It was the Mass. air, that did her some good. It reformed her and then that reformed Teddy.

...and then there is TheMarketTicker.org this a.m.:

Monday, August 31. 2009
Posted by Karl Denninger in Editorial at 10:51

Impending Crash?

You have to wonder when you see statistics like this (through 9:30 this morning):



Remove SPY, ETFC and LEHMQ (none of which trade on the NYSE) from the list and you get 606 million shares.

How many shares have traded in total with one hour in?


1.491 billion.

Forty percent of the volume is comprised of four used dogfood stocks, just as we've seen for the last couple of weeks - all people passing shares back and forth among each other, many of it being "computer HFT games."

The other used dog-food stocks (LEHMQ and ETFC) are really no better; they just don't trade on the NYSE. Lehman is particularly ridiculous as that's a formally-bankrupt company!

Fannie and Freddie are two of the most outrageous abuses I've seen in a long time, second only to AIG. All three of these should be delisted as their equity value is quite literally bupkis.

This just goes to illustrate - the market is currently being levitated on literal trash. Again today we see the Casino trying to suck in people; I got emails from two more associates over the weekend telling me that their "advisors" are telling them "you have too much cash allocated; now is the time to buy."

Now is the time to buy, after a 50% move?! Where the hell were these so-called "advisors" at SPX 666!

Nobody - and I do mean nobody - is talking about what this sort of volume pattern means. Well, I will: this is the sort of pattern that precedes an all-on equity market collapse. It strongly implies that the only volume support that the market has is from "hot money" speculators. Lest you think this is sustainable let me point out that just a few weeks ago the very same so-called "commentators" said the same thing about China's market.

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

Mr. Denninger was the first one to get me thinking about The Mirage late last year...

...and it gets scary when more and more people start to realize...

http://www.marketwatch.com/story/us-stock-...says-2009-08-31

...

The AAII survey, which measures the percentage of individual investors who are bullish, bearish and neutral
on the stock market over the coming six months, last week saw bullish sentiment falling to 34%, beneath the
long-term average of 38.9%; neutral sentiment fell to 17.5%, below the long-term average of 31.1%; and
bearish sentiment rose to 48.5%, above the long-term average of 30%.

The three previous occasions on which the index behaved in this fashion, the S&P 500 corrected, as it did in
early 2007; peaked, as in October 2007; or saw a bear-market rally fail, as was the case in May 2008, Marta said.

...get into something you want to have...values will swing wildly...buy things you can use, IMO.

"Federal Reserve made $14 billion on turmoil loans: report"

Mon Aug 31, 12:24 am ET

LONDON (Reuters) – The Federal Reserve has made $14 billion in profits on loans made in the last two years, The Financial Times reported on Monday, citing officials close to the matter.

The U.S. central bank also earned about $19 billion from interest and fees charged to institutions that tapped liquidity facilities during the global financial crisis, the report said.

If the Fed had invested the same amount loaned out in three-month Treasury bills since August 2007, it would have earned $5 billion in interest, the FT said.

This estimate excludes company bailouts and purchases of long-term assets as well as unrealized gains or losses on the Fed's portfolio of mortgage-backed securities and Treasuries purchased as part of the $1.75 trillion asset purchase program.

The Fed was not immediately available for comment on the report.

DID SOMEBODY SAY IT WAS SEPTEMBER ALREADY?

MY, MY, HOW THE TIME DOES FLY ...

And so ...

MARKETWATCH Bond Report

Aug 31, 2009, 2:51 p.m. EST

"Treasurys regain footing; U.S. debt on track for monthly gain"

By Laura Mandaro & Nick Godt, MarketWatch

SAN FRANCISCO (MarketWatch) - Treasurys resumed their push higher Monday, sending yields lower, helped by a global stocks sell-off that was only temporarily offset by signs that Midwestern manufacturing was recovering.

For the month, Treasurys are on track to post modest gains, as investors overlooked record-large sales of new U.S. debt to buy bonds ahead of an anticipated stock-market drop next month.

As prices rose, yields on 10-year Treasury notes slid 5 basis points at 3.396%.

The note, used to set mortgages and other loans, had earlier fallen as low as 3.39% and as high as 3.46%.

Prices on bonds move inversely to yields.

U.S. government debt had started off the week higher after a steep sell-off in Shanghai stocks led investors to seek the safety of government bonds.

"Treasurys seem to be keying off this Shanghai index that broke last night," said Thomas de Galoma, head of fixed-income rates trading at Guggenheim Partners in New York.

Treasurys briefly relinquished those early gains after the Chicago purchasing managers index showed manufacturing activity improved for the third straight month in the Chicago region in August.

Yields on the 30-year bond fell 2 basis points to 4.183%.

Yields on the 5 year notes slid 6 basis points to 2.387%.

One basis point is 1/100th of a percentage point.

For the month, U.S. Treasurys have gained about 1.5%, according to a Banc of America Securities-Merrill Lynch index.

Some of those gains have probably come from investors moving some of their holdings into government debt in anticipation that stocks will drop in September, a historically poor month for U.S. equities.

"There's been a lot written on September being a tough month for equities."

"I think bonds have been rallying, mainly in front of that."

"The easy trade is to sell equities and buy bonds," di Galoma said.

On Monday, Standard & Poor's Equity Research said the S&P 500 could drop to 940, roughly 7% from current levels.

Since 1929, the S&P 500 has delivered its worst performance of the year in September, losing 1.3% on average.

Plus, some bond investors may be deciding to take profits from corporate bonds and move some of their proceeds into Treasurys, di Galoma said.

Laura Mandaro is a reporter for MarketWatch in San Francisco. Nick Godt is a MarketWatch reporter based in New York.

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

NO, NO, NOT POSSIBLE ....

NOT POSSIBLE AT ALL ....

IT'S GOING RIGHT UP THROUGH THE ROOF ....

OBAMA AND BEN BERNANKE TOLD US SO ....

And so ...

I am a person who does not obsess about money, rla ....

I am a person who does not put money on an alter higher than God or other persons ....

I am a person who does not go out and kill human beings in other countries for the sheer sport of it ...

Who is it that I am much more alike than different from?

What percentage of America, would you say?

And so ....

100%

The Dow's keel was dragging today ....

HEY!

WOW!

TALK ABOUT "GREEN SHOOTS", ALRIGHT ...

SOME OF THE STIMULUS MONEY IS GETTING TO THE STREETS, ANYWAY ......

NOT ALL OF THE ECONOMY IS DOING BAD ....

SOMEBODY UP HERE HAS MONEY TO SPEND ....

And so ....

"Heroin use on rise in region - Federal studies find an an increase in illegal drug use here"

By ROBERT GAVIN, Staff writer, Albany, New York Times Union

First published in print: Monday, August 31, 2009

ALBANY -- America might be in the midst of a recession, but the Capital Region is experiencing a boom in the use and abuse of heroin, cocaine, illegal prescription drugs and high-potency marijuana, federal data shows.

Due to cocaine shortages attributed to surging costs, some of the area's traditional coke peddlers "have begun distributing heroin to new and existing heroin abusers," a drug market analysis prepared this year by the Justice Department's National Drug Intelligence Center revealed.

"Heroin availability and abuse have increased significantly in Albany County," the analysis stated.

The study found Capital Region heroin dealers trek to Washington Heights in upper Manhattan by private vehicle, bus or train, obtain bricks of the drug and transport it to Albany, where the drug is milled for retail dealing.

Heroin users in many nearby rural counties travel to Albany, where the addictive narcotic sells for $25 per bag or $250 per bundle, a pack of 10 bags, the data stated.

Meanwhile, the wholesale street value of an ounce of cocaine is around $1,200, with a kilogram carrying a wholesale value of $35,000 to $40,000, a rise of about $15,000 in the last year, said Albany County Assistant District Attorney Francisco Calderon, bureau chief of the street crimes unit for District Attorney David Soares.

"We think there has been an increase in heroin coming into the Capital Region," Calderon said.

Prosecutors attributed the trend to a general hike in the price of cocaine.

The federal analysis, quoting law enforcement sources, said cocaine purity levels have "dropped significantly" as a result of the shortages.

"Many distributors are not finding it cost-effective to convert the drug into crack cocaine," the study said.

"As a result, there has been an increase in the abuse of powder cocaine in the Albany area."

The analysis found cocaine in Albany County is supplied through "Dominican sources in New York City," specifically in Washington Heights.

It noted New York City dealers travel to Albany to deliver powder cocaine ranging in weight from ounces to kilograms.

In addition, the study said local cocaine dealers typically travel by private vehicle or bus to Washington Heights or the Bronx to transport the powered coke into Albany County.

In a phone interview, Soares referred to drug organizations as "franchises."

If they experience downturns, he said, they will simply adjust and switch their product.

He said the study is consistent with trends witnessed by his office.

Some cocaine dealers, frustrated by the shortage, have referred to New York City as "the Sour Apple," said Assistant District Attorney Eric Galarneau, who handles the office's long-term drug cases.

"Heroin is not only more readily available -- it's more cost-effective," he said.

"It's a business decision."

Among other findings in the analysis:

• It found diverted prescription drugs "pose an increasing drug threat in Albany County."

It specifically identified Vicodin and OxyContin as well as Xanax, or alprazolam, as the drugs primarily abused in the county.

• As in past studies, the analysis labeled hydroponic marijuana from a Canada a so-called "serious threat."

It said some in law enforcement view the pot as a gateway drug for younger users toward prescription drug and even heroin abuse.

• It noted the hydroponic pot, which can be grown indoors at a higher potency than typical marijuana, is smuggled into New York across the Akwesasne/St. Regis Mohawk reservation.

Federal prosecutors in Albany recently charged 13 members of an organization they said transported more than 2,200 pounds of hydroponic pot across the 428-mile border, at times using used heat-sealed bags inside large duffel bags.

• The study stated that "Mexican marijuana is occasionally shipped to the Albany area from the West Coast through package delivery services."

• The study said Albany served as a "distribution center for crack cocaine in upstate New York."

It said the city is a source for powder cocaine, crack and heroin to smaller towns and cities nearby, as well as in Vermont and Massachusetts.

A number of recent major cases illustrate the overall trends found in the report.

The Times Union reported in February that police have seen an increase in heroin use in area suburbs -- and a drop in treatment.

Statistics from the state Office of Alcoholism and Substance Abuse Services showed 1,276 people were admitted for heroin treatment in 2008, an 11 percent drop from 1,438 in 2006.

In February, Bethlehem town police raided a home on Howard Place and arrested two pairs of siblings after they found 9 ounces of marijuana, 3 grams of cocaine and 83 hydrocodone pills.

At the time, police said the home was a major source of drugs for high school students seeking marijuana, pills and cocaine.

Last summer, state Attorney General Andrew Cuomo's office charged 19 people they said were involved in bringing cocaine from the Bronx to Albany.

They seized nearly 20 pounds of cocaine and 140 pounds of marijuana, with an estimated street value of $1.7 million.

Investigators found a kilo and a half of the drug -- worth up to $60,000 in wholesale street value -- inside a Central Avenue apartment earlier this year.

Jermaine Hicks, 32, of Albany, later pleaded guilty to felony drug possession.

He faces 12 years in prison at his upcoming sentencing.

In another major case, 39-year-old Patrick Dozier is accused of running a New York City-to-Albany drug ring that transported two kilos of cocaine, as well as heroin.

Reputed drug mules for Dozier were allegedly carrying eight ounces of cocaine when State Police arrested them on the Thruway in Bethlehem in February.

His drug conspiracy case is headed for trial in Albany County Court.

Robert Gavin can be reached at 434-2403 or rgavin@timesunion.com

And some of that aggregate is coking, rla ...

And some is shooting heroin ...

And those are the folks with the money up here, rla ....

Because it ain't the po' folks buying that $*** .....

And so ...

SORRY, FOLKS ...

DON'T CALL US ....

WE HAVE NOTHING FOR YOU ....

WE CAN'T HELP YOU IF YOU ARE IN TROUBLE ....

And so ...

"Study: Cities slash services in economic downturn"

By BETH FOUHY, Associated Press Writer

Tue Sep 1, 12:04 am ET

NEW YORK – The economic downturn has taken a toll on U.S. cities, forcing them to slash jobs, raise taxes and fees and limit hours of operation at libraries, zoos, parks and other popular facilities, according to a survey.

The National League of Cities' 2009 report on city fiscal conditions released Tuesday had some good news for city residents: About half of all cities maintained or even increased spending on public safety.

But NCL research director Christopher Hoene warned that cities including Los Angeles, Dallas and Chicago have explored cuts to public safety as a way to cope with future budget shortfalls.

"The worst of the recession's impact for cities still isn't here yet."

"We'll be feeling it in 2010 and 2011," Hoene said.

"That means service cuts and quality-of-life changes that define who you are as a city."

Because of how cities raise and collect their revenues, the report found they will be weathering the effects of the downturn long after a national economic recovery is under way.

Persistent state budget shortfalls will also contribute to cities' fiscal woes, as states continue to slash aid to local governments.

The NCL report was based on data collected from fiscal officers in 380 cities across the country.

Nearly all of those surveyed have populations of 50,000 or more.

A steep drop in property tax revenues has had a major impact on cities, about 95 percent of which collect and rely on property tax revenue to fund services.

About half have a local sales tax and 10 percent have a local income tax.

Hoene said cities that suffered the worst of the housing and foreclosure crisis like Phoenix and Las Vegas were the first to feel the effects of the downturn.

The next wave were cities that rely most heavily on sales and property tax, including San Diego, Dallas, Miami, Chicago and other, smaller cities in the Midwest.

To meet their fiscal challenges, the report found that 67 percent of cities have cut jobs or enacted a hiring freeze while 62 percent have delayed or canceled capital projects.

Only 14 percent have cut public safety so far, the report found.

To boost revenue, 27 percent of cities reported raising fees on services like water use and garbage collection; 25 percent hiked property taxes; and five percent raised their sales tax.

Even as city revenues have dropped, their wage, pension and health care costs have steadily climbed and will continue to do so even without an economic recovery, the report found.

The report did not measure the effects of the recession on city schools because only about a dozen states allow cities to run their own school systems.
___

On the Net:

National League of Cities: http://www.nlc.org

MARKETWATCH

Sep 1, 2009, 3:26 p.m. EST

"US Stocks Tumble, Led By Financials, Amid Worries For Correction"

By Peter A. McKay

NEW YORK (MarketWatch) -- U.S. stocks opened what has traditionally been a bleak month for the markets with a financials-led sell-off Tuesday, as analysts and investors voiced increasing concerns the summer rally could be facing a correction.

The Dow Jones Industrial Average was up more than 60 points at its morning high but recently slumped to trade down 168 points, or 1.8%, at 9328.

Between 10:30 and 11:30 a.m., the Dow went from just above 9500 to below 9350, a loss of nearly 200 points.

If the current point decline holds through the close, it would be the worst day for the Dow since July 2.

The Nasdaq Composite Index was off 1.8% at 1972.

The S&P 500 was down 1.9% to 1001, hurt by declines in every sector.

The S&P's financial category was the weakest, off 4.1%.

Financials led stocks' August rally as investors grew increasingly confident the economy had moved past the worst.

However, with the credit crisis ongoing and the third-quarter reporting season not too far off, fears are rising that the rally may have gotten ahead of fundamentals.

"It's not surprising that financials are the first to go," said Motley Fool senior analyst James Early.

"It's a case of easy come, easy go."

"There's a belief the market moved up more than the economic news did, and everyone's wondering if it was a head fake."

While the run-up was vast and lifted even some of the most speculative stocks, Tuesday's nervous selling is hitting those speculative stocks the hardest, though stronger financials are getting hurt in the process too.

Among the weakest financials was American International Group, which sank 17%.

Sanford C. Bernstein & Co. downgraded AIG's shares to "underperform" from "market perform" and estimated that if the government's support and other goodwill were discounted, AIG would have a negative book value of $6.4 billion.

AIG shares had more than tripled in August.

Other financial stocks that fell Tuesday included Citigroup, which surged 58% in August and was recently down 7%.

Bank of America also fell, tumbling 5.2%.

It climbed 19% last month.

Options traders expect share declines for even the most stable banks.

Interest in October options to sell Wells Fargo stock for $26, for example, surged, with the shares recently changing hands at $26.30, off 4.4%.

"Everyone is asking if this is it for the run in banks," said William Lefkowitz, chief options strategist for vFinance Investments.

"Everyone keeps talking about September and it's history and has made people really nervous today."

"People are betting financials simply got ahead of themselves."

Volume on the session was above average, with NYSE Composite volume at 5.4 billion shares around 3 p.m., compared with a 2009 average of about 5.9 billion shares for a full day.

The market got a brief early boost from the Institute for Supply Management's monthly manufacturing index, which rose to 52.9 in August, the best reading since June 2007 and first above 50, the level indicating growth in the factory sector, since January 2008.

But some traders say the market has simply run out of steam after a rally that included a 3.5% August jump for the Dow, its best performance for that month in nine years.

"We're beginning to see more of this, where the market is getting good news but not really responding," said David Bellantonio, head of trading at Instinet, a New York brokerage.

"It tells you that the market may have gotten ahead of itself."

Investors on Tuesday are also digesting a mixed bag of monthly sales reports from major auto makers.

General Motors reported a 20% decline in sales for August, while Ford, which managed to avoid bankruptcy, posted a 17% rise in monthly sales and its first year-over-year increase in truck sales in nearly three years.

Ford shares recently fell 4.5%.

September's history also doesn't offer much hope for the weeks ahead.

Since 1900, the Dow has fallen 1.1% on average in September, the only month with a significant average drop, according to Ned Davis Research.

Hank L. Camp, president of the trading firm H.L. Camp & Co. in Palm Beach, Fla., said he began unloading bets on the S&P 500 shortly after the ISM data were released, based upon the likelihood that the index's recent trading pattern favored a sell-off following the news.

Camp says he's also positioning himself for a broader correction over the next few months.

A gauge of future home sales, meanwhile, came in stronger than expected.

However, a report on new construction showed a surprising drop in outlays.

http://www.marketwatch.com/story/us-stocks...tion-2009-09-01

One sees more Diversity in some areas than others...Socio-Economic-Cultural Dimensions of this Diversity Manifest
itself in both Adaptive and Maladaptive Trends in the Social System...

I expect a violatile Stock Market for the short and intermediate Term with out a lot of trend setting and at some point a nose Dive...and where it stops, nobody knows...

We seem to be on the maladaptive end of the spectrum up here, rla ...

And so ...

Everything that is, is itself and its relations to a larger whole and is Correlated with Everything Else...

OBAMA WAS BLOWING SMOKE UP PEOPLE'S BUTTS WHEN HE SAID HIS STIMULATION WOULD CAUSE CATERPILLAR TO HIRE PEOPLE IF IT WAS PASSED ....

IT WAS PASSED AND CATERPILLAR IS STILL LAYING OFF PEOPLE ....

BUT HEY ....

DRUG SALES IN ALBANY, NEW YORK HAVE INCREASED ....

SO SOME OF OBAMA'S STIMULATION IS HITTING THE STREETS ANYWAY ....

AND IT IS PUTTING PEOPLE TO WORK IN THE "SERVICE" INDUSTRY ...

And so ...

"Jobless rates up in fewer metro areas in July - Jobless rates rise in 44 percent of metropolitan areas in July, down from 90 percent in June"

By CHRISTOPHER S. RUGABER, Associated Press

Last updated: 5:16 p.m., Tuesday, September 1, 2009

WASHINGTON -- In a sharp improvement, the largest U.S. metropolitan areas were evenly split in July between those where unemployment rates rose from June and those where rates fell.

In June, by contrast, 90 percent of the 380 metro areas had seen their jobless rates rise from the previous month.

Much of the improvement was due to seasonal factors.

They include the hiring of farm workers in many agricultural states and lower unemployment in college towns after a jump at the start of summer.

The metro employment figures, issued Tuesday by the Labor Department, aren't adjusted for such seasonal changes, so they tend to be volatile from month to month.

And many of the changes in local unemployment rates in July were too small to signal larger trends.

The local figures also reflect the modest improvement seen at the national level in July, when the jobless rate fell to 9.4 percent, from 9.5 percent in June.

On Friday, the Labor Department will report the national unemployment rate for August.

Many economists expect it to tick back up to 9.5 percent.

An Associated Press analysis of Labor Department data found that unemployment rates fell in 168 metro areas and rose in 168 others.

No change was recorded in the remaining 44 areas.

The biggest improvement occurred in Kokomo, Ind.

Its jobless rate dropped to 14.4 percent in July from 19.1 percent the previous month.

The reopening of a Chrysler plant that makes transmissions caused much of that drop, said Christopher Cornell, an economist at Moody's Economy.com.

Chrysler reopened many factories in late June and July after emerging from bankruptcy protection.

The company employed more than 4,500 people in the Kokomo area at the end of last year.

But Fiat Group SpA, which owns a 20 percent stake in the company and manages Chrysler, is deciding which plants to close permanently.

"People are extremely nervous in Kokomo," Cornell said.

"Their fate is literally up in the air."

Other areas that saw sharp drops in their unemployment rates were Wenatchee-East Wenatchee, Wash., Bismarck, N.D., and Grand Forks, N.D., all of which include agricultural production.

Wenatchee bills itself the "apple capital of the world."

Some of the hardest-hit areas are still suffering from a manufacturing sector that is recovering but has yet to return to strength.

Peoria, Ill., where heavy equipment maker Caterpillar Inc. is based, endured the largest jump in joblessness in July: from 9.6 percent to 12.3 percent.

Caterpillar has said it is cutting thousands of jobs in the face of plunging overseas sales.

The next-largest increase was in nearby Decatur, Ill., where the unemployment rate rose to 13.7 percent from 11.2 percent.

Even in places where the rate has fallen, joblessness remains high.

Overall, 139 metro areas reported unemployment of 10 percent or above, compared with 144 metro areas in June.

Many economists say they think the unemployment rate will top 10 percent nationally by the end of the year.

Nineteen areas reported jobless rates of 15 percent or higher in July, one more than in June.

Eight of those areas were in California; five were in Michigan.

The unemployment rate of 30.2 percent in El Centro, Calif., was the highest in the nation, followed by Yuma, Ariz., at 26.2 percent.

The two areas are next to each other and have long suffered high unemployment due to many seasonal farm workers.

Most of the bright spots on the unemployment map are in the upper Midwest.

Bismarck had the lowest jobless rate in July, at 3.1 percent, down from 3.8 percent in June.

The next-lowest rates were in Fargo, N.D., Rapid City, S.D., and Sioux Falls, S.D.

Those regions have benefited from prices for agricultural commodities that remain above historical trends.

Among larger metro areas, Michigan's Detroit-Warren-Livonia had the highest unemployment rate, at 17.7 percent, up from 17.1 percent in June.

The next-highest were Riverside-San Bernardino-Ontario, Calif.; Las Vegas; Providence-Fall River-Warwick, in Rhode Island and Massachusetts; and Charlotte-Gastonia-Concord, in North and South Carolina.

Oklahoma City had the lowest jobless rate among large cities, with 5.9 percent, followed by Washington, D.C., and its Virginia and Maryland suburbs, at 6.2 percent.

Watch your toes, rla ...

And so ...

THE OBVIOUS ANSWER AS TO WHO WILL BUY ALL OF THE STUFF THAT MANUFACTURERS ARE PRODUCING IS OBAMA AND BEN BERNANKE ....

THE REAL QUESTION IS WHAT ARE THEY GOING TO DO WITH ALL THE STUFF ONCE THEY HAVE BOUGHT IT, SINCE NOBODY ELSE HAS ANY MONEY ....

ARE THEY GOING TO HAVE A BIG POTLATCH AND GIVE IT ALL AWAY?

OR ARE THEY GOING TO HOARDE IT?

And so ...

"Hopeful economic signs tempered by wary consumers - Hopeful signs in manufacturing, housing, auto sales tempered by consumers wary of spending"

By TALI ARBEL, Associated Press

Last updated: 6:46 p.m., Tuesday, September 1, 2009

NEW YORK -- New signs of economic recovery emerged Tuesday only to be overshadowed by new worries that they won't last.

The U.S. manufacturing sector grew in August for the first time in 19 months.

A gauge of future home sales surged in July to its highest point in more than two years.

And auto sales -- boosted by the Cash for Clunkers program -- appeared in August to have marked their first year-over-year monthly gain since October 2007.

Yet hopes for a sustained recovery remain clouded by a big concern: consumer spending, which fuels about 70 percent of U.S. economic activity.

Americans are hamstrung by flat wages and job losses and aren't borrowing and spending enough to nourish a lasting rebound.

That raises the vexing question of who will buy all the goods that manufacturers are producing?

Skepticism about a recovery contributed to a nasty tumble on Wall Street Tuesday, following a monthslong rally.

All the major averages fell about 2 percent, with the Dow Jones industrials sliding 185 points, as concerns grew about the fragility of the banking industry and the global economy.

Stock market analysts noted that the manufacturing and housing gains were boosted by temporary government stimulus steps, including the Cash for Clunkers program, which has since expired.

The clunkers program helped lift sales at Ford, Toyota and Honda in August, though Chrysler Group LLC and General Motors Co. withstood another month of falling sales.

"People reviewed the numbers and said this type of demand is just not sustainable," said Tom di Galoma, head of U.S. rates trading at Guggenheim Capital Markets LLC.

At the same time, the National Association of Realtors said its seasonally adjusted index of sales contracts signed in July for previously occupied homes rose 3.2 percent to 97.6.

It was the sixth straight increase and 12 percent above the same month last year.

U.S. construction spending dipped in July as weakness in nonresidential building and government projects offset the best showing for home building in 10 months.

At the moment, manufacturers may be the economy's strongest pocket of strength.

Yet even that might prove short-lived if demand doesn't pick up, analysts said.

The better-than-expected report from the Institute for Supply Management showed the highest number for its manufacturing index since June 2007.

New customer orders jumped to a level not seen since late 2004.

"Manufacturing will continue to expand," said Daniel Meckstroth, chief economist for the Manufacturers Alliance, a trade group.

But he said capital investment likely will slip because plants have too much excess capacity.

"You're going to see ups and downs," Meckstroth said.

Most manufacturers are simply restocking depleted stockpiles of goods -- a process that will run its course within six months, said Joshua Shapiro, chief U.S. economist at MFR Research.

Beyond that, it's hard to say how much the U.S. manufacturing sector can expand as long as credit for consumers and businesses remains tight.

If loans remain out of reach for many, shoppers and companies can't spend and grow.

Apart from the boost from the clunkers program, "we feel that the headwinds for consumer spending remain too brisk to expect much help on this front," Shapiro said.

The ISM, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August, from 48.9 in July.

That was its first reading above 50, which indicates expansion, since January 2008.

The index has been trending lower since a peak reading this decade of 61.4, in May 2004.

The index, based on a survey of the group's members, includes such factors as new orders, production, employment, inventories and prices.

New orders jumped nearly 10 percentage points to 64.9 in August -- their highest point since December 2004.

President Barack Obama said the manufacturing gains mean companies are starting to invest and produce more.

"It is a sign that we're on the path to economic recovery," he said.

Sam Ko, president of Philos Technologies Inc., a supplier for the aerospace, auto, electronics and energy sectors, said he's gained 20 new customers in the last two months.

Ko is assigning overtime to employees and even looking to add five employees to his staff of 40 in Wheeling, Ill.

They would be his first new hires since June 2008.

"Some companies we haven't heard from in six months started calling us for orders," Ko said.

That's not to say all, or even most, companies are returning to full strength.

John Rosmarin, president of Saunders Manufacturing Co., which makes clipboards, portable desktops and other office supplies, said the company's factories are running below full capacity.

Still, sales at the company in Readfield, Maine, have been rising since February.

And Rosmarin hopes to shift employees from reduced workweeks to full-time hours within the next three months.

Yet any improvement will be limited, because the retailers he supplies are keeping their stockpiles low in the face of slack demand.

"It's going to be at least another 18 months before we get back to where we were 12 months ago," Rosmarin said.

A fall in the dollar's value helped U.S. exports grow for the second straight month, after having shrunk for nine months, according to the ISM.

A weaker dollar makes U.S. goods cheaper for overseas buyers.

Other countries also reported a revival in trade.

In China, a state-sanctioned survey and a private bank report showed the manufacturing sector grew at its fastest rate this year in August as the government's stimulus spending plan boosted production.

"The underpinnings for manufacturing in this country are solid," said Neil Dutta, U.S. economist at Bank of America Merrill Lynch -- but that's mostly due to the Asian consumer, not the U.S. shopper.

Interesting references to the stability of the Asian (bond and note consumption) market.
I just found this today (as a result of a MarketTicker.Org piece)...may I suggest reading it carefully...


http://www.businessworld.ie/livenews.htm?a=2470412

Markets hit by China commodity default
Monday, August 31 12:48:54

A report that Chinese state-owned companies will be allowed to walk away from loss-making
commodity derivative trades provoked anger and dismay among investment bankers on Monday
as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder
for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts,
Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.

While the details of the report could not be confirmed, it was Monday's hot topic in financial circles from
Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges
could simply renege on the deals, costing banks millions of dollars in profit.

The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale
of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection
against higher prices last year only to watch the market collapse -- leaving them with losses.

While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.

"I wouldn't be surprised if more state firms emerge with big derivatives trading losses, otherwise
SASAC wouldn't come out with such a radical move," said a Hong Kong-based derivatives analyst,
who like most other industry officials and bankers declined to be named due to the high sensitivity of the issue.

A SASAC media official said on Monday that he was waiting for the "relevant department's" official comment
before he can clarify to media. A government official said that the Bureau of Financial Supervision and Evaluation
under SASAC was handling the issue. The official declined to be named and did not elaborate.

Spokespersons at Goldman Sachs and UBS declined comment, and media officials at Morgan Stanley and JPMorgan
were not immediately available for comment. All are major global providers of commodity risk management.

No banks were named in the Caijing report. The SASAC media officer also declined to identify any specific banks.

"It's a handful of companies who are being encouraged by regulators to re-negotiate," said a second banking source.
"It's outrageous, but it's China, so everyone is treading very carefully."

For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy
and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term
precedent that suggests Chinese companies can simply renege on deals when they like.

The report follows an order from SASAC in July that required all central government-controlled state companies
engaged in trading derivatives to make quarterly reports about their investments, including details of holdings and performance.

But the reported letter opened several important questions that could not immediately be answered.
"If we were among the banks receiving that letter, we would be very angry. But now the key is to find out
more details on the letter: In whose name the letter was issued, the government or the corporate's? And
under what was the reason for defaulting?" said a Singapore-based marketing executive with a foreign bank.

The source, whose bank did not receive a letter, said that Air China, China Eastern and shipping giant COSCO -
among the Chinese companies that have reported huge derivatives losses since last year - had issued almost identical notices to banks.

"If it's in the name of the government, the impact will be very negative," said the source, who declined to be named.

Beijing-based derivatives lawyers said the so-called "legal letter" has no legal standing -- SASAC as a shareholder
has no business relationship with international banks.

"It's like the father suddenly told the creditors of his debt-ridden son that his son won't pay any of his debt,"
said a lawyer from the derivatives risks committee of the Beijing Lawyers Association.

(C ) Reuters

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

Those good ol' boy capitalists running between Wall Street and D.C.
better start listening to a little more Lou Dobbs and a little less Ed Schultz.

When the Chinese decide they are done, they are done...and so is our banking/treasury system.

groovy!

the first thing racist Lou Dobbs needs to see is-

every single person in America right now becomes an instant citizen

G4A:

Everybody's a racist, but you. Is it lonely up there?

Meanwhile...
can it be said any plainer than this?:

http://www.bloomberg.com/apps/news?pid=ema...id=aRQZei1HXzug

No Underlying Value’ in Fannie, Freddie, Miller Says

By Dawn Kopecki

Aug. 31 (Bloomberg) -- Fannie Mae and Freddie Mac fell in New York trading after FBR
Capital Market’s Paul Miller said the mortgage-finance companies have no “underlying value”
to justify a more than tripling in their share prices this month.

“There is no fundamental value remaining in Fannie and Freddie, particularly since
the government owns 80 percent of each company,” Miller, a banking analyst based in
Arlington, Virginia, said in a note to investors today.
...

That's not "Hope" they're counting on, it's "Dope".

And the interesting thing is that ALL of the bundled securities being put out by FANNIE and FREDDIE are being bought up by Ben Bernanke at the FED ...

He is printing new money by the truck load to buy them with ....

He is going to end up with something like a TRILLION DOLLARS worth of them ....

And nobody else is buying them ....

So who is he going to sell them to?

THIS WAS YESTERDAY ...

I THINK THE INVESTORS ARE BEGINNING TO REALIZE THAT THE GREEN SHOOTS ARE JUST PAINT ON THE WALL ....

And so ...

"Worries about banks drag stock market lower - Stocks tumble as traders juggle worries about health of banks, size of market's six-month run"

By SARA LEPRO and TIM PARADIS, Associated Press

Last updated: 6:46 p.m., Tuesday, September 1, 2009

NEW YORK -- A stock market ripe for a big pullback succumbed Tuesday, plunging when rumors of a bank failure revived investors' anxiety about the banking industry and the economy as a whole.

A batch of economic reports that just weren't good enough added to the mix as the major indexes all fell about 2 percent and the Dow Jones industrials slid 185 points.

Treasury prices, usually the beneficiary of a slide in stocks, ended only moderately higher.

A break in the market's six-month rally was widely expected after investors showed a growing inclination to sell for some time.

While the major indexes finished August with respectable gains, including a 3.4 percent rise in the Standard & Poor's 500, trading was erratic and the advances had a half-hearted feeling.

Analysts warned that investors were doubting whether they should have bid stocks so high in the rally that began in early March.

So it wasn't surprising that, after the Dow was up 60 points in response to a seemingly better-than-expected reading on manufacturing, something like a rumor about a possible bank failure could take the market down.

"Some time midmorning, rumors came out that a large bank could be in trouble," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

"That's all it takes to spook this market."

The rumors were never substantiated.

The Dow's drop virtually equaled a 186-point slide two weeks ago that the market later recovered from, sending stocks to their highest levels in almost 10 months.

Dan Deming, a trader with Strutland Equities in Chicago, said it didn't appear much had changed in the market since then, but investors have grown more nervous as stocks have pushed higher and that was enough to tip off heavy selling.

"It's really more psychological right now than anything."

"The first day of September -- the market shows some weakness and then it just kind of starts to feed on itself," he said.

"Everybody is kind of looking over their shoulder."

Deming referred to the fact that many investors had some fear of what might happen in September, which historically has been the worst month for stocks.

Many analysts said the change in calendar was one of many factors that created a critical mass of sorts for the market and fueled Tuesday's drop.

Banks and insurance companies were among the most notable losers amid the fears of bank failures, but they also had been pumped up the most in the rally that lifted the market more than 50 percent since hitting 12-year lows in March.

With the government reporting last week that 400 banks were in trouble during the second quarter, investors' anxiety about the health of the financial industry was heightened and so rumors that investors might shrug off in less fractious times became powerful enough to cause sustained losses.

The plunge in stocks came even as the Institute for Supply Management reported that U.S. manufacturing grew in August for the first time since January 2008.

The market also shrugged off another positive economic report, the sixth straight monthly increase in pending home sales.

On the surface, the day's economic numbers were good.

A deeper look at the data gave some cause for concern.

Analysts said both the manufacturing and housing reports got a boost from government stimulus efforts, including the Cash for Clunkers program that has since expired, which means the recovery in those industries may not continue at the same pace.

"In both cases it seems headlines overstate details by a touch," said Tom di Galoma, head of U.S. rates trading at Guggenheim Capital Markets LLC.

"People reviewed the numbers and said this type of demand is just not sustainable."

The thing that could make the difference if the Obama Administration would really start cleaning up the Corruption and Incompetence in Government and the Government's Contractors, both Business Persons and Common Ordinary People would get more optimistic about our intermendiate-term and olong-term Future and the GDP would go back up...

"Fed minutes: officials saw recession's end in Aug. - Fed minutes: With economy on mend in Aug., officials felt comfortable slowing revival program'

By JEANNINE AVERSA, Associated Press

Last updated: 4:05 p.m., Wednesday, September 2, 2009

WASHINGTON -- With the economy on the mend, Federal Reserve policymakers last month felt comfortable slowing the pace of one of its economic revival programs and not changing any others, according to documents released Wednesday.

Minutes of the central bank's closed door deliberations, held Aug. 11-12, also showed Fed Chairman Ben Bernanke and his colleagues striking a much more hopeful note about the economy's prospects compared with an assessment made in late June.

Many Fed officials saw "smaller downside risks," the documents stated.

Fed officials expected the pace of the recovery to "pick up" in 2010, but there was a range of views -- and considerable uncertainty -- about the likely strength of the upturn because of concerns about how consumers will behave.

After being pounded by the recession, consumer spending finally appeared to be leveling out, the housing market was firming and manufacturing was stabilizing, the Fed said.

Plus, the outlook for other countries' economies improved, auguring well for the sale of U.S. exports.

All that strengthened the confidence of Fed officials that "the downturn in economic activity was ending."

They also repeated a prediction that the economy would start growing again in the second half of this year.

That expected growth will be helped by President Barack Obama's $787 billion package of tax cuts and increased government spending, they said.

Against that backdrop, the Fed at its August meeting, announced that it would gradually slow the pace of its program to buy the remainder of $300 billion worth of Treasury securities and shut it down at the end of October, a month later than previously scheduled.

The program is designed to force interest rates down for mortgages and other consumer debt, and spur Americans to spend more money.

The Fed also did not change another program that aims to push down mortgage rates.

In that venture, the Fed is on track to buy $1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year.

I'm not holding my breath waiting for that to happen, rla ....

OBAMA HAS EMBRACED THE CORRUPTION, rla ...

AND IN THE MEANTIME ...

I WONDER IF BERNANKE AND GEITHNER EVER TALK TO EACH OTHER TO TRY AND GET ON MESSAGE ...

AND ARE WE GETTING SOME CROSS-TALK HERE BETWEEN OBAMA'S TIMMY AND THE FDIC OVER HOW MUCH CAPITAL BANKS SHOULD HOLD IN RESERVE IF THEY ARE OWNED BY PRIVATE INVESTORS?

And so ...

"Geithner says global economy still needs stimulus - Geithner says global economy still needs stimulus until clearer signs of recovery"

By MARTIN CRUTSINGER, Associated Press

Last updated: 4:56 p.m., Wednesday, September 2, 2009

WASHINGTON -- Treasury Secretary Timothy Geithner said Wednesday that efforts by the United States and other nations to fight a worldwide economic crisis have been able to pull the global economy "back from the abyss."

But countries must continue to provide sizable amounts of support until there are clearer signs of recovery to avoid a classic mistake countries have made in past recessions, he said.

Geithner said he would stress that point in meetings of financial ministers in London that start Friday.

Those discussions will allow officials to assess the state of the global economy for growth and decide what steps are needed to prevent a recurrence of last year's crisis.

"We have come a long way, but we have got a long way to go," Geithner said at a briefing for reporters to preview the meetings of finance ministers from the Group of 20 nations.

"We need to make sure we are confident we have a strong recovery in place."

A proposed global framework to bolster requirements for the amount of capital reserves that banks need to hold to guard against losses also will be among Geithner's talking points.

Many experts believe last year's crisis occurred because current bank regulations do not impose strict enough requirements on the reserves a bank has to cover its losses on loans.

The administration is hoping to get broad agreement among major countries on raising capital standards so that financial institutions in the U.S. would not be put at a disadvantage if capital standards here are raised to higher levels than their competitors face in other nations.

Specific numbers won't be discussed at the weekend meeting but a broad framework and timetable for implementing new standards would be reviewed, Geithner said.

The G-20 includes the world's wealthiest nations and big developing countries such as China, Brazil and India.

Finance ministers are meeting to prepare the agenda for a Sept. 24-25 summit in Pittsburgh that will be attended by President Barack Obama and other world leaders.

Those discussions will be a follow-up to a leader's summit in early April in London and an initial G-20 summit in Washington last November when the financial crisis was still gaining force.

Geithner said the U.S. will be stressing the need to move quickly to implement financial sector reforms.

The administration has put forward a sweeping overhaul package but Congress has yet to act on it.

German Chancellor Angela Merkel said this week that "no bank must be allowed to get so big that it can get into a situation where it could blackmail governments," while French President Nicolas Sarkozy urged tough rules restricting executive compensation.

Geithner wants to hear the views of other officials at the meetings, and he sought to play down differences, saying there was a broad agreement on the types of financial reforms that are needed.

In terms of repairing the global economy, Geithner said that the U.S. would continue to make the point that the world needs more balanced growth going forward.

As U.S. consumers boost their savings rates, other countries will need to look to domestic demand to push growth rather than export-led expansion.

Geithner and other officials have made this point in their discussions with China in hopes of getting the Chinese government to boost domestic demand, a move that U.S. officials hope would lower America's huge trade deficit with China.

The G-20 finance discussions are expected to wrap up on Saturday with a joint statement.

the marketticker.org

Wednesday, September 2. 2009
Posted by Karl Denninger in Macro Economics at 15:09

Why Our Economy Is Utterly Screwed

Steve Liesman once again stunned me with his lack of understanding of matters economic today,
when he commented that "in all recessions since 1970 at least the original part of it (recovery) has been jobless."

Yes, Steve, but why is any of this a surprise? What part of this graph isn't instantly obvious to anyone with more
than two firing neurons in their head?



That's credit and population growth normed to a base of 1970. Population went from roughly 205 million
to roughly 304 million during that time, a 50% increase.

Outstanding consumer credit went from $128 billion to $2,525 billion, or a 1,973% increase - and this is only consumer credit,
ignoring mortgages, financial firm credit, business credit, commercial real estate and of course government debt!

Why are we not seeing "robust" economic growth when we exit recessions? Why is there no real hiring going on? Why can we not
have a robust economic recovery? Why are we are replacing good jobs with "McJobs" that pay half as much - or less? And more
importantly, where did all the "so-called prosperity" really come from, especially from 1994 on?

In each and every instance of recession from 1970 onward we have "pulled forward" more and more demand and created fake
"prosperity" through the creation of ever more debt that we have goaded consumers to take on. By doing so we have crippled
the ability of the economy to grow, redirecting as much money as possible to a handful of people and firms (commonly known as
"banks" and other "financial companies") instead of directing that effort and money into productive enterprises such as building cars,
television sets and similar items.

THIS time though the recession didn't come from "ordinary business conditions"; it instead happened because the credit carrying capacity
among both consumers and businesses hit the wall - they could no longer make the debt service payments and started to default.

It began with "subprime" mortgages but that was nothing other than the first "hiss" of trouble out of the pressure vessel as the structural integrity
of the fraud-laced credit system, where "capacity to pay" became a bad joke, had begun to disintegrate.

We pushed the envelope of fraudulent credit creation and the sale of fraudulently-underwritten debt too far - and it blew up in our collective faces!

Rather than admit complicity in the myriad Ponzi-style scams that underlay all of the financial system for more than thirty years
(or have it shoved in their face) The Fed and financial "wizards" along with The Bush Administration (who was responsible for and complicit
in refusing to fix the fraud during the 00-07 timeframe) chose to try to sweep it under the rug with "yet more liquidity" and "yet more lending."

President Obama and his administration made a critical error after having won in November by refusing to stand up and take these scammers
on face-to-face.

He decided to instead continue and even accelerate the scam!

It can't and won't work because the underlying issues have not been resolved and the bogus debt has not been forced out and defaulted -
it remains clogging up the system, destroying the ability of the credit-intermediation system to function properly.

Period.

Folks, the facts are impossible to ignore. We are in this recession because consumer and business borrowing capacity hit the wall.
We have removed almost none of that outstanding credit from the top to today, as this chart shows (which I have printed here an endless number of times!)



We have taken a measly 4.5% off the maximum outstanding credit amount (incidentally reached in January of this year)
to date. 4.5%! That's nothing - it is absolutely insufficient to return the system to normal functioning and restore sound economic
growth - we need five times or more that much contraction!

The bad news folks is that we will get that contraction, and if The Government and Fed do not force it to happen "voluntarily"
we'll get double that much - as much as a 50% decrease in outstanding credit - coupled with a deflationary credit collapse.

The small crack in the market the last few days is a warning: The fraud-laced game is about up and we are running out of time to do the right thing.

Stop listening to the media idiots - they have not and will not discuss this facet of the crisis because doing so means admitting
that their corporate parents are a huge part of how we found ourselves in this mess, along with all the advertising they've stuck
in your face for the last 30 years to "go on, buy now, pay later!"

But irrespective of whether CNBC talks about it or not the mathematical reality of credit capacity as it relates to both population
and earnings capacity is a mathematical reality. No amount of magical handwaving will change it, leaving us with only two choices:
we either force the bad debt out into the open and default it, thereby shrinking both the balance sheets of banks and consumers
(at the same time) or we continue to try to "press our bets" and take the risk of a second credit-system dislocation that will be far worse
than what we experienced last fall and this spring.

At present we are choosing path #2 - a river that is quickening in pace.
Does anyone have an idea what that funny roaring noise around the next corner might be?
-----------------------------------------------

We can not say we were not warned.
Anyone for a new $1 trillion entitlement program (Obamacare)?

ARE THE "GREEN SHOOTS" NOTHING MORE THAN CHEAP PAINT SPRAYED ON THE WALL LIKE GRAFITTI?

"Productivity gains in 2Q due mainly to cost cuts - Productivity jumps in spring on cost cuts, but stronger consumer demand needed for recovery"

By MARTIN CRUTSINGER, Associated Press

Last updated: 4:25 p.m., Wednesday, September 2, 2009

WASHINGTON -- Companies managed to boost their workers' productivity and their own profits in the spring mainly by slashing costs and capping their employees' pay.

That was clear from revised government figures released Wednesday that provided further evidence that a tentative economic recovery has begun, while also reinforcing nagging concerns.

Analysts worry the tight job market and lack of wage growth will depress incomes, limit further corporate profitability and forestall a pickup in all-important consumer spending.

Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa., said companies that have shed workers and squeezed out savings won't be able to show the big profit gains they did last quarter by relying on more big cuts.

Having already made deep reductions, companies will need to find ways to generate more revenue.

"Profits have recovered nicely, but it's more the way that they have recovered that gives people pause," Schultz said.

"The key is to somehow blend this cost-cutting with revenue growth."

Productivity -- the amount of output per hour of work -- rose at an annual rate of 6.6 percent in the April-June quarter, the Labor Department said.

That's the largest advance since the summer of 2003.

And it's slightly better than the 6.4 percent productivity increase the government had estimated last month.

At the same time, labor costs fell at an annual rate of 5.9 percent -- the sharpest drop since 2000 and slightly more than the 5.8 percent drop estimated a month ago.

Economists said the rising productivity and lower labor costs supported their view that the longest recession since World War II is coming to an end.

Mark Zandi, chief economist at Moody's Economy.com, said it's "very typical" for productivity to surge at the end of a recession as businesses aggressively cut costs.

Economists say they don't expect productivity to keep surging.

But they said the productivity jump in the second quarter, combined with falling labor costs, might persuade employers to slow their pace of layoffs and eventually resume hiring.

That is critical because until the labor market heals, consumers probably won't step up their spending.

And consumer spending, which accounts for about 70 percent of economic activity, is a vital ingredient in any sustained rebound from the recession.

A dismal job market makes that prospect uncertain.

On Friday, the government will report the unemployment rate for August.

Economists expect the rate to tick up to 9.5 percent, from 9.4 percent in July, and that a net total of 225,000 jobs were lost in August, down from 247,000 jobs lost in July.

The jobless rate is widely expected to top 10 percent by next spring, before a recovery is strong and sustained enough to push that rate down.

During this period, the economy also faces the risk that a recovery would falter and the economy would fall back into recession.

"This is always a tricky transition, and there are many things that could still derail the economy given that the labor market is still very weak," Zandi said.

William Rutherford, president of Rutherford Investment Management LLC in Portland, Ore., agreed that companies don't have much leeway to cut costs without hurting vital parts of their businesses.

Sustained profitability will require higher revenue, he said.

"They've done a lot of cutting of jobs," Rutherford said.

"They've gotten their inventories down under control."

"I think from here on out we're going to have to see some top-line growth."

With the recession showing signs of ending, Federal Reserve policymakers last month felt comfortable slowing the pace of its program to buy Treasury securities and putting off any major changes to other programs, according to minutes of their discussions released Wednesday.

But a "poor" jobs market, evaporated wealth, hard-to-get credit and stagnant wages mean consumers are still facing "considerable headwinds," the minutes said.

"With these forces restraining spending, and with labor income likely to remain soft, (Fed) participants generally expected no more than moderate growth in consumer spending going forward," the minutes stated.

On Wall Street, the improved report on productivity and labor costs did little to ease worries about future economic prospects.

The Dow Jones industrial average lost nearly 30 points and broader indices also edged down.

The Dow lost 186 points on Tuesday.

In a separate report, the Commerce Department said factory orders rose 1.3 percent in July.

That was the fifth gain in the past six months and further evidence that manufacturing is starting to pull out of its nosedive.

An 18.5 percent jump in transportation goods drove the overall increase as aircraft orders surged after a big plunge the previous month.

Orders for new autos grew by 5.1 percent as sales jumped, thanks to the Cash for Clunkers government incentive program.

But orders for nondurable goods, such as food, petroleum products and chemicals, fell 1.9 percent, the most since December.

The factory orders report followed a positive reading on manufacturing activity Tuesday.

That report showed that the sector grew in August for the first time in 19 months, according to a survey by the Institute for Supply Management.

The 6.6 percent rate of increase in productivity in the second quarter compared with a 0.3 percent rise in the first quarter.

It was the largest increase since a 9.7 percent jump in the third quarter of 2003.

The 5.9 percent drop in unit labor costs followed a 5 percent decline in the first quarter.

Rising productivity and falling labor costs might be expected to bolster the competitiveness of U.S. companies against foreign competition.

But with the U.S. productivity gains mainly due to companies trimming costs more sharply than their output was falling, exports aren't expected to rise significantly.

Analysts said once a recovery takes hold and demand begins to rise, output will finally increase and laid-off workers can be rehired.

"In the long run, the best way to increase productivity is to increase output, especially in areas where the United States has a competitive advantage, such as high-technology goods," said Sung Won Sohn, an economist at California State University's Smith School of Business.

------

AP Business Writers Christopher S. Rugaber and Jeannine Aversa in Washington, and Tim Paradis in New York contributed to this report.

The latest method of spending American Recovery and Reinvestment Act Funds:

The Recovery Act, signed into law by President Obama, provides the Office of Justice Programs'
Office of Juvenile Justice and Delinquency Prevention (OJJDP) with more than $85 million
for national mentoring programs to reduce juvenile delinquency, violence, gang participation,
school failure and dropout rates. The Recovery Act National Mentoring award recipients are:

The Boys and Girls Clubs of America, Atlanta, GA ($44,400,000)
Goodwill Industries International, Rockville, MD ($19,160,337)
Public/Private Ventures, Philadelphia, PA ($17,829,110)
National Association of Police Athletic Activities Leagues, Inc., Jupiter, FL ($3,700,000).

The statutes appropriating funds for Fiscal Year 2009 authorize OJJDP's National Mentoring Programs
initiative. The awards of more than $44 million were made to programs that target underserved and
at-risk youth. The Fiscal Year 2009 National Mentoring award recipients are:

Home Builders Institute, Washington, DC ($9,949,890)
The Milton S. Eisenhower Foundation, Washington, DC ($9,093,440)
YouthBuild USA, Somerville, MA ($8,840,914)
Young Men's Christian Association, San Francisco, CA ($7,129,327)
The Institute for Educational Leadership, Washington, DC ($3,496,766)
Nazarene Compassionate Ministries, Inc., Lenexa, KS ($3,251,170)
The Experience Corps, Washington, DC ($2,762,022).

So, if y'all are in one of these few places you hit the jackpot with from $2.7 million to $44 million.
It looks similar to the COPS millions...going to largely minority areas: DC area, Atlanta;
and organizations: Nazarene Compassionate Ministries (?); and then of course there is San Fran
(a orientation minority). Congratulations to y'all, and The National Association of Police Athletic
Activities Leagues, Inc., whomever the f*ck that is...11 grantess averaging $11.73 million each...
the few, the proud, the Obamians.

http://www.washingtonpost.com/wp-dyn/conte...isrc=newsletter

Obama Would Keep $85 Billion in Tax Breaks for Working Poor
Critics Call Cost Irresponsible

By Lori Montgomery
Washington Post Staff Writer
Thursday, September 3, 2009

President Obama is proposing to add more than $85 billion to the nation's budget deficits over the next decade to extend two tax breaks for the working poor, a move critics on Wednesday blasted as a violation of Obama's pledge to pay for new policies.

The tax breaks were included in the economic stimulus package Obama signed soon after taking office in January, and are scheduled to expire in 2011. But last week, in its midyear update of the federal budget, the White House said it plans to extend the tax cuts through 2019 without covering the cost by cutting spending or raising taxes elsewhere.

The reason? Technically, the stimulus amended a series of sweeping tax cuts enacted in 2001 during the Bush administration. Obama has repeatedly said he does not expect Congress to cover the enormous cost of maintaining the Bush tax cuts past their 2010 expiration date. And because the stimulus provisions are now part of the Bush tax cuts, Congress shouldn't have to pay for them, either, White House budget documents say.

"Since these two policies . . . represent expansions of tax cuts first enacted in the 2001 tax bill, extension of the policies are incorporated in the baseline projection of current policy," the documents explain in a footnote.

Deficit hawks are appalled. Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, called the move "outrageous" at a time when the nation is facing record budget deficits and the national debt is soaring toward a 50-year high. In addition to breaking Obama's pledge to pay for his policies, she said, it undermines confidence in Democrats' claim that the $787 billion stimulus package was truly a temporary measure aimed solely at reviving the slumping economy.

"Certainly, when the stimulus discussion was going on, we were very worried there was going to be some kind of bait-and-switch to make the tax cuts permanent," MacGuineas said. "This is a dead-of-night move to very technically slip them into the baseline and have no discussion about whether the country can afford to make these tax cuts permanent without offsetting the costs."

Republicans, who have derided the tax breaks as payments to people who do not pay taxes, also were critical.

"It turns out that so-called 'stimulus' really wasn't temporary, and that it was in fact a vehicle to push liberal priorities all along," said Antonia Ferrier, spokeswoman for House Minority Leader John A. Boehner (R-Ohio). "Apparently, the president's pledge to 'pay for' his agenda was nothing more than just a talking point."


Tom Gavin, a spokesman for the White House budget office, defended the move, saying Obama has made no secret of his intention to make permanent the two tax breaks. He argued that Obama's budget has always called for them to be paid for through other budget maneuvers, such as Obama's plan to let some of the Bush tax cuts expire on schedule.

"The President's budget is the most honest budget in many, many years," Gavin said via e-mail. "It is straightforward in how it addresses extending middle-class tax cuts and many other important national priorities."

At issue are two provisions that affect some of the nation's poorest working families. One expands the availability of the $1,000 child credit to families earning as little as $3,000 a year. Under the 2001 tax measure, the credit was available to families earning as little as $12,000 a year. Because those families are unlikely to have a tax bill that could be reduced by the credit, both the 2001 law and the stimulus legislation permitted the government to send them the money.

Expanding the child credit through 2019 would cost about $9 billion a year, according to the nonpartisan Joint Committee on Taxation, adding a total of $74 billion to future deficits. The other stimulus provision, which is much less costly, made similar changes in the availability of the Earned Income Tax Credit for married couples.

The White House proposal has yet to pass the Senate, but the House quietly adopted it in July as part of a measure that specified which policies Congress could extend and which would be subject to strict new pay-as-you-go rules. At the time, House leaders questioned the rationale for extending stimulus provisions without paying for them. "The distinction the White House made was that, unlike [Obama's signature] Make Work Pay [tax cut], these weren't new tax cuts created by the Recovery Act, but were just an expansion of existing tax cuts," according to a House Democratic aide who was not authorized to speak publicly.

The idea struck many people "as being hard to defend," the aide said, but House leaders felt they had to leave them in to attract liberal votes for a measure that would permit the extension of other tax cuts that primarily benefit the wealthy, such as the inheritance tax.
-----------------------------------

So, they really aren't tax cuts, but an expanded entitlement, since those getting covered
will get government checks, rather than any reduction in tax payments. Call it what
you will...reparations perhaps?

We should accept Bill's thinking and call it an allowance...there are not enough jobs to go around. people who
want to work, are ready to work and are productive workers should get the jobs...others get an allowance, + Training in career development and independent living skills...

...and that sounds like government controling jobs...comrad...

But...back to the "Mirage"...here's a perfect example:

Thursday, September 3. 2009
Posted by Karl Denninger in Regulatory at 10:24

To The Regulators: STOP THIS NOW!

1 billion shares on the tape as of 9:00 Central on the NYSE and who's responsible for over 1/4 of it?



(thats Citi Group, Fannie Mae and Bank of America)

This is outrageous folks. Three zombies, one of which has no equity value and two more that exist only because the government has guaranteed, collectively, half a trillion dollars of what may be worthless assets.

Not to mention all the ENRON-STYLE off balance sheet exposure that we have no means to value or come up with a reasonable understanding of.

This sort of garbage "support" for market volume, put forth for the explicit purpose of propping up stock market prices and generating fees for the trade of each share at the NYSE, is an outrage.

If this is not stopped we are going to wake up one morning to a lock-limit down market crash when this so-called "market liquidity support" is withdrawn as the boys with the computers come to end of the rope where they can steal a fraction of a penny from each trader who buys into this frenzied froth-driven fraudulent nonsense.

The retail bagholder will, as always happens, get utterly screwed in the inevitable collapse as what is left of our economy and financial markets implode into the hole left by the disappearance of this imaginary "liquidity."

Regulators have an obligation to step in and put a stop to this crap - an obligation that they have utterly refused to meet for the last six months.

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

These and another three or four stocks have been "the major movements" for the past five months...
there is no real economic activity going on in real companies...just those with smoke and mirror
bookkeeping...mark-to-model...don't-look-behind-the-curtain where the toxic waste is hidden...zombies.

It's a Mirage y'all...the "green shoots" are paper mache...like the sides of a Mardi Gras parade float.

IF OBAMA WERE TO WIPE OUT CORRUPTION AND INCOMPETENCE IN WASHINGTON, D.C., rla, THERE WOULD BE NOTHING LEFT OF THE PLACE, OR THE DEMOCRAT PARTY, OR THE FEDERAL GOVERNMENT, AND LIKELY HIS FINANCIAL BACKERS ....

And so ...

"Inspector: SEC botched investigation of Madoff scam - Inspector general says agency was incompetent but not corrupt"

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) -- The Securities and Exchange Commission's inspector general on Wednesday released a scathing report finding that the agency failed to follow up on detailed complaints and missed exposing the biggest fraud in the history of the agency, a $50 billion Ponzi scheme perpetrated by Bernard Madoff.

"Despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff's trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme," the SEC Inspector General David Kotz said in the report.

Kotz found evidence of a failure to follow up on three examinations and six complaints in a "competent" way.

Specifically, the report explained that the majority of a 2005 investigation was performed by a staff attorney who had recently graduated from law school and only joined the SEC 19 months before she was assigned the Madoff investigation.

The attorney had never before been the lead staff attorney on any investigation, the report said.

The report describes an SEC culture where different agency offices failed to communicate effectively and, in one case, a discovery by staffers of Madoff "lies and misrepresentations" were ignored.

The inspector general's report sharply criticized the SEC investigators for general incompetence, saying that "a thorough and competent investigation or examination was never performed."

Madoff is serving a 150-year sentence imposed on June 29 after he pled guilty in March to federal charges based in part on the SEC investigation.

He also has been stripped of all his personal property.

SEC Chairwoman Mary Schapiro said the findings in the report "reinforce" her view that changes the agency has undertaken since the Madoff scandal will help the agency better detect fraud.

She added that the agency has streamlined its enforcement procedures and put in more experienced staff members on the frontlines.

Madoff, who was arrested in December and charged with securities fraud, oversaw a fund that managed capital for high net-worth individuals, hedge funds, banks and other institutions.

Many high-profile figures, including economist Henry Kaufman and actor Kevin Bacon, are reported to have lost money in the Ponzi scheme.

Kotz was instructed by SEC Chairman Christopher Cox on Dec. 16 to investigate how the SEC's compliance, inspections and examinations division handled criticism of the fund that it has received over the years.

Details of complaints

According to the report, the SEC found that SEC Assistant Director Eric Swanson's romantic relationship with Madoff's niece, Shana Madoff, did not influence the conduct of the agency's examination of Madoff and his firm.

(Swanson has since left the SEC, and he and Shana Madoff are now married.)

"The [Office of the inspector general] did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard Madoff Investment Securities had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work," the report said.

However, the first complaint against Madoff was brought to the agency in 1992.

It related to allegations that an unregistered investment company was offering "100%" safe investments with high and extremely consistent rates of return over significant periods of time, according to the report.

Well-known investor Harry Markopolos brought three versions of a complaint, in May 2000, March 2001 and October, 2005.

His third letter was entitled "The World's Largest Hedge Fund is a Fraud," and detailed 30 red flags indicating that Madoff was operating a Ponzi scheme.

One red flag indicated by the complaint said Madoff's returns were "impossible."

He also took issue with Madoff's secrecy, and the unrealistic volume of options Madoff was purportedly trading.

In May 2003, the agency received a third complaint from a hedge fund manager questioning whether Madoff was actually trading options in the volume he claimed, noting that Madoff's strategy and purported returns were not duplicable by anyone else.

A fourth complaint was provided as part of a series of internal emails between the SEC and another investor that identified red flags his employees had identified while performing due diligence of their own.

"The red flags identified Madoff's incredible and highly unusual fills for equity trades, his misrepresentation of his options trading and his unusual consistent, non-volatile returns over several years," the report said.

A fifth complaint was from an investor in Madoff's fund.

This investor said in an October 2005 email that he decided to withdraw all $5 million of his investments after deciding that Madoff was "very secretive" and refused to disclose anything about its operations.

SEC puts staff attorney with little experience on the Madoff investigation

According to the report, the SEC found Markopolos' 2005 concerns credible, in part, because the agency worked with him previously.

However, the SEC's Boston office, which had been examining the case, decided that even though Markopolos' concerns about Madoff operating a ponzi scheme were credible, they said it made sense for the agency's New York-based Northeast Regional Office to conduct the review, in part, because Madoff was based in New York.

The report notes, however, that the investigation was assigned to the regional team that had "little or no" experience conducting Ponzi scheme investigations.

Officials at the Northeast office expressed skepticism about the information in the complaint, complaining that Markopolos was not a Madoff insider or investor and they "immediately discounted his evidence."

The group also noted that Markopolos was a competitor, which also raised their concerns.

At one point SEC enforcement staff "immediately caught Madoff in lies and misrepresentations," but failed to press him on it.

"While Madoff told examiners he had stopped using options as part of his strategy after they scrutinized his purported options trading, the Enforcement staff found evidence from the feeder funds that Madoff was telling his investors that he was still trading options during that same period," the report said.

"Yet the Enforcement staff never pressed Madoff on this inconsistency."

After that, the investigation hit a road-block, with agency officials in Washington and New York became reluctant to proceed.

Responses from Capitol Hill

Key lawmakers on Capitol Hill said they were outraged about the results of the report.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., said he plans to hold a hearing on the Madoff case on Sept. 10.

"The Inspector General's report lays out the string of massive regulatory failures and incompetent investigations at the SEC that led to unimaginable loss for so many."

"It further reminds us how essential it is that we improve both financial regulation and the competence of the regulator," said Dodd.

"The scope of Madoff's fraud hurt thousands of investors, municipalities, charities, and individuals, many in my home state of Connecticut."

"We will use this report to learn what went wrong and figure out how best to get things right."

Sen. Charles Grassley, R-Iowa, ranking member of the Senate Finance Committee, said the SEC's culture needs to be transformed, otherwise the agency will never be the tough cop-on-the-beat the public needs.

"The SEC's utter failure to follow up aggressively on detailed and specific information about Madoff's fraud is further evidence of a culture of deference toward the Wall Street elite at the SEC," Grassley said.

"Until that culture is transformed, the SEC will not be the tough cop-on-the-beat that the public needs."

Rep. Paul Kanjorski, D-Penn., the chairman of a House Capital Markets subcommittee, said the report demonstrates how the SEC's investigation was a "colossal blunder."

Kanjorski said he pressed Kotz to pursue his investigation in a speedy manner and he was pleased that the report was final.

"This initial release of the Madoff report by Mr. Kotz provides the American public with its first glimpse into the internal details of a colossal blunder," Kanjorski said.

Ronald D. Orol is a MarketWatch reporter, based in Washington.

http://www.marketwatch.com/story/inspector...tent-2009-09-02

I heard Joe "SHINEY TEETH" Biden on the radio today bragging it up that he and Obama had ended the recession only eight months into their term .....

Right, Joe ....

And so ...

AND IN THE MEANTIME, TOTALLY HEEDLESS OF JOE BIDEN AND HIS BRAGGING, REALITY CONTINUES OUT THERE ....

And so ...

"1.3 million to lose jobless benefits by year's end - Out of work, out of benefits: As unemployment checks end, impact on families, economy grows"

By TAMARA LUSH, Associated Press

Last updated: 4:16 p.m., Thursday, September 3, 2009

JACKSONVILLE, Fla. -- Jobless since January, Donald Money has already moved in with his elderly parents, stopped going to the movies and started using less of his prescription medication so it will last longer.

This month, something else will fall by the wayside: Money's unemployment check.

The 43-year-old former printing press operator is among the more than 1.3 million Americans whose unemployment insurance benefits will run out by the end of the year, placing extra strain on an economy that is just starting to recover from the worst downturn in a generation.

These are the most unfortunate of America's 14.5 million jobless: the ones whose benefits are drying up -- in some cases after a record 18 months of government support.

With savings depleted and job opportunities scarce, people who've run out of benefits are living with relatives and borrowing cash from friends.

They are even skipping meals.

Through it all, they are trying to stay positive through exercise and prayer.

The government said Thursday that 570,000 laid-off workers filed new claims for unemployment benefits last week, while the number of people receiving benefits has risen to 6.23 million.

The Labor Department is expected to report Friday that the August unemployment rate rose to 9.5 percent, up from 9.4 percent in July.

Many are scrambling to find work before they have to reach for the next layer of government aid -- food stamps or even welfare.

On a recent day in Jacksonville, Money attended a church-run job fair in a half-vacant shopping mall.

Most of the vendors were vocational schools trolling for students, or recruiters for the military and fast food joints.

Money, who was laid off from a printing business, said he'll do anything for a paycheck.

"I'm tired of not working," he sighed.

"I just can't sit at home anymore."

People who lost white-collar jobs seem most surprised by the dire circumstances they are finding themselves in as unemployment benefits dry up.

Before the recession and financial crisis, it had always been easy for them to find work.

Clifford Sheffield, 43, of Fernandina Beach, Fla., used to earn $2,000 a week as an analyst for Merrill Lynch's Jacksonville office.

Today, Sheffield lives off of a $1,300 monthly check from the government -- and is burning through his savings to keep up with rent.

The unemployment benefits run out later this month.

At a recent job fair, he perused applications for Valu Pawn and Taco Bell, but did not fill them out.

"I have family I could fall back on, but it's not very appealing," Sheffield said.

"People are just barely getting by," said Sue Berkowitz, the director of the South Carolina Appleseed Legal Justice Center, an advocacy group that helps the poor with legal issues surrounding rent and mortgage contracts.

"When I go down to our food bank, I see a lot of people who never, ever thought that's where they would be."

In the past year, nearly 5.5 million people exhausted their 26 weeks of standard benefits without finding work.

The government says the "exhaustion rate" is the highest on records dating from 1972.

Some 3.4 million people now depend upon extended benefits approved by Congress lasting anywhere from 20 weeks to a year -- the longest period of extensions ever added.

The length of these extensions vary by state, depending on the unemployment rate.

More than half of all states have unemployment rates that triggered 53 weeks of extended benefits.

The government does not track how many jobless Americans have exhausted both their standard and extended benefits, but experts estimate the figure to be nearly 100,000 -- and rising.

According to the National Employment Law Project, more than 402,000 Americans will exhaust their unemployment benefits by the end of September.

That figure will more than triple by the end of December unless Congress -- or individual states -- authorizes another extension.

Legislation has been introduced to provide an additional 13 weeks of unemployment benefits in states with high jobless rates; the bill, introduced by Rep. Jim McDermott, D-Wash., has 23 co-sponsors, including two Republicans.

Unemployment benefits play an important part in stabilizing the economy because recipients tend to spend their weekly checks, rather than saving the money or paying down debt.

"It's definitely a valuable component of economic stimulus," said Alan Auerbach, a professor of economics at the University of California, Berkeley.

Rudolf Augustine, a 39-year-old former construction worker from Miami, is one of about 16,000 Floridians who have exhausted all their benefits.

Out of work for the past two years, Augustine's last unemployment check came in August.

He's doing handyman-type jobs, living with his brother to save money, and had to borrow just to visit his oldest daughter in New York to see her graduate from high school.

Augustine's self-esteem is bruised from the lack of cash.

"I used to drive a Saab turbo," he said.

"Now I drive a clunker a friend gave me for free."

Still, he says he has something to look forward to: a business degree, which he should receive in about a year.

He spends time with his youngest child in the park for fun and occasionally visits Burger King for a treat.

Trying to maintain a good attitude is key, said Mike Allen of Riverside County, Calif., who received about 13 weeks of unemployment benefits earlier in the year.

He wasn't eligible for more because he owned his own business and didn't pay enough into the state's unemployment fund to qualify him for more assistance.

Allen, who is 41, moved his wife and 15-year-old daughter into his parents' home in early August.

"They've got a small house," Allen said.

"But it's a roof."

"We'll help out with food."

After their mortgage company refused to work with them on a loan refinancing, the family walked away from their home, which is several hundred thousand dollars underwater.

Allen, formerly the owner of a trucking company, owes about $500,000 in business loans.

He's traded in his newer cars for a used Jeep that needs $2,400 of repairs.

The family sold most of their furniture.

His one bright spot: Allen has launched two employment-related Web sites in hopes of generating money through online advertising.

"We don't dwell on the past," said Allen, who added that his Christian faith is seeing them through.

"We can't change it."

"We can only change our future."

Sheffield, the former Merrill Lynch analyst, said he has some job leads and is beginning a retraining program to become a radiographer.

He's done some odd jobs around his neighborhood for cash, and has cut back on most of his expenses -- even his $25 a week comic book hobby.

"I don't drink or smoke, and I can't go to lunch or anything like I used to with my friends," said Sheffield, who runs on the beach to relieve stress.

"I eat less."

"I've lost 20 pounds."

------

AP Business Writer Christopher S. Rugaber in Washington contributed to this report.

JOE BIDEN SURE DOES HAVE SOME REAL SHINEY TEETH, ALRIGHT ...

And so ...

"Jobless claims show labor market may slow recovery - New jobless claims dip less than expected, sign that weak labor market will hinder recovery"

By MARTIN CRUTSINGER, Associated Press

Last updated: 4:25 p.m., Thursday, September 3, 2009

WASHINGTON -- New claims for jobless aid fell less than expected last week, and the number of people continuing to receive unemployment benefits rose -- further signs that any economic recovery will be hindered by a weak job market and flat incomes.

Most economists think the recession is over, but they say the jobless rate will keep rising until at least next summer as the economy struggles to mount a sustained recovery.

That means household incomes will remain depressed and consumer spending, which accounts for 70 percent of the economy, will continue to lag.

"Firms are still not hiring, and that reflects deep pessimism about the sustainability of the economic recovery once government stimulus programs wear off," said Sal Guatieri, senior economist at BMO Capital Markets.

"The lack of job creation remains a big headwind for cash-starved and credit-constrained consumers."

The nation's major retailers on Thursday reported lackluster results from August back-to-school sales.

Results in established stores fell 2.1 percent in August compared with the same month last year, a compilation of 31 retailers' results by the International Council of Shopping Centers and Goldman Sachs indicated.

Some major discounters managed to exceed expectations.

The Labor Department said the number of laid-off workers applying for benefits dipped to 570,000 from an upwardly revised 574,000 the previous week.

That was a smaller improvement than economists had expected.

The number of Americans continuing to receive benefits jumped to 6.23 million, up 92,000 from the previous week and a troubling reminder of the difficulty people are having finding jobs.

The continuing claims data lag new claims by one week.

The recession, which began in December 2007, has eliminated a net total of 6.7 million jobs.

That toll is expected to grow on Friday, when the government reports the unemployment rate for August.

Economists predict the jobless rate, now at 9.4 percent, will rise to 9.5 percent, with 225,000 net job losses in August.

Guatieri and other analysts said job losses for August might turn out even larger -- perhaps topping the 247,000 jobs lost in July -- because of the weakness in the unemployment claims figures.

"Employers are nervous that the economy is growing only because of policy stimulus and that when the stimulus fades, it will weaken again," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Christina Romer, a top Obama economic adviser, said last week that unemployment could reach 10 percent this year.

And some private economists are forecasting it will hit 10.3 percent next summer before starting to improve.

Guatieri expects it to remain near 10 percent for most of next year.

On Wall Street, stocks gained after a four-day slide but investors refrained from making big moves ahead of Friday's report on unemployment.

The Dow Jones industrial average added nearly 64 points and broader indices also rose.

In another report Thursday, a key gauge of activity in service industries, which account for about 80 percent of U.S. economic activity, edged up to 48.4 in August from 46.4 in July.

It was the best reading by the Institute for Supply Management's service-sector survey in 11 months.

And it pushed the index closer to topping 50, the dividing line between contraction and expansion.

Earlier this week, the ISM reported that its manufacturing gauge hit 52.9, the first over-50 reading since January 2008.

Analysts said manufacturing fared better in August in part because it had received a boost from the government's most successful stimulus program yet, the Cash for Clunkers deals that spurred auto sales.

The Obama administration issued an upbeat assessment of the economy on Thursday.

Vice President Joe Biden said the government's $787 billion economic stimulus program had exceeded expectations and changed the trajectory of the economy.

"Instead of talking about the beginning of a depression, we are talking about the end of a recession," Biden said in a speech at the Brookings Institution.

But some Republicans charged that Biden's comments ignored the fact that millions of Americans remain unemployed.

Economists closely watch initial jobless claims, which are considered a gauge of layoffs and a sign of companies' willingness to hire new workers.

Claims are well off the recession's high of 674,000, hit in the first week in April.

But they are still running far above the 350,000 that many economists view as a sign of a healthy labor market.

The Labor Department report showed that the four-week average of initial jobless claims edged up to 571,250 last week, compared with 567,250 the previous week.

When federal emergency programs are included, though, the total number of jobless benefit recipients was 9.14 million people in the week that ended Aug. 15, down from about 9.18 million the previous week.

Congress has added up to 53 extra weeks of benefits, on top of the 26 typically provided by the states.

In the chain store sales report, discounter Target Corp. and warehouse club operators Costco Wholesale Corp. and BJ's Wholesale Club Inc. said sales at established stores dropped but beat analyst expectations.

A 5 percent jump at TJX Cos., which operates discount chains TJMaxx and Marshall's, topped expectations.

But upscale retailers, including Saks Inc. and Nordstrom Inc., reported a weak month.

--------

AP Retail Writer Mae Anderson and Business Writer Tali Arbel in New York contributed to this report.

"Banks borrow more from emergency Fed loan program - Banks boost borrowing from Fed's emergency lending program, cut back on other types of loans"

By JEANNINE AVERSA, Associated Press

Last updated: 5:36 p.m., Thursday, September 3, 2009

WASHINGTON -- Banks boosted borrowing from the Federal Reserve's emergency lending facility over the past week, but cut back on other programs intended to ease the financial crisis.

The Fed on Thursday said banks averaged $32.7 billion in daily borrowing over the week that ended Wednesday.

That was up from nearly $30 billion in the week ending Aug. 26.

The Fed's weekly report also showed the Fed increased its purchases of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

The Fed's balance sheet now stands at $2.1 trillion, more than double the level from before the financial crisis struck.

HE'S A POLITICIAN, SO OF COURSE HE DOES ...

PEOPLE IN AMERICA DON'T EXPECT A POLITICIAN TO TELL THE TRUTH ....

AND I AM SURE THAT JOE BIDEN KNOWS THAT AND EXPLOITS IT ....

And so ...

"FACT CHECK: Biden ignores problems with stimulus"

By BRETT J. BLACKLEDGE, Associated Press Writer

4 SEPTEMBER 2009

WASHINGTON – Vice President Joe Biden proclaimed success beyond expectations for the $787 billion economic stimulus, but his glowing assessment overlooks many of the program's problems, including delays in releasing money, questionable spending priorities and project picks that are under investigation.

In a speech aimed squarely at Republican criticism and public skepticism over the costly program's effectiveness, Biden said accomplishments over the past 100 days provide proof of promises kept when he and President Barack Obama began rolling out the plan earlier this year.

"The Recovery Act is doing more, faster and more efficiently and more effectively than most people expected," he said.

The stimulus program includes tax cuts, billions for Medicaid and unemployment benefits, and a massive federal investment in education, environmental projects, technology and traditional infrastructure work.

The administration has struggled to make the case that the huge spending program has delivered real economic recovery at a time when the nation's unemployment rate threatens to top 10 percent.

Biden, Obama's chief stimulus cheerleader, proudly pointed to more than 2,200 highway projects Thursday funded by the program, but didn't mention the growing frustration among contractors that infrastructure money is only trickling out and thus far hasn't delivered the needed boost in jobs.

"It is difficult to understand why more communities aren't moving to put their stimulus funds to work while they are experiencing these kinds of job losses," Stephen E. Sandherr, head of the Associated General Contractors of America, said in a statement this week.

"Coping with the red tape required by the stimulus ought to be worth it to help put neighbors and friends back to work."

The problem is with money for building projects, not roads and highways, Sandherr said.

Biden noted 192 airports targeted for improvements with stimulus money, but made no reference to the investigation launched after a federal watchdog raised concerns about how the projects were selected.

Transportation Department Inspector General Calvin Scovel said last month he will examine the Federal Aviation Administration's process for selecting programs for the $1.1 billion in grant money.

His announcement came after his office discovered that the Obama administration used stimulus money to pay for 50 airport projects that didn't meet the grant criteria and approved projects at four airports with a history of mismanaging federal grants.

And Biden praised the more than 2,400 military construction projects paid for with stimulus money, but ignored the millions of dollars in savings the Defense Department lost because it hasn't competitively bid many of the jobs.

The Defense Department frequently awards no-bid work to small contractors for repairs at military bases under the stimulus, costing taxpayers millions of dollars more than when businesses compete for the work, an Associated Press analysis of 570 such contracts found.

Biden exercised some restraint in his praise for the stimulus' impact.

He took a more cautious approach, for example, when asked if his declaration of stimulus success means Americans can now rethink the common view that government is wasteful and inefficient.

"I think it's too early to make that decision, to be very blunt about it," he said.

And Biden didn't attempt to credit the stimulus alone for signs of broad economic recovery, saying it was one of several government actions that are helping.

"Had we done just this and not done the incredibly unpopular thing of bailing out the banks, had we had done this and tried to deal with stabilizing the housing market, had we done only this we would not be where we are," he said.

But most of Biden's remarks focused on what he argued is evidence of success with the stimulus, even if his examples were questionable.

In making the case that the recovery program was not just economically sound but also good policy, Biden noted that transportation money was replacing unsafe bridges.

"It is worthwhile to take some of those 5,000 bridges out there that are ready to collapse, follow what happened in the upper Midwest, and fix them," he said.

But most states are spending stimulus money on bridges that are already in good shape, another AP analysis found.

Of the 2,476 bridges scheduled to receive stimulus money so far, nearly half have passed inspections with high marks, according to federal data.

Those 1,123 sound bridges received such high inspection ratings that they normally would not qualify for federal bridge money, yet they will share in more than $1.2 billion in stimulus money, the AP analysis published in July found.

The vice president's speech is part of a concerted White House push in advance of the 200th day of the stimulus act on Saturday.

Five top administration officials also were speaking about the law's benefits on Thursday in appearances in Arkansas, Virginia, Illinois, California and Minnesota.

The dude might prevaricate a bit ....

Or a lot ....

But boy, does he ever have shiney teeth ....

My, how they sparkle ....

I wonder what kind of toothpaste the dude is using ....

And whether or not he is using a power buffer to get them that white ....

And so ...

HERE ARE SOME "GREEN SHOOTS", ALRIGHT ...

THE "GREEN" SHOOTS OUT OF OUR POCKETS AND INTO THE GRASPING HANDS OF THE TAXMAN .....

SO MUCH FOR RENEWED CONSUMER SPENDING HERE IN AMERICA, ALL OF YOU INVESTORS ....

WHEN THE TAXMAN IS TAKING ALL OF OUR MONEY TO FEED HIS FAT FACE, THERE IS NOTHING LEFT FOR YOU ....

And so ...

"Fund crisis hits home - Property tax prime target to fill public pension coffers drained by financial meltdown"

By RICK KARLIN, Capitol bureau, Albany, New York Times Union

First published in print: Friday, September 4, 2009

ALBANY -- Cities, towns and counties statewide face a budget-busting rise in their employee pension costs and New Yorkers, already hit by the recession, will likely see higher property taxes.

It's the latest financial hit to come from last year's stock market crash, state Comptroller Tom DiNapoli said Thursday as he released the 2011 pension contribution rates for towns, cities, counties and the state work force.

"It is going to have an impact on local budgets," DiNapoli said.

Due largely to the state Employee Retirement System's battered investment portfolio, the percentage of payroll that local governments must contribute for pensions will rise from 7.4 percent next year to 11.9 percent in 2011.

The higher contributions are expected to cost the city of Albany $4.5 million more.

In Albany County, it could cost another $6 million by 2012, Comptroller Mike Conners said.

The looming increases are just another sign that New York's generous public employee pension plans are not sustainable, say critics like E.J. McMahon, director of the Empire Center for State Policy, a fiscally conservative think tank.

"Do you think you can promise 300,000 people early retirement at three-quarters of their salaries and it's cheap?" McMahon said.

Many localities make their payments a few months early, meaning they will pay their 2011 contribution at the end of next year.

Increases for "uniformed" employees, including police and firefighters, who receive richer benefits, will be even higher: going from 15.1 percent of payroll in 2010 to 18.2 percent in 2011.

The state retirement system serves more than 1 million public employees including 358,109 retirees and beneficiaries, according to the comptroller's data.

Many public employees can retire at age 55, younger for police and firefighters -- far sooner than most private sector workers."

"Their pensions can approach 75 percent of their earnings or more, depending on hiring date and length of service.

The rising costs come after five years where contributions remained steady or even fell thanks to a booming stock market.

But last year's financial collapse meant the retirement fund shrank to $116.5 billion as of March, down from a high of $154 billion in the spring of 2008.

With lower investment returns, local governments have to make up the difference because public employee pensions are protected by the state constitution.

That's in contrast to the private sector, where workers often see their pensions reduced or eliminated with economic downturns.

"All of these systems offer pensions that are extravagant by private sector standards," added McMahon.

DiNapoli stressed the effect of higher contribution rates depends on the locality.

But short of making deep cuts in services or laying off people in order to save money, many will likely have to raise taxes at some rate to make up the difference.

The increased costs also come as counties and municipalities are squeezed by lower sales tax revenues, noted Stephen Acquario, executive director of the state Association of Counties.

The 2012 rates are significant since they are expected to jump even higher if the current trend continues.

The 57 counties outside of New York City, for example, could be paying $1 billion in pension contributions by 2012, compared to the current $337 million, said Acquario.

Also on the horizon: possible cost increases to school districts and their attendant tax rates.

That's because the Teachers Retirement System, another pension system entirely, is likely to announce higher costs when its report comes out this fall.

The number of retirees is growing, prompting observers to call for changes.

McMahon and other conservatives believe future public employees should enter a largely self-funded plan such as that used by the State University system.

Politicians, who rely on public sector unions for contributions and political support, have broached more modest changes.

Gov. David Paterson earlier this year called for creation of a less-generous "Tier V" program in which future employees would make more of a contribution and retire later than those in earlier retirement plans.

Thursday's news on pension costs prompted Paterson to renew his call.

His spokeswoman Marissa Shorenstein said the governor is continuing to push for a deal with lawmakers.

Two major unions -- the Public Employees Federation and Civil Service Employees Association -- earlier this year agreed not to oppose a Tier V in exchange for a no-layoff pledge from Paterson.

But other politically influential unions such as the New York State United Teachers oppose Tier V and legislators don't appear to be embracing the concept.

The looming expenses have been both aggravated and masked by past actions of state officials and lawmakers.

Previous comptrollers such H. Carl McCall have, when the stock market was rising, reduced the amount of money localities had to pay for pension costs.

But that makes the increases doubly painful when the market is down.

And lawmakers in past years have sweetened public employee pensions -- a move popular with unions, but which ultimately bears a price tag.

In the future, DiNapoli wants to allow localities to institute reserve accounts they could tap in bad years.

He also wants localities to amortize payments, or borrow against future years to cover their rising costs.

That would include increasing from 4.5 percent to 5.5 percent the floor or lowest amount that communities pay into their pensions.

"The pension liability is there."

"It's not going to go away," said DiNapoli.

Rick Karlin can be reached at 454-5758 or rkarlin@timesunion.com.

FOR $787 BILLION IN BORROWED MONEY WHICH WE WILL HAVE TO PAY BACK WITH INTEREST, THE OBAMA-ITES AND JOE "SHINEY TEETH" BIDEN HAVE SAVED 135,000 JOBS ....

AND JOE BIDEN IS BRAGGING THAT UP AS A GREAT ACCOMPLISHMENT ....

And so ...

"Jobless rate at 9.7 pct.; 216K jobs lost in Aug. - Unemployment rate rises to 9.7 percent in August, highest level in 26 years; 216,000 jobs lost"

By CHRISTOPHER S. RUGABER, Associated Press

Last updated: 1:16 p.m., Friday, September 4, 2009

WASHINGTON -- The unemployment rate jumped almost half a point to 9.7 percent in August, the highest since 1983, reflecting a poor job market that will make it hard for the economy to begin a sustained recovery.

While the jobless rate rose more than expected, the economy shed a net total of 216,000 jobs, less than July's revised 276,000 and the fewest monthly losses in a year, according to Labor Department data released Friday.

Economists expected the unemployment rate to rise to 9.5 percent from July's 9.4 percent and job reductions to total 225,000.

By contrast, in a healthy economy, employers need to add a net total of around 125,000 jobs a month just to keep the unemployment rate stable.

"It's good to see the rate of job losses slow down," said Nigel Gault, chief U.S. economist at IHS Global Insight.

But "we're still on track here to hit 10 percent (unemployment) before we're done."

The rise in the jobless rate was largely due to the government finding that the number of unemployed Americans jumped by nearly 500,000 to 14.9 million, while 73,000 people joined the civilian labor force.

Those figures are from a different survey than the report on total job cuts.

The civilian labor force usually grows as a recession winds down and optimism about finding work grows.

But as long as Americans remain anxious about their jobs, consumer spending isn't expected to rise enough to power a rebound.

"There isn't the underlying fuel there for strong consumer spending growth," Gault said.

Instead, most of the current rebound in the economy stems from auto companies and other manufacturers restocking inventories, which have plummeted as factories and retailers have sought to bring goods more in line with reduced sales.

Few economists think that can provide the basis for a sustainable recovery.

Gault forecasts the economy will grow at a 3.7 percent clip in the current July-September quarter, but expects that to fall to 2.4 percent by the fourth quarter and 2 percent in the first quarter next year.

Analysts expect businesses will be reluctant to hire until they are convinced the economy is on a firm path to recovery.

Many private economists, and the Federal Reserve, expect the unemployment rate to top 10 percent by the end of this year.

If laid-off workers who have settled for part-time work or have given up looking for new jobs are included, the so-called underemployment rate reached 16.8 percent, the highest on records dating from 1994.

That rate rose because the number of workers settling for part-time hours, either because their employer cut their work week or because that's all they could find, increased by about 300,000.

But earnings rose and the number of hours worked stayed above a recent record-low.

Average hourly wages increased to $18.65 from $18.59, the department reported.

Average weekly earnings increased to $617.32.

The number of weekly hours worked remained at 33.1, above the low of 33 reached in June.

That figure is important because economists expect companies will add more hours for current workers before they hire new ones.

On Wall Street, stocks moved in a narrow range in midday trading.

The Dow Jones industrial average added about 11 points, and broader indexes also edged up.

The recession has eliminated a net total of 6.9 million jobs since it began in December 2007.

Job cuts last month remained widespread across many sectors.

The construction industry lost 65,000 jobs, which caused some economists to note that the Obama administration's $787 billion stimulus package hasn't yet stemmed layoffs in that industry.

"It doesn't look like a whole lot of those 'shovel ready' projects have been started," Joel Naroff, president of Naroff Economic Advisors, wrote in a note to clients.

Factories cut 63,000 jobs, while retailers pared 9,600 positions.

The financial sector eliminated 28,000 jobs, while professional and business services dropped 22,000.

Even the government lost 18,000 jobs, as the U.S. Postal Service cut 8,500 positions, and state and local governments laid off teachers and other school workers.

Health care and educational services was the only bright spot, adding 52,000 workers.

And the pace of layoffs is slowing.

Job losses averaged 691,000 in the first quarter and fell to an average of 428,000 in the April-June period.

Other economic data released this week has been positive.

The Institute for Supply Management, a trade group, said Tuesday that the manufacturing sector grew in August for the first time in 19 months.

On Thursday, the ISM said its service sector index rose to 48.4 last month, the highest level in nearly a year.

Home sales, meanwhile, have increased for several months and prices are stabilizing.

Federal Reserve policymakers said in minutes from an August meeting that they expect the economy to recover in the second half of this year.

But labor market conditions are still "poor," the Fed minutes released Wednesday said, and many companies are likely to be "cautious in hiring" even as the economy picks up.

Some economists credit the stimulus package of tax cuts and spending increases, along with the Cash for Clunkers program, with contributing to a recovery.

But they worry about what will happen when the impact of the stimulus efforts fades next year.

Administration officials argue the stimulus has already saved about 135,000 jobs.

Labor Secretary Hilda Solis said Friday that funds are still being injected into the economy and will continue to spur recovery.

"The recession has done more damage than could ever be fixed in half a year," Solis said.

Vice President Joe Biden defended the stimulus package Thursday against Republican critics who say it is too costly.

"The recovery act has played a significant role in changing the trajectory of our economy, and changing the conversation in this country," Biden said.

"Instead of talking about the beginning of a depression, we are talking about the end of a recession."

Republicans criticized Biden's speech.

"The Democrats' rhetoric on their economic experiment doesn't match with the reality of millions of Americans remaining unemployed," said Republican Party chief Michael Steele.

"The stimulus was an economic experiment that failed Americans."

More job cuts were announced this week.

Washington-based manufacturer Danaher Corp. said it will lay off about 3,300 of its roughly 50,000 employees, an increase from the 1,700 cuts it announced in the spring.

American Airlines said it is cutting 921 flight attendant jobs as it deals with an ongoing downturn in traffic and lower revenue.

"G-20 to maintain economic stimulus measures - G-20 pledge continued economic stimulus, reach compromise on plan to limit bankers' bonuses"

By JANE WARDELL and AOIFE WHITE, Associated Press

Last updated: 11:35 a.m., Saturday, September 5, 2009

LONDON -- Top finance officials from rich and developing countries on Saturday pledged to maintain stimulus measures to boost the global economy, warning that the fledging recovery that provided the backdrop to their meeting is by no means assured.

Group of 20 finance ministers also promised a crackdown on bankers' pay -- while stopping short of a European push for a cap on bonuses -- and agreed to giving developing countries a greater say in international financial institutions.

A joint communique said that fiscal and monetary policy will stay "expansionary" for as long as needed to reduce the chances of a double-dip recession after the worst financial crisis since World War II.

"Financial markets are stabilizing and the global economy is improving, but we do remain cautious about the outlook for growth and jobs," British Treasury chief Alistair Darling, the host of the London meeting, said.

"We agreed that we would continue to implement our necessary support measures -- including monetary and fiscal policies -- consistent with price stability and long-term fiscal sustainability until recovery is secured."

The International Monetary Fund has said that the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5 percent, from an April projection of 1.9 percent.

But the IMF also downgraded its forecast for this year to a contraction of 1.4 percent, from 1.3 percent.

Japan, Germany, France and Australia all recorded growth in the second quarter.

Other countries like Britain, which is expected to move back into growth in the third quarter, have been slower to recover.

"The financial system is showing signs of repair," said U.S. Treasury Secretary Timothy Geithner.

"Growth is now underway."

"However, we still face significant challenges ahead."

There is a fear that withdrawing any time soon from the trillions of dollars worth of extraordinary stimulus packages that have been pumped into the ailing world economy in recent months could result in a double-dip recession.

Germany and France had previously pushed for more discussion of a so-called exit strategy from the massive stimulus measures, arguing that spending measures have taken government debt to dangerously high levels, but have backed away from the issue in London.

The G-20 also pledged restrictions on excessive bankers' pay in a bid to address concerns about the risk-promoting bonus culture blamed for fueling the current crisis.

The communique said that work will continue on the possibility of introducing a cap mechanism for financial sector bonuses but did not commit to the measure after U.S. and British objections to the French-German proposal.

Instead, the G-20 proposed clawback mechanisms to ensure that bonuses are linked to the long-term success of deals and could be forfeited if they fail to deliver over a period of years.

Darling said the new measures would make sure that institutions "are focused on long-term sustainability and long-term strength."

Darling said banks must realize that "they would not be here had it not been for the efforts of countries, underwritten by the taxpayer," and there must be no more cases in which "people are being rewarded for reckless behavior."

The Financial Stability Board, an international body established at the London Summit of G-20 leaders in April, was given the task of drawing up practical proposals for implementation at the Sept. 24-25 leaders meeting in Pittsburgh.

The United States had tried to put the focus of the London meeting, which is a preparatory gathering for the leaders summit, on its proposal for a new international accord to increase banks' capital reserves.

The U.S. wants to establish stronger international standards for the reserves banks are required to hold to cover potential loan losses.

Going into the meeting, U.S. Treasury Secretary Geithner wanted to reach agreement on an accord by the end of 2010, with implementation by the end of 2012.

The communique did not directly address that plan, but called for rapid progress in developing stronger prudential regulation, including a requirement that banks hold more and better capital once recovery is assured.

British Prime Minister Gordon Brown won support for his push to take tougher action against tax havens, with the G-20 agreeing to a March 2010 deadline to start sanctions against tax havens which refuse to comply with new transparency rules agreed at the April G-20 leaders' summit in London.

The G-20 also reaffirmed its commitment to reform of the World Bank and the International Monetary Fund to give developing countries a great say on those bodies.

The BRIC proposed a quota shift of 7 percent in the IMF and 6 percent in the World Bank Group to reach an equitable distribution of voting power between advanced and developing countries.

The G-20 stopped short of that, but said it will complete World Bank reforms by spring 2010 and the next IMF quota review by January 2011.

The G-20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States.

The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.

"Investors see few reasons to send market higher - Few catalysts ahead means market is unlikely to continue six-month charge into fall"

By STEPHEN BERNARD, Associated Press

Last updated: 1:45 p.m., Sunday, September 6, 2009

NEW YORK -- The stock market has lost some of its swagger, and it seems unlikely to regain it anytime soon.

A six-month rally that sent Wall Street's major indexes up more than 45 percent from their March lows has hit the wall.

While months ago investors welcomed even modest signs that the economy had slowed its decline, now traders won't settle for anything less than signs of actual growth before they'll buy stocks with any enthusiasm again.

"There's no catalyst to push the market higher right now," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego.

"You can only be less bad for so long before you need to be good."

The holiday-shortened week -- the market is closed Monday -- brings few major economic indicators that could revive the rally.

The biggest reports will likely be the Federal Reserve's beige book report, which tracks economic activity by region, and the University of Michigan's preliminary report on consumer sentiment during September.

However, those reports are not considered as important as monthly jobs data, which came out Friday, or retail sales and consumer spending reports.

An improvement in employment and consumer spending is needed for a full recovery but there's no sign yet of that happening, said Mike Rubino, CEO of Rubino Financial Group in Troy, Mich.

"We think numbers can get worse," Rubino said about job losses.

"We're still going to leak jobs."

On Friday, the Labor Department said the unemployment rate rose to a higher-than-expected 9.7 percent in August from 9.4 percent in July.

There was some upbeat news in the report: U.S. employers cut fewer jobs than anticipated, shedding 216,000 positions during the month.

Stocks rallied in light pre-holiday trading after the report was released, with the Dow Jones industrials rising almost 97 points.

But that blip up wasn't enough to offset a big drop earlier in the week that came on resurgent worries about the economy and fears that investors had been too optimistic in bidding stocks up this spring and summer.

The Dow and Standard & Poor's 500 indexes fell more than 1 percent last week, while the Nasdaq composite index slipped 0.5 percent.

The concern across financial markets is that consumers, even if they have jobs, will continue to curb their spending out of fear that they'll be laid off.

And they're not likely to spend with any vigor until they see a more stable job market.

"We definitely need to see jobs improve to see consumers spend," said Ingrid Hendershot, president of Hendershot Investments in Bristow, Va.

"With unemployment continuing to rise, a recovery will be anemic."

Investors will get some insight into the consumer's psyche this week from the Reuters/University of Michigan preliminary consumer sentiment index for September.

But at this point, the news isn't expected to be good; economists expect a slight drop in the index to 65.3 from 65.7, according to Thomson Reuters.

Last month when the preliminary report was released, the market tumbled sharply.

In the absence of new data showing solid growth in spending and a rebound in jobs, the market is unlikely to move much higher, analysts say.

It's unclear, however, if the market will settle into a narrow range ahead of earnings reports next month -- the next potential major catalyst for the market -- or start to track backward.

Terence Burns, president of Campion Wealth Management in Vienna, Va., said a 5 percent to 10 percent pullback wouldn't be surprising as investors try to balance stock prices with potential earnings growth moving out of the recession.

The market "overreacted on the downside, then overreacted on the upside," Burns said.

"There's an ebb and flow to find the right valuation."

CBIZ Wealth Management Group's D'Arcy is more optimistic, believing the market will stay relatively flat during the coming weeks.

The reason, he said, is "there's plenty of money to protect against any big declines."

Enough cash remains on the sidelines and investors' tolerance for risk has returned enough that any major drop in the market is likely to be met with buying, especially since investors do believe a recovery is coming.

It's just that no one is expecting much strength when the rebound finally occurs.

Other reports due out during the week include the Labor Department's weekly tally of unemployment claims, to be released Thursday and the Commerce Department's data on July wholesale inventories on Friday.

As soon as investment banks think they have wrung out all they can from mutual funds,
day-traders, the government in all forms, and individuals (excepting their own private investment club)
you are going to see a very ugly sell off. And, guess what, the big boys have the computer programs to make
the sales 1,000,000 times faster than the others can.

Why would they do that and end their means of profit? Because they know the big picture, they can see
the forest for the trees because they are sitting on top of the financial mountain, while we drive to work.

May I offer a peek from the peak?:

http://market-ticker.org/
The Market Ticker
Commentary On The Capital Markets
Sunday, September 6. 2009
Posted by Karl Denninger in Macro Economics at 14:12

2009 Labor Day Ponderings....

After a bit of prodding I decided to go back and expand a bit on the "Weekend Chart To Ponder" posting.

Be warned: this is a far more esoteric undertaking than the previous, and may make your eyes glaze over. Nonetheless I believe it is important, as it sets forth some "boundary conditions" that, when analyzed against current economic trends and behavior, are likely to lead you to inescapable (and perhaps ugly) conclusions.

Expanding this chart was particularly difficult to do because The Fed doesn't make it easy to find the data I was looking for - specifically, total outstanding borrowings on mortgages. Their "Flow of Funds" report shows changes, but that's not sufficient - I need total numbers outstanding. Fortunately The Census Bureau keeps track of that data - albeit with a bit of a lag (they don't have 2008 yet.)

Just to reiterate for those who didn't catch this up front - these numbers are expressed as percentage changes and are all per-capita.

The latter is important and often ignored - a rising population of course can support a larger (total) amount of credit outstanding, but at the same time it mutes GDP growth. That is, if you have 100 million people in the nation and double it (to 200 million) GDP doubling doesn't actually improve anyone's lot in life - the per-capita GDP is the same. Ditto for total incomes, and total debt - rising debt is bad, but only if it is rising per-capita.

Many people have asked why I didn't include inflation in these numbers. There are a number of reasons, the most-important of which is that it doesn't matter when one is comparing against incomes. There is also the problem of defining inflation - exactly what do you include and what do you not? Government statistics are notoriously inaccurate - for instance, they did not define the rise in house prices from 2003-2007 as "inflation", since they use a thing called "owner's equivalent rent" in the computations - a farcical measure for the majority of Americans, since the majority own their homes. Then there are what are called "hedonic" adjustments; the simplest explanation of "hedonics" is that when steak becomes too expensive the government substitutes hamburger, since both are meat and contain protein (yeah, really.)

We can fight over "inflation" numbers all day and all we'll generate is heat, not enlightenment. The easiest way to avoid doing that is to compare against what matters when it comes to debt - that is, income.

Why?
Because the servicing of debt requires income. The greater the outstanding debt (per-capita) in regards to income, the closer "the wall" gets to the consumer.
So with that, here's the chart (click on it for a bigger copy):

Chart Here



Now let's agree on a few things, shall we?

First, there is a "critical level" beyond which all debts will default - without exception. That point is where the carrying cost exceeds income. For example, if you have a $100,000 mortgage and $9,999 (or less) in income, if the interest rate is 10% every such mortgage will default since you can't pay $10,000 with $9,999.

A direct comparison of this sort is, however, a ridiculously optimistic scenario. "Money income", as defined by the Census Bureau, includes all money earnings before taxes and excludes non-cash benefits (that couldn't be used to pay debts) such as food stamps and housing subsidies. It also excludes capital gains and losses (we can argue over whether it should, but it does.)

Note, however, that taxes are not included, and for essentially all employed persons there is an explicit tax hit (even if you have zero federal income tax) for Social Security and Medicare, never mind state taxes, property taxes and other forms of tax, all of which reduce income available to service debt.

Second, before you can service debt you must have the basic necessities of life. Chief among these are of course food and shelter, the latter often being a big source of that debt too (mortgage debt in particular.) Therefore, we must subtract out of your income the cost (per-capita) of the basic necessities of life. We'll define this as the Federal Poverty Threshold; since the average household is 2.59 people (per the US Census again) this places the per-capita requirement for basic necessities of life at ($14,540 / 2.59) (arithmetic average of the 2 and 3 person poverty level divided by actual average household size) or $5,614 as of 2007. This must be subtracted from the per-capita income of $26,804 (for 2007) knocking the actual income available to service debt (in the best case) back to 1998 levels, when it first crested $20,000, or 500% of baseline.

Third, all forms of debt are additive. That is, you can't compute the percent interest necessary to force 100% default rates just for mortgages unless mortgages are the only form of debt out there, and clearly they're not. When you try to "blend" the numbers you again run into the need to make assumptions that make it impossible to set an accurate "must default" level.

Finally, we must add in the costs associated with the income and debt you are trying to service. This is often ignored and yet it can't be - the cost, for example, of a vehicle (including insurance, gasoline, repairs, etc) to get to work, if you live where mass transit is unavailable between your home and office, is an unavoidable expense that must come out of income before anything is available for debt service. The impact that this has on an individual varies greatly.

Does this particularly enlighten us on the promise (or peril) going forward for America?

Not really, but it does give us a framework to start thinking about whether what we've been doing to "address" the recession since 2007 can possibly work.

Now let's think for a moment about the actual "default function"; that is, how outstanding debt compared to income actually results in defaults (or not) in a real system. I would argue that it is most like the rational function f(x) = 1/x where x is a positive number representing the "displacement" from "zero hour", or the maximum debt possible to be sustained, and y is the default percentage with infinity representing 100%. The "zero point" is where debt service (if all debt) is impossible with current income (that is, interest due exceeds current after-tax and after-necessity income.)

That is, once we get a reasonable distance away from that "zero point" the change in default rate for a given displacement is rather small. This behavior is what leads to booms during loose lending periods - reasonably large changes in income and debt levels do not immediately lead to large changes in default rates - so long as we're a "safe" distance away from the "zero point."

But this behavior is deceiving, because the change in default behavior is in fact parabolic, not linear, as one approaches the "zero point." As debt continues to build in the system the ratio gets closer to the zero point for (x), and as that occurs the default rate starts to rise - first slowly, then much more rapidly for a given excursion toward zero. What's worse is that the act of default forces the equation the wrong way, since defaults tend to cause bankruptcies of both borrowers and lenders, and thus business failures - and the latter results in unemployment (thus driving per-capita income down.)

So, you say, this is all a nice bunch of arm-waving, but what does it mean? (Are your eyes glazing over yet?)

On that point we can reach some conclusions. We know, for instance, that unlike all previous recessions since the 1930s this one began with consumer defaults on subprime loans. That is, we began to approach the zero point through the dramatic increase in debt outstanding and the most-marginal borrowers were unable to make their payments.

This in turn caused the cessation of origination of these loans and the construction of homes that were enabled by them, which forced people out of work both in those lending and building enterprises (thus forcing per-capita income downward.)

That in turn drove us even closer to the zero point, and the damage began to move up the scale. Higher-quality borrowers began to default - first on ALT-A loans and then prime loans, and the defaults spread into other areas of finance including credit cards and commercial real estate.

The Fed and Government, in response to this trend, flooded the system with liquidity in an attempt to drive down borrowing costs (that is, to get the interest component down so "the wall" was further away.)

Did it work?

No - because the banks, rather than being forced to admit their losses and come clean, were instead permitted to hide them. They took this "cheap money" for themselves and instead of lowering interest costs for consumers, moving the default function in the desired direction, raised them on consumer debt, forcing the default function the wrong way!
The government in turn stepped up its borrowing and replacement of actual income with subsidy, since the interest rate for government borrowing did indeed go down. This prevented an all-on implosion at that instant in time.

But did it fix the problem?

NO!

Why not?

Because the debt is still out there and the ability of the government to continually borrow more money forever to use in these subsidies for the purpose of halting the shift to the left in the debt/income default function does not exist.

Oh sure, government can do this for a while - and it has. But not forever, and yet "forever" is what is required, until and unless those debt levels go down or income levels go up to get us back into the "safe" zone of the default function.

Yet the government's actions in fact move the curve the wrong way over time! That is because government borrowing is in fact debt that ultimately must be paid for out of individual income. While it is "cheap" borrowing it has not (and doesn't) replace the high-cost debt that is causing the problem - it is simply a means of attempting to subsidize the current payment required to keep the default from happening "right now" (as in this month.)

We are doing the wrong thing because government and The Fed have misdiagnosed (either intentionally or not) the cause of the recession and thus whether their tonic can be effective.
During an ordinary inventory-led recession where excessive credit is not the triggering cause (rather, it is over-capacity in the economy) the tonic applied is useful, because stimulating demand causes the slack to come out. It also causes debt:income ratios to expand, but remember the default function - so long as you are a good distance away from the "zero point" this has little cost in terms of increasing the actual number of defaults. It does, in each and every case, shave the safety margin. We've gone through multiple recessions (all the way back to the 1970s) where we had lots of safety margin, and as a consequence this "tonic" seemed the right medicine for the job.

The problem is that we never forced the contraction of borrowing and thus never, over more than 30 years time, caused the safety margin to be rebuilt!

When you are in a recession that is occasioned by getting "too close to the sun" - that is, too close to the zero point - such policies are a disaster, because there is no safety margin left - you have in fact entered the parabolic zone of defaults, where anything that ramps the debt/income ratio at best masks the problem for a period of time and at worst can drive you into the maw of what amounts to a singularity - the implosion of your economic and monetary system.

I believe the evidence is clear and in fact irrefutable - we are in this mess because we reached the parabolic portion of the default function - in fact, we just touched the edge of it.

As such what the government and The Fed have done is exactly backwards and is only going to make the inevitable pain that must be taken worse.

In 1933 Roosevelt devalued the dollar to get out of this death spiral. He was able to do so because the dollar was linked to gold, and thus he could simply sign a document and change the exchange rate, at the same time banning private ownership of the metal (and thus preventing the market from immediately counteracting his devaluation and rending it meaningless.) Today all currencies are fiat and this option is not available - should it be attempted via massive money printing (doing so would require The Fed to literally print the entire asset base underlying the credit system in the US - somewhere on the order of $20+ trillion dollars!) the outcome would be an instantaneous ramp in energy costs (and all other imports) by more than 1,000% and the immediate collapse of both our economy and all banks, including The Fed itself, since wages would not and cannot increase by that same 1,000% in a global economy.

We must force the outstanding credit levels down to sustainable levels. This will cause a huge number of bankruptcies, especially among the financial "heavy hitting firms" on Wall Street and the pension and insurance funds of Americans as the true "value" of their so-called assets are exposed.

The problem is that there is no alternative - we squandered the ability to rebuild our safety margins over the previous 30 years, and now we're into the maw of the parabola with no remaining margin available to exploit. The longer we wait to do the right thing the worse the outcome will be, and if we wait too long we will lose our nation - literally.

History has shown that the 2000-01 recession "avoidance tactic" of more than doubling outstanding consumer credit in mortgages and increasing it by 60% in other debt while income only rose 23% during the same period bought us seven years of delay and a collapse far worse when we hit the wall - unemployment only reached 6.3% during the 00-01 recession (in 2003) while we are now at 9.7% (officially) and climbing. Consumer spending and defaults were a non-factor in 00-01 - today they are the feature of our recession.

Today we simply have no more "forward debt capacity" in our economy.

This is not conjecture or belief - it is hard fact and has been proved by the structure of the current recession.

Attempting to use even more lending - that is, credit - to "pull us out" of this recession is not only doomed to fail it will drive the default equation closer to zero.

We must stop this madness and the accumulation of damage that must be taken in our economy before we find ourselves in a monetary and fiscal gravity well from which we are unable to escape.

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

If you have waded this far (especially with comprehension) you may now stop worrying about Global Warming
War and H1N1. The defaulting on the economy will turn man against man...by nation, state and community.
Can y'all remember I said we "could not afford" a liberal presidency? I hope there is "change", but instead
they just telling me I "have to understand"...well if you understand the above...what they're selling is...well...a mirage.

IH, the analysis you shared with us could very well be accurate. Even if it is, seems like you went to an
awfull lot of trouble just to smear the concept, "Liberal"...

Liberals already do a real good job themselves of discrediting the term, rla ...

They always have real good ideas, they say, that will have somebody have to take care of their brother-in-law who drinks too much ...

Or some family member of theirs who needs and wants things, but won't work for them ....

And they NEVER stop to consider the consequencs of their actions ....

"OH, LA, JUST DO IT AND SOMEBODY ELSE CAN WORRY ABOUT IT LATER!"

That is Nancy Pelosi right there, in a nutshell ....

And Nancy Pelosi spells LIBERAL ...

And so ...

There always is change, IH ...

And most of the time, we have no control over it, whatsoever, despite the White House PROPAGANDA MACHINE that would try and make one think or believe differently ...

Last night, I started re-reading a book I got back in 1980 or so, entitled ENTROPY - A New World View by Jeremy Rifkin ...

The Author's Note at the very beginning is as follows:

HOPE is the feeling that what is desired is possible of attainment.

This book is about HOPE: the hope that comes from shattering false illusions and replacing them with new truths.

To a civilization nurtured on the modernist notion of a future without physical constraints and a world without material boundaries, the truths of the ENTROPY LAW will at first appear sobering, even somber.

That is because this law defines the ultimate physical boundaries within which we are constrained to act.

If we continue to ignore the truth of the ENTROPY LAW and its role in defining the broad context in which our physical world unfolds, then we shall do so at the risk of our own extinction.

After finishing this book some will remain unconvinced that there are physical limits that place restraints on human action in the world.

Others will be convinced but will conclude with despair that the ENTROPY LAW is a giant cosmic prison from which there is no escape.

Finally, there will be those who will see the ENTROPY LAW as the truth that can set us free.

The first group (Bernanke et al) will continue to uphold the existing world paradigm.

The second group will be without a world view.

The third group will be the harbingers of the new age.

Copyright 1980

And so ...