EVERY STORY PAINTS A PICTURE, DON'T IT ...

"Lending flat in May among top banks in bailout - Lending across consumer, commercial lines flat in May for banks that received bailout funds"

Associated Press

Last updated: 2:45 p.m., Thursday, July 16, 2009

NEW YORK -- Lending among the biggest banks to receive government bailout funds was flat in May as the worsening recession led to efforts to pay off debt, the U.S. Treasury said.

As the economy continued to slide, consumer and business demand for credit weakened, said the report, released late Wednesday.

Total outstanding consumer loans, including mortgages, home equity lines, credit cards and other borrowing, was flat among the 21 banks surveyed.

The average total of all outstanding mortgages among the 21 banks was $914 billion in May, edging up from $913 billion in April.

"Households are facing growing pressures from a weakening labor market and the recent declines in their wealth," Treasury said in a release.

"In this context, consumers focused on paying down debt, driving the decreases in outstanding balances held by major banks."

However, low interest rates and low home prices did encourage consumers to seek mortgages.

Mortgage originations, or new loans, increased at 15 of the surveyed banks and fell at 3, for a total of $277 billion in new loans.

The number is expected to fall in later months as interest rates began to rise at the end of May.

The total credit card outstanding balance fell 1 percent to $617 billion in May, from $622 billion in April.

Of the 13 banks surveyed that offer credit cards, seven reported outstanding balances increased, while six saw declines.

One bank's increase in originations largely drove a 13 percent increase in new cards issued.

The total outstanding balance of other consumer lending products, including auto, student, and other consumer loans, decreased by 1 percent in May to $470 billion from $474 billion in April, with just four banks seeing increases and 14 reporting declines.

Like consumer loans, total commercial and industrial loans were also flat, at $1.22 trillion.

Banks reported that demand for this lending was "well below normal levels," Treasury said.

With downsizing and cost cutting still on the agenda, banks expect demand will remain low.

Weak market conditions and general caution among business was cited for falling balances and lower-than-normal demand for commercial real estate loans.

Rising office vacancies and a surplus in the commercial real estate market were also noted.

The total outstanding was $537 billion, compared with $534 billion in April.

Overall, total originations rose by 1 percent, with 14 banks showing increases and 7 posting declines.

One bright spot was small business lending.

The total outstanding balance of small business loans rose 1 percent, to $269 billion, from $267 billion in April.

Originations gained 7 percent.

Since Treasury's Capital Purchase Program was created, it has funded 651 banks of all sizes in 48 states, Puerto Rico and Washington, D.C.

...a nod is as good as a drink to blind whores..

http://www.marketwatch.com/story/economy-w...da-summers-says
market pulse
Jul 17, 2009, 10:46 a.m. EST
Economy won't impede Obama agenda, Summers says

By Greg Robb

WASHINGTON (MarketWatch) -- The White House agenda won't be impeded by the economy, said Larry Summers,
a top advisor to President Obama on Friday. Many economists are worried about the mushrooming federal budget deficit
and believe that more time should be spent reducing government spending over the medium term rather than launching
new programs. But the White House will not be deterred, Summers said. "Yes, the President has an ambitious agenda.
But it is an agenda comprised of measures that lay a foundation for future prosperity and for the confidence on which
the current recovery depends," Summers said. The rebuilt economy must be more export-oriented and rely less on
consumer spending. Summers said that economists worried about the outlook should focus on how much the economy
has improved over the past six months.

In readers' comments below this story were included:

"The Arrogance of Hope"

"The Arrogance of Dope"

and

"The Hubris of Scope"

These guys are so far out of touch it is staggering.

In speech after speech after speech and interview after interview after interview, President Obama always says
the right thing and says it in an effective manner...Now that has to count for something...I still don't know what but
I'm still trying to keep an open mind...

Did you hear any of Obama's speech to the NAACP last night, rla?

NPR has been playing it ....

He talks so fast as the "angry black man" that he sounds like a dog barking to me - unintelligible ....

I can't understand fast talk like that ....

He sounds like Bobby Seale or Malcolm X on a rant ....

GOD HELP AMERICA!

And so ...

A fair statement...I'm trying too...but until this locomotive slows down a little, my brakes are locked.

We used to get 4-packs of cigarettes in the field...Kools, Winstons.

And, we used to save them to light and apply to leeches.

I don't know what that means, but punishing smokers reduces
the elimination of leeches. File it, store it, forget it.
Newbies know everything. They are sophisticated.

The movement has begun ....

Anybody but Obama in 2012 ....

We don't need no KING HUSSEIN in America ...

I voted for the dude which now gives me the right to voice my complaints about the man I voted for to uphold the U.S. Constitution ...

And he has now lost my vote ....

And my confidence ...

And any support that he might have gotten from me had he done the job I elected him to do, which was to restore integrity to OUR federal government ....

Sorry for the political speech in your thread, IH ...

And so ...

Maybe he'll get a lesson on cap-and-trade or national health, moderate
and work on the economy. Clinton did. (I have some hope, I just don't live on it.)
BTW - not my thread - the nice folks just let me rant here. The black sheep ya know.

Anyway...on the markets...this past week was bullish - a 7% hike in the major indexes
based on big bank profit reports (of course it's creative accounting with derivatives
not figured in with any mark-to-market reality) and IBM (International Business Machines,
which made their profits in Asia). Bulls from MarketWatch to CNBC are claiming the dip is
done and singing the sirens' song like Bob Barker, "Come On Down". They could be correct...

http://www.marketwatch.com/story/stock-inv...-earnings-ahead

Market Snapshot
Jul 18, 2009, 12:01 a.m. EST

U.S. stock investors face a landslide of quarterly reports
Equities investors hope for repeat of prior week's upbeat quarterly results

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- The U.S. stock market faces a massive onslaught of earnings in the days ahead,
after getting a major lift from surprisingly upbeat results from a slew of big-name players, helping the major indexes to a 7% gain last week.

07/17/09: Earnings Seasons Kicks Into High Gear

Investors liked what they saw in earnings so far but by Friday's close, trading quieted down. Peter McKay reports after the closing bell.

While the market saw some profit-taking on Friday as it headed into the weekend, the pendulum, which swung to the negative side in
late June, "has decisively swung back in mid-July," said Marc Pado, U.S. market strategist, Miller Tabak.

Last week had financial powerhouse JP Morgan Chase & Co. (JPM 36.89) and IBM Corp. (IBM 115.42) delivering large positive earnings
surprises. The stream of better-than-expected results also included General Electric Co. (GE 11.65) , Bank of America Corp. (BAC 12.85)
and Citigroup Inc. (C 3.02).

Others turning in like results including Baxter International Inc. (BAX 54.13) and Marriott International Inc. (MAR 19.98)
U.S. stocks on Friday ended mixed, but the Dow Jones Industrial Average (INDU 8,744) tallied a weekly gain of 7.3%,
the S&P 500 Index (SPX 940.38) scored a 7% rise from the prior Friday's close, while the Nasdaq Composite (COMP 1,887) added 7.4%.
Technical charts indicate the market is at the end of a big bear market, according to Ed Yardeni, chief investment strategist at Yardeni Research Inc.

Commodities gained along with equities, with crude-oil futures rising more than 6% for the week to close above $63 a barrel.

Treasury prices turned lower, pushing yields to their biggest weekly jump in more than a month.

"Keep in mind that several of the financial institutions reporting good earnings this week have enjoyed a nice uptick in investment banking
but do not have to deal with the negative ramifications of mark-to-market accounting of derivative holdings that wrecked havoc on financial
earnings over the last couple of years," said Fred Dickson, chief market strategist, Davidson Cos.

"We believe that most of the positive market action relates to investors and traders being surprised by the number and consistency of positive
earnings surprises coming from the big names that reported [last] week," said Dickson.

"We still are very early in earnings reporting season and will be anxious to see how second-tier companies with primarily domestic business models
fared during the quarter and what they see for the next couple of months. We suspect that the news from these smaller less visible companies may
not have the luster" seen last week, he added.

Another cautionary note came from Peter Boockvar, equity strategist, Miller Tabak & Co., who said while companies are topping
earnings-per-share estimates, many are missing revenue estimates.

"It's a tribute to corporate America's ability to keep a lid on costs and improve margins but also highlights the tough economic environment," Boockvar said.

More to come

The coming week brings another wave of quarterly reports, starting off with slated releases on Monday from a broad array of sectors,
including industrial manufacturer Eaton Corp. (ETN 44.95) , toymaker Hasbro Inc. (HAS 25.38) , and oil services giant Halliburton Co. (HAL 21.38), among others.

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

Yesterday I heard a TV guy talking down Hasbro's expectations...I don't know about the others.
Two more banks failed Friday one in GA and one in MT. I guess Ben will print some more money for the FDIC (they cost $119 milion).
Remember, (if you have any money in banks) withdraw in less than $5,000 denominations.
If Hasbro would just contract with Sarah Palin and make a Caribou Barbi...they might jump 7% too.

I'm thinking of trying to do a deal with Sarah and Walmart's that could possibly bring in the Hasbro angle ....

SARAH PALIN'S POSSUM PALACE - C'MON IN - POSSUM ANY WAY YOU WANT IT, SO LONG AS IT IS FRIED!

Walmart's is said to have a real kick-ass white wine that is just delightful with possum and they are said to be working on a rose ....

So you serve the Walmart's wine with the possum at Sarah Palin's Possum Palace, which you will find at every interstate exit next to the Arby's all across America ....

And then, you sell the Hasbro "Sarah" dolls at the cash register on the way out ....

And I'm thinking that this gig is worth some real big bucks for all of us, and since you are big on this doll idea, IH, I thought I should bring you in on the ground level ....

Make some kind of corporate executive out of you while there are still slots left to fill in the corporate management structure ....

Dress is casual ....

Coon-skin cap is optional, except for publicity functions ....

Then it is mandatory ....

But outside of that ....

And so ....

I'll call a capitalist with cash...

speaking of capitalism...cash...gold...Goldman Sachs...
I was brousing to find comments made between Karl Denninger
and Larry Kudlow on CNBC yesterday when I stumbled onto
a post that mentioned them on Daily Kos...

The most interesting things about the post however,were
the discussion of electronic (computer) trading by Goldman.
You may remember the FBI arrested a Russian programmer
who left the firm, downloaded some of the files he built them
and emailed them to London. Automated trading programs...
well, the post mentions "high frequency trading" (using algorithms
to discover other trade algorithms) and the "frontrunning" or
at least "tailgating" trades. Take a few minutes to buff up on the modern
market plays...

http://www.dailykos.com/storyonly/2009/7/1...-St.-(w-update)

It just convinces me further that there is an insider arrangement, which now connects to federal
TARP/TALF/FDIC/Fed Reserve funds, which makes it next to impossible for a normal person
to research companies and make good long-term stock purchases. It appears only
Exchange Traded Funds - bets across sections of the markets on a daily basis - offer
a chance for individuals to be quick enough to make a play.

Anyway the munipulation of the markets seems as expansive as it was when there was
another new piece of technology --- the market ticker --- which BTW ran at least
a few minutes behind trading. Now programs are predicting trading and jumping ahead of it,
so trading is not being done on good reasoning...only on trend and speculation itself.

Here's a snip-it from the posting:
-------------
Bill King: Automated front-running on an unfathomable scale
July 10th, 2009 by GreenLight Advisor

For the past several years Street operators have assumed that the computer jockeys who were being employed
by proprietary trading departments on The Street were developing algorithms that would find other algorithms that
represented buyside orders so prop desks could trade against those orders.
Another trading prop that has been occurring for years is certain firms feed their electronic trading systems into prop
desks so traders can see in real time money flows into and out of stocks and groups.

However recent revelations are forcing the Street to consider the possibility of automated front-running on an
unfathomable scale. The two "front-running" issues are: 1) "queuing" [of orders] - finding orders loaded into a system,
particularly limit orders, and trading against them; and 2) "latency" - discovering and then front-running electronic orders
by a penny or more by exploiting the latency or lag in execution.

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

...and I thought back to part of what my study included this a.m.

Zep 3:1 ¶ Woe to her that is filthy and polluted, to the oppressing city!

Zep 3:2 She obeyed not the voice; she received not correction;
she trusted not in the LORD; she drew not near to her God.

Zep 3:3 Her princes within her [are] roaring lions; her judges [are] evening wolves;
they gnaw not the bones till the morrow.

Zep 3:4 Her prophets [are] light [and] treacherous persons:
her priests have polluted the sanctuary, they have done violence to the law.

Zep 3:5 The just LORD [is] in the midst thereof; he will not do iniquity:
every morning doth he bring his judgment to light, he faileth not; but the unjust knoweth no shame.

Have a nice day.

"Bank profits not as impressive as they seem - Banks turn in hefty profits, but industry still has big problems"

By STEPHEN BERNARD and IEVA M. AUGSTUMS, Associated Press

Last updated: 11:25 p.m., Friday, July 17, 2009

NEW YORK -- The big banks are making big money again, but they won't be back to health as long as they have to deal with a recession and customers defaulting on mortgages and credit cards.

The impressive numbers included a $3 billion second-quarter profit announced Friday by Citigroup and $2.4 billion for Bank of America.

They followed similarly robust earnings for Goldman Sachs and JPMorgan Chase.

That the banks managed to turn a profit at all is remarkable.

Just 10 months ago, many of them looked to be on the verge of collapse.

The stock market staged a huge rally this week, driven by the signs of health in banking.

But Bank of America CEO Ken Lewis had some sobering words during a conference call with Wall Street analysts after his company's results were released Friday:

"Profitability in the second half of the year will be much tougher than the first half."

Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. earned profits this spring largely on investment banking and trading -- not traditional banking businesses, which still look shaky.

Citi benefited from selling its majority stake in the Smith Barney brokerage.

Strip away those money-makers, and the banks have to rely on customers who are losing their jobs or earning less money.

The banks will suffer as long as their customers do.

Bank of America, JPMorgan Chase and Citigroup Inc. all reported they lost more money on loans during the second quarter.

Bank of America alone set aside $13.4 billion to cover loan losses.

But the banks also saw signs that loan delinquencies were starting to stabilize.

Celent analyst Isabel Schauerte said Bank of America's earnings tell the story of the financial industry.

"B of A's results are the bellwether of where Main Street is headed."

"Measured by credit losses, a moderation of default rates is not in sight," Schauerte said.

"For the investment banking business of B of A, in contrast, the worst days seem to have passed."

President Barack Obama's top economic adviser said the signs of improvement displayed by the banks would not have been possible without government infusions, guarantees and other programs provided by the government.

"There is no financial institution that would be reporting the kind of positive results that we have seen in the last quarter but for the extraordinary public support provided by the government," said Lawrence Summers, the director of the White House's National Economic Council.

The profits announced this week raise more questions about when banks will be able to repay their bailout money.

Goldman Sachs and JPMorgan Chase have already repaid their loans.

Others, like Bank of America and Citigroup, have not.

"Moving forward, companies that are solvent and performing should be held to the promise to repay the taxpayers with interest," said Rep. Darrell Issa of California, the top Republican on the House Oversight and Government Reform Committee, which is convening a hearing next week on bailout oversight.

The banks that reported earnings this week cited similar trends:

-- Mortgages: Bank of America's second-quarter revenue was bolstered by a spike in mortgage refinancings as interest rates tumbled early in the quarter.

But rates have been climbing lately, and analysts expect that surge in refinancings to taper off.

And more people are defaulting on mortgages.

-- Credit cards: Credit card losses tend to track the unemployment rate, and banks are expected to keep losing money on credit cards as more people lose their jobs.

JPMorgan Chase, Citi and Bank of America all have huge credit card operations.

-- Investment banking: By far the quickest recovery in the banking business has come in the investment banking sector, helping Goldman Sachs earn $2.7 billion in the second quarter.

Some of the rebound has come from the big stock market rally this spring.

Companies also did well because there's less competition since Lehman Brothers and Bear Stearns went under.

Analysts say that besides the problems with loans, bank earnings may suffer because the country has less of an appetite for debt.

-- Commercial real estate: While home foreclosures are increasing, the commercial real estate market is expected to keep causing loan losses for banks.

Rising store and office vacancies are cutting into landlords' and developers' cash flow, and leading them to default on their mortgages.

------

Ieva M. Augstums reported from Charlotte, N.C. Associated Press Writer Anne Flaherty in Washington, D.C., also contributed to this story.

"Jobless rate tops 10 percent in 15 states, DC - Jobless rate tops 10 percent in 15 states and DC, endangers economic recovery

By JEANNINE AVERSA, Associated Press

Last updated: 8:06 p.m., Friday, July 17, 2009

WASHINGTON -- Fifteen states have crossed a painful threshold: 10 percent unemployment.

More states, and the nation, likely will follow, one of the biggest dangers to an economic recovery.

How consumers behave in the face of rising unemployment will figure prominently in shaping a broader rebound.

If they go back into hibernation and sharply cut spending like they did at the end of last year, the recovery could cave in.

More likely is that consumers will stay cautious, making for a fragile and slow-moving national economic turnaround, economists said.

The Labor Department on Friday said unemployment topped 10 percent in 15 states and the District of Columbia last month.

And the jobless rate in Michigan surpassed 15 percent, the first time any state hit that mark since 1984.

The Federal Reserve this week projected that the national unemployment rate, currently at a 26-year high of 9.5 percent, will pass 10 percent by the end of the year.

Most Fed policymakers said it could take "five or six years" for the economy and the labor market to get back on a path of long-term health.

"With so much uncertainty, companies will stay in cost-cutting mode and consumers will watch their spending," said Steve Cochrane, managing director at Moody's Economy.com.

The news was not all bad.

North Dakota, helped by the oil business, reported the lowest unemployment rate of 4.2 percent in June.

It was followed by Nebraska at 5 percent and South Dakota at 5.1 percent, supported by farm businesses.

None of those states ever got carried away with the housing boom, either, so their residents didn't suffer as big a hit to household wealth.

Still, the state unemployment report underscored the damage that the longest recession since World War II has inflicted on companies, workers and communities, and the challenges the economy faces getting back on its feet.

A common theme running through states suffering from high unemployment was heavy layoffs tied to the troubled auto industry and the collapse of the housing market.

Workers in manufacturing, construction, retail and finance have been the hardest hit.

"A lot of older industries are having to shut down and many of these jobs will never come back," said Bernard Baumohl, chief global economist at the Economic Outlook Group.

Take Michigan, ground zero of the recession.

Home to the nation's struggling auto makers, Michigan has been clobbered by lost factory jobs.

Its jobless rate of 15.2 percent in June was the nation's highest.

It was the first time in 25 years that any state has suffered an unemployment rate of at least 15 percent.

If laid-off workers who have given up looking for jobs or have settled for part-time work are included, the state's jobless rate was 22.5 percent, according to Michigan's Department of Energy, Labor and Economic Development.

Nationwide unemployment by that measure was 16.5 percent in June, the highest on government records dating to 1994.

"In Michigan and elsewhere, the unemployment rate is just the tip of the iceberg of the extensive adverse impact of this 'Great Recession,'" said economist Lawrence Mishel, president of the left-leaning Economic Policy Institute.

Many workers have seen hours trimmed, their pay cut and have lost benefits.

Combine that with a dismal housing market making it difficult for people to sell their homes and move to other places to find work, some jobseekers are trapped.

The other states where unemployment topped 10 percent last month were: Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Nevada, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee.

In May, 13 states plus the District of Columbia watched their jobless rates surpass 10 percent.

Alabama and Georgia joined the list in June.

Rhode Island had the second-highest unemployment rate in the country in June at 12.4 percent.

When including people who stopped looking for work and those forced into part-time jobs, the state's unemployment rate was 22.7 percent, Mishel estimated.

Oregon had the third-highest unemployment rate at 12.2 percent, which was 21.6 percent by the broadest measure.

South Carolina's jobless rate of 12.1 percent jumped to 22 percent when underemployed workers were included.

It was followed by Nevada with a jobless rate of 12 percent, or 21.6 percent by the broadest measure, Mishel said.

The June jobless rates for Nevada, Rhode Island and South Carolina were the highest ever for those states in records dating to 1976.

Other record-highs: Florida at 10.6 percent, Georgia at 10.1 percent and Delaware at 8.4 percent.

--------

Associated Press Writer Tim Martin in Lansing, Mich., contributed to this report.

"Joblessness threatens US recovery - Troubled labor market threatens a significant turnaround in US economy"

By RACHEL BECK, Associated Press

Last updated: 12:05 a.m., Saturday, July 18, 2009

NEW YORK -- All the talk about a "jobless recovery" being ahead for the economy misses the point.

There won't be much of a recovery at all if the labor market stays in such dire straits.

You don't need to be an economist to understand why the nation's joblessness is the biggest hurdle to reviving growth.

The official U.S. unemployment rate is at 9.5 percent and climbing, and it stands at a startling 16.5 percent when you add in discouraged Americans who have stopped looking for work and those who want to work full time but can only find part-time jobs.

No wonder consumer spending has flatlined.

That only perpetuates the crises in the housing and banking sectors.

"Everything that got us into this recession is made worse by weak job conditions and any hopes we have of climbing out of this recession will be hindered by the same," said Niko Karvounis, a policy analyst at the New America Foundation, a nonpartisan think tank based in Washington.

The deep recessions that started in 1973 and 1981 were followed by a burst of hiring about six months after the peak in job losses.

That wasn't the case in 1991 and 2001, when shallower recessions were followed by nearly two years of woes for workers.

The term "jobless recovery" grew from those latter experiences.

Even though the economy was looking stronger, plenty of Americans didn't feel much relief because they still didn't have jobs.

Part of that shift in post-recession employment had to do with structural changes in the economy.

The manufacturing sector lost prominence to the service sector over the years.

The diminished role of unions also was a factor.

"Manufacturers tend to have a deeper job cuts in a downturn and they have a sharper upturn," said David Wyss, chief economist at Standard & Poor's in New York.

"The service sector does layoffs later but hires later, too."

Many economists are forecasting a "jobless recovery" for the United States as it emerges from the recession that began in December 2007.

That includes the Federal Reserve, which on Wednesday bolstered its outlook for economic growth.

The central bank now predicts the economy will shrink between 1 percent and 1.5 percent this year, less than it had previously forecast.

It also is predicting the economy will expand as much as 3.3 percent next year, a relatively weak showing coming out of a recession.

One reason why: The Fed expects the unemployment rate to move above 10 percent this year and remain stuck in the high 9 percent range in 2010.

But can the economy really grow stronger in the face of such joblessness?

Researchers at the Federal Reserve Bank of San Francisco have found that the current recession is much like its predecessors in the overall pace of job losses.

But what is different is a historically low level of hiring this time around, which means many of the newly unemployed can't find new jobs.

At the same time, there are high levels of involuntary part-time workers.

The fraction of the labor force that is working part time for economic reasons has nearly doubled to 5.8 percent in June of this year from when this recession began in December 2007.

More than half of such workers faced reductions of five hours or more per week, according to the Fed report.

To see that at work, look at the many private and public entities using job furloughs, or short-time hiatuses, to reduce costs.

Just this week, US Airways asked 400 flight attendants to take furloughs in an effort to avoid layoffs in that group.

Workers at Gannett Co., CSX Corp. and many others have also faced furloughs.

All this presents a problem for the U.S. government, which has been trying to bolster the economy through monetary and fiscal stimulus.

The Fed has cut interest rates to near zero, while President Barack Obama's $787 billion stimulus package reduced taxes and increased government spending after an earlier Bush administration plan to distribute $168 billion in cash through tax rebates had little lasting impact.

None of that has been "labor intensive enough," argued economist Nouriel Roubini in a note to his clients at his economics analysis firm RGE Monitor.

Roubini, who is also an economics professor at New York University, was ahead of the pack in 2006 when he forecast that the worst recession in four decades was on its way.

Deutsche Bank chief U.S. economist Joseph LaVorgna points out that the ratio of household debt to income now stands at 128 percent, much higher than in the final quarters of the last two recessions.

That will inhibit consumers' ability to take on debt again, which helped drive those previous recoveries.

It also amounts to another hurdle to a housing rebound.

That will intensify the pressure on already battered bank balance sheets as mortgage and credit-card default rates rise -- and make them think twice about boosting lending to both consumers and businesses.

Even though Congress and the Obama administration haven't shown any inclination to push for another stimulus package, they may have to act again with a plan directly aimed at creating jobs if the unemployment rate stays stubbornly high.

They may want to look at the success in China, where second-quarter growth accelerated 7.9 percent from a year earlier on a stimulus-fed investment boom.

That plan included big spending on construction of highways and other public works.

In the U.S., money could be pumped into industries to make them more productive or there could be a further ramping up of spending on infrastructure projects.

It also could mean more targeted tax cuts, including some aimed at businesses.

None of that will be cheap.

But something has to be done to bring jobs back, for the entire economy's sake.

------

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

Speaking of banks with problems...

http://online.wsj.com/article/SB124804574208263605.html
JULY 20, 2009
Citi's Latest Snag: Froman's Funds
One Shut, One Struggles Amid Failed Deals as Ex-Chief Toils for White House

BY JENNY STRASBURG, DAVID ENRICH AND CRAIG KARMIN
New problems are flaring up in Citigroup Inc.'s private-investments division, this time involving two funds
overseen by an executive who left this year to join the Obama administration.

Clients of a private-equity fund that amassed $3.4 billion to invest in airports, roads and other infrastructure projects
last month voted to bar it from making new investments after its co-head quit and several high-profile deals collapsed,
according to people familiar with the matter. A second, smaller fund geared toward sustainable development projects
failed to attract clients and was shelved late last year.

The funds were the progeny of Michael Froman, former ...

Another All-Star for the Obama/Wall Street team.

You don't cross Henry Kissinger and stay in business...

From my own reading of it, I'm not so sure that article had anything whatsoever to do with Henry Kissinger ....

It seemed to me to be more a reflection of the Obama eco-nom-i-cal team being out there sweeping up every incompetent in the field that it can find ....

On an apparent supposition that if you take all of the incompetents out of the private sector and put them into the public sector regulating the private sector from whence they came, that order will then somehow come out of the chaos these same people were creating by their incompetence when they were in the private sector ....

And so ...

Rather than enter into the "Blame-storm" mode (I saw that in a Direct TV ad)...
I'll offer an idea of why I've started reading the WSJ more...they seem to get it:

http://online.wsj.com/article/SB1248044690...emEditorialPage

OPINION JULY 20, 2009

Why Toxic Assets Are So Hard to Clean Up
Securitization was maddeningly complex.
Mandated transparency is the only solution.

By KENNETH E. SCOTT and JOHN B. TAYLOR

Despite trillions of dollars of new government programs, one of the original causes of the financial crisis --
the toxic assets on bank balance sheets -- still persists and remains a serious impediment to economic recovery.
Why are these toxic assets so difficult to deal with? We believe their sheer complexity is the core problem and
that only increased transparency will unleash the market mechanisms needed to clean them up.

The bulk of toxic assets are based on residential mortgage-backed securities (RMBS), in which thousands
of mortgages were gathered into mortgage pools. The returns on these pools were then sliced into a hierarchy
of "tranches" that were sold to investors as separate classes of securities. The most senior tranches, rated AAA,
received the lowest returns, and then they went down the line to lower ratings and finally to the unrated "equity"
tranches at the bottom.

But the process didn't stop there. Some of the tranches from one mortgage pool were combined with tranches
from other mortgage pools, resulting in Collateralized Mortgage Obligations (CMO). Other tranches were combined
with tranches from completely different types of pools, based on commercial mortgages, auto loans, student loans,
credit card receivables, small business loans, and even corporate loans that had been combined into Collateralized
Loan Obligations (CLO). The result was a highly heterogeneous mixture of debt securities called Collateralized Debt
Obligations (CDO). The tranches of the CDOs could then be combined with other CDOs, resulting in CDO2.


Each time these tranches were mixed together with other tranches in a new pool, the securities became
more complex.

Assume a hypothetical CDO2 held 100 CLOs, each holding 250 corporate loans -- then we would need information
on 25,000 underlying loans to determine the value of the security. But assume the CDO2 held 100 CDOs each holding
100 RMBS comprising a mere 2,000 mortgages -- the number now rises to 20 million!

Complexity is not the only problem. Many of the underlying mortgages were highly risky, involving little or no down
payments and initial rates so low they could never amortize the loan. About 80% of the $2.5 trillion subprime mortgages
made since 2000 went into securitization pools. When the housing bubble burst and house prices started declining,
borrowers began to default, the lower tranches were hit with losses, and higher tranches became more risky and declined in value.

To better understand the magnitude of the problem and to find solutions, we examined the details of several CDOs
using data obtained from SecondMarket, a firm specializing in illiquid assets. One example is a $1 billion CDO2
created by a large bank in 2005. It had 173 investments in tranches issued by other pools: 130 CDOs, and also
43 CLOs each composed of hundreds of corporate loans. It issued $975 million of four AAA tranches, and three
subordinate tranches of $55 million. The AAA tranches were bought by banks and the subordinate tranches
mostly by hedge funds.

Two of the 173 investments held by this CDO2 were in tranches from another billion-dollar CDO -- created by
another bank earlier in 2005 -- which was composed mainly of 155 MBS tranches and 40 CDOs. Two of these
155 MBS tranches were from a $1 billion RMBS pool created in 2004 by a large investment bank, composed of
almost 7,000 mortgage loans (90% subprime). That RMBS issued $865 million of AAA notes, about half of which
were purchased by Fannie Mae and Freddie Mac and the rest by a variety of banks, insurance companies,
pension funds and money managers. About 1,800 of the 7,000 mortgages still remain in the pool, with a current
delinquency rate of about 20%. (Confused yet?)

With so much complexity, and uncertainty about future performance, it is not surprising that the securities are
difficult to price and that trading dried up. Without market prices, valuation on the books of banks is suspect
and counterparties are reluctant to deal with each other.

The policy response to this problem has been circuitous. The Federal Reserve originally saw the problem as a
lack of liquidity in the banking system, and beginning in late 2007 flooded the market with liquidity through new
lending facilities. It had very limited success, as banks were still disinclined to buy or trade such securities or
take them as collateral. Credit spreads remained higher than normal. In September 2008 credit spreads
skyrocketed and credit markets froze. By then it was clear that the problem was not liquidity, but rather
the insolvency risks of counterparties with large holdings of toxic assets on their books.

The federal government then decided to buy the toxic assets. The Troubled Asset Relief Program (TARP)
was enacted in October 2008 with $700 billion in funding. But that was not how the TARP funds were used.
The Treasury concluded that the valuation problem seemed insurmountable, so it attacked the risk issue
by bolstering bank capital, buying preferred stock.

But those toxic assets are still there. The latest disposal scheme is the Public-Private Investment Program
(PPIP). The concept is that private asset managers would create investment funds of half private and half
Treasury (TARP) capital, which would bid on packages of toxic assets that banks offered for sale. The
responsibility for valuation is thus shifted to the private sector. But the pricing difficulty remains and this
program too may amount to little.

The fundamental problem has remained untouched: insufficient information to permit estimated prices
that both buyers and sellers find credible. Why is the information so hard to obtain? While the original
MBS pools were often Securities and Exchange Commission (SEC) registered public offerings with
considerable detail, CDOs were sold in private placements with confidentiality agreements. Moreover,
the nature of the securitization process has made it extremely difficult to determine and follow losses
and increasing risk from one tranche and pool to another, and to reach the information about the original
borrowers that is needed to estimate future cash flows and price.

This account makes it clear why transparency is so important. To deal with the problem, issuers of
asset-backed securities should provide extensive detail in a uniform format about the composition
of the original pools and their subsequent structure and performance, whether they were sold as
SEC-registered offerings or private placements. By creating a centralized database with this information,
the pricing process for the toxic assets becomes possible. Making such a database a reality will restart
private securitization markets and will do more for the recovery of the economy than yet another redesign
of administrative agency structures. If issuers are not forthcoming, then they should be required to file
the information publicly with the SEC.

Mr. Scott is a professor of securities and corporate law at Stanford University and a research fellow at the
Hoover Institution. Mr. Taylor, an economics professor at Stanford and senior fellow at the Hoover Institution,
is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened
the Financial Crisis" (Hoover Press, 2009).

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

These are the reasons I see a pro-longed deep recession or even the D-word...and think those who "believe"
we can throw more money at big banks, or insurers, or at massive new government programs, or add
to the tax burder of small businesses...are all wet. The system will collapse, IMO.

That's why I include in my signature something from a Revolutionary Hero:

"The more simple any thing is, the less liable it is to be disordered,
and the easier repaired when disordered." - from Common Sense by Thomas Paine.

...or maybe the Beatles? ..."get back to where you once belonged..."

Has the WSJ been as out-spoken against business and government in the past? Not always,
and when they stop providing the forum for information like the above...I'll fold them up again.

It's a big week for earnings reports...
and it hasn't started well:


Halliburton 2Q Earnings Fall 48% On Weak Demand, Lower Prices
Wall Street Journal - ‎51 minutes ago‎
Halliburton Co.'s (HAL) second-quarter earnings fell 48% on weak demand and
lower prices, but results were better than feared.

Eaton 2Q Profit Plunges 91%, Cuts Full-Year
Wall Street Journal - ‎46 minutes ago‎
Eaton Corp.'s (ETN) second-quarter profit plunged 91% on slumping sales and
margins as results missed expectations. The electrical system and hydraulics maker
projected third-quarter earnings above views but cut its full-year earnings outlook.

Hold on y'all the third quarter is still the one
I think will kill the last of the alleged "green shoots",
but if we get through it (without new massive govt. programs)
we can be among the "survivors".

...but those captains of banking (Goldman Sachs) are still selling "green shoots".

http://www.bloomberg.com/apps/news?pid=206...id=alcaYpBt0PvY

S&P 500 to Post Biggest Gain Since 1982, Goldman

By Sarah Jones and Roger Neill

July 20 (Bloomberg) -- Goldman Sachs Group Inc. boosted its forecast for the Standard & Poor 500 Index,
saying improving earnings will spur the steepest second-half rally since 1982.

The benchmark index for U.S. stocks will end the year at 1,060, 15 percent above its level on June 30
and an increase from David Kostin’s prior projection of 940. The chief U.S. investment strategist at New
York-based Goldman Sachs also lifted his 2009 and 2010 earnings per share estimates for S&P 500
companies to $52 and $75, which are 30 percent and 19 percent higher than his prior estimates, respectively.

“Improvement in ex-financial earnings per share, stabilization in profit margins and higher forward
EPS guidance all point to a rising market through 2009,” Kostin wrote in a report today.

The S&P 500 rallied the most since March last week as companies from Goldman Sachs to Intel Corp.
reported results that topped analysts’ estimates. Since March 9, the gauge has rebounded 39 percent
amid speculation the economy is recovering.

Kostin is now tied with Deutsche Bank AG’s Binky Chadha for the second-highest S&P 500 forecast
among 10 Wall Street strategists tracked by Bloomberg News. Only JPMorgan Chase & Co.’s Thomas Lee,
at 1,100, is more bullish on stocks. Barclays Plc’s Barry Knapp, who had been the pessimistic U.S. strategist,
increased his projection a week ago following the 40 percent surge in the S&P 500 between March and June,
the biggest gain since the 1930s.

The average year-end forecast for the S&P 500 among the 10 Wall Street strategists followed by Bloomberg News is now 997.

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

Investment bankers suggesting more investments...surprise...time will tell.

Goldman Sachs uses the US Treasury for its petty cash fund. It is my sense that the Kissinger-Paulson-Summers-Geithner Cabal is leading the sheep to the shearing pen and shipping the profits to Israel and various off shore banks...

You seem to be in a growing company...but it may be
the slaughterhouse rather than the sheering pen...if they continue, it might kill investments.

http://www.marketwatch.com/story/most-firm...abe-survey-says

Economic Report
Jul 20, 2009, 12:02 a.m. EST

Most firms see slow recovery, NABE survey says
Demand stabilizing, but few companies plan to hire workers

By Rex Nutting, MarketWatch

AMMAN, Jordan (MarketWatch) -- The severe U.S. recession is slowly abating, but most companies
are still cutting costs, and few have immediate plans to hire more workers or increase their capital spending,
according to a quarterly survey released Monday in Washington by the National Association for Business Economics.

Demand appears to be stabilizing after severe declines over the past four quarters, said Sara Johnson,
an economist for IHS Global Insight, who helped analyze the survey results for the NABE, a professional
organization for economists.

The industry demand net rising index improved to negative 5 in the second quarter, compared with
negative 14 in the first quarter and a record-low negative 28 in the fourth quarter of 2008. The index
has been below zero for four straight quarters, the longest such stretch in its 27-year history.

About half (45%) of the companies said their sales have already bottomed, with nearly as many (41%)
believing sales will bottom in the second half of the year. The remainder don't see sales rising until 2010.

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

The Market Ticker
Commentary On The Capital Markets
Monday, July 20. 2009
Posted by Karl Denninger in Company Specific at 07:54

And Again, More Black Shoots (Earnings)

The "30%er" club continues to gain members on earnings reports this morning.

Eaton, down 32%

Halliburton, down 22%

Johnson Controls down 29.3%

Weathorford down 10.5% (heh, an outperformer!)

All revenue numbers y/o/y.

Folks, where is the good news in here? Yes, earnings were beats by a few pennies, but again,
this is all happening on the basis of massive labor cost contraction, which in turn feeds back into
the economy in the coming quarters in the form of weaker demand!

Johnson Controls is a lesson in what I have repeatedly said: a 30% decline in revenues can
wipe the floor with your earnings numbers. In this case their earnings were down 63% from
previous year numbers; again, this happens due to business fixed costs that you can't shed quickly (if at all.)

Never mind Eaton, which had its profit fall 92% (!) on a 32% revenue fall. In fact they were lucky to eek out
a profit at all ($31 million); last year this was $337 million in the second quarter.

Of course the market crooners will point to these as "beats" and suggest you buy, with some of these firms
getting a nice pop premarket.

Uh huh. I want to buy a company that is seeing its net operating margin destroyed on the back of
30% year-over-year revenue declines?

The evidence continues to mount that unreasonable and unsustainable credit expansion was in fact responsible
for an about 20-30% of revenues in America (you can extrapolate that to GDP) and that the economy is indeed
on track to contract toward that metric on balance, despite attempts to keep it from happening.

The belief that this disruption will be transient or is "over" is, in my opinion, nothing other than pure fancy.

Invest accordingly.

From The Washington Post:

http://www.washingtonpost.com/wp-dyn/conte...9071702093.html

What's Next, Mr. President -- Cardigans?

By Matt Welch and Nick Gillespie
Sunday, July 19, 2009

Barely six months into his presidency, Barack Obama seems to be driving south into that political speed trap
known as Carter Country: a sad-sack landscape in which every major initiative meets not just with failure
but with scorn from political allies and foes alike. According to a July 13 CBS News poll, the once-unassailable
president's approval rating now stands at 57 percent, down 11 points from April. Half of Americans think the
recession will last an additional two years or more, 52 percent think Obama is trying to "accomplish too much,"
and 57 percent think the country is on the "wrong track."

From a lousy cap-and-trade bill awaiting death in the Senate to a health-care reform agenda already weak
in the knees to the failure of the stimulus to deliver promised jobs and economic activity, what once looked
like a hope-tastic juggernaut is showing all the horsepower of a Chevy Cobalt. "Give it to me!" the president
egged on a Michigan audience last week, pledging to "solve problems" and not "gripe" about the economic hand he was dealt.

Despite such bravura, Obama must be furtively reviewing the history of recent Democratic administrations
for some kind of road map out of his post-100-days ditch.

So far, he seems to be skipping the chapter on Bill Clinton and his generally free-market economic policies
and instead flipping back to the themes and comportment of Jimmy Carter. Like the 39th president, Obama
has inherited an awful economy, dizzying budget deficits and a geopolitical situation as promising as Kim Jong Il's
health. Like Carter, Obama is smart, moralistic and enamored of alternative energy schemes that were nonstarters
back when America's best-known peanut farmer was installing solar panels at 1600 Pennsylvania Ave. Like Carter,
Obama faces as much effective opposition from his own party's left wing as he does from an ardent but diminished GOP.
...
The key to understanding Obama's predicament is to realize that while he ran convincingly as a repudiation of Bush,
he is in fact doubling down on his predecessor's big-government policies and perpetual crisis-mongering. From the
indefinite detention of alleged terrorists to gays in the military to bailing out industries large and small, Obama has
been little more than the keeper of the Bush flame. Indeed, it took the two of them to create the disaster that is the
2009 budget, racking up a deficit that has already crossed the historic $1 trillion mark with almost three months left in the fiscal year.

...
In the same way that Bush claimed to be cutting government even while increasing real spending by more than
70 percent, Obama seems to believe that saying one thing, while doing another, somehow makes it so. His first
budget was titled "A New Era of Fiscal Responsibility," even as his own projections showed a decade's worth of
historically high deficits. He vowed no new taxes on 95 percent of Americans, then jacked up cigarette taxes and
indicated a willingness to consider new health-care taxes as part of his reform package. He said he didn't want to
take over General Motors on the day that he took over General Motors.

Such is the extent of Obama's magical realism that he can promise to post all bills on the Internet five days before
signing them, serially break that promise and then, when announcing that he wouldn't even try anymore, have a
spokesman present the move as yet another example of "providing the American people more transparency in government."

What the new president has not quite grasped is that the American people understand both irony and cognitive dissonance.
Instead, Obama has mistaken his personal popularity for a national predilection toward emergency-driven central planning.
He doesn't get that Americans prefer the slower process of building political consensus based on reality, and at least a
semblance of rational deliberation rather than one sky-is-falling legislative session after another.

On this last point, Obama is a perfect extension of Bush's worst trait as president. In the wake of the Sept. 11, 2001,
attacks, the Bush administration pushed through the Patriot Act, a massive, transformative piece of legislation that
plainly went unread even as Congress overwhelmingly voted aye. Bush whipped up an atmosphere of crisis every
time he sensed a restive Congress or a dissatisfied electorate. And at the end of his tenure, he rammed through the
TARP bailout at warp speed, arguing that the United States yet again faced catastrophe at the hands of an existential threat.

Bush learned the hard way that running government as a perpetual crisis machine leads to bad policy and public fatigue.
Obama's insistence on taking advantage of a crisis to push through every item on the progressive checklist right now
is threatening to complete that cycle within his first year.


What are his options? First, stop doing harm. Throwing money all over the economy (and especially to sectors that match up
with Democratic interests) is the shortest path to what Margaret Thatcher described as the inherent flaw in socialism:
Eventually you run out of other people's money.

No matter how many fantastical multipliers Obama ascribes to government spending, with each day comes refutation
of the administration's promises on jobs and economic growth. Even his chief source on the topic, economic adviser
Christina Romer, now grants that calculating jobs "created or saved" by Team Obama is simply impossible.

Which leads to the second point: Stop it with the magical realism already.

Save terms such as "fiscal responsibility" for policies that at least minimally resemble that notion. Don't pretend
that a budget that doubles the national debt in five years and triples it in 10 is the work of politicians tackling
"the difficult choices." Americans have a pretty good (if slow-to-activate) B.S. detector, and the more you mislead them now,
the worse they'll punish you later. Toward that end, producing real transparency instead of broken promises is the first step
toward building credibility.

That the administration is now spending millions of dollars to revamp its useless stimulus-tracking site Recovery.gov
is one more indication that, post-Bush, the White House still thinks of citizens as marks to be rolled.

Finally, it's time to connect the poster boy for hope to the original Man From Hope. After Bill Clinton bit off more
domestic policy than even he could chew, leading to a Republican rout in the midterm elections of 1994, the 42nd
president refocused his political intelligence on keeping his ambitions and, as a result, the size of government growth,
limited. Though there is much to complain about in his record, the broad prosperity and mostly sound economic policy
under his watch aren't included.

This shouldn't be a difficult task for Obama. As a political animal, he has always resembled Clinton more than Carter.
This might help him avoid the Carteresque pileup he's driving into. Far more important, it just might help the rest of us.

Nick Gillespie is the editor of Reason.com and Reason.tv. Matt Welch is editor of Reason magazine.

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

Here we have a good explanation of what I want:
not for the president to fail, but for him to redirect and pace his approach
so he can find common ground on which to succeed, all of us.

You hope for a lot, IH ....

But what the hey ....

Your feet are on the ground ....

So hope away ....

I notice that now that the speculators think the stock market is going to rise, they are running up the price of crude oil and commodities ....

I was going to buy some copper, but not at the price it is now ....

So gas is going to start rising again, which means that I'll cut back on my driving, again ...

And Treasury rates are being pushed up as bond prices fall when equities go up ....

So the stock market has a built-in governor here, it seems ....

Everytime it starts to pick up, it is going to do nothing more than choke itself off ....

And so ...

Anything with real value (productive) seems okay to me,
just no financials as they are yet to be honest about the
toxic assets still on their books...they yo-yo daily.

I still like SRG (construction, including nuke) and HAL looks okay.
Heck Coke did good this past quarter...but too much volitility for me.
Most folks I know are sitting on low-income gauranteed income funds,
maintenancing residences and vehicles and wearing faded jeans.

It seems CA is coming closer to passing a budget:

http://www.google.com/hostednews/ap/articl...G7wuLQD99J0L005
...
Personal income fell this year in California for the first time in 70 years, leading to a 34 percent plunge
in income tax revenue during the first half of the year. California's unemployment rate hovered at 11.6
percent in June, the highest in modern record-keeping.

The $26.3 billion shortfall amounts to nearly 30 percent of the state's general fund, the account that pays
for day-to-day state services. The sheer size of the deficit meant that any effort to balance the state's books
would be felt throughout the state, from college students seeing a sharp increase in fees to local police
and fire departments that face cuts as the state takes about $4 billion from city and county governments.

Monday's agreement reduced general fund spending from $92 billion to $88 billion, taking California back to 2005 levels.

The compromise includes billions in cuts to education, health care, prisons, welfare and other programs.
The rest of the deficit will be made up by a combination of borrowing from local governments, shifting money
from other government accounts and accelerating the collection of certain taxes.

The cuts include $6 billion to K-12 schools and community colleges. Nearly $3 billion will be cut from
the California State University and University of California systems, while the state prison system will be cut by $1.2 billion.

Medi-Cal, the state's health program for the poor, will be cut by $1.3 billion.

Welfare, in-home support services and a health care program for low-income children also would suffer
cuts but would not be eliminated as Schwarzenegger had originally proposed.

In exchange, the budget includes some of the reforms to social programs the governor wanted,
including changing the duration that welfare recipients can continuously receive benefits.

Schwarzenegger also succeeded in having a proposal to expand oil drilling off the Southern California
coast included in the budget agreement.

Under that plan, drilling would be allowed from an existing rig off the Santa Barbara coast,
generating about $1.8 billion in revenue over time. The proposal, opposed by many conservation groups,
would be the state's first new offshore oil project in more than 40 years.

The governor will get authority to sell some state assets, such as the Orange County Fairgrounds and state office buildings.
...

This is a wake-up call to the rest of the U.S.

Do you heard the phone ringing WASHINGTON, D.C.?

Back in The Day we could have tried this:

(from CNN Money)
Where to find rich singles

Seeking a sugar daddy (or mama)?
Follow the money to these affluent towns,
where singles are abundant.

1. Hermosa Beach, CA
2. Arlington, VA
3. Coronado, CA
4. Edgewater, NJ
5. Santa Clara, CA
6. Edwards, CO
7. Oak Park, IL
8. Herndon, VA
9. Irvine, CA
10. Arlington, MA

(and most these spots are in deficit states...hmmm )

Sorry to intrude here, IH ....

I'll make it a point to not do it again ...

But I just found myself more than passing curious as to how a mere conversation laced with philosphical flotsam can have such a profound impact on a big tough guy who has felt the wind to the point of where it forced him to stop communicating ....

It is incongruous to me how that could occur ....

Do mere words have that much power, do you think?

I would think from my end that someone who has felt the wind wouldn't even be fazed by the passage of some strung-together consonants and vowels ...

But that is just me ....

And obviously, I don't have that answer, not being an oracle or PhD or anything like that ...

And so ...

And so, I'll say a prayer for a decent man...who (like most) doesn't know how good he is...
leaving me to think he's taken a sabbatical for positive reasons... BWTF do I know?

Thanks for your candor, IH ...

It is appreciated ....

My thread about his health was sincere ...

I'm glad you joined in over there ....

And so ...

You are right ....

We all see life the way we see life ....

And that is about all that can be said about it ....

Environment makes the person as much or more than the person makes the environment ...

And so ...

You survive, IH, because you are in your element, and you are attuned to your element ....

In synch ...

And the same with me ....

However, my element is some 1,800 miles or so removed from yours ....

So you seeing your way clear down there might not translate into a wise course of action for me up here ....

And vice versa ....

So I never think that I have the way for everyone ....

Only for myself ....

And only for that moment of time ....

And that moment of time is everchanging ....

Hence, patience is always in order ...

Without it, I would truly be lost ...

And so ...

AND THEN THERE IS BEN BERNANKE ...

WHO WAS GOING THROUGH A BLAME-STORMING SESSION DOWN IN WASHINGTON, D.C. ....

And so ...

"Bernanke says Fed can take on supercop role - Bernanke defends Fed's ability to take on supercop role, unwind stimulus to prevent inflation"

By JEANNINE AVERSA, Associated Press

Last updated: 5:06 p.m., Tuesday, July 21, 2009

WASHINGTON -- Federal Reserve Chairman Ben Bernanke ran into skepticism Tuesday from lawmakers wary of expanding the Fed's duties to police big financial companies.

They argued that the Fed failed to spot problems that led to the financial crisis in the first place.

"The Fed has made some big mistakes," said Rep. Spencer Bachus, R-Ala., ranking member of the House Financial Services Committee.

An Obama administration proposal to make the Fed the supercop of globally interconnected financial companies would be "just inviting a false sense of
security that inevitably will be shattered at the expense of the taxpayer," Bachus warned.

Bernanke countered that the administration's proposal would be a "modest reorientation" of the Fed's powers, not a great expansion of them.

The Fed boss sought to assure investors and Congress that the central bank will be able to reel in its extraordinary economic stimulus and prevent a flare up of inflation once a recovery is firmly rooted.

Still, any such steps will be far off in the future.

The central bank's focus remains "fostering economic recovery," he said.

Bernanke also worked to beat back an administration proposal to create a new consumer protection regulator for financial services and strip some of those duties from the central bank.

The House panel delayed a committee vote on that legislation until September.

Consumer groups and lawmakers have blamed the Fed for failing to crack down early on dubious mortgages practices that fed the housing boom and figured into its collapse.

Later this week, the Fed will issue a proposal to boost disclosures on mortgages and home equity lines of credit.

It also will include new rules governing the compensation of mortgage originators.

Bernanke also argued against congressional proposals to let the Government Accountability Office, Congress' investigative arm, audit the central bank.

He feared that audits that delve into the Fed's interest-rate decisions could compromise its independence in setting interest-rate policies.

"A perceived loss of monetary policy independence could raise fears about future inflation," he warned.

Rep. Ron Paul, R-Texas, a frequent Fed critic, rejected that argument and said the Fed already makes political calculations.

"Just the fact that (the Fed) can issue a lot of loans and special privileges to banks and corporations," Paul said.

"That's political."

Rep. Bill Posey, R-Fla., who wants the Fed to be more open, argued that some people rightly say "you can find out more about the operations of the CIA, than the Fed."

"The public has the right to know."

Bernanke's term expires early next year, and President Barack Obama will have to decide whether to reappoint him.

The Fed chief's innovative policies have been credited with pulling the economy from the edge of the abyss last year.

But those actions also have touched off criticism about putting taxpayers at risk and whether the government should be cleaning up Wall Street messes.

Bernanke again pledged to keep its key bank lending rate at a record low near zero for an "extended period."

Economists predict rates will stay at record lows through the rest of this year.

Laying out a plan now to unwind the Fed's stimulus could give Bernanke more leeway to hold rates at record lows to brace the economy.

It could ease investors' fears that the Fed's aggressive steps to end the longest recession since World War II could spur inflation later on.

"It is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation," Bernanke said.

"We are confident that we have the necessary tools to implement that strategy when appropriate."

But House committee chairman Barney Frank, D-Mass., said it is important that the Fed not take those actions "prematurely" and snuff out a recovery.

Nigel Gault, economist at IHS Global Insight, said Bernanke wanted to send Congress a clear message:

"Our monetary exit strategy is ready."

"Don't try to interfere with it."

On Wall Street, bond investors took comfort in Bernanke's remarks, pushing up Treasury prices for a second straight day.

The Dow Jones industrial average gained nearly 68 points to 8,915.94, the seventh straight advance for the blue chips.

Broader indices also finished higher.

To revive the economy, the Fed has plowed trillions into the financial system in an effort to drive down rates on mortgages and other consumer debt.

It also has created programs to bust through credit clogs, a key ingredient in turning the economy around.

Eventually, the Fed will need to soak up that money.

Besides raising its key bank lending rate, the Fed can raise the rate it pays banks on reserve balances held at the central bank, Bernanke said.

That would give banks an incentive to keep their money parked there, rather having it flow back into the economy, where it can stoke inflationary pressures.

The Fed also can drain money from the financial system by selling securities from its portfolio with an agreement to buy them back at a later date.

Or it can sell securities outright.

Steering the economy from recession to recovery will be a delicate move for Bernanke -- economically and politically.

Bernanke repeated the Fed's forecast that the economy should start growing again in the second half of this year.

But he warned that growth would be slight, leading to higher unemployment.

The nation's unemployment rate climbed to a 26-year high of 9.5 percent in June.

The Fed says it could rise as high as 10.1 percent this year and stay elevated into 2011.

The post-World War II high was 10.8 percent at the end of 1982.

"We have a very long haul" back to full economic health, Bernanke told lawmakers.

MARKETWATCH Bond Report

Jul 22, 2009, 4:20 p.m. EST

"Treasurys weaker as Bernanke wraps up testimony"

By Deborah Levine, MarketWatch

NEW YORK (MarketWatch) -- Longer-dated Treasury prices traded lower Wednesday, pushing up their yields, as analysts weighed comments from Federal Reserve chief Ben Bernanke and the direction of U.S. stock markets.

On Tuesday, Bernanke stressed the need for fiscal responsibility as he said the Fed isn't close to changing its ultra-low interest-rate policy.

In testimony on Wednesday before a panel of senators, he said any discussion of enacting a second stimulus package to prop up the economy is premature.

Ten-year note yields, which move inversely to prices, rose 5 basis points to 3.54%, on the heels of a Tuesday rally in which the benchmark note's yields sank by the most since July 10.

A basis point is 0.01%.

The 10-year's yield is expected to range between 3.43% and 3.58%, said John Spinello, Treasury strategist at Jefferies & Co., one of the 17 primary government security dealers required to bid at U.S. auctions.

However, two-year note yields rose 1 basis point to 0.94%.

Shorter-term maturities are usually more sensitive to changes in interest-rate expectations.

Stock prices gyrated for much of the session.

The Standard & Poor's 500 Index finished down 0.5 points at 954.

Traders are also looking toward the Treasury Department's announcement scheduled for Thursday on the amount of debt it plans to sell next week.

"The market now finds itself in a 'what do we do now?' position as a historic chunk of supply looms next week and after Bernanke effectively put a near-term cap on short rates yesterday," said William O'Donnell, head of Treasury strategy at primary dealer RBS Securities.

The Treasury is expected to sell $7 billion in 20-year inflation-indexed debt on July 27, according to Wrightson ICAP, a research firm specializing in government finance.

It will also sell $40 billion in 2-year notes, $39 billion in 5-year securities and $27 billion in 7-year debt next week, the firm predicts.

The 5-year sale would be larger than last month's sale of this maturity.

The inflation-protected security sale would be smaller than the last offering in January, which is typical for a sale that is a re-opening.

The only economic data released Wednesday, while generally minor for the market, were both negative for bonds.

First, mortgage applications rose a seasonally adjusted 2.8% last week from the prior week, marking the third straight weekly increase, according to the Mortgage Bankers Association's latest survey.

And second, U.S. home prices rose 0.9% in May, the Federal Housing Finance Agency reported.

Still, it said home prices have dropped 5.6% in the last year.

Many analysts had thought the FHFA's index would show prices declined, so its gradual improvement may bolster hopes that housing prices have bottomed.

"Yields are edging higher in the wake of the surprise uptick in FHFA home prices in May," analysts at Action Economics said.

Deborah Levine is a MarketWatch reporter, based in New York.

http://www.marketwatch.com/column/Bond%20Report

The stock market, the bond market, the Federal Reserve and the Treasury are like four cats with their tails all tied together ...

And so ...

"Treasurys fall as investors cash in on rally - Treasurys slide after rallying; Investors await announcement of next week's Treasury auctions"

By TIM PARADIS, Associated Press

Last updated: 6:15 p.m., Wednesday, July 22, 2009

NEW YORK -- Treasury prices pulled back Wednesday as traders cashed in gains from a steep rally.

Treasurys had jumped Tuesday after Federal Reserve Chairman Ben Bernanke told Congress that inflation was likely to remain tame.

Rising prices are worrisome to bond investors since they reduce the value of a bond's fixed returns over time.

The drop in Treasury prices drove their yields higher.

Long-term Treasury yields are closely tied to rates on mortgages and other consumer loans.

The central bank has been buying government debt to absorb some of the new supply of bonds that Washington is issuing to fund its economic stimulus programs.

Policymakers are also hoping to stimulate the economy by reducing borrowing costs.

In late trading, the benchmark 10-year Treasury note fell 18/32 to 96 16/32, sending its yield up to 3.55 percent from 3.48 percent late Tuesday.

The drop in Treasurys came ahead of an announcement Thursday of how much debt the Treasury Department plans to auction next week.

Jim Vogel, debt analyst at FTN Financial in Memphis, said investors likely will be on edge again as they wait to see whether the supply of debt will overwhelm demand.

The last three auctions have gone well but investors are worried that if demand falters Washington could be forced to entice buyers by boosting its payout.

That could raise borrowing costs in general and threaten the economy's recovery.

In other trading, the 30-year bond fell 31/32 to 96 23/32, and its yield rose to 4.45 percent from 4.39 percent.

The two-year note fell 1/32 to 100 10/32, while its yield rose to 0.95 percent from 0.93 percent.

The yield on the three-month T-bill was flat at 0.17 percent.

Its discount rate was 0.18 percent.

The cost of borrowing between banks was little changed.

The British Bankers' Association said the rate on three-month loans in dollars -- the London Interbank Offered Rate, or Libor -- was essentially flat at 0.50 percent.

Speaking of Treasuries...

The Market Ticker
Commentary On The Capital Markets
Thursday, July 23. 2009
Posted by Karl Denninger in Bonds at 11:37

HOLY !@#!! Treasury Auction Schedule


Oh My......

Let's see if I can count this up....

70 day CMBs, $30 billion (tomorrow)
13 week Bills, $32 billion (July 27th)
26 week Bills, $31 billion (July 27th)
52 week Bills, $27 billion (July 28th)
2 year Notes, $42 billion (July 28th)
5 year Notes, $39 billion (July 29th)
7 year Notes, $28 billion (July 30th)
19 year, 6 month TIPS (reopened), $6 billion (July 27th)

That's two hundred thirty-five billion dollars over the next week!

Almost one quarter of a trillion....... geejus.

I guess you should get while the getting is good, but this is going totally parabolic.
That money has to come out of somewhere, by the way, in order for the sale to succeed,
which is going to get rather interesting at some point - but exactly where it matters is impossible to know.

I expected that when we crossed the $100 billion threshold in a week the market would
throw up all over it, but it didn't. Now we've got the government trying to sell a quarter
of a trillion dollars in debt over the next week, the announcement is out there,
and while the bond market is selling off to a material degree equities could care less!

This is flat-out insane. At this run rate we would be trying to sell twelve trillion dollars
over one year's time, an obviously ridiculous and impossible-to-peddle amount of debt at any price.

When does the rest of the world wake up (not to mention the primary dealers) and say "NO!"?
Never? Is there a truly insatiable demand for our government's debt, despite the fact that President Obama
got up on the national stage last night and promised to spend another trillion dollars we don't have?

How do equities power higher into this sort of debt issuance? Is it simply that the market has deduced
that the government will hand all of this zero-interest money out - indefinitely?

Guess what - that which is impossible won't happen, and the stock market is now telling you that
the impossible will become reality. There has been and will not be any amount of fiscal sanity on
the part of our government until the market imposes it, and when it does it is going to happen in
exactly the same way it happened to Bear Stearns, Lehman, Fannie and Freddie. May I remind
readers that it was said that Fannie and Freddie "couldn't" get in trouble due to their implicit
government guarantee? Well guess what - they both effectively failed, but when the US Government
finds itself in the same situation it has nobody who can take it into conservatorship and as such we're
just going to have to deal with the consequences of failed debt auctions - that is, dramatically increased
funding costs across the board in the economy, including the government, which will choke off any
hope of economic anything.

Folks, this is how you get detonation of a nation's monetary and political system. Timing the "event"
it is not easy, but the certainty of outcome given this sort of outrageously irresponsible activity is not in doubt.

I'm increasing my stock of things that "will never go to zero" and keeping my ear to the ground.
The "short the phone book but make sure you get out fast before you get trampled" moment approaches
- mark my words.


When the levee breaks...I hope you have food, guns & ammo and a rural location...

An interesting analysis as always, IH ....

The bond market is the overlooked market most of the time ....

Everybody knows what the Dow is doing, as if that made any difference to anything real, but people are mostly ignorant of bonds ....

In this go-round, my eye is on the bond market ....

That is where that action is going to be ....

And I am watching the relationship between the Dow rising, and Treasury interest rates also rising at the same time ....

As those interest rates go up, so too do mortgage rates ....

I wonder how the WHIZ BANGS at the Fed and THE TIMMY's shop are going to de-couple that relationship ....

So far as I can see, they can't .....

Which means this whole thing is going to blow up, right in their faces as they try to pump up the Dow to re-inflate that bubble ....

Ah, yes, the train wreck scene from The Fugitive ......

When the wheels start coming off that puppy, get out of the way, because the pieces will be flying everywhere ....

And so ...

AND SPEAKING OF BOND YIELDS ....

MARKETWATCH Bond Report

Jul 23, 2009, 4:04 p.m. EST

"Treasury yields soar as stocks rally; massive supply looms - Heavy-duty week for debt sales - more than $205 billion in U.S. securities"

By Polya Lesova, MarketWatch

NEW YORK (MarketWatch) -- Treasury yields soared Thursday and prices traded broadly lower, as rallying U.S. stocks and indications that a massive amount of securities will be auctioned next week combined to reduce the appeal of government debt.

Ten-year note yields, which move inversely to bond prices, surged 14 basis points to 3.686%.

"It's all a matter of supply today and strong gains in equities," said Kim Rupert, managing director of global fixed-income analysis at Action Economics.

"We're seeing a real shift back into demand for riskier assets and money coming out of Treasurys," she said.

"We will see if that new momentum can be sustained."

On Wall Street, U.S. stocks surged anew, as signs of mergers-and-acquisition activity returned and as upbeat earnings season continued on a largely upbeat note.

The three major equities benchmarks -- the S&P 500 index, the Dow Jones Industrial Average and the Nasdaq Composite -- all rallied more than 2%.

The Dow broke above 9,000 points for the first time since January.

Two-year note yields also jumped, up 9 basis points to 1.039%, while 30-year Treasury yields rose 12 basis points to stand at 4.571%.

"It's been pretty violent."

"We've seen quite a bit of selling," said John Spinello, bond strategist at Jefferies & Co.

"It's a supply-driven trade," he said.

"It's been happening throughout the year."

"As the supply is coming to market, yields do back up."

The Treasury Department said Thursday it plans to auction massive amounts of debt next week.

Specifically, the Treasury will sell $42 billion in two-year notes, $39 billion in five-year notes, $28 billion in seven-year notes, and $6 billion in 20-year Treasury Inflation Protected Securities.

In addition, it will auction $27 billion in 52-week bills, $31 billion in 26-week bills and $32 billion in 13-week bills.

This total -- $205 billion -- doesn't include the four-week bills that will be announced on Monday, Rupert noted.

"There is the potential of over $236 billion in auctions next week," she said, as four-week bills this week totaled $31 billion.

In other news, the Federal Reserve Bank of New York bought $3 billion in Treasurys on Thursday.

The debt bought included securities maturing between August 2026 and May 2039.

Dealers submitted $7.37 billion in debt to be purchased.

Dallas Fed's Fisher speaks out

Richard Fisher, president of the Federal Reserve Bank of Dallas, said he is against expansion of purchases of Treasurys beyond $300 billion.

In a speech in Carlsbad, Calif., Fisher said the Federal Reserve faces some risk of being viewed as a "handmaiden" to the Treasury and making it easy for them to sell their debt.

Fisher said he is confident that the Fed will exit its non-traditional monetary policy without regard to political factors.

"We know full well ... that we will have to 'pull the trigger' of tightening policy well before it is politically convenient," he said.

Bond traders also digested fresh U.S. economic data.

Resales of U.S. single-family homes and condos rose 3.6% in June to a seasonally adjusted annual rate of 4.89 million, the highest level since last October, the National Association of Realtors reported.

Earlier Thursday, the Labor Department said that first-time claims for state unemployment benefits bounced higher in the latest week, rising by 30,000 to 554,000.

The four-week moving average of initial claims, a measure of the underlying trend, fell by 19,000 to 566,000, however.

It was the lowest level for the four-week average since late January.

Polya Lesova is a New York-based reporter for MarketWatch.

http://www.marketwatch.com/column/Bond%20Report

WHO is driving up the stock market, do you think, IH?

BECAUSE THEY SURE DO HAVE A DIFFERENT VISION OF REALITY THAN I DO ....

And so ...

"Weak recovery to provide little relief for jobless - Little relief in sight for long-term unemployed as benefits run out, jobless rate rises"

By CHRISTOPHER S. RUGABER, Associated Press

Last updated: 5:29 p.m., Thursday, July 23, 2009

WASHINGTON -- As the recession eases, companies are cutting fewer jobs.

Yet they remain reluctant to hire, leaving potentially millions of people without any financial aid long after their unemployment benefits run out.

That grim picture was reinforced Thursday by the latest government report on jobless benefits.

The number of first-time claims -- a proxy for the pace of layoffs -- remained below the peak levels of the spring.

At the same time, though, the total number of people receiving unemployment aid topped 9.1 million.

"We are left with a bifurcated job market, with fewer newer claimants but a rising tide of long-term unemployed," said Cary Leahey, an economist at Decision Economics.

"Some will exhaust all their benefits and be at wit's end to make ends meet."

The National Employment Law Project, an advocacy group, projects that 540,000 people will use up their unemployment benefits by the end of September.

It estimates 1.5 million will have run out by year's end.

Those benefits include up to 53 weeks of emergency extended coverage, on top of the standard 26 weeks of aid typically provided by most states.

The loss of all unemployment aid for so many jobless Americans could lead to calls for further benefits extensions.

Congress first provided federal emergency benefits last year.

Those benefits were extended in February by the Obama administration's stimulus package.

Steven Ridenhour, 40, is receiving extended unemployment benefits after having been laid off nine months ago from a Chrysler plant in suburban St. Louis.

But that extra assistance is scheduled to run out this fall.

He is using a one-time buyout payment from Chrysler to pay his mortgage and support his wife and four children.

The pretax payment of $140,000 amounts to one year of his salary.

Ridenhour said he wants to work with his hands.

But jobs are scarce.

"There are so many people I know around St. Louis that are where I'm at," he said.

"The (job) market is pretty well flooded right now."

Even if the economy begins to recover this summer, as some economists expect, growth will likely be anemic, and unemployment will continue to rise.

Most private economists and the Federal Reserve expect the unemployment rate to top 10 percent by year-end.

The rate for June hit 9.5 percent, a 26-year high.

Job seekers are trying to pounce on any potential opportunity.

J.C. Penney Co. Inc. opened a new store in New York City on Thursday, creating 500 new positions.

Company officials told The Associated Press that they received 15,000 applications -- an average of 30 for each opening.

Economists say job creation will be weak even if the economy begins to recover this year.

The reasons include:

-- Huge slack in the labor market.

Besides the 14.7 million Americans officially counted as unemployed, nearly 9 million people are working part-time but would prefer full-time work, the Labor Department says.

Those people will escalate the competition for any new jobs.

-- The average work week is at a record low.

That means companies could squeeze more work from their existing employees before hiring new ones.

-- Economic growth will be weak.

A rebound is widely expected in the second half of this year in part because industries like housing and autos will inevitably recover from abysmally low production levels.

Consumer demand, which is necessary for a sustained recovery, is likely to remain subdued.

Mark Vitner, senior economist at Wells Fargo, said nearly all companies that are reporting healthy second-quarter profits are benefiting from cost cuts, not increased sales.

But they'll need to see sales rebound before they'll hire, he said.

-- Layoffs are more likely to be permanent.

Unemployment in past recessions included manufacturing and construction workers who were laid off temporarily when business slowed, Leahey noted.

Many of those workers knew they would be rehired as soon as the economy recovered.

This time, many jobs at auto makers and other factories are being cut permanently.

Workers on temporary layoff made up about 22 percent of the unemployed in 1982, when the economy last suffered a steep recession, according to Labor Department data.

They represent only about 11 percent of the unemployed now.

"If you are a blue collar worker laid off in the last year or so, you may never get another job like your old one," Leahey said.

And it could take several years for the job market to regain its health.

Some Federal Reserve policymakers project the unemployment rate could remain above 9 percent into 2011.

And some economists say the jobless rate won't return to a historically "normal" rate of roughly 5 percent until 2013 or 2014.

"We've got a long, tough road ahead of us in terms of unemployment," Vitner said.

In the 1991 and 2001 recessions, the unemployment rate didn't peak until roughly 18 months after the recessions ended.

Vitner and many other economists expect a similar lag this time.

The rise last week in first-time claims for unemployment benefits followed two straight weeks of sharp drops, largely because automakers didn't lay off as many workers as expected in early July.

General Motors and Chrysler temporarily shut down many of their plants earlier than usual this year, in May and June, after filing for bankruptcy protection and restructuring their companies.

Still, weekly claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy.

New claims last fell below 300,000 in early 2007.

The lowest level this year was 488,000 for the week that ended Jan. 3.

The number of people continuing to receive jobless benefits, meanwhile, fell by a more-than-expected 88,000 to 6.2 million in the week that ended July 11, the lowest level since mid-April.

That total doesn't include those on the extended-benefits programs.

They pushed the figure to 9.1 million for the week that ended July 4, the most recent period for which numbers are available.

--------

AP Business Writers Anne D'Innocenzio in New York and Christopher Leonard in St. Louis contributed to this report.

I guess the question is more one of what does anyone see to support this latest stock market rally ...

The government has salted a gold mine to get people to buy financial stocks, because historically, financial stocks always led the nation out of a recession ...

So the government manipulated people's thoughts, by propping up financials to make it look like the recession was ending ....

But outside of that ....

Well ....

And so ...

And when I talked of buying copper, I meant it as a building material ....

I talked to the supplier a bit ago, and he said that the last time copper went so high, which was just last year, they started selling a substitute made of copper plated steel ....

And then, the price of copper slid dramatically ....

Because the only ones the speculators could sell to were other speculators ....

And now, the speculators are right back in there driving up the cost again ....

It is what I call a BALL SQUEEZE ....

They think they can squeeze us and make us pay their price ...

And I am willing to sit by the side of the road and do nothing, in my turn ....

Let them eat the stuff if they can digest it ....

And so ...

IMO commodities will be worth more than equities soon...
paper is closing on worthless...and if one treasury is left
on the table, that is if any $1 of US gauranteed debt is
un-wanted there willl be a bugle-call for retreat.

They have pushed it here...they feel confident...but if
all they can do is get The Fed to buy what is not wanted...
the corner is turned...the credit card is voided...and we are in the real world.

As I was saying ...

HERE IS SOME OF WHAT I AM ON ABOUT IN HERE ...

"Dow tops 9,000 as home sales rise for 3rd month - Stocks extend rally after jump in home sales; Dow climbs to highest level since November"

By TIM PARADIS, Associated Press

Last updated: 6:15 p.m., Thursday, July 23, 2009

NEW YORK -- Investors celebrated news of another jump in home sales by propelling the Dow Jones industrials to their first close above 9,000 since January.

The stock market's best-known indicator shot up almost 190 points Thursday to 9,069.29, its highest level since November, and all the big indexes gained more than 2 percent.

News that existing home sales rose in June for the third straight month and by a higher-than-expected amount led investors to extend a buying spree that has now lifted the Dow 923 points, or 11 percent, in just nine days.

On paper, U.S. stocks have gained $1.2 trillion in value.

The week's economic news and upbeat earnings reports and forecasts from companies including chip maker Intel Corp. and heavy equipment maker Caterpillar Inc. convinced investors that the bets they've placed since March on a recovering economy were well-founded.

Still, the economy, and in turn, the market, are likely to face more quicksand pits in the months ahead.

Many more companies, including retailers, who are a barometer of consumer spending, have yet to announce second-quarter earnings.

And many of the corporations that have already released their reports said they made money because they had cut costs so deeply, something that they can't keep doing indefinitely.

There was already some troubling earnings news after trading ended Thursday.

Microsoft Corp. missed analysts' expectations for revenue, sending its shares lower in extended trading.

American Express Co. and Amazon.com also traded lower after releasing their earnings.

Another ongoing problem is the banking business.

Banks are forecasting that they'll continue to suffer losses from loans as consumers keep getting laid off.

But some analysts don't believe investors are caving in to euphoria.

"I don't think the market is signaling that we are fully healed at all but it is telling us that there is a strong likelihood that a recovery is under way," said Ciaran O'Kelly, head of equities, Americas, at Nomura Securities Intl. Inc. in New York.

Analysts also caution that volume remains relatively light, as is typical of the summer months when many traders take vacations.

It's easier for the market to make big swings when there are fewer trades.

The Dow rose 188.03, or 2.1 percent, to 9,069.29.

It was the highest finish for the blue chips since Nov. 5 and the first time the Dow has traded or closed above 9,000 since January.

Even with the gains, the Dow is still far off its peak of 14,165 in October 2007.

The Standard & Poor's 500 index rose 22.22, or 2.3 percent, to 976.29.

It hasn't traded or closed above 1,000 since early November.

The Nasdaq composite index rose 47.22, or 2.5 percent, to 1,973.60, its 12th straight advance.

The Nasdaq hasn't had a rally that long since a streak that ended Jan. 8, 1992.

About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6 billion shares, compared with 4.7 billion Wednesday.

Bond prices tumbled, pushing their yields higher, as money flowed back into the stock market and out of safe-haven investments.

The yield on the benchmark 10-year Treasury note, which is closely tied to home mortgage rates, jumped to 3.67 percent from 3.55 percent late Wednesday.

The Realtors said sales of previously occupied homes rose 3.6 percent in June.

Sales came in at 4.89 million, above the 4.84 million analysts expected.

Dealmaking also supported stocks.

Investors look to companies' willingness to make acquisitions -- and part with cash or take on debt -- as a sign of confidence.

In health care, Bristol-Myers Squibb Co. plans to acquire Medarex Inc. for about $2.1 billion.

Medarex surged $7.49, or 89 percent, to $15.89, while Bristol-Myers rose 57 cents, or 2.8 percent, to $20.86.

Amazon.com Inc. agreed to buy Zappos.com Inc., a privately held online shoe store, in a deal worth about $850 million.

Amazon rose $5.08, or 5.7 percent, to $93.87.

It tumbled to $87.58 after its earnings were released.

Among the day's earnings news, Ford Motor Co. announced a profit that was a huge improvement over the record $8.7 billion loss it reported a year earlier.

Without one-time gains, the car maker would have lost $424 million, or 21 cents per share.

That is still smaller than the loss of 50 cents per share analysts had been expecting.

Ford rose 60 cents, or 9.4 percent, to $6.98.

Microsoft, which rose 76 cents to $25.56 in regular trading, fell to $23.62 in after-hours activity.

American Express traded at $28.05 in extended trading after rising 69 cents to $29.45 during the day.

Some analysts warn that stocks won't be able to hold their gains if companies can't increase earnings by boosting revenue rather than slashing costs.

"It's like going on a diet."

"You can only starve yourself for so long," said Lawrence Creatura, portfolio manager at Federated Investors in Rochester, N.Y.

"You cannot cost cut your way to prosperity."

Creatura noted that companies are reducing costs in large part by getting rid of workers.

That could wind up hurting other businesses as the ranks of unemployed people grow.

Unemployment is at a 26-year high of 9.5 percent, and the Federal Reserve predicts it will top 10 percent by year-end.

The dollar mostly fell against other major currencies, while gold prices dipped.

Oil prices rose $1.76 to settle at $67.16 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies gained 17.15, or 3.2 percent, to 545.85.

The gains in U.S. stocks pushed markets overseas sharply higher.

Britain's FTSE 100 rose 1.5 percent, while Germany's DAX index jumped 2.5 percent and France's CAC-40 rose 2.1 percent.

In Japan, where markets closed before U.S. stocks began trading, the Nikkei stock average rose 0.7 percent.

Wow! The DJIA is 9,000...a bit less than the 14,000 this time last year...
but hey...believe what ya want...just don't get caught standing when the
music stops (in the market's musical chairs game, now on).

The debt monster doesn't care. Smart investors hope they are smart
enough to predict the timing...but they all know where it's going.

Well .....

It is a number ....

But how real is it?

I wouldn't bet much on it, myself .....

And so ...

And then, of course, there is this ....

To be a stock market investor, it seems to me that a good percentage of the time, you have to have your head parked firmly in your *** so that you are oblivious to reality ....

"HEY, THE CASINO IS OPEN, C'MON IN, EVERYBODY A WINNER!"

And so ...

House sales are up...yeah...I saw an investor on CNN talking about buying hundreds of houses in Detroit for $6,000 each...
housing sales may be up...but the economy isn't...a few investors are buying to remodel and resale when they can...

http://globaleconomicanalysis.blogspot.com/

Friday, July 24, 2009
U.S. Home Vacancies Hit 18.7 Million; What's the Real Story?

Bloomberg is reporting U.S. Home Vacancies Hit 18.7 Million on Bank Seizures.

More than 18.7 million homes stood empty in the U.S. during the second quarter as the steepest recession in 50 years
sapped demand for real estate and banks seized properties from delinquent borrowers.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, was little changed from 18.6 million
a year earlier, the U.S. Census Bureau said in a report today. The quarterly homeownership rate was 67.3 percent, seasonally adjusted.

More than 14 percent of homes were vacant in the period, the Census said. Home values dropped 33 percent since 2006, according
to the S&P/Case-Shiller index, and the unemployment rate in June rose to the highest in almost 26 years. Tumbling home prices
and rising job losses have thwarted government efforts to reverse the housing decline at the heart of the longest U.S. recession since the 1930s.

There were 130.8 million homes in the U.S. in the second quarter, the Census Bureau said. In addition to the 1.9 million empty properties for sale,
the report counted 4.4 million vacant homes for rent and 4.6 million seasonal properties that are only used for part of the year.

As is typical, Calculated Risk has posted some great charts showing the trends.
The homeowner vacancy rate was 2.5% in Q2 2009.

It's hard to define a "normal" rental vacancy rate based on the historical series, but we can probably expect the rate to trend back towards 8%.
According to the Census Bureau there are close to 40 million rental units in the U.S. If the rental vacancy rate declined from 10.6% to 8%, there
would be 2.6% X 40 million units or about 1.04 million units absorbed.

These excess units will keep pressure on rents and house prices for some time.

Dip In Vacancy Rate Reflects Rise In Rental Rate

It appears as if there is improvement in the homeowner vacancy rate, but the main reason for the dip in homeowner vacancies is consumers
have given up on trying to sell their homes and instead are attempting to to rent them. Furthermore, the record 10.6% rental vacancy rate
is pressuring rental prices.

Of course there are many finished condo building that were for sale that are instead for rent as apartment buildings. Many of those anticipated
condo sales will never be sold. Oversupply of condos is especially rampant in places like Florida, Las Vegas, and San Diego. That adds to various localized pressures.

I spoke with Calculated Risk this morning and asked "How many of those vacancies" are even livable. Neither of us could find an answer.

Yet the question is an important one as 50 Cities Must "Shrink to Survive".

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts
and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into
a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government
and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank,
as potentially needing to shrink substantially to cope with their declining fortunes.

Banks Walk Away On Foreclosures

For further proof many homes are worth nothing (or a liability) please consider Banks Walk Away On Foreclosures.
City officials and housing advocates in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling
development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost
of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

Astonishing Home Prices In Detroit

Also note that Median Home Prices In Detroit Fall To $6,000 as Detroit heads towards bankruptcy.

Totaling Unlivable, Worthless Home

How many homes for sale in Detroit are unlivable with liabilities that exceed the asking price or are simply
unlivable at all? What about Flint, LA, Memphis, Toledo, and even places like Danville, Illinois?

There is simply no way to know what that total is.

Looking ahead, how many more foreclosures will we see as the unemployment rate heads towards 11% in 2010?

These are the kind of factors that are not readily apparent when one looks at the headlines such as "Home Vacancies Hit 18.7
Million on Bank Seizures" and then sees a dip in vacancies.

The real story is things are much worse than they look in many ways, even if one could figure out how to subtract vacant
"unlivable worthless" homes from the totals.

Mike "Mish" Shedlock

----------------------------------
http://globaleconomicanalysis.blogspot.com...-50-cities.html
Friday, July 24, 2009

Detroit Heads For Bankruptcy; 50 Cities Must "Shrink to Survive"

For Detroit, as with GM, bankruptcy has always been a question of when, not if. Detroit's time is nearly up even as Mayor Dave Bing
says I’m fighting to keep city from going broke.

Detroit is in danger of running out of cash if the city doesn’t take steps to eliminate a $20-million to $25-million budget shortfall
before Oct. 1, Mayor Dave Bing told the Free Press on Thursday.

After spending most of his first two months in office poring over Detroit’s financial books and organizational structure, Bing said the city
is so deeply in the red that the following measures must be taken to avoid bankruptcy:

• The consolidation and elimination of some city departments.

• A reduction in nonessential city services.

• Concessions by city employees, including job losses in some cases.

• The hiring of an outside emergency collection agency to help recoup some of the debt owed to the city.

Bing said the city cannot afford to continue operating the way it has for generations, nor can it afford to keep all of its 13,000 employees.

Bing said Thursday there are no more creative moves to make -- those budgetary tricks were all tapped by previous administrations -- and the
city is up against a wall financially. The only answer, he said, is to change how the city functions.

To start, he said, these are his priorities:

• Bing said city workers must accept some concessions, and end contract negotiations within the next 30 days. "Every day that we go forward
without understanding what our labor costs are is a missed opportunity. ... There are financial consequences for the city," he said.

• Reach out to Lansing legislators for ideas and help in tackling the city's accumulated debt, especially as it relates to revenue sharing.

• Determine which city services can be cut or eliminated all together. Bing said he has some ideas, but he couldn't be more specific because
of the ongoing labor negotiations. "There are going to be services we can't provide anymore -- we can't afford it," he said.

....

The mayor said this year's budget is padded with soft or unrealistic revenue, including money from plans to sell the rights to the profit
generated by the city's parking system, lighting system and the Detroit-Windsor Tunnel.

John Riehl, president of AFSCME Local 207, which represents water and sewer employees, said Bing's plans to consolidate or eliminate city
departments is "just a way to mess with the unions," and said he's certain city residents won't tolerate having more city services cut.

"It's not our role to give anymore concessions -- we've heard the same crying for 30 years that they don't have money for us," Riehl said.
"He needs to find another way to solve the budget problem."

Bing said he views municipal bankruptcy -- Chapter 9 -- as a last option. "Right now I'm still pretty competitive," Bing said. "I don't want to
get into this situation and fail. We're going to get the job done."

[Note: The original link above was broken. Freep also changed the headline from "Bing: I’m fighting to keep city from going broke" to "Bing:
It's time for the city to face reality". The text above may have changed.]

Selling long-term cash producing operations like the Detroit-Windsor Tunnel (connecting the US to Canada) to finance short-term operations is pure insanity.

The city is broke and the unions have not even figured that out. Many people would gladly take those jobs at a lower salary and no pension benefits.

US cities may have to be bulldozed in order to survive

Inquiring minds are reading how 50 US cities may have to be bulldozed in order to survive.
The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.

"The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee.
"Decline is a fact of life in Flint. Resisting it is like resisting gravity."

Shrink To Survive

Inhabit is reporting on the same story in Shrink to Survive. The plan is modeled after a proposal currently underway in Flint, Michigan, the original home of General Motors.
Sections of Detroit, Flint, and 50 other cities sit in ruins. Let the bulldozing, the bankruptcies, and the tossing out of unions begin.

I am glad AFSCME Local 207 is taking a "no concessions" stance. This will allow Bing to do the number one thing that will benefit Detroit the most:
Declare bankruptcy and hopefully get a court to eliminate the unions entirely.

The sooner Detroit files bankruptcy, the better off it will be. For the sake of Detroit, let's hope it happens this autumn.

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

Maybe those stocks selling so well are being sold to squirrels and bunnies who are going to live in the "back to nature" pastures, when the bulldozers are done.

HERE WE GO ALL OVER AGAIN ....

RIGHT BACK TO YESTERDAY ....

THESE SPECULATORS HAVE NOT LEARNED A SINGLE THING BETWEEN THEN AND NOW ....

WHICH GOES TO PROVE THERE IS ABSOLUTELY NO CONNECTION WHATSOEVER TO HAVING MONEY AND SOME COMMON SENSE ....

GO ON, BOYS ....

RUN THE PRICES RIGHT BACK UP THROUGH THE ROOF ....

SEE IF YOU END UP IN A DIFFERENT PLACE THAN YOU LANDED LAST YEAR ....

And so ...

"Pump prices rising despite glut of gasoline - Gas prices rising despite supply glut; oil rises above $68"

By CHRIS KAHN, Associated Press

Last updated: 4:15 p.m., Friday, July 24, 2009

NEW YORK -- Retail gas prices are increasing around the country even though U.S. supplies have swelled for six weeks in a row.

Pump prices rose the final three days this week, including a half cent Friday, to a new national average of $2.47 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

A gallon of gas is still more than 20 cents cheaper than it was a month ago, and it's priced at a major discount to last year, when the national average was above $4.02.

But with so much unused gasoline in storage, analysts said prices should be heading even lower.

That doesn't seem to matter, with a lot of gasoline futures being bought up on the belief that a number of rosy earnings reports from major corporations hint at a coming rebound in demand from consumers.

Gasoline futures on Nymex have risen every day since July 13 and prices have jumped 28 cents in less than two weeks.

"There's just a crowd behavior, and it's forcing prices above what it should be," said Fred Rozell, retail pricing director at Oil Price Information Service.

"People are acting emotionally."

Crude prices also rallied this week as the Dow Jones industrial average increased 11 percent in the last nine days and passed the 9,000 mark for the first time since January.

Benchmark crude for September delivery rose 89 cents to settle at $68.05 a barrel Friday on the New York Mercantile Exchange.

Like gasoline futures, crude moved higher this week as the stock market rallied and companies reported strong second-quarter earnings.

"We haven't seen demand increase yet, but all the good news about the economy seems to be adding fuel to the fire," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney.

"Just the fact that things are improving is enough to change the sentiment of a lot of people."

Most second-quarter corporate results have beaten analyst expectations, but reports late Thursday from Microsoft Corp., American Express Co. and Amazon.com disappointed investors, giving a mixed picture about a recovery.

The Organization of Petroleum Exporting Countries says it's concerned about the build in gasoline supplies in the U.S., and how that may eventually force crude prices lower than its members want.

The group was able to cinch production earlier this year and prices rebounded, but some members have losened the spigots for badly needed cash.

OPEC crude production increased in April, May and June, according to the organization's July report.

In that period, Angola leapfrogged Nigeria as Africa's largest oil producer.

Nigeria's production has been slowed as militants atack its energy infrstructure.

In other Nymex trading, gasoline for August delivery added less than a penny to settle at $1.9159 a gallon and heating oil rose 1.69 cents to settle at $1.7813 a gallon.

Natural gas for August delivery jumped 14.5 cents to settle at $3.695 per 1,000 cubic feet.

In London, Brent prices rose $1.07 to settle at $70.32 a barrel on the ICE Futures exchange.

------

Associated Press writers Ernest Scheyder in New York, Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

Except things aren't improving ....

The fools with money just think they are ...

EUPHORIA!

What a reason to commit money foolishly ...

And so ...

This morning, I happened to catch an item on the local news concerning all the OBAMA STIMULATION money coming in to New York State ....

According to the news, that STIMULATION money is going to create all these jobs, but they will be in "weatherization" ....

The news named two organizations that are getting all this STIMULATION money and allegedly providing training to make people into "weatherizers" ...

Both were organizations that serve the black community up here, which is not me ....

Then they gave the kicker - so far they have trained SIXTEEN people ....

I thought to myself, "well, that is going to make a real dent in the unemployment, alright" ....

And afterwards, I had to wonder how much it cost to train those sixteen people to be "weatherizers" given the amount of money given these groups ....

What was it?

A million dollars a person?

And so ...