it's 170% of that highest year ever only in 264 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 264 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=3915576&mesg_id=3915584

(Debt moves up .124B$. That's small once again. EDIT: Posted yesterday's again, here follows the correct one.)

= Held by the Public + Intragovernmental(FICA)
= 7,110,096,282,278.54 + 4,273,891,322,860.47
UP 124,232,779.18 + DOWN 7,595,883,069.12

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: $9.78, ABOUT TEN BUCKS for a 1B$ 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 306,623,942 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 $37,126.87.
A family of three owes $111,380.61. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 33 days.
The average for the last 21 reports is 5,966,371,889.61.
The average for the last 30 days would be 4,176,460,322.73.
The average for the last 33 days would be 3,796,782,111.57.
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$/day.
There were 96 reports in 141 days of Obama's part of FY2009 averaging -0.08B$ per report, -0.01B$/day so far.
There were 171 reports in 253 days of FY2009 averaging 7.95B$ per report, 5.37B$/day.

PROJECTION:
There are 1,320 days remaining in this Obama 1st term.
By that time the debt could be between 13.2 and 18.5T$.
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)
06/10/2009 11,383,987,605,139.01 BHO (UP 757,110,556,225.93 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: 1,359,262,708,226.60 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
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 ------------********
06/03/2009 -000,003,266,733.82 -----
06/04/2009 +011,755,789,483.75 ------------**********
06/05/2009 -000,226,149,345.97 ---
06/08/2009 +000,015,040,049.19 ------------******* Mon
06/09/2009 +000,025,670,087.48 ------------*******
06/10/2009 +000,124,232,779.18 ------------********

128,136,852,324.52 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,719,355,801,879.94 in last 265 days.
That's 1,719B$ in 265 days.
More than any year ever, including last year, and it's 169% of that highest year ever only in 265 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 265 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=3917341&mesg_id=3917361

June 11 (Bloomberg) -- U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year, RealtyTrac Inc. said.

A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said today in a statement. One in 398 U.S. households received a filing last month.

“The foreclosure bucket is filling faster than it’s emptying,” Jay Brinkmann, chief economist of the Washington- based Mortgage Bankers Association, said in an interview. “It will continue through next quarter at least.”

Job losses and falling property prices are delaying the housing recovery as more homeowners are unable to pay the mortgage or have difficulty selling or refinancing. The unemployment rate climbed to 9.4 percent in May, the highest since 1983, the Labor Department said last week. Prices in 20 U.S. cities dropped 18.7 percent in March, according to the S&P/Case-Shiller home-price index.

More home loans originated in 2005 or before are likely to default as unemployment climbs, said Rick Sharga, executive vice president for marketing at RealtyTrac.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aHEpXU3Pg_oU

6/11/09 May Foreclosure Activity Decreases By 6%, Up 18% Year Over Year
After hitting a record high in April, RealtyTrac has announced that the pace of foreclosures has slowed down, and in May dropped by 6%. Nonetheless, “May foreclosure activity was the third highest month on record, and marked the third straight month where the total number of properties with foreclosure filings exceeded 300,000 — a first in the history of our report,” said James J. Saccacio, chief executive officer of RealtyTrac. “While defaults and scheduled foreclosure auctions were both down from the previous month, bank repossessions, or REOs, were up 2 percent thanks largely to substantial increases in several states, including Michigan, Arizona, Washington, Nevada, Oregon and New York. We expect REO activity to spike in the coming months as foreclosure delays and moratoria implemented by various state laws come to an end.” Ah yes, the dreaded moratorium: interesting how long the Wells Fargo lobby will keep postponing the inevitable collapse.

May foreclosure rates presented below:




more...
http://zerohedge.blogspot.com/2009/06/may-foreclosure-activity-decreases-by-6.html

State Rankings




more...
http://zerohedge.blogspot.com/2009/06/may-foreclosure-activity-decreases-by-6.html

I am away for the rest of the day on a trip out of town.

I'll catch up with today's events this evening.

:hi:

see you later :hi:

I'm thinking we should issue smelling salts to all visitors to this thread. Even after months of exposure, I'm feeling a little faint every time I stop in.

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

Last trade 80.092 Change -0.237 (-0.30%)

Dollar Weighed As Diversification Warnings Eclipse Growth Forecasts

http://www.dailyfx.com/story/bio1/Dollar_Weighed_As_Diversification_Warnings_1244677969972.html



The Economy and the Credit Market



Will the world diversify out of the US dollar and the liquid assets that it backs? Is it feasible? More importantly, is it advisable considering the still-fragile state of the global financial markets? These are the concerns market participants have developed for the American currency over the past week. While it is not at all unusual to hear officials from developing nations comment on the need for a supranational currency to unbind themselves from the risk of the US dollar; there has been little action to suggest that this effort would begin anytime soon. Recently however, Russian central bankers have announced their intentions to reduce their holdings of treasuries to potentially fund their plans to purchase $10 billion in bonds from the IMF. This same plan has been echoed by Brazil and China. This effort may originate from a desire to reduce exposure; but with the global financial crisis and recession ongoing, it may be an effort that creates more problems. And, not to reduce the complexities of the dollar too much, fundamental traders must still account for the government’s policy efforts and exit strategy, risk appetite, and very early signs of an economic recovery.

...more...

Pound Rises On Higher Inflation Expectations, Commodity Dollars Soaring On Increased Chinese Investment

http://www.dailyfx.com/story/topheadline/Pound_Rises_On_Higher_Inflation_1244714740581.html

The sterling continued to find support overnight reaching as high as 1.6490 after a BoE survey showed that consumer expectations for inflation rose to 2.4% from 2.1% for the next 12 months. Additionally, the NIESR GDP estimate showed that the rate of contraction for the economy has slowed in the three months ending in May to -0.9% from -1.5% in the period ending in April. The stabilizing economy and rising commodity prices have fueled expectations for rising costs and ultimately higher interest rates from the central bank.

The major central banks expressed when they embarked on their monetary easing policies, that the risk of future inflation would leave them ready to reverse their actions and look to remove liquidity from the markets. Policy makers are concerned that the risks of future bubbles exist, if they don’t manage the process in a timely manner. Therefore, we are starting to see interest rate expectations rise in the U.S. and U.K. as evidence mounts that growth is around the corner. Therefore, rhetoric from policy makers will start to have a greater impact on price action and bears watching as we go forward. Yet, we don’t expect any change in policy until we start to see concrete signs of growth which may not come until early 2010. It appears that we may see a test of the 6/3 high of 1.6665 for the GBP/USD today with potential to 1.7000 beyond that price level.

The Euro has remained choppy through overnight trading and the ECB’s monthly bulletin didn’t help generate any conviction for either direction. The Central Bank said the Euro-zone economy will start growing again by the middle of next year and inflation will pick up after temporarily dipping into negative territory this summer, which was nothing that they haven’t already stated. Meanwhile, French non-farm payrolls showed further deterioration in the labor market as its initial reading for the first quarter was revised lower to -1.2% from -0.9%. The weak labor data only supports the arguments that growth will not return to the area until next year. Forex traders should watch the head and shoulders formation that is becoming evident which could signal that euro weakness is ahead. If we see a move below the 20-Day SMA at 1.3952, then a bearish bias may be warranted.

Commodity dollars continue to generate support with the “kiwi” and Australian dollars the leaders on the day. A RBNZ rate hold and Australian employment figures reporting a loss of 1,700 jobs versus expectations of -30,000 has helped raise the outlook for the individual economies. However, it was evidence that Chinese capital investment is surging as the country’s 4 trillion Yuan stimulus plan start to impact its domestic economy that has raised the outlook for the global economy and demand for natural resources.

The dollar has given back its recent gains against most the major currencies as improving fundamentals across the globe has spurred hope that the broader economy has stabilized. The upcoming advance U.S. retail sales report is expected to keep the theme going as consumption is forecasted to rise by 0.5% in May. The U.S. consumer confidence indicator jumped the most in six years to 54.9 from 40.8 last month as rising equity markets and stabilizing house prices have eased fears which should support an increase in demand. Markets will be looking to see what the reaction will be from the greenback on the positive fundamental data. Will we see a bullish reaction similar to the Non-farm payroll report or will it send the dollar lower as it increases risk appetite. Additionally, initial jobless claims are forecasted to fall to 615,000 from 621,000 but a sharper drop would reinforce the U.S. labor report and could add to rising optimism. An auction of 30 year U.S. treasury bonds may add support for the dollar today and should be factored into strategies for today. Concerns are rising that increasing yields could start to derail the potential recovery.

...more...

Wednesday, June 10, 2009
A common sense guide to investing
Posted by Cornelius at 10:05 PM

Apologies for the lack of posting but I've been back home, on vacation the past couple of weeks. As you can imagine in this economy, being a "finance" guy in a group of "non-finance" people typically elicits a number of questions, but one that surprisingly came up over and over again was "What do I do?" (i.e. how should I invest). The buy-and-hold model has ruined many people and individual investors seem completely lost now that the standard go-to plan has clearly failed to meet the most basic of objectives: capital preservation in times of need. Demographically, this is an unmitigated disaster as baby boomers are going to start retiring in a few years en masse and the long-term assumptions built into their carefully crafted investment plans have been torn down by massive drawdowns in their IRA NAVs. This post is meant be an introductory answer to the "Now what do I do" question that many retail investors are asking. As members of the financial community, I'm sure many of us have faced this question in various forms from friends and family so if you can think of anyone who could use an answer to this question, forward them to this post and hopefully this will provide a solid framework that individual investors can use and tailor to their own needs. As always, feedback is welcome.


*************************************************************************************
INTRO

If you are reading this, you are probably asking yourself what to do with your IRA/529s/investment accounts in various forms. The financial planning industry has grown massively and in direct correlation with the massive influx of retail investors into the equity market and this army of CFPs has spread the gospel for years: "invest in stocks and bonds 60/40, equities will return 9% in the long-term, don't try to time the market" etc. However the past year has demolished most of these notions and even the few individual investors who did well, seem adrift and shaken in their investment beliefs. The purpose of this post is not to answer why the old paradigm failed but instead to guide you going forward.

Many of these ideas are not particularly new or innovative (though there are some twists in here that we haven't seen anywhere else) but we hope this provides you with two things; 1) an easily digestable and common sense approach to new financial concepts that will improve your portfolio and 2) an imperative to become more financially educated. I designed this to be helpful to a reasonably wide range of individual investors - from completely passive investors who park their money in Treasuries every year to relatively sophisticated individuals, who may do their own equity research and be comfortable with basic finance.

THE GOAL: WHAT TO LOOK FOR IN A PORTFOLIO
1) Limit significant drawdowns
more at link

2) Ensure an appropriate level of volatility for the time horizon
more at link

3) Provide a rate of return sufficient to meet your goal
more at link

THE APPROACH: WHAT'S THE BEST WAY TO ACHIEVE YOUR GOAL
Diversification
more at link

Leverage
more at link

Tying it all together
more at link

THE ACTION PLAN: HOW YOU CAN DO THIS
more at link


more...
http://zerohedge.blogspot.com/2009/06/common-sense-guide-to-investing.html


Edit: Read the comments, most are not favorable.

Cornelius responds...
This isn't meant to be a definitive guide - it's more of an introduction to financial concepts that an individual investor can then do more research on. There are entire books written on this topic - to presume that we can cover it in a blog post is a little extreme.
As we stated, the goals are to "provide you with two things; 1) an easily digestable and common sense approach to new financial concepts that will improve your portfolio and 2) an imperative to become more financially educated. "
Either you feel that I did not explain a concept adequately or I was not sufficiently persuasive in convincing you to become more financially educated.

http://www.ft.com/cms/s/0/69023f08-55e5-11de-ab7e-00144feabdc0.html

Citigroup on Wednesday introduced a “poison pill” that discourages investors from buying more than 5 per cent of its shares and deters large shareholders from raising their stakes in an effort to protect a $43bn tax benefit.

Citi’s surprise move came as the company launched its long-awaited $58bn conversion of preferred shares into common stock which will leave the US government with a 34 per cent stake and help the bank bolster its battered balance sheet.

Citi’s executives argued that the rare provision was not a classic “poison pill” designed to thwart takeover attempts because it would not be triggered if the bank received a bid.

However, corporate lawyers said the measure, which will last three years, would have the effect of preventing investors and hedge funds from building up a large stake in Citi as well as deterring existing shareholders from increasing their holdings.

The creation of the poison pill is another sign of the internal changes forced upon Citi by its need to raise billions of dollars of capital from the government and other investors to offset the huge losses suffered during the credit crisis.

Under the new provision, if an investor buys a stake of more than 5 per cent in Citi, or if an existing shareholder with more than 5 per cent increases its holding by more than 50 per cent, all other investors will in effect be able to buy one share for every share held at a 50 per cent discount to the market price.

That would significantly increase Citi’s share count, diluting the value of its shares.

Citi executives said they had had to introduce the measure because the conversion threatened Citi’s ability to benefit from a $43bn tax benefit by increasing the number of shareholders with more than a 5 per cent stake.

US tax rules constrain companies’ ability to use tax losses on their balance sheet when more than 50 per cent of their shares are held by investors with stakes of more than 5 per cent.

If Citi loses its right to use some of the tax benefits it has accumulated over the years, it will have to raise a corresponding amount of capital from elsewhere, putting a further strain on its finances.

The poison pill, which Citi called a “tax benefits preservation plan”, will not apply to the US government. The authorities will become Citi’s largest shareholder after the conversion of about $25bn of preferred stock that they received in their multiple bail-outs of the company.

Citi will also convert $33bn in preferred shares held by non-government investors, including several sovereign wealth funds. Citi will issue about 17bn new shares in the conversion, diluting existing shareholders by more than 70 per cent.

The group said it was considering a reverse stock split to reduce its total number of shares.


GAAAAH! (RUNS SCREAMING FOR THE EXITS)

http://www.ft.com/cms/s/0/0ca5f026-55cf-11de-ab7e-00144feabdc0.html

....Fiat’s share price rose by 6 per cent in afternoon trading on Wednesday.

http://www.ft.com/cms/s/0/8e914154-560f-11de-ab7e-00144feabdc0.html

US car parts makers appealed to the Obama administration on Wednesday for at least another $8bn-$10bn in aid to stave off widespread bankruptcies.

“The industry remains on the verge of collapse”, said Bob McKenna, president of the Motor & Equipment Manufacturers Association.

Mr McKenna cited a continued credit squeeze, a severe decline in vehicle production and extended shutdowns of General Motors and Chrysler plants.

The association estimates that the sector employs 686,000 people in the US, and is the largest manufacturing employer in eight states.

Parts makers met members of the Obama administration’s auto task-force on Wednesday....The new money would be in addition to a $5bn factoring programme put in place in March, under which suppliers can sell their receivables to the government at a modest discount.

The association estimates that government aid to the motor industry so far totals about $115bn (€82bn, £70bn), more than half of which consists of emergency loans to GM and Chrysler....Four big suppliers – Visteon, Hayes Lemmerz, Metaldyne and Mark IV Industries – have sought bankruptcy protection in the past six weeks.

Lear, a seats manufacturer, missed a $38m interest payment earlier this month.

Almost a quarter of 81 respondents to a recent industry survey said they were no longer in compliance with their financial covenants...

Sold off to a rinky-dink foreign car maker at pennies (if that much) on the Dollar of what the assets of Chrysler are really worth.

"Chrysler Corporation was awarded the prime production contract and began missile and support equipment production in 1952 at the newly-renamed Michigan Ordnance Missile Plant in Warren, Michigan."

http://en.wikipedia.org/wiki/Redstone_(rocket)

Well, at least now I suppose I can say I drive a sexy Eye-talian car.

(Disclaimer: This is my opinion... and I'm entitled to it. You aren't going to change my mind. So, save your arguments for some other day.)

After all, look what Ford did to Volvo.

http://www.ft.com/cms/s/0/3fb98672-5614-11de-ab7e-00144feabdc0.html

Ken Lewis, chief executive of Bank of America, used the threat of invoking a “material adverse change” clause to break off his agreement to buy Merrill Lynch last December because he wanted to negotiate a lower price, Federal Reserve chairman Ben Bernanke claimed in an e-mail.

Mr Lewis, who is scheduled to testify about the matter on Thursday at a congressional hearing, only dropped his threat after being told by former US Treasury secretary Hank Paulson that regulators, including Mr Bernanke, would remove him and his board if BofA tried to invoke the “MAC” clause.

The House committee on oversight and government reform has been investigating whether federal regulators put undue pressure on Mr Lewis to complete an agreed deal last year to buy Merrill Lynch.

After the Fed initially refused to comply with the committee’s request for documents and e-mails in the matter, the committee took the extraordinary step of issuing a subpoena on Tuesday to obtain material from the Fed that concerned the deal.

One person familiar with the Fed’s history could remember only one previous occasion when it had been served with a subpoena.

The Financial Times has learned that Mr Bernanke, in an e-mail, described Mr Lewis’s threat to invoke the “MAC” clause as a “bargaining chip”, and a “foolish move”, before concluding that “the regulators will not condone it”.

A staffer at the Federal Reserve bank in Richmond, Virginia, said in an e-mail that top executives at BofA, including the bank’s chief financial officer, Joe Price, “want the transaction to go through but have to protect their shareholders”.

Since January, when BofA revealed that it only completed the Merrill transaction following a promise of $20bn in taxpayer support from Mr Paulson, BofA shareholders have complained that Mr Lewis kept them in the dark about mounting losses at Merrill.

Several have filed suit, and the Securities and Exchange Commission, as well as the government watchdog responsible for tracking funds paid out of the troubled asset relief programme (Tarp), are also investigating the matter.

In January, following the disclosure that Merrill had payed $3.6bn in bonuses in late December, a month ahead of schedule and days before BofA completed is purchase of the firm, the New York state attorney-general, Andrew Cuomo, began an investigation.

While conducting his probe into the bonuses paid out at Merrill Lynch, Mr Cuomo has investigated the interactions between Mr Lewis and his federal overseers. Mr Cuomo published his findings in a letter to Congress in April.

http://www.ft.com/cms/s/0/1797146c-5604-11de-ab7e-00144feabdc0.html

By Alan Rappeport and Francesco Guerrera in New York


General Electric, the US industrial group, will announce a $500m deal on Thursday to supply new gas and steam turbines to the Kingdom of Bahrain as the company continues to push for a greater presence in the Middle East to counteract troubles in its domestic market.

Through the deal GE will supply advanced power equipment and services to Al Dur, Bahrain’s largest power plant, which will generate 30 per cent of the country’s electricity when completed. The move is GE’s latest effort to embrace faster-growing emerging markets while it struggles domestically and works to shrink its finance arm, GE Capital.

Demand for power in Bahrain is growing at a rate of 7-10 per cent a year and the country is planning a massive expansion in its capacity during the next 20 years. The Al Dur project is expected to provide 1,250 megawatts of power and 48m gallons of clean water per day.

”It is critical for us to have access to proven technology and world-class services that are customised for our specific needs,” said Fahmi Bin Ali Aljowder, who heads Bahrain’s electricity and water authority.

GE has signed more than $6bn worth of contracts in the Middle East during the last year, which the New York-based company notes is supporting domestic manufacturing jobs and boosting its wind business which is lacking a strong market in the US.

In 2008 GE signed a $3bn contract with Iraq for 56 turbines for a project that was to double the country’s capacity to generate electricity. The company has more than 1,000 of its turbines operating throughout the Middle East.

The new Bahrain contract promises services to the country for the next 20 years. GE is providing two steam turbines and four gas turbines. Steve Bolze, head of GE Energy’s power and water business said the project “demonstrates our commitment to deliver advanced technology solutions and services to support the Kingdom’s growing power and water needs”.

GE recently signalled that it planned greater involvement in the Middle East with its $8bn commercial finance joint venture with Mubadala Development, Abu Dhabi’s state investment vehicle. The move was intended to help GE expand its dealmaking reach and to capitalise on its underwriting and risk management expertise without expanding GE Capital’s balance sheet.

In March, GE reassured its shareholders that its finance arm was still “open for business” and that it would invest $4bn in energy projects this year. Earlier in the year GE slashed its dividend for the first time since 1938 and lost its triple A rating from Standard & Poor’s.

http://www.ft.com/cms/s/0/44ea6a1c-5605-11de-ab7e-00144feabdc0.html

By Andrew England in Abu Dhabi, Simeon Kerr in Dubai, and Neil Hume and Patrick Jenkins in London

Western banks have begun to close down credit lines to Maan al-Sanea and his investment entity, Saad Group.

People familiar with Mr Sanea’s investment business said that some of the several dozen international banks that had lending relationships with the Kuwaiti-born former fighter pilot had started liquidating shareholdings.

The moves came after news of an edict from the United Arab Emirates central bank, restricting lenders’ business with Saad or related companies, including Ahmad Hamad Algosaibi & Brothers. One banker who had seen the memo said the central bank had instructed local banks not to grant new facilities to the Saudi groups until further notice.

Apparently taking their cue from that directive, Citigroup on Wednesday placed 30m shares, or a 4 per cent stake, in 3i Infrastructure, owned by Mr Sanea at 85p, according to traders. The previous day, the bank placed 16.1m shares in Berkeley at 701p, the homebuilder. Credit Suisse placed another 4.4m Berkeley shares at 715p, according to Bloomberg. This week, Saad Group sold half its stake in Berkeley.

Saad’s only comment was: “We are continuing to make progress with the restructuring plan announced last week and will update you further in due course.”

It has emerged that the Saudi central bank had frozen the personal accounts of Mr Sanea, who is also a major shareholder in HSBC. The action was taken shortly after the International Banking Corporation (TIBC), a wholly-owned entity of Ahmad Hamad Algosaibi & Brothers, had defaulted.

Saad Group has since appointed Lawrence Graham LLP and BDO Corporate Finance as advisers as it seeks to restructure its debt.

Algosaibi has not made public comments, but it is understood that TIBC defaulted because its parent was carrying out a group-wide debt restructuring.

In a second circular, the United Arab Emirates’ central bank has told banks they may offset any credit facilities with two troubled Saudi groups against deposits held by the companies, bankers said on Wednesday.

The action relates to Saad Trading & Contracting Co. and its owner, Mr Sanea, as well as Algosaibi Trading Services and Ahmad Hamad Algosaibi & Brothers, two bankers who have seen the circulars said.

A circular said that banks could offset their exposure against available assets held by the groups, subject to legal requirements, according to one of the bankers who has seen the document.

The rare move is a sign of concerns about the potential ramifications for the region’s financial sector.

Another senior banker said the UAE’s central bank planned to meet with bankers on Thursday to gauge the extent of the exposure of banks based in the Gulf’s main business hub have to the groups.

The Algosaibi group was one of the Gulf’s most respected family companies and able to borrow almost on reputation alone. Saad Group, which had been rated by both Moody’s and Standard and Poor’s, has interest across the region and internationally, with a high exposure to property and the financial sector. It had assets of $30.6bn by the end of 2008.

“The Saad Group understands that the Central Bank of the UAE has reminded its banks of their obligations to abide by the terms of their documented rights and liabilities with regard to the Saad Group,” Saad Group said in a statement e-mailed to the Financial Times. “The group appreciates such reminders as they assist the process of responsible banking, which is a characteristic of the UAE.”

http://www.ft.com/cms/s/0/3f42d83c-55ed-11de-ab7e-00144feabdc0.html

By Kenneth Li in New York

The New York Times Co has quietly begun presentations to potential buyers of The Boston Globe in recent weeks, but efforts to dispose of the loss-making newspaper have been complicated by a rejection of a package of wage and benefit cuts by the title’s largest labour union this week.

Goldman Sachs, long-time bankers for The New York Times, solicited interest in a possible sale of the Globe and related properties from a handful of parties including Mortimer Zuckerman, a real estate magnate and publisher of the New York Daily News, according to two people who have seen a copy of the presentation.

It is not known if any parties were interested and several bankers expressed doubts that a qualified buyer would be found.

The presentations in Boston and New York to potential buyers indicated that the Globe, its website and other properties in the New England Media Group, which includes the Worcester Telegram & Gazette, are up for sale.

Goldman was expected to court initial interest by the beginning of June, after the Globe’s largest union, the Boston Newspaper Guild, completed its vote.

But the guild’s rejection of a package of wage and benefits cuts, which triggered the Times management’s plan to force a 23 per cent salary cut across the board by next week, now complicates a sale, one person said.

Goldman was prepared to begin accepting offers regardless of how the union membership would vote, according to a report on The Boston Globe’s website.

The guild said it would “oppose the company’s drastic and extreme move to implement a 23 per cent wage cut through any legal means necessary”.

The New York Times Co aimed to cut $10m in costs from the Boston Newspaper Guild membership and another $10m from other unions.

Union leaders filed a complaint with the National Labor Relations Board on Tuesday evening while also appealing to The New York Times to engage in third party mediation talks before heading into a federal court battle that could snarl recovery efforts for months or years.

A meeting with Times management is scheduled for Monday and a hearing in front of the Labor Relations Board is slated for Tuesday, union leaders said.

The Times declined to comment, citing a long-standing policy of not commenting on speculation of potential deals.

Goldman Sachs and Mr Zuckerman did not have immediate comment.

The publisher hired Goldman to shop its 17.75 per cent stake in the Boston Red Sox baseball team and its stake in a related cable network in January.

The Guild appealed directly to any potential bidders to discuss its contracts and an option for its members to own equity in the paper.

http://www.ft.com/cms/s/0/c8ffffee-55cc-11de-ab7e-00144feabdc0.html

By Tom Braithwaite in Washington

Published: June 10 2009 16:06 | Last updated: June 11 2009 00:04

The salaries of the top 100 employees at seven US companies with government bail-out funds will be vetted by a “special master” named by the Obama administration on Wednesday as part of a raft of executive compensation reforms.

The administration is also expected to bring in “say on pay” legislation that would force public companies to hold non-binding shareholder votes on executive pay every year.

Kenneth Feinberg, the former head of the 9/11 compensation fund, was named as the “special master” empowered to reject the pay plans of companies getting “exceptional assistance” from the government, officials said on Wednesday.

The seven companies receiving the most government support and eligible for supervision by Mr Feinberg are AIG, Citigroup, Bank of America, General Motors, Gmac, Chrysler and Chrysler Financial.

Unveiling the moves on Wednesday, US Treasury secretary Tim Geithner said it was clear that executive pay practices were a “contributing factor” to the financial crisis. “Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excess leverage,” he said

The move to vet salaries is tougher than that proposed by Chris Dodd, the Democratic chairman of the Senate banking committee, who had suggested it should only apply to the salaries of the top 25 staff at companies receiving money under the government’s troubled assets relief programme.

However, the administration appears to have backed away from plans for a salary cap, which President Barack Obama had previously sought to limit to $500,000.

The proposals come just a day after 10 banks were permitted to pay back $68bn of Tarp money, paving the way for them to be freed from other restrictions. To leave the bail-out scheme, the banks, including JPMorgan and Goldman Sachs, will have to repay the funds and reach an agreement on how to price warrants that the Treasury holds over their common stock.

While the 100 most senior employees at these banks will escape the more onerous aspects of the administration’s moves, all companies face tougher scrutiny of their executive compensation plans under the new measures.

Companies will be required by legislation to have an independent compensation committee, an administration official said on Wednesday. The Securities and Exchange Commission will get new legal powers to “strengthen the independence of compensation committees in the way that Congress previously strengthened the independence of audit committees”.

The SEC had previously feared losing power in the regulatory shake-up now underway in the wake of the financial crisis and the new authority will be seen as a vote of confidence in Mary Schapiro, chairman of the financial watchdog.

The House financial services committee, chaired by Democrat representative Barney Frank, will examine executive compensation on Thursday, and is expected to hear evidence from Gene Sperling, a senior Treasury official, Scott Alvarez, general counsel at the Federal Reserve and Brian Breheny, a senior official from the SEC.

“We have a ‘heads I win, tails I break even’ compensation system in the financial services industry in America,” said Mr Frank. “Executives have a perverse incentive to expose their companies to more and more risk, but only the shareholders realise the downside of bad bets.”

The proposals will face opposition from business groups, who are expected to lobby Congress for modifications. Plans for more shareholder oversight of executive compensation have been attacked by the US Chamber of Commerce, which argues there is no need for more federal rules and individual states should be free to apply their own corporate codes.

HENCE THE RUSH FOR THE TARP EXITS.....

http://www.ft.com/cms/s/0/a837644a-54ec-11de-b953-00144feabdc0.html

By Tom Braithwaite in Washington and Francesco Guerrera in New York

Published: June 9 2009 14:51 | Last updated: June 10 2009 01:39

Ten financial groups including JPMorgan Chase and Goldman Sachs were on Tuesday allowed to repay a combined $68bn to the US Treasury in a move that marks a turning point in the economic crisis but formalises the divide between healthy and fragile banks.

The companies, which also include Morgan Stanley and American Express, can now shed the restrictions on pay and hiring that came with the troubled asset relief programme launched last year at the height of the turmoil in global markets....The first batch of Tarp repayers includes eight banks that last month were found not to need additional capital after government stress tests. Others allowed to return the funds included Morgan Stanley, which was instructed to raise capital, and Northern Trust, a bank catering to wealthy individuals that was not among the 19 institutions subjected to stress tests...

http://www.ft.com/cms/s/0/6b078a2a-559e-11de-ab7e-00144feabdc0.html

WHAT SAY YOU, OUR READERS OVERSEAS?

http://www.ft.com/cms/s/0/7754f22a-551e-11de-b5d4-00144feabdc0.html

By Bernard Simon in Toronto



General Motors said on Tuesday that Edward Whitacre, a former chairman and chief executive of AT&T, the telecoms group, would become the carmaker’s chairman on completion of its court-supervised restructuring.

GM, which filed for bankruptcy protection on June 1, also announced that six of its 12 board members would step down once the new company is launched, probably in July or August.

Those departing include George Fisher, who was the board’s lead director during the turbulence that led to GM’s Chapter 11 filing.

Mr Whitacre, 67, will replace Kent Kresa, a former chairman of Northrop Grumman, the aerospace group, who has held the chairman’s job since Rick Wagoner was ousted as chairman and chief executive in late March. Mr Kresa, 71, will remain as a director until he retires next year.

The new board will have 13 members: Mr Whitacre, six existing board members, four to be chosen by the Obama administration’s auto industry task force, and one each nominated by the Canadian government and a United Auto Workers healthcare trust.

Fritz Henderson, Mr Wagoner’s successor as CEO, will remain on the board.

As chairman of AT&T and its predecessor companies from 1990 to 2007, Mr Whitacre oversaw a series of mergers and acquisitions that created America’s largest provider of local, long-distance and wireless services. He is also a director of ExxonMobil and Burlington Northern Santa Fe, one of the US’s biggest railway operators.

Mr Kresa said in an interview that during his time at AT&T Mr Whitacre had done “a great job weaving his way through morass and coming forward with a very, very strong company”.

Under the restructuring plan, the US government will own just over 60 per cent of the “new” GM, with Canada holding 12 per cent, the UAW 17.5 per cent and unsecured bondholders 10 per cent. The bondholders will also receive warrants to raise their stake to 25 per cent at a later stage.

As the principal owner, the US government has a veto on most of the board appointments. Mr Kresa has worked closely with Steve Rattner, de facto head of the auto industry task force. Mr Kresa said that GM could become a public company again within six months to a year of the new company’s creation.

The New York bankruptcy court overseeing the restructuring is due to consider the sale of most of the carmaker’s assets and some of its liabilities to the new entity on June 30. Objections are due by June 19.

Her "philosophy" seems designed for psychopaths. Her concept of the "ideal man" is absolutely a psychopath.

According to Wickedpedia: "It is estimated that approximately one percent of the general population are psychopaths." 300 million Americans times 1% = 3 million. Sometimes I wonder what occupations would fit those 3 million psychopaths, besides serial killer and corporate executive. I joke. But not really. A lot of corporate execs display a number of the characteristic symptoms: Grandiose sense of self-worth, Superficial charm, Pathological narcissism, Pathological lying, Deceitfulness/manipulativeness, Lack of empathy, Lack of remorse, indifferent to or rationalizes having hurt or mistreated others, A sense of extreme entitlement, Inability to distinguish right from wrong. I don't know about their bedwetting or cruelty to animals, but they definitely enjoy starting fires, at least of the metaphorical economic variety.

And that was eye-opening. It explained a lot.

http://www.ft.com/cms/s/0/6b9600a2-5454-11de-a58d-00144feabdc0.html

By Edward Luce in Washington and Daniel Pimlott in London

President Barack Obama stepped up the pace of Washington’s stimulus spending on Monday with plans to create or save 600,000 jobs over the next hundred days – four times the rate achieved in the $787bn package’s first 100 days.

The announcement, which followed last week’s news that 345,000 US jobs had been lost in May, a significant deceleration from earlier months, coincided with a forecast on Monday that the major industrialised economies, including the US, could soon emerge from recession.

The report from the Paris-based Organisation for Economic Co-operation and Development pointed to a possible recovery by the end of the year. Consensus forecasts in the US point to a bottoming out by the third quarter.

“It is still too early to assess whether it is a temporary or a more durable turning point,” said the OECD. But the data “point to a reduced pace of deterioration in most of the OECD economies with stronger signals of a possible trough in Canada, France, Italy and the United Kingdom”.

Mr Obama, who is under growing political pressure to show that his spending plans are well directed, on Monday pointed out that the number of jobs lost last month, although “still too many”, was the lowest total since September.

“We are moving in the right direction,” said Mr Obama, after unveiling 10 stimulus spending plans for the next 100 days. “The key is for us to build on the modest progress that has been made, in the months to come,” he said.

DISCUSSION OF WHY THEY THINK SO FOLLOWS...

http://www.ft.com/cms/s/0/98cad7ae-545a-11de-a58d-00144feabdc0.html

By Ed Crooks


The head of BP’s alternative energy division is to retire at the end of the month as the company sharply scales back its rate of investment in the business.

Vivienne Cox, 49, chief executive of alternative energy, is BP’s most senior female executive. She previously ran the larger gas, power and renewables segment, which was broken up in a restructuring launched by Tony Hayward, the company’s chief executive who took over two years ago.

She will be replaced by Katrina Landis, who has in effect been her deputy as chief operating officer in the alternatives division, which includes biofuels, wind farms, manufacturing solar modules, and power stations that capture and store their carbon dioxide emissions.

BP has been criticised by environmentalists for failing to live up to the promise of its “beyond petroleum” slogan, introduced in 2000 under Lord Browne, the previous chief executive, and retained by Mr Hayward.

The company insists it has not weakened in its commitment to building up alternative energy. In 2005, it set out a plan to invest $8bn in alternatives by 2015, and so far has been running ahead of schedule.

But the rate of investment, which was rising fast in 2007-08, is now being scaled back. Capital spending on alternatives was $1.4bn last year and is expected to be just $500m-$1bn this year. BP has also been cutting costs, especially in its solar business.

A plan to bring in outside investors for the business has been shelved indefinitely, although BP has not abandoned the idea in principle.

BP announced the retirement internally. The news was uncovered by Women-omics.com, a website covering women and employment. Ms Cox spent 28 years with the company and has been working flexibly to have more time with her family.

In a newspaper interview in 2006, she said of the competing demands of work and her children, then aged seven and two: “If that gets out of balance and I don’t have enough time to spend with my kids then I just get so completely ineffective.”

Her decision follows the recent departure of Linda Cook, the most senior female executive at Royal Dutch Shell.

Avivah Wittenberg-Cox, a consultant and publisher of Women-omics.com, said the “female brain drain” at BP and Shell “threatens to deter women from entering the oil and gas sector”.

http://www.ft.com/cms/s/0/c0ab3768-547e-11de-a58d-00144feabdc0.html

By Harvey Morris in New York

Published: June 8 2009 23:56 | Last updated: June 9 2009 00:26

Royal Dutch Shell and the families of Ken Saro-Wiwa, an executed Nigerian opposition leader, and other activists hanged by the military government in 1995, on Monday agreed a $15.5m settlement in a New York court case stemming from allegations the oil group was complicit in the executions.

The settlement, in which Shell and its Nigerian subsidiary denied any liability, ended a 13-year campaign by relations and supporters of Saro-Wiwa to hold the company accountable.

A spokesman for the plaintiffs said $5m of the settlement to be paid by Shell would be put into a trust fund to promote education and welfare in the Ogoniland region of the Niger delta. The balance would be shared among 10 plaintiffs after legal costs were met.

Saro-Wiwa and eight other activists were hanged after leading a campaign against Shell’s activities in the region and the then military-led government.

Shell, which said the civil case before a federal court in New York was without merit, always insisted it had no role in the execution and had appealed for clemency after the death sentences were handed down by a military tribunal.

Oil production stopped in Ogoniland in 1993 when Shell ceased operations amid mass protests led by Saro-Wiwa against the environmental damage alleged to have been inflicted by the company’s operations.

The plaintiffs had alleged that at the request of Shell, and with its assistance and financing, Nigerian soldiers used deadly force and massive, brutal raids against the Ogoni people throughout the early 1990s to repress a movement against the oil company.

The plaintiffs’ spokesman described Monday’s outcome as a fair settlement that spared the families of Saro-Wiwa and his fellow activists up to four more years of litigation if the case had gone to trial.

The case was brought under the Alien Tort Statute, a 1789 law that gives non-US citizens the right to file suits in US courts for international human rights violations. The case had been due to go ahead after Shell failed to have the charges dismissed.

Commenting on the establishment of the $5m trust fund, Ken Saro-Wiwa Jr, son of the late activist, said: “In reaching this settlement, we were very much aware that we are not the only Ogonis who have suffered in our struggle with Shell.”

"Have we moved to positive numbers, yet since Dec. 31st 2008?"

Here are the 12/31/2008 numbers:
DJIA: 8,776
S&P 500: 903
Nasdaq: 1,577
NYSE composite: 5,757

Here are the 06/10/2009 numbers:
DJIA: 8,739 (-0.4%)
S&P 500: 939 (+4.0%)
Nasdaq: 1,853 (+17.5%)
NYSE composite: 6,098 (+5.9%)

So, Question Everything, your answer is, "Yes," with the Dow Jones Industrial Average the only exception. As economic indicators, these indexes leave something to be desired. The range, -0.4% to +17.5% is a variance of 17.9%. That would give you a plus or minus of nearly 9%. Not exactly high precision.

Any day now I expect the Republicans to start crowing about how "George Bush's TARP plan worked!"

GM and Citicorp have been dropped, others have been added. Not a good comparison.

NEW YORK, June 11 (Reuters) - Global stocks rose and oil prices rallied to over $73 a barrel on Thursday after upbeat news and data from around the world pointed toward an economic recovery.

Copper, zinc, lead, tin and nickel all jumped to their highest levels since last October on growing optimism about industrial consumption, while the euro broke above $1.41 and demand waned for the U.S. dollar as a safe-haven.

U.S. retail sales rose for the first time in three months in May and the number of American workers filing new claims for jobless benefits last week hit the lowest level since January. For details

The data bolstered the argument that the severe U.S. recession was close to bottoming, while surging Chinese investment in May fueled hopes of a global recovery.

Bank-to-bank dollar funding costs eased again, with the three-month rate retesting a record low as market speculation of a U.S. interest rate hike by year-end was seen as overdone.

"The big picture as we see it is that there's fairly convincing evidence now that the recession is ending. The data is basically unanimous on that point," said Zach Pandl, an economist at Nomura Securities in New York. "But there is still a lot of concern about what the economy is going to look like on the other side of the recession."

Predicting when economies will recover and by how much remains difficult because of the severity of the slump. World Bank President Robert Zoellick said the global economy is set to contract by close to 3 percent this year, worse than a previous estimate of a 1.75 percent decline.

European equities posted their highest close in five months, propelled by banking stocks. The FTSEurofirst 300 .FTEU3 index of top European shares ended 0.89 percent higher at 887.78 points.

In the United States the Dow was poised to end the session at break-even for the year, as it staged a further comeback after hitting a decade-low in March that had seen the bluechip index fall 25 percent since the start of the year.

/... http://www.reuters.com/article/marketsNews/idINN1136961920090611?rpc=44&sp=true

WASHINGTON, June 11 (Reuters) - The global economy will contract in 2009 much more sharply than thought three months ago, underscoring the need to mobilize resources to help poor nations, World Bank President Robert Zoellick said on Thursday.

Speaking before a weekend meeting in Italy of finance ministers from the Group of Eight major industrial nations, Zoellick said indications were that the world economy would shrink by nearly 3 percent, worse than the previous estimate of 1.75 percent made in March.

Zoellick's remarks came as a G8 source told Reuters that the International Monetary Fund had raised its 2010 global growth estimate to 2.4 percent from 1.9 percent and confirmed its 2009 forecast for a 1.3 percent contraction made in April.

The IMF will publicly release new projections on July 7.

"I personally believe you might be able to see some aspects of recovery in 2009 and 2010, but from a policy point of view, that isn't the core question because we have a large degree of uncertainty," Zoellick told reporters.

He said while developed economies have previously recovered rapidly from downturns, there were concerns that the process this time around would be slow because of very low capacity utilization and questions about sources of demand.

/... http://www.reuters.com/article/marketsNews/idINN1149832720090611?rpc=44&sp=true

PARIS/LONDON (Reuters) - Luxury goods groups need to brace themselves for at least two more years of pain, with big-ticket items such as cars and watches suffering most, even if some U.S. brands and retailers are seeing signs of recovery.

Luxury goods executives told the Reuters Global Luxury Summit this week they were doing their best to preserve cash and cut costs, delaying store openings and cutting advertising.

It will probably take longer than first thought to reverse negative trends as consumers feel uncomfortable spending $40,000 on a Chopard watch or $400,000 on a Lamborghini while thousands are losing their jobs and the economic future remains uncertain.

"I think the crisis is very deep," said Lamborghini Chief Executive Stephan Winkelmann, adding the sports car maker had cut production by 30 percent this year. "A lot of companies are going out of business," he said.

Global luxury goods sales are set to drop by at least 10 percent this year and remain sluggish in 2010, industry experts and analysts predict. Consultants Bain & Co do not see a full recovery before 2012.

"In my opinion, turbulence will last long, maybe two years," Hermes (HRMS.PA) Chief Executive Patrick Thomas said.

/... http://www.reuters.com/article/wtUSInvestingNews/idUSTRE55A1W020090611