On that day, Moody's released a report acknowledging that while the United States' debt was still triple-A rated, the government's margin for error had "substantially diminished" in the wake of the recession and trillion-dollar deficits. Like a Rorschach ink blot, the report was many things to many people -- and it mostly served to confirm their deep suspicions. Deficit hawks saw an omen. Others saw ... well, nothing at all.
Investors should acclimate themselves to years of lower-than-normal returns in both stocks and bonds, Pimco's Bill Gross told CNBC.
As part of the firm's forecast of a "new normal" in the slow-growth economy, Gross, co-CIO at the largest bond management firm in the world, said returns probably will be half of the normal 8 percent or so annualized profits to which investors have become accustomed.
But the outrage over health-care really isn't about the actual bill, says our guest David Walker, former U.S. Comptroller General and head of the Government Accountability Office. "It was really more about the fact that government is out of touch and out of control."
Fitch Ratings late Monday downgraded Illinois’ general obligation rating one notch to A-minus and warned of possible further action by leaving the state’s credit on negative watch ahead of $1.3 billion of short- and long-term GO issuance in three deals over the coming weeks.
President Obama is splintering America. The passage of Obamacare was a historic victory for liberal governance. Yet, its true cost may be that it triggers the eventual breakup of the country.
California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.
California’s stated debt — the value of all its bonds outstanding — looks manageable, at just 8 percent of its total economy. But California has big unstated debts, too. If the fair value of the shortfall in California’s big pension fund is counted, for instance, the state’s debt burden more than quadruples, to 37 percent of its economic output, according to one calculation.
The yield on 10-year Treasuries – the benchmark price of global capital – surged 30 basis points in just two days last week to over 3.9pc, the highest level since the Lehman crisis. Alan Greenspan, ex-head of the US Federal Reserve, said the abrupt move may be "the canary in the coal mine", a warning to Washington that it can no longer borrow with impunity. He said there is a "huge overhang of federal debt, which we have never seen before".
"China is not throwing its weight amid China-Africa cooperation, though China's influence is getting stronger as an emerging power," a senior Tanzanian media
official said on Wednesday.
Tax revolt? Instead of default, more likely scenarios for local governments include selling assets, cutting spending and raising taxes. Of course, that in turn could spark social unrest, as Aaron notes in the accompanying clip. But we're not there yet, says Altucher, adding that any incremental improvement in the economy will translate into more revenue for local coffers.
This Shortfall creates a “snowball” effect as China’s gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world’s largest gold producer since 2007.
The state's funding crisis has already put 9,800 teachers on the unemployment line, and a coalition of education groups warns that figure could more than double.
Schools must tell employees now whether their jobs will be cut next year. Officials from the six-group coalition said they have heard from 75 percent of Illinois school districts and they plan more than 17,000 layoffs.
On paper, the government's 27 percent stake has grown in value to $33 billion. The size of the deal in the works has Wall Street buzzing. Only the stock offering by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987, was larger, according to Thomson Reuters.
Nicolas Colas, chief market strategist at institutional brokerage BNY ConvergEx, says a number of trades are looking “crowded,” meaning too many investors have placed bets on a market moving in one direction. The trade could still work for a while. But it may not have as much payout as the investor who gets in late is probably hoping.
1. Buying gold. “Countless Internet banner ads and television commercials” are the give-away, Colas said. Shares of the largest gold exchange-traded fund, the SPDR Gold Trust, have more than doubled in the past year.
Judging from stock prices alone, one would think the economy was poised for a roaring comeback. But the federal government plans to unplug the economic life-support programs that stimulated production, kept interest rates low and placed a thick cushion under the real estate market.
Consumer spending in the U.S. rose in February for a fifth consecutive month, a rebound that may accelerate when employment strengthens.
“The consumer is still making traction with the overall recovery,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who accurately forecast the rise in spending. “Factors are falling into place for the recovery to be sustained.”
Either Americans are truly reckless consumers, or they, struggling to keep their heads above water in troubled economic times, find themselves spending increasing amounts of their personal income on basic, survival consumption. I tend to view the rising ratio more as the latter. How much of personal income can be devoted to consumption – 85%, 90%, how about 100%?
Personal Income Edges Higher, March 03, 2010
Zhejiang Geely Holding Group signed a binding deal Sunday to buy Ford Motor Co.'s Volvo Cars unit for $1.8 billion, representing a coup for the independent Chinese automaker which is aiming to expand in Europe.
When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market. Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."
Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.
zerohedge.com
John
Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.
Investors are betting that small-caps will be the stock market's standouts as the economy improves.
Rumor has it that Federal Reserve in response to slumping action figure sales of Helicopter Ben and their never ending battle against the Great - but don’t call it a depression - Recession has been adapting new, creative quantitative easing tactics. Rather than simply dumping money from helicopters, which has become somewhat gauche and predictable after his famous speech, the tactic of "accidentally" dropping money bags out of armored cars has been observed across the country.Whitehall Sgt. Dan Kelso said a Garda armored car was eastbound on E. Broad Street at 8:20 a.m. yesterday when a bag of cash fell from the back into the intersection at Hamilton Road.
Despite early fears of an attack, there was no immediate indication that North Korea — which lies within sight about 10 miles (17 kilometers) from Baengnyeong — was to blame, the Joint Chiefs said. Still, troops were maintaining "solid military readiness," Vice Defense Minister Jang Soo-man said.
Regulators on Friday shut down two Georgia banks and one each in Florida and Arizona, bringing to 41 the number of bank failures in the U.S. so far this year following the 140 that fell in 2009 to mounting loan defaults and the recession.
Remember the part in the ObamaCare pitch when they said if you like your current healthcare, it won't change?
Turns out it might.
Companies are already announcing that their healthcare premium costs are going through the roof. Some are responding by firing people. Some are cutting benefits. And some are presumably eating it.
Bill Gross’s warning that the almost three-decade rally in fixed-income has run its course may catch individual investors off guard after they poured $89 billion into bond funds this year.
The prospect of a strengthening U.S. economy and rising interest rates makes an “argument to not own as many” bonds, Gross said in the interview.
It's going to be another bad spring for the US housing market-unless you're a buyer.
With prices still falling and more distressed homes hitting the market, many experts are expecting the market to get even worse before it gets better.
On the eve of a two-week spring recess, the Senate found itself embroiled again over the issue of a short-term extension of unemployment benefits and other programs.
Even though growth turned out to be a tad less than the government's prior two estimates for the quarter, the new reading still marked the strongest showing in six years.
After months of criticism that it hasn't done enough to prevent foreclosures, the Obama administration is expected to announce Friday a plan to reduce the amount some troubled borrowers owe on their home loans.
Countries that use the euro said Thursday they have agreed on a financial backstop for Greece that would combine loans from other eurozone governments and the International Monetary Fund, a move aimed at stopping the government debt crisis that has undermined the shared currency.
The 37-year-old Pacifica woman, her husband and their two children are among an uncounted number of Californians who find themselves in desperate circumstances caused by long bouts of joblessness.
Bernanke, in testimony to the House Financial Services Committee, essentially repeated the rationale behind the Fed's decision last week to hold rates near zero. He cited still-fragile economic conditions, and noted that inflation is low, which gives the Fed leeway to keep rates at rock-bottom levels.
In addition, Europe’s debt problems are unlikely to go away — earlier the vice governor of the People’s Bank of China, Zhu Min, said the Greek debt crisis was the “tip of the iceberg.”
“This comment might well signal the point that we stop talking about a ‘Greek debt crisis’ and start talking about a ‘euro zone structural crisis’ instead,” said Neil Mellor, currency strategist at Bank of New York Mellon.
“In other words, the issue is no longer about Greek profligacy per se — in our opinion, it never has been — but, rather, about how the euro zone actually functions,” Mr. Mellor said.
Dubai offers Dubai World new funds. Dubai will provide $9.5B to support Dubai World's debt restructuring. The state-owned holding company has asked creditors to wait as long as eight years to get all of their money back, and the new cash injection brings Dubai's investment in Dubai World to $20B since November, when the company first said it would delay repaying debt. The funds include $5.7B remaining from a loan Abu Dhabi had made earlier, but no new money from Abu Dhabi.
My view from Dar es Salaam, Tanzania, East Africa
As you witness the machinations in the European Union with market perspective riveted to that situation please do not ignore reality. Perception makes price in the short term but reality is the unavoidable
The following comment from CIGA Pedro throws light on what appears to be a destructive act by Germany.
Dear Jim,
Given the American predilection for German rehabilitation after WWII, and the often-overlooked symbiosis between Germany and America for well over 100 years, it looks like this may have been the plan all along. Germany lays down the law in Europe, France is marginalized, and an Amero-IMF entre is provided into EU financial matters. Brussels is humiliated... there is now an American star on the EU flag ... and Germany is the country that put it there.
Maybe those Marshall planners were right when they chose to finance German industrial rehabilitation before and above all others after WWII. In their reasoning they clearly stated that, ultimately, the German economy was the only one really worth helping within Europe. Today the rest of Europe looks as marginalized now as it did then.
Regards,
Pedro
An Irish bank that loaned $165 million to five Wisconsin school districts for investments that went bust says it has seized most of their remaining value.
C. Fred Bergsten, head of the Peterson Institute for International Economics, told the House Ways and Means Committee on Wednesday that a successful campaign to pressure Asian nations on the currency issue could create as many as 1.2 million new American jobs.
Beggar thy neighbour, or beggar-my-neighbour, is an expression in economics describing policy that seeks benefits for one country at the expense of others. Such policies attempt to remedy the economic problems in one country by means which tend to worsen the problems of other countries.
The term was originally devised to characterize policies of trying to cure domestic depression and unemployment by shifting effective demand away from imports onto domestically produced goods, either through tariffs and quotas on imports, or by competitive devaluation.
By an almost 2-to-1 margin Americans believe the economy has worsened rather than improved during the past year, according to a Bloomberg National Poll conducted March 19-22. Among those who own stocks, bonds or mutual funds, only three of 10 people say the value of their portfolio has risen since a year ago.
A little noticed change in tax law was incorporated into the extension of jobless benefits last year. Under the new rules companies can use losses to apply for tax refunds against earnings from the past 5 years--up from just 2 years before the change.
The law specifically excluded companies that took TARP from applying for the refund. So how does JP Morgan qualify? It argues that since Washington Mutual never got TARP funds, its past taxes should qualify.
That's a plausible argument. But the deeper problem here is that our tax code shouldn't be used like this. This rewards the worst managed companies with a subsidy while punishing those that didn't see losses in the crisis. It's got bailout written all over it.
The Obama administration’s main foreclosure-prevention program risks helping few borrowers and may do more harm than good by “merely spreading out the foreclosure crisis” over several years, federal investigators said.
Sales of newly built U.S. single-family homes fell for a fourth straight month to a record low in February, a government report showed on Wednesday, heightening fears of renewed weakness in the housing market.
Demand for purchase loans, a tentative early indicator of home sales, edged higher, but activity was down from a year earlier, further evidence that the housing market has hit a lull after showing signs of a recovery late last year.
European markets are mostly lower after Fitch Ratings said Portugal's recovery will be slower than other countries that use the euro, hurting Portugal's ability to repay its debt. Debt problems in Europe have been one of the few drags on stocks in recent months.
Stocks punched higher Tuesday to extend their streak of gains after sales of existing homes fell less than expected.
Deputies from the Party for Democracy (PPD), of the four parties comprising the opposition, center-left Concertación coalition, proposed this week to increase the mining royalty tax in order to pay for earthquake reconstruction.
Sales of existing U.S. homes fell in February for a third month, indicating a lack of jobs is hindering government efforts to revive demand.
The extension and expansion of a federal tax credit that helped stabilize housing in 2009 has yet to spark sales this year as hiring hasn’t materialized. Home Depot Inc. is among companies cutting prices to stimulate demand as the world’s largest economy recovers from the worst recession since the 1930s.
Purchases dropped 0.6 percent to a 5.02 million annual rate, the lowest level in eight months and in line with the median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price decreased 1.8 percent from February 2009.
As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn't sell in the market, according to a report from court-appointed examiner Anton R. Valukas.
European Central Bank President Jean-Claude Trichet’s campaign for governments to learn the lessons of the Greek fiscal crisis may provoke a transatlantic policy split that forces the euro back toward its lows of 2006.
As investors push Greece, Spain, Portugal and Ireland to deliver on plans to cut budget deficits, the withdrawal of stimulus raises the risk of double-dip recession and even deflation in all or parts of the 16-nation euro area. The possibility of slower expansion is prompting economists from Deutsche Bank AG to HSBC Holdings Plc to predict Trichet’s ECB will be slower than they previously anticipated in raising its key interest rate from a record low of 1 percent.
Worsening economic conditions caused the nation to reach a bleak milestone in January: For the first time since The Associated Press began analyzing conditions in more than 3,100 U.S. counties nearly a year ago, the average county was found to be economically stressed.
Driving the pain was a deterioration in states that earlier had weathered the Great Recession better than the nation as a whole. These states endured the sharpest gains in unemployment for the past three months due to job losses in such industries as energy and construction. The states include West Virginia, Idaho, Mississippi, Montana and Wisconsin.
Chen, speaking at forum Sunday, said China's deteriorating trade picture with the rest of the world indicated China shouldn't revalue its currency against the U.S. dollar, the state-run China Daily reported.
Right now, there's the pressing matter of Iran: Obama needs China to endorse sanctions, which China seems loath to do. China's intransigence on revaluing its currency and agreeing to climate change initiatives are also plaguing the administration and fueling anti-China sentiments in Congress. The foreign policy cognoscenti in Washington are calling for action.
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
North Korea has executed a senior official blamed for currency reforms that damaged the already ailing economy and potentially affected the succession, a news agency in South Korea reported today.
With revolutionary die-hards behind him, Mr. Pitts has fired a warning shot across the bow of the Washington establishment. As the writer of one of 28 state "sovereignty bills" – one even calls for outright dissolution of the Union if Washington doesn't rein itself in – Pitts is at the forefront of a states' rights revival, reasserting their say on everything from stem cell research to the Second Amendment.
"Washington can be a bully, but there's evidence right now that there are people willing to resist our bully," said Pitts, by phone from the state capitol of Columbia.
“This is not a junk stock rally,” said Lieber, who helps manage more than $7 billion in Purchase, New York. “This is a restoration-of-confidence rally. This is a business confidence rally.”
The Federal Reserve must be prepared to raise interest rates if necessary before the jobless rate has fallen to "acceptable levels", or risk losing its inflation-fighting credibility, a senior Fed official said on Tuesday.
"This is what change looks like," Obama said later in televised remarks that stirred memories of his 2008 campaign promise of "change we can believe in."
While this week brings reports on sales of new and existing homes in February, there are no signs of heightened anxiety in the stock market. That's a big change from one and two years ago, when these numbers were often horrific enough to send investors running. In recent months, traders have shrugged off some ugly figures. The reason: Steadying home prices are good enough for now.
Asked what measures China would adopt if the Treasury Department declared it a currency manipulator, Chinese Commerce Minister Chen Deming said China would not sit idly by and reiterated Premier Wen Jiabao's statement a week ago denying that the yuan was undervalued.
Mr Papandreou said his country did not want charity. "We are not asking for money from the Germans, Italians or French, what we are saying is that we need strong political support for reforms and to make sure that we do not have to pay more than necessary. We need to borrow at rates that are normal, similar to the rates other states in the EU and eurozone can use," he said.
Mrs Merkel told the German Bundestag on Wednesday that Greece’s trouble were home-grown and had almost nothing to do with speculators. Hammering home the point, she said the EU Treaties should be changed to allow the expulsion of countries eurozone "as a last resort" if they persistently breach the rules.
It's not what you know, it's what you can prove.
Victory within reach, President Barack Obama rallied House Democrats on Saturday for a final health care push, and party leaders appeared confident they had overcome a flare-up over abortion funding restrictions in the legislation.
Late last year, analysts were touting the metal's promise as a much cheaper investment alternative to gold that was poised to see higher industrial demand. Some even predicted a price climb above $20 an ounce by the end of 2009, but instead, prices dipped below $15 in February. See previous Commodities Corner on poor man's gold.
Regulators on Friday shut down banks in Utah, Ohio and Georgia, boosting to 33 the number of bank failures in the U.S. so far this year following the 140 that succumbed in 2009 to mounting loan defaults and the recession.
The Federal Deposit Insurance Corp. took over the banks: Advanta Bank Corp., based in Draper, Utah; American National Bank of Parma, Ohio; and Century Security Bank of Duluth, Ga.
This morning's Post reports that former CEO Richard Fuld feels "vindicated" by the report, since Repo 105 is not illegal, but merely kind of skeazy. Others apparently feel the same way: "I'm like, whatever," a former managing director of Lehman London tells the Observer. "When I read this, I giggle a little bit, because $50 billion is a drop in the ocean."
Read more: Former Lehman Executives ‘Giggle’ at ‘Nonprofessionals’ Who Think Losing Billions of Dollars Is a Big Deal
In an unscheduled move on Friday the Reserve Bank of India raised the repurchase rate, or its key lending rate, to 5% and the reverse repurchase rate, or the borrowing rate, to 3.50% effectively immediately.
