STOCK MARKET WATCH, Wednesday 21 April

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

Last trade 91.15 Change +0.66 (+0.73%)

related articles:

http://www.fxstreet.com/nou/content/2115/content.asp?menu=market&dia=2142004

Dollar Accelerates Gains on Greenspan Remarks

The dollar added to overnight gains, accelerating its shift from uncertainty to a currency on the move. The greenback took out key support levels at 1.1850 against the euro rising to a new 4-month high of 1.1815 while also surpassing its previous peak at 109.25 yen to a new one-month high of 109.42. The gains come on the back of a few words from Fed Chairman Alan Greenspan on Tuesday, which were widely interpreted by traders as opening the way for a rate hike later this year. Greenspan implied that the balance of risks now leans towards inflation, no longer deflation. Yields on the 10-year note reached a new 8-month high above 4.48% in London trade, now targeting last summer’s peak of 4.67%.

Greenspan Testimony In Focus
Chairman Greenspan’s remark that deflation is no longer a worry sent stocks and bonds tumbling on Tuesday. Today he gives Congress his more robust view on where the central bank sees the economic balance between growth and inflation. Markets are already interpreting the recent spate of better than expected news, especially on the jobs front as an indication that interest rates will surely rise, even if Mr. Greenspan tries to only slowly Sheppard the market in that direction. But while patience may be a virtue at the Fed, the recent rise in headline CPI at an annualized 6% rate confirms to traders their suspicions about rising costs after a 55% run in the CRB index, this fastest rise since the 1970s inflationary crack up boom. Greenspan has played down the role that soaring commodity prices have on the economy, indicating instead that labor costs are more representative of inflation. But the rising prices have already caused many firms to raise costs, thereby forcing others in the service sector to raise prices, not wages. As a whole this is a drag on the economy as people are left with less purchasing power. So rising rates should help bring the speculative froth out of the commodities boom, and should also weigh heavily on gold, with the dollar gaining.

Stocks and Gold Breakdown as the Dollar Breaks Out
While the dollar piggybacked higher on a rising rates outlook, stocks plunged on the news that the Fed might back down from its emergency rate stance. The Nasdaq and banking shares led the decline, down 2% and 1.6% respectively on the day. Gold also came under pressure as rising rates give traders less reason to hold a non-interest bearing asset. Gold is now trading below its one-year long uptrendline at $395, and hovering just above its March low of $388. This low may also be violated since gold shares were hammered on Tuesday indicating that the precious metal rally may turn into gold dust. But it will take a move below key support at $388 to indicate more bearish potential ahead.

...more...

http://www.fxstreet.com/nou/content/102055/content.asp?menu=market&dia=2142004

Daily Market Briefing 21/04/04

Euro/dollar:

Expectations of a US rate increase will continue to support the dollar in the short term, especially with Euro sentiment fragile. The dollar will still find it difficult to make strong headway, especially as a rate hike by August is now priced in. Persistent capital market weakness would also unsettle the US currency. The dollar will attack 1.18 and there is a 40-50% chance of 1.1650 over the next two weeks, but there is little merit in long dollar positions beyond 1.18 at this stage.

The Euro has remained on the defensive over the past 24 hours, undermined by the weak Euro-zone data and the comments from Greenspan. The dollar strengthened to 1.1850 in New York on Tuesday and had extended these gains to 1.1820 in early Europe on Wednesday.

Fed Chairman Greenspan chose to make significant comments on monetary policy on Tuesday rather than wait for the economic testimony due today. He stated that the US companies were regaining purchasing power and that deflation fears were now over. These remarks were clear by Greenspan's normal standards and this suggests that he is trying to shift interest rate expectations. The comments today will be important to see whether he decides to reinforce this message or is more moderate. Greenspan still faces a tough task as he needs to control market expectations and avoid instability. The dangers were illustrated by the dip in US equities yesterday and the rise in bond yields. He will, therefore, aim to maintain a balance which could trigger profit taking on long dollar positions.

There will still be uncertainties as to whether expectations of higher US interest rates will provide durable dollar support, especially with the risk that portfolio inflows to the US will slow. Nevertheless, the near-term impact should still be for a slightly stronger dollar bias, especially as bond selling will tend to damage the Euro. Confidence in the Euro-zone economy will also remain weak.

I guess we'll see what the Meanspin has to say today. Also, the Fed's Beige Book is due at 2:00 EST.

I did not know Congress was doing anything with the insurance funds.
Need to go do some digging.

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?pv_noticia=1082487198-9e32d306-42574

Much of Greenspan's testimony was repetition of his well-known views on bank regulation. "The system remains strong and well positioned to meet customer needs for credit and other financial services," he said. "In general, the industry is adequately managing its interest rate exposure," Greenspan said. "Many banks indicate that they now either are interest-rate neutral or are positioned to benefit from rising rates." "Many banks seem to believe that as rates rise -- presumably along with greater economic growth -- they can increase lending rates more than they will need to increase rates on deposits." He said deposit insurance guarantees should not be increased as Congress moves to reform the finances of the insurance funds.

http://www.newsday.com/business/ny-greenspan-banking,0,173786.story?coll=ny-business-headlines

snip>

Deposit Insurance

I would like to turn now to the issue of deposit insurance reform and to the need for some legislative change in this area. As the committee knows, most depository institutions have not paid any deposit insurance premiums since 1996, and in fact, some large institutions that have been chartered in the past eight years have never paid them at all. Under current conditions, not only is a government guarantee being provided free, but also depositories having similar or identical risks are exposed to potentially disparate treatment should one, but not the other, of the deposit insurance funds fall below its funding target. In that situation, the FDIC would be required to impose a charge on one set of depository institutions while continuing to provide free deposit insurance to those in the other fund. Because some depository institutions today have commingled BIF- and SAIF-insured deposits as a result of bank and thrift mergers, this disparate treatment could apply even to different deposit accounts within the same depository institution.

At this time, the Congress has the opportunity to provide the FDIC with greater flexibility to charge risk-based premiums, possibly using market data (for example, rates on uninsured deposits) for the largest banks, to allow such premiums to increase or decrease in a gradual manner over a wider range of fund reserve ratios, and to treat all depositories with similar risk ratings equally and equitably. Such reforms should be implemented in a manner that does not unnecessarily create additional moral hazard and that strengthens, rather than erodes, market discipline.

Higher coverage limits, for example, would exacerbate moral hazard problems without apparent and offsetting benefits. The current level of coverage seems adequate to meet the needs of an overwhelming majority of depositors. First, depositors have certain flexibility in distributing large balances among multiple accounts and depository institutions to obtain higher insurance coverage. Second, the Federal Reserve's latest survey of consumer finances indicates that at year-end 2001 less than 4 percent of U.S. depositor households had any uninsured deposits. Moreover, the median bank IRA/Keogh account balance was only $15,000, well below the existing insurance limit. Finally, community banks have shown themselves just as adept as the largest banks in attracting uninsured deposits when necessary to fund customer loan demand.

Conclusion

In closing, Mr. Chairman, let me reiterate that the past decade has been one in which the banking industry has recorded persistent record profits while providing an ever-wider range of products and services to much more diverse groups. The industry's experience during the past several years in dealing with clear weakness in key economic sectors demonstrates the importance of strong capital positions and sound risk-management practices. Bank supervisors worldwide are working to encourage further progress in these areas, through more-accurate and more-effective regulatory capital standards based on even better internal risk-management procedures.

has historically been higher as prime increases, IIRC. Those spreads make for some nice profits in the banking industry. I sold my banking stock, though. I think my husband has some.

This carry trade stuff confuses me, it also seems rather scary - but the unknown usually is. I am still trying to understand the ideas of hedging, deriviatives, shorts and the carry trade. Just the idea of selling something you don't own on a bet prices will be lower in the future just seems so wacked out to me.

Here are a few articles I came across, posted some late in yesterday's thread and a couple over in the economics thread.

What If 2004 Really Is Like 1994?
http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_baum&sid=azUGOOgLGptI

snip>
Carry Them Out

Those who argue 2004 will not be a repeat of 1994 are focusing primarily on the reaction of the Federal Reserve and carnage in the bond market. When the Fed started to raise interest rates in February 1994, the first increase in a yearlong cycle that took the funds rate from 3 percent to 6 percent, the unwinding of leveraged trades produced what was at the time the worst year for a long-term Treasury since 1926, according to Jim Bianco, president of Bianco Research in Chicago. The total return, which includes price change and coupon income, for the 30- year Treasury was -11.97 percent, Bianco says.

The ``carry trade'' was the rage in 1994, just as it is now. Ensured of cheap financing by the Fed -- the funds rate was 3 percent from September 1992 until February 1994 -- leveraged accounts, including banks, bond dealers and hedge funds, took advantage of it, borrowing at a low rate of interest, buying higher yielding Treasury notes and pocketing the difference, or positive carry.

A big move in the market can wipe out the carry in a flash. Witness what happened recently, when the government reported that 308,000 new jobs were created in March.

Paradise Lost

Prior to the April 2 release of the March employment report, a trader could have bought the active five-year Treasury note yielding 2.84 percent and financed it overnight at roughly 1 percent, producing 180 basis points of positive carry on an annual basis.

The five-year note lost 1.3 percent of its value that day. Almost three-quarters of the year's positive carry vanished.

more...


Fannie Mae postpones derivatives disclosures
http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=4869824

snip>
Fannie Mae previously had included some details of its derivative losses and total stockholders' equity in a report of "selected financial information" released each quarter, along with its earnings statement.

The future impact of most derivatives on earnings -- seen in a balance sheet line item known as "accumulated other comprehensive income," or AOCI -- has received a lot of attention recently from critics who charge the company has downplayed potentially big losses, either from bad bets or poor interest-rate hedging.

A Fannie Mae spokesman, Jason Lobo, said the decision was made for a few reasons. The gap between Fannie Mae's quarterly earnings report and its filing with the Securities and Exchange Commission has shrunk to three weeks, so investors will still get the information in a timely fashion.

snip>

Fannie Mae said its recent reporting of the derivative loss impact on AOCI, which the company has expanded with its 2003 annual report, would also be given quarterly in its SEC filing. Fannie Mae said the losses are considered part of its cost of doing business in managing its $881 billion mortgage securities portfolio.

Fannie Mae reported that its figures for generally accepted accounting principles reflected a drop in net income to $1.90 billion from $1.94 billion a year earlier, mostly due to $959.3 million in unrealized losses on derivatives compared with $624.6 million in unrealized derivative losses a year earlier.

more...

U.S. agency spreads end wider in nervous market
http://www.forbes.com/markets/newswire/2004/04/20/rtr1339243.html

NEW YORK, April 20 (Reuters) - U.S. agency spreads finished
a choppy session weaker on Tuesday as concerns over interest
rates and more talk on Government Sponsored Enterprises
resulted in a nervous market, traders said.

"We opened wider on some selling over concerns that Fannie
Mae needed an extension for its derivatives disclosure," said
one trader. "The market is feeling heavy in general."

snip>

Nervousness around the delay triggered agency spreads to
open a basis point wider at the open, traders said. The market
later improved after the selling dissipated, but spreads were
pushed back out in the afternoon to finish 1 to 1.5 basis
points wider after comments surfaced on the GSEs, traders
said.

Assistant Treasury Secretary Wayne Abernathy said Fannie
Mae and Freddie Mac
(nyse: FRE - news - people) have grown their mortgage
portfolios to close to $1.5 trillion worth of holdings. "That
creates a very significant and problematic conflict of
interest," Abernathy said in a speech to a mortgage banking
conference.

"The market is weaker on Abernathy's comments about there
being a conflict of interest with how large Fannie and Freddie
portfolios are, and how they have a vested interest in keeping
rates low and being able to widen their spreads," said Mary Ann
Hurley, vice president of fixed income trading at D.A.
Davidson.

more...

J.P. Morgan 1st-Qtr Profit Up 38% on Investment Bank
http://quote.bloomberg.com/apps/news?pid=10000006&sid=a367gVmQZT2k&refer=home

snip>
The J.P. Morgan-Bank One transaction creates a bank with $1.08 trillion of assets to challenge Citigroup Inc., the world's largest financial-services company, with $1.21 trillion in assets. It also provides a successor to Harrison in Bank One CEO James Dimon, 48, who takes over in 2006.

Bank One yesterday reported that net income rose 51 percent to $1.2 billion on rising fees from credit cards and investment management. Dimon took over the company in 2000 when it had a $511 million loss.

Investment banking fees increased 10 percent to $682 million, driven by bond and stock underwriting and trading. Stock sales increased 65 percent to $177 million, while bond underwriting fees grew 1 percent to $358 million.

Bond trading revenue increased 12 percent to $1.94 billion, and stock trading garnered $333 million, up 67 percent. The company said a surge in the use of derivatives by customers and for the company's own accounts boosted equity trading.

more...

Then finally to Greenspin

http://money.cnn.com/2004/04/20/news/economy/greenspan.reut/?cnn=yes
Central bank chief says industry has not exposed itself to 'undue risk,' cites infrequent failures.

"All told, the available data, industry and supervisory judgments, and the long and successful experience of the U.S. commercial banking system in dealing with changing rates suggest that, in general, the industry is adequately managing its interest-rate exposure," Greenspan said in testimony prepared for delivery to the Senate Banking Committee.

"The (banking) industry appears to have been sufficiently mindful of interest-rate cycles and not to have exposed itself to undue risk," he added.

snip>

Greenspan said both the size and number of U.S. bank failures in recent years had been exceptionally small and regulators look for further improvement in the industry's asset quality this year.

I am of a much simpler mind on investing. I never put in what I don't yet have and I never invest in any one item that if it went bust I'd be sunk. Just as you would not want to take more to a casino than you can afford to lose.

Much of what is happening in the world these days is unprecendented. The only thing that is always in forever in this world is that the very rich will always survive and then some. Companies the US military would be used to insure their investment in foreign lands are good, safe bets for instance.

I have little faith in the investment world. Sure banks look inviting now but Mr. & Mrs. Consumer are nearly tapped out and will soon not be able to keep up with bloodletting style interest rates, over-limit fees etc. that the bank execs are now rolling naked in. Will housing die? Of course not. But the consumer base could shift and I predict it will.

I never been in a more "play it safe" mode than I am in now. I don't trust these lunatics, er I mean "adults" who are "in charge" one iota and have half a mind to turn all investments into tangibles. The kind of tangibles one could take with when fleeing the country. haha

Good luck in the casino today Marketeers! I am working to achieiving a massive swath of Michigan going to Dems in our state house this year. Could be three big districts going into our column if we work hard and smart enough. Will keep you posted on progress of the overthrow. In the meantime, guard your pennies. ;-)

Julie

You may not get rich, but hopefully you won't get fleeced either.
Good luck on the overthrow on your side of the pond! Keep up the great work!

The future impact of most derivatives on earnings -- seen in a balance sheet line item known as "accumulated other comprehensive income," or AOCI -- has received a lot of attention recently from critics who charge the company has downplayed potentially big losses, either from bad bets or poor interest-rate hedging.

And then there is this quote from Greenspan:

"All told, the available data, industry and supervisory judgments, and the long and successful experience of the U.S. commercial banking system in dealing with changing rates suggest that, in general, the industry is adequately managing its interest-rate exposure."

The first paragraph tells us that you are betting on the chances that the market will eventually land at a certain price. This leads me to believe that the system governing these prices is open to manipulation due to the very nature of the speculative process itself. This speaks (as I often like to point out) on the psychology of the markets. Derivative pricing plays two games. One investor bets that the price will hit an recognized low (or high). Other investors playing that market are cogniscent of that bet. This, in turn, influences the overall price of the commodity.

The Greenscam quote is the window dressing that the derivatives market needs to remain legitimate. But Greenscam says here that they are "adequately managing their interest rate exposure." This also tells us that there is interest rate exposure - leaving financial stability open to the laws of chance and the irrational sea-chage attitudes of short investors.

Warren Buffett has warned us about the derivatives market, equating it to a ticking nuclear time-bomb. If this sounds whacked-out to you and Warren Buffett, then it probably is completely whacked out and dangerous to the overall stablility of the commodities markets.

the SEC regulating the derivative markets as they provided needed liquidity to the markets. He seemed to want to protect them from prying eyes. I'd have to go digging for that original post.

when I went to find those Meanspin comments on the hedge funds, I found that he supported their bailout in 1998

http://www.forbes.com/newswire/2004/02/12/rtr1258714.html

Greenspan-No need for hedge fund SEC registration
Reuters, 02.12.04, 12:46 PM ET

WASHINGTON, Feb 12 (Reuters) - Federal Reserve Chairman Alan Greenspan said on Thursday he did not believe hedge fund advisers should be registered by the Securities and Exchange Commission.

"I think that hedge funds -- which I would define as financial institutions in which investors are only of high- income levels -- the value of these institutions is to create a very significant amount of liquidity in our system," Greenspan said.

"And I think that while they have a reputation as being a sort of peculiar type of financial group, I think they've been very helpful to liquidity and hence internal flexibility of our financial system," he said in response to a question from the Senate Banking Committee.

He said while "we have to be careful" hedge funds do not become an investment vehicle for people of lower and moderate incomes -- which appropriately requires SEC oversight -- it did not necessarily follow that SEC registration was needed.

...more...

and back in 1998 - here's what I found:

http://news.bbc.co.uk/1/hi/business/the_economy/184505.stm

Friday, October 2, 1998 Published at 05:06 GMT 06:06 UK

Greenspan defends hedge- fund bail-out

The Chairman of the US Federal Reserve Bank, Alan Greenspan, has defended the publicly organised bail-out of Long-Term Capital Management (LTCM), a hedge fund specialising in large-scale speculation.

Speaking to the banking committee of the US House of Representatives, Mr Greenspan said a failure of LTCM's failure could have caused substantial damage to banks and investors and might have impaired the economies of many nations, including the United States.

LTCM lost hundreds of millions of dollars when its financial experts misjudged the extent of the crisis in Russia. Co-ordinated by the Federal Reserve, 14 large banks got together to bail out the fund to prevent its collapse.

Mr Greenspan insisted that for LTCM's bailout "no Federal Reserve funds were put at risk, no promises were made by the Federal Reserve, and no individual firms were pressured to participate."

The "fragile" condition of the markets had prompted the Federal Resevere to act quicker than usual, he said, promising that the bail-out would be a "rare occasion."

US lawmakers raised critical questions about the fund's rescue. Jim Leach, chairman of the House Banking Committee, called on the Justice Department to make an antitrust review of the group of big banks and brokerage firms involved.

The rescue raised "troubling questions of financial concentration and antitrust," Mr Leach said at the hearing. "As a group working together, the new owners can have a greater impact on markets than in competition with one another."

Representative Bernard Sanders of Vermont, the House's lone independent, called it a "bailout for billionaires" that rewarded "the gambling practices of the Wall Street elites."

...more...

comparing Fannie and Freddie to them. And hey, no wonder derivatives took off again these last few years. Hey we got bailed out before, so let's do it again.
So, how many of the "little guys" mutual funds are exposed to this ponzi scheme?
"He said while "we have to be careful" hedge funds do not become an investment vehicle for people of lower and moderate incomes -- which appropriately requires SEC oversight -- it did not necessarily follow that SEC registration was needed.
Sure the mutual funds themselves may be registered with the SEC, but does that assure they aren't divested into some hedge funds?

said in Feb.

High returns

Mr Greenspan described LTCM's clients as "a small number of highly sophisticated, very wealthy individuals" who had tried to get high rates of return.

snip>

At the same time he ruled out direct regulation of hedge funds, saying it was possible to monitor the fund's activity and act when necessary.

Dow 10,273.55 -40.95 (-0.40%)
Nasdaq 1,975.82 -2.81 (-0.14%)
S&P 500 1,116.62 -1.53 (-0.14%)
30-yr Bond 5.254% +0.025

9:45AM : On the heels of a mixed open, all of the major averages have dipped into the red... Technology sectors' outperformance relative to the broader market is rooted in MOT's strong earnings report, which blew past expectations... Also reporting better than expected numbers this morning are Dow components Honeywell (HON 34.25 +0.25), Coca-Cola (KO 51.59 -0.69), and SBC Communications (SBC 24.75 +0.39)... While earnings reports continue to check in rather strong, participants' focus remains on the rising interest rates...
The market sold off yesterday when Fed Chairman Greenspan made some inconspicuous comments regarding the absence of deflation and the banks being ready for higher interest rates... Demonstrating just how sensitive the market is to higher-interest-rates talk, the major averages closed down 1.2-2.1%... Chairman Greenspan is speaking in front of the Joint Economic Committee at 10ET and his comments are not going to pass unnoticed...

9:15AM : S&P futures vs fair value: +0.5. Nasdaq futures vs fair value: +8.5. Near its best levels of the morning, the futures market continues to point to a relatively flat to slightly higher open for the cash market.

9:00AM : S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: +8.5. Supported by better than expected earnings reports from the likes of MOT, KLIC, SBC, and KO, futures indications lift to their best levels of the morning and are now pointing to a slightly higher open for the cash market. Technology sectors maintain their edge and look to outperform the broader market on the heels of yesterday's sweeping losses of 1.2%, 1.6%, and 2.1% for the Dow, S&P 500, and Nasdaq, respectively. There are no economic reports this morning, but all eyes (and ears) are on Dr. Greenspan ahead of his testimony in front of the Joint Economic Committee at 10ET.

"Monthly Charts"

Quite often we lose clarity of thought due to the short-term gyrations of the market. Thus, I find it important to regularly examine the markets from a long-term point of view, even when our intention is to trade on a short-term basis.

<cut>

The indices did continue to decline for another thirty days as we had suggested, and they bottomed within a few points of the downside targets we had specified. Subsequently, they rallied strongly and in the case of the SP and the Dow they came within 1.5% from their February high, while the Russell 2000 managed to make a marginal new high. NASDAQ was the notable lagger, as institutional investors liquidated high tech and moved into issues with lesser beta such as oil, health care, and natural resources. In the process, several interesting developments took place. Price has generally behaved as the bulls would have wanted. Even NASDAQ, which lagged behind, managed to show a respectable price action. For example take a look at the QQQ; it rallied from 34 to 37.5 (10.3%) then it pulled back nice and neatly to 35.79 which happens to be both a 50% Fibonacci re-tracement level, and trend-line support. One couldn't have asked for a better text-book case behavior.

However, the rally in all the indices took place on lesser volume than the one which accompanied the decline, and moreover, the internals have failed so far to match the exuberant performance displayed by price. The McClellan Summation Indexes have formed a pattern that is identical to the one in March-April of 2002, and 2003. In the first case, what followed was a spectacular decline, while in the second case, what followed was an equally spectacular rally. Consequently, at the very least, one ought to consider both scenarios going forward, and come up with the appropriate strategy to take advantage of each outcome.

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

EDIT: Rats! I responded to the wrong post. This was intended for your derivatives question. What impressed me about Mr. Iossif's comments was the line in bold text about internals not reflecting the market price per share. Now, I would be curious to see how and if the derivatives are influencing the price.

of the "liquidity provided by derivatives" Greenspin was talking about?

Damn, I was hoping for a bluelight special again!

Last trade 90.82 Change +0.33 (+0.36%)

High 91.24 Low 90.84

but only on stocks :)

Dow 10,265.25 -49.25 (-0.48%)
Nasdaq 1,980.39 +1.76 (+0.09%)
S&P 500 1,117.84 -0.31 (-0.03%)
10-Yr Bond 4.431% +0.016

dollar

Last trade 90.65 Change +0.16 (+0.18%)

(edited for clarity)

over to the jewelry department! :evilgrin:

US stocks idle waiting for Greenspan

US stocks saw a directionless open on Wednesday as investors awaited further comments from Alan Greenspan (news - web sites), Federal Reserve (news - web sites) chairman.

On Tuesday, in his first day of testimony before Congress, the Fed chairman signalled that interest rate rises were likely to come sooner rather than later, triggering a sharp drop in the markets.

story

much for deals with the Saudis.

This interest rate hike timing, who is Greenspin kidding here. It won't come before June 30th, he needs to be careful just in case that Iraqi hand over doesn't go as well as planned :eyes:
Best to take a wait and see attitude for at least a month, that puts him into August, assuming there's no trouble in the ME (so far, that's looking like a sure bet HA!). That's getting way too close to the election, I don't think he's going to want a repeat of Poppy. There would have to be a HUGE push from the bond vigilantes. What was that article from one of the reserve banks I posted a while back that lead me to speculate that the BoJ and Fed were in cahoots?

Venezuela decides not to sell us oil.... So??

Unless they decide not to sell ANYONE oil (cutting their own throats), how would this affect anything?

politically, it may help with the Anti-Bush rhetoric. He certainly timed it right with Shrub ticking off most of the ME in his backing of Sharon. It's also timed well with the snub Shrub got from Jordan this week.

The price of oil seems to be out of the control of OPEC right now anyway, it's rising despite "leakage" of over production of both OPEC and non-OPEC producers. Right now, to Joe Sixpack it looks like Shrubs lack of diplomacy is causing the high gas prices. Is that true, probably not but IMHO it's a good move by Chavez to attempt to tie in to the high prices so that it looks like blow-back on Shrubs "foreign policies". Could get Shrub to back off of Chavez for a bit.

Heck, Russia may come out of this looking like a Savior.

http://www.mmegi.bw/2004/April/Monday19/943789461788.html

debate on what to do about the issue.
The more Kerry pushes his ideas, the better the chances of Shrub being trusted to pull a rabbit out of his hat with Cheney's energy bill. Joe sixpack will be ready to accept that pig in a poke bill rather than give up that big ol' pick-em-up truck, cheap gas or loss of his job at the auto factory.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/04/20/MNGIG67MMG1.DTL
Oil erupts as issue in presidential campaign

By PETER SVENSSON, AP Business Writer

NEW YORK - Stocks fluctuated Wednesday as stunning earnings from Motorola Inc. bolstered the technology sector but interest rate worries weighed on more traditional companies.

For the second day in a row, Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) said interest rates will have to rise at some point, telling the congressional Joint Economic Committee the economic recovery is on track and that a rate hike is needed to head off inflation.

story

http://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=497286§ion=finance

WASHINGTON (Reuters) - Red-hot house prices in countries like Britain and Australia raise fears of a housing market bubble that could damage economic growth if it burst, the International Monetary Fund says.

Global recovery is fuelling expectations interest rates are set to rise, focusing attention on housing, which has benefited from the lowest borrowing costs in many years and helped shore up consumer spending when the world economy stalled in 2001.

Adding Ireland, the Netherlands and Spain to the list of countries where prices have risen dramatically, the IMF warned in its latest World Economic Outlook on Wednesday that the market could be hit even if the gains look justified on a fundamental basis.

"A house price reversal could still be caused by deteriorating fundamentals -- for example, higher interest rates, a significant rise in unemployment and slower growth in disposable income," the IMF said.

<snip>

Top of the list is consumer spending. Houses are crucial to family wealth and in countries like the United States, remortgaging homes to withdraw equity on the back of higher prices propped up consumer spending in the 2001 recession.

But there is also a drain on residential property investment, which can be an important part of gross domestic product. Plus, falling house prices also hurt bank asset quality, potentially bad news for broader investment if banks rein in credit.

...more...

trying to cause trouble again. :evilgrin: /sarcasm off

"The global economy, after being battered by recession, terrorist attacks and war, should grow strongly this year and next with growth in the United States hitting the fastest pace in 20 years, the International Monetary Fund predicted Wednesday. The IMF significantly increased its growth forecast both for the United States and the global economy in its latest World Economic Outlook. But IMF officials cautioned that this rosy outlook could be undone by further terrorist attacks or a sharp increase in oil prices."

-clip-

"For the United States, the IMF predicted growth this year of 4.6 percent, which if it comes true, would be the fastest growth rate since the U.S. economy expanded by 7.2 percent in 1984. That represented a 0.7 percentage point increase in the IMF's September forecast. "



http://ap.tbo.com/ap/breaking/MGAFRRBKBTD.html

U.S. Treasury Secretary John Snow, however, took issue with the IMF's urgings of greater efforts on the part of the United States to deal with the budget and trade deficits, saying the real problem is a lack of strong economic growth in other countries.

"The fact is that we have a growth deficit," Snow said in comments to reporters after testifying in Congress. "And the growth deficit is the low growth rates in France and Germany and other parts of the developed world."

Snow said that the stronger U.S. economic growth, fueled by Bush's tax cuts, was "making the whole world economy stronger, healthier and more prosperous."

is in brain cells within this mal-administration and its minions.

http://quote.bloomberg.com/apps/news?pid=10000103&sid=arnlETgDJlCU&refer=us

Fed's Parry Says Rates to Rise `Significantly at Some Point'

April 21 (Bloomberg) -- The Federal Reserve will have to raise interest rates ``significantly at some point'' to prevent growth from triggering inflation, said Robert Parry, president of the Federal Reserve Bank of San Francisco.

``As long as the inflation rate has been low, upside surprises haven't been as much of a concern,'' Parry said in the text of a speech at Gettysburg College in Gettysburg, Pennsylvania. ``Short-term rates will need to move up significantly at some point to prevent a rise in inflation.''

Parry, who's retiring in May, said the ``major issue'' facing Fed policy makers is deciding when to start tightening monetary policy. The Federal Open Market Committee, which has kept the target for the overnight bank lending at 1 percent since June, last raised that rate in May 2000.

Parry, a non-voting member of the FOMC this year, reaches the Fed's mandatory retirement age of 65 on May 16, and won't attend the committee's next meeting on May 4. Former Federal Reserve Governor Janet Yellen will succeed him on June 14.

In testimony earlier today to the Joint Economic Committee of Congress, Fed Chairman Alan Greenspan also said rates must rise ``at some point'' to stave off inflation and was noncommittal about the timing of any increase. ``As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building,'' Greenspan said.

...more...

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?pv_noticia=200404211214MKTNEWS_MAINWIRE_C4F3_2757

NY FX:FX Market Exits, Then Reenters Dlr Longs Post-Greenspan

NEW YORK, April 21 (MktNews) - "Buy the rumor, sell the fact" was the order of the day in foreign exchange on Wednesday, at least initially, as traders exited long dollar positions in the wake of testimony by Federal Reserve Chairman Alan Greenspan, basically confirming market expectations about the U.S. economy and monetary policy and then re-entered dollar longs during Greenspan's Q&A session.

As background, Greenspan's remarks from Tuesday, interpreted by analysts as hinting at scope for higher U.S. interest rates, prompted a wave of dollar buying, traders said.

However, in response to his comments before the Joint Economic Committee on Wednesday -- also seen as suggestive of higher U.S. rates later in the year -- the market became wary that the benefits to the dollar from a rate hike later in the year, were already priced in, traders explained.

<snip>

Comments by San Francisco Federal Reserve Bank President Robert Parry that the Fed funds rate must "move up significantly" at some point, also helped to reinvigorate the dollar's biddish tone, traders said.

...more...

:shrug: Must be getting "updated".

guess you have to hurry and read their news the moment they put it out there :shrug:

here's what I found there now (hurry hurry - before it's gone)

http://www.bloomberg.com/news/economy/economies.html

Greenspan Says `Vigorous' Growth Hasn't Produced `Broad- Based' Inflation

April 21 (Bloomberg) -- The U.S. economy is in a ``vigorous expansion'' that has not yet produced ``broad- based'' inflation pressures, Federal Reserve Chairman Alan Greenspan said.

Faster growth has started to boost hiring, Greenspan told the Joint Economic Committee of Congress in Washington. Worker incomes have yet to rise and trigger higher prices, he added.

``As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging,'' Greenspan said. ``As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building.''

Greenspan's comments are laying the groundwork for an interest rate increase as soon as August, economists and investors said. His comments yesterday, repeated today, that deflation is no longer an issue had sent markets tumbling as investors bet the Fed would raise its benchmark overnight bank lending rate from 1 percent sooner than investors had expected.

``He's saying we're watching, we're waiting, and we haven't decided yet'' on when to raise rates, said Robert Hormats, vice chairman of Goldman Sachs International in New York.

...more...

Greenspan's. Guess they decided making Parry sound like an old senile fart being put out to pasture didn't tone down his "The Fed will have to raise its target significantly at some point".

Now they follow it with "In general, an boost in the rate wouldn't mean more would necessarily follow, Greenspan said. ``There have been many occasions in which we made one move and stop,'' Greenspan said. ``When we go through protracted moves it is usually a year or so.

http://www.eubusiness.com/afp/040421150658.6ooojmpj

With inflation likely be held to 1.7 percent in 2004, according to the IMF, there is now an argument for an easier monetary policy in the eurozone in order to preserve the recovery.

"If economic indicators continue to suggest that the already subdued pace of the recovery has weakened further, and the inflation outlook remains benign, a cut in interest rates would be in order," the report said.

The Frankfurt-based European Central Bank has so far steadfastly resisted political pressure for lower eurozone interest rates, a position it may now have an easier time defending as the euro's surge against the dollar has lately slowed.

Eurozone political leaders and commentators earlier this year turned up the heat on the fiercely independent ECB when the single currency's appreciation against the dollar seemed unstoppable.

snip>

The sluggish pace of the eurozone recovery stands in stark contrast to the performance of economies in much of Asia and the United States, a point likely to be made Saturday when top finance officials from the Group of Seven industrialized countries -- Britain, Canada, France, Germany, Italy, Japan and the United States -- convene in Washington.

US participants in the meeting are expected to reiterate the need for structural reform in Europe to make it easier and less costly for enterprises to hire and fire workers -- a point underscored by the IMF.

more...

of "fire and hire". Much of what the workers and the unions have archieved over years of struggle has been demolished and will be destroyed even more.

It's working people who have built this world, and not arrogant greedy IMF bankers, big bosses, their political spitlickers and their military. Time to resist, once again.

attractive investment to herd more money back into the US$ on hopes of an interest rate increase here?
Nah, they wouldn't do that, would they? :evilgrin:

Dow 10,292.35 -22.15 (-0.21%)
Nasdaq 1,986.24 +7.61 (+0.38%)
S&P 500 1,121.59 +3.44 (+0.31%)
30-yr Bond 5.233% +0.004

NYSE Volume 1,050,655,000
Nasdaq Volume 1,292,564,000

1:00PM: The market maintains its trendless trade as participants remain hesitant in the face of inflation concerns and fears over rising interest rates... Given Chairman Greenspan's commentary yesterday and today, tomorrow's economic reports are likely to be a main-stage event... While the PPI report has been a non-event for most of the past year as inflationary concerns remained on the back-burner, tomorrow's PPI number will be dissected in the context of Chairman's indication that deflation has run its course...
The latter is particularly true on the heels of last week's stronger than anticipated CPI report... Separately, the Initial Claims report, which checked in at 360K last week is expected to subside to 340K... A better than expected Initial Claims report may act as the evidence required to conclude that lat week's higher than anticipated reading was an aberration...NYSE Adv/Dec 1363/1852, Nasdaq Adv/Dec 1567/1471

12:30PM: The market breathed a sigh of relief with the finish of Chairman Greenspan's testimony, with the Dow and Nasdaq lifting toward their best levels of the morning and the S&P 500 surging to a fresh session high... With all of the brouhaha surrounding Greenspan talk, it's worth noting that the Chairman didn't say anything earth-shattering either yesterday or today... The fact that the fed funds rate will eventually rise from its historically low level of 1.0% is hardly surprising...

The fed funds futures are pricing in a 100% probability of a 1/4% hike by August, while surveys of economists show expectations that the 10-year note yield will be near 5% in a year...

This was from Monday, but for some reason it's linked again on the Yahoo finance page.

http://biz.yahoo.com/bizwk/040419/b3880105mz020_1.html

snip>
But today's bond market is anything but normal. It functions on a hair-trigger of speculation about just how soon the Federal Reserve will begin raising overnight interest rates. The market sold off sharply, too, the morning of Apr. 14, when the government announced a much bigger than expected 0.5% jump in consumer prices. Anxiety is so intense because the market is more leveraged and more hooked on cheap Fed financing than it has been in at least a decade. Traders fear the end of a profitable ploy known as the "carry trade," in which hedge funds, banks, and Wall Street dealers borrow money at dirt-cheap overnight rates and buy 5- and 10-year notes, which yield two to four times what they are paying for their borrowing.

Indeed, the market's bets are leveraged more than ever. Net borrowings by Treasury securities dealers, including big Wall Street banks, are up to nearly $800 billion, double the level of three years ago. Bond purchases by leveraged hedge funds and other financial institutions based in Caribbean tax havens have doubled, to $100 billion a year. And open interest in Treasury futures contracts, which are leveraged instruments, has also doubled, to 35% of the value of outstanding Treasuries.

The trouble is, the carry trade will turn sour as soon as it's clear that the Fed is about to start raising overnight rates, now at a 46-year low of 1%. Traders know that the time will come, but they're inevitably tempted to wait another day before closing their positions. Says James A. Bianco, president of bond-research firm Bianco Research LLC: "The minute they end the trade, they stop making money. That's what blinds everybody."

This leaves the Fed in a tricky position. It must find a way to engineer a gradual rise in interest rates throughout the bond market while avoiding the kind of violent selling that could roil trading firms, rattle bank lending, and paralyze borrowers, from corporations to home buyers. While the Fed's low interest rates worked well to stimulate the economy after the recession and the September 11 terrorist attacks, that cheap money threatens to become too much of a good thing. Before long, the Fed may need to begin raising interest rates to keep the lid on inflation as the economy gathers momentum.

much more...

The only way things are going to start looking better is if we get rid of * and get off or a least lighten up on this destabilizing addiction to petroleum

http://www.countercurrents.org/peakoil.htm

Until then look for more deficit spending, tax cuts for the rich (to keep their income up), and many regional WAR to secure wellheads.

Of course this will all be under the rubric of some bogus war on terra

http://cbs.marketwatch.com/news/story.asp?guid=%7B98A85F16-9A7C-492B-8909-27284807E35F%7D&siteid=google&dist=google

WASHINGTON (CBS.MW) -- Stronger economic growth has been seen in most U.S. regions and sectors since late February, the Federal Reserve said Wednesday in its Beige Book report on current economic conditions.

"Economic activity increased across the nation," the Beige Book said. "The growth was widespread." Read the full report.

Retail sales improved, while manufacturing, mining, tourism and services all grew. Commercial real estate markets remain a soft spot.

Meanwhile, labor markets "tightened somewhat with modest wage increases," the report said. Many regions reported modestly higher consumer prices, but nearly all indicated "significant increases in numerous commodities and input products."

The report, written by the professional staff at the Minneapolis Fed, largely confirmed the upbeat assessment on the economy given earlier in the day by Fed Chairman Alan Greenspan in congressional testimony. See full story.

...more...

http://abcnews.go.com/sections/business/US/consumer_confidence_poll_040421.html

N E W Y O R K, April 21 — Consumer confidence edged lower this week, failing to sustain last week’s modest gain.

The ABCNEWS/Money magazine Consumer Comfort Index, based on Americans’ ratings of current economic conditions, stands at -17 on its scale of +100 to -100, down three points to end a gradual, eight-point advance over the last four weeks.

The index is still holding higher than its recent low, -22 last month. But it’s well below its level just three months ago, -3, and its 18-year average, -9.

The index is based on views of the economy, personal finances and the buying climate. Amid record-high gas prices, just 36 percent call it a good time to buy things, three points off average and down seven points since February. Indeed, 54 percent in a new ABCNEWS/Washington Post poll say gas-price increases have caused them financial hardship; 31 percent say it’s been a “serious” hardship, up from 20 percent in 2002.

In the index’s other components, 33 percent of Americans rate the economy positively, seven points below average, and 55 percent say their own finances are OK, two points off the long-term average.

EXPECTATIONS — Expectations for the future direction of the economy, measured separately, are perhaps marginally better than last month after worsening in February and March. But pessimists still reign: Just 26 percent of Americans say the economy is getting better, while 37 percent say it’s getting worse.

...more...

Dow 10,317.27 +2.77 (+0.03%)
Nasdaq 1,995.63 +17.00 (+0.86%)
S&P 500 1,124.09 +5.94 (+0.53%)
30-yr Bond 5.231% +0.002

NYSE Volume 1,728,173,000
Nasdaq Volume 2,057,550,000

Close: Today's session could be separated into two parts, with the first being during Chairman Greenspan's testimony in front of the Joint Economic Committee and the second being after the said event... Note that this was the second day that the Fed Chairman managed to ruffle traders' feathers... In yesterday's session, Dr. Greenspan's rather innocuous comments regarding the absence of deflation and banks being ready for higher interest rates led to a 1.2-2.1% sell-off in the major averages...
Today, the first part of the session was spent with the major averages trading in a choppy fashion as participants continued to weigh the benefits of the generally better than expected earnings reports, highlighted by Motorola's (MOT 19.30 +3.08) stellar results, with the prospects of rising interest rates and accelerating inflation... The Chairman, for his part, appeared less hawkish, saying that the fed funds rate will have to rise at some point, but indicating that as of yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building...

As a result, the market breathed a sigh of relief when Dr. Greenspan's testimony was over and spent the rest of the afternoon drifting with a slight upward bias... The major averages closed well off their session lows and in positive territory, with the Nasdaq at fresh session highs... Accordingly, the bulk of the sectors closed in the green, with leaders to the upside including the internet, networking, semiconductor, telecom, biotech, healthcare, hotel, airline, and industrial sectors... Among the laggards of note were the gold, metal mining, coal, iron & steel, aluminum, and paper products groups...