Finally, the Crossroad

Notes:

• Finally, the Crossroad In the sound-money community you hear a lot about “the crossroad.” That's the point at which an overindebted country suddenly realizes that it has to choose between two (and only two) very different paths. One leads to deflation, with excess debt being purged from the system through mass-bankruptcy and falling prices. The other leads to inflation, with the debt being eliminated by lowering the value of the currency in which it’s paid off. It’s been clear for years that the U.S. was approaching this fork in the road. And last week, with the Fed chopping half a point from short term rates and promising more action as needed, we may have arrived. Whether inflating away this much debt is even possible remains to be seen, but that we’ll try looks certain. Which Way Is Scarier? The Federal Reserve cut interest rates last week in order to address a pressing concern: the risk of recession and of a breakdown in credit markets. By lowering rates before it really wanted to, however, the central bank has revived another fear that had been dying down: inflation. That has left the Fed and the investment world in a tight spot. If the Fed gets it just right, the economy will slip through this crisis and keep expanding with only modest inflation, making investors happy. If the Fed's rate cuts are too little, too late, recession fears will return, sending another cold wind through credit markets and the stock market. If the Fed cuts rates too much, inflation could loom. And even if the Fed succeeds for a little while longer, all it will have accomplished is to spread another layer of toxic debt across the top of the financial landfill. Sorry, but this time the crossroad has just two forks. And we’ve made our choice.

Attachments

• DollarCollapse - Your ringside seat for the global financial crisis

Bankruptcy filings surge 29% - Aug. 27, 2008

Notes:

• Bankruptcy filings surge 29% By Ben Rooney, CNNMoney.com staff writer Last Updated: August 27, 2008: 2:22 PM EDT Number of bankruptcy filings in recent 12-month period rises to nearly 1 million. Total filings rose to 967,831 from 751,056 a year earlier. Business filings jumped more than 41% to 33,822 from 23,889 the year before. Non-business filings totaled 934,009, up 28% from last year. For the three months that ended June 30, total cases surged to 276,510 - an increase of 31% over the same period last year and is the highest number of filings since December 2005.

Attachments

• Bankruptcy filings surge 29% - Aug. 27, 2008

BBC NEWS | Business | Merrill Lynch posts $7.8bn loss

Notes:

• Merrill Lynch posts $7.8bn loss Wall Street banking giant Merrill Lynch has unveiled a huge loss for 2007, crippled by exposure to risky investments in the US housing market. It made a net loss of $7.8bn (£3.9bn) in the 12 months to the end of December from a net profit of $7.5bn in 2006. The loss includes a massive $14.1bn write-down on failed investments related to sub-prime mortgages. n the last three months of 2007 alone, Merrill chalked up losses of $9.83bn - the biggest quarterly loss in its history.

Attachments

• BBC NEWS | Business | Merrill Lynch posts $7.8bn loss

Government's court order plan will allow people in debt to keep their creditors at bay - Times Online

Notes:

• Government's court order plan will allow people in debt to keep their creditors at bay Government's court order plan will allow people in debt to keep their creditors at bay Borrowers will be allowed to stop repaying debts by taking out a court order, under radical plans outlined yesterday by the Government. The proposals would mark the biggest shake-up of personal insolvency legislation in years and come at a sensitive time for the financial services industry, which is bracing for an increase in consumer bad debts.

Attachments

• Government's court order plan will allow people in debt to keep their creditors at bay - Times Online

US STOCKS-Market falls for 6th day, Nasdaq off 3 percent | Reuters

Notes:

• US STOCKS-Market falls for 6th day, Nasdaq off 3 percent Wed Jan 23, 2008 12:41pm EST NEW YORK (Reuters) - Stocks dropped for a sixth straight session on Wednesday, led by the Nasdaq's 3 percent slide as profit forecasts from Apple Inc and Motorola added to recession fears. After Tuesday's closing bell, Apple forecast a quarterly profit below analysts' expectations and reported disappointing holiday-season iPod shipments. By midday on Wednesday, Apple's stock sank 18 percent to $127.47 on the Nasdaq. The Dow Jones industrial average was down 218.91 points, or 1.83 percent, at 11,752.28. The Standard & Poor's 500 Index was down 28.31 points, or 2.16 percent, at 1,282.19. The Nasdaq Composite Index was down 72.36 points, or 3.16 percent, at 2,219.91.

Attachments

• US STOCKS-Market falls for 6th day, Nasdaq off 3 percent | Reuters

Stocks sag as economy worries return | Reuters

Notes:

• Shares in Asia fell on Monday, with Japan down around 2.5 percent and Hong Kong down more than 3 percent, as concerns over the health of the U.S. economy returned to haunt stock markets, sending investors to seek safe haven government bonds. Monday's losses on equity markets came despite efforts last week by U.S. authorities to stop that country's economic downturn, which is exacerbated by subprime losses and credit market worries. It included an emergency 75 basis point Fed cut, a $150 billion fiscal stimulus plan from the White House and early discussions on how to bail out insurers whose underwriting of debt may yet trigger a new wave of losses. The Fed is also expected to cut interest rates again this week with interest rate futures showing the market betting on another 25 or 50 basis points in cuts, possibly taking rates as low as 3.0 percent.

Attachments

• Stocks sag as economy worries return | Reuters

Tech Sector Likely to Get Roughed Up in Looming Recession

Notes:

• I would expect the mortgage holders to take a heavy hit from tech layoffs - Lots of expensive homes and lavish lifestyles! Late to mid summer for this to hit??

Attachments

• Tech Sector Likely to Get Roughed Up in Looming Recession

Dow soars nearly 300 points as banks rally | Reuters

Notes:

• Jan 28. 2008 Stocks snapped a five-day losing streak on Wednesday, with the Dow surging nearly 300 points on optimism that a government plan to rescue ailing bond insurers is taking shape and could prevent billions more in credit losses. The market also drew support from growing confidence that aggressive interest-rate cuts by the Federal Reserve could help stabilize the economy and support the beleaguered banking sector.

Attachments

• Dow soars nearly 300 points as banks rally | Reuters

The Broken Window Fallacy Reapplied by Llewellyn H. Rockwell, Jr.

Notes:

• Government the Destroyer A kid throws a rock at a window and breaks it, and everyone standing around regrets the unfortunate state of affairs. But then up walks a man who purports to be wise and all-knowing. He points out that this is not a bad thing after all. The man fixing the window will get money for doing so. This will then be spent on a new suit, and the tailor too will get money. The tailor will spend money on other items and the circle of rising prosperity will expand without end. What's wrong with this scenario? As Bastiat put it, "It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. After every natural disaster, we at the Mises Institute start what we call the Broken Window Watch. After Hurricane Katrina, the Labor Secretary said: "What will happen – and I have seen this in previous catastrophes and hurricanes – there is a bright spot in that new jobs do get created." After last year's California fires, we heard this. "In the odd nature of economic accounting, this will probably be a stimulus," said Alan Gin, a University of San Diego economist. "There will be a huge amount of rebuilding in the next couple of years, financed by insurance payments." Continuing on, we find the Broken Window fallacy popping up even after 9-11. It doesn't matter what the government spends money on. For example, building pyramids with tax dollars is not good for the economy, despite what Keynes claimed. But neither is waging war good for us or the victim country, despite constant claims to the contrary. It is surely one of the most deadly myths that the Second World War ended the depression. As Robert Higgs has shown, it further prolonged it, all phony data aside. And consider the spending on the war on terror. If government spending were capable of stimulating the economy, we would not have recession right now.

Attachments

• The Broken Window Fallacy Reapplied by Llewellyn H. Rockwell, Jr.

UBS facing subprime banking investigations: report | Reuters

Notes:

• U.S. government prosecutors are investigating whether Swiss banking giant UBS misled investors by reporting inflated prices of mortgage-backed securities it held despite knowing those valuations had eroded, the Wall Street Journal said on Saturday. UBS, Europe's hardest-hit bank from the credit crisis, last week raised its subprime write-downs to $18.4 billion. The U.S. Justice Department on Wednesday said it was looking into whether fraud occurred in the packaging and selling of complicated mortgage securities like collateralized debt obligations (CDOs), the Journal said. The Federal Bureau of Investigation is looking at 14 unnamed companies in that probe, the agency said.

Attachments

• UBS facing subprime banking investigations: report | Reuters

BBC NEWS | Business | World Bank sees a China slowdown

Notes:

• The World Bank says China's economy will slow this year as the effects of a global slowdown take hold. It is forecasting that the Chinese economy will expand 9.6%, down from the Bank's original forecast of 10.8% made last September. A moderate global slowdown this year would not hurt China much, according to the report. It said the Chinese government could easily raise spending to compensate for falling demand overseas. ♦

Attachments

• BBC NEWS | Business | World Bank sees a China slowdown

Services index plummets, points to recession | Reuters

Notes:

• The U.S. services sector retrenched sharply in January to levels not seen since the 2001 recession "The recession has indeed arrived," said Jane Caron, chief economic strategist at Dwight Asset Management in Burlington, Vermont. The employment index fell to 43.9 from 51.8, corroborating last week's dire U.S. payrolls report, which showed the first net monthly contraction in the labor market in more than four years

Attachments

• Services index plummets, points to recession | Reuters

GMAC considers selling mortgage lender assets - Times Online

Notes:

• GMAC, the US financial services group, is in talks about selling assets owned by its mortgage business, Residential Capital, after it reported a $724 million (368.5 million) loss for the fourth quarter. GMAC blamed both the US sub-prime crisis and recent turbulence in global financial markets for the steep loss after making a $1 billion profit in the same quarter last year. Although the result was an improvement on the $1.6 billion loss reported in the third quarter in 2007.

Attachments

• GMAC considers selling mortgage lender assets - Times Online

Buyback Blowback at Ambac and MBIA by Eric Englund

Notes:

• Buyback Blowback at Ambac and MBIA Ambac and MBIA are world leaders in providing financial guarantees and credit enhancements for bond issuers (e.g., municipalities), asset managers, financial institutions, and insurance companies. Both companies are traded on the New York Stock Exchange. Holders of bonds and securities, "insured" by Ambac and MBIA, are provided irrevocable guarantees of timely payment of interest and principal should there be a default or other triggering event. These previously obscure companies are dominating the financial headlines as their names are now forever linked to the subprime-mortgage meltdown To date, both Ambac and MBIA have experienced horrific financial results in structured finance. For fiscal-year 2007, Ambac suffered a net loss of a little over $3.2 billion while MBIA suffered a net loss of slightly over $1.9 billion. And now, the New York state insurance superintendent is begging money-center banks to rescue these two train-wrecked companies

Attachments

• Buyback Blowback at Ambac and MBIA by Eric Englund

The Coming Collapse of International Credit-Ratings

Notes:

• So you thought the Ambac/MBIA bond insurers crisis was bad? You ain’t seen nothin' yet The problem, the challenge, the scandal, is not that the bond insurers are about to be downgraded. The real scandal lies in the fact that they haven’t been downgraded a long time ago - and much deeper than from “AAA” to “AA”. In fact, what needs to be downgraded are the major international credit ratings agencies, Moody’s, Standard & Poor, and Fitch. Ironically, they are already in the process of downgrading themselves. Moody's, for example, recently issued a statement cautioning investors not to rely on its ratings so exclusively. Ha! Thats like a corporate CFO saying investors shouldn't rely on the company's financial statements so much when making their decisions. The Upshot The upshot of all this is that the entire global professional investing world has traditionally heavily relied on these ratings outfits in making investment decisions. “AAA” ratings that used to be regarded as immovable, solid landmarks in the investment landscape now turn out to be nothing more than shape-shifting phantoms. In fact Egan-Jones, which is a relatively new ratings agency that decided to follow the old model of getting investors to pay for their services, rates MBIA not ”AA” (to where Moody’s wants to downgrade it) but only a mere BB+, which is essentially junk status. Interest Rates Will Have to Rise Unfortunately, as far as most government bonds are concerned, higher returns mean that a lot of bonds have to be sold because, with bonds, yields are an inverse function of price. For the yield to go up, the price must go down, and that means selling, selling, selling.

Attachments

• The Coming Collapse of International Credit-Ratings

BBC NEWS | Business | More gloom for US housing market

Notes:

• More gloom for US housing market The number of pending home sales in the US fell by 1.5% in December, official figures show, adding to evidence the housing market is still deteriorating. The index, compiled by the National Association of Realtors, fell to its second lowest reading on record. Separately the largest homebuilder in the US, DR Horton, reported a loss in the last three months of 2007. The firm had to write off assets, including the declining value of land, as the housing slump continued to bite. Losses hit $128.8m (£64m) compared with a profit of $109.7m in the same period a year ago.

Attachments

• BBC NEWS | Business | More gloom for US housing market

RPT-TREASURIES-Bond prices sag after dismal 30-year sale | Markets | Bonds News | Reuters

Notes:

• NEW YORK, Feb 7 (Reuters) - U.S. government debt prices sagged on Thursday in the biggest sell-off in four years as a dismal $9 billion auction of 30-year government bonds and recovery in stocks punished safe-haven Treasuries. The Treasury had an auction and NOBODY showed up! (my note) The $9 billion of 30-year bonds were sold at a bid-to-cover ratio, an indication of demand, of 1.82, which was below average. Indirect bidders, which include foreign central banks, took around 11 percent of the sale, well below average. "It wasn't a very good auction and I think it surprised the participants," said Lou Brien, a strategist with DRW Trading Group in Chicago. With low foreign interest and a lighter-than-average bid-to-cover ratio, "this one can be characterized as poor," Brien said.

Attachments

• RPT-TREASURIES-Bond prices sag after dismal 30-year sale | Markets | Bonds News | Reuters

Wall St stumbles on fresh risk aversion | Reuters

Notes:

• Wall St stumbles on fresh risk aversion Stocks fell on Friday as investors lost their appetite for risk and sold shares of financials, home builders and other sectors that have been at the center of the credit market crisis. American Express Co shares led declines on the Dow, while Bank of America Corp was the biggest drag on the S&P 500. The S&P Financials were the worst performer of the 10 major industry groups, losing 2.9 percent.

Attachments

• Wall St stumbles on fresh risk aversion | Reuters

Wal-Mart leads parade of huge sales misses - Feb. 7, 2008

Notes:

• "If we aren't already in a recession, there is a very good chance that we are heading there," Macy's, Home Depot, Sears (SHLD, Fortune 500) and Talbots are among the retailers that have already announced store closings and job cuts. Perkins expects even more consolidation ahead. Wal-Mart, the world's largest retailer, said January sales at its stores open at least a year rose just 0.5% versus its own forecast for a 2% increase for the month. Wal-Mart backed its fourth-quarter profit guidance of between 99 cents to $1.03 a share. It's scheduled to report its quarterly and year-end results on Feb. 19.

Attachments

• Wal-Mart leads parade of huge sales misses - Feb. 7, 2008

Bush: Will sign economic stimulus bill next week | Reuters

Notes:

• Bush said on Friday he would sign a $152 billion economic stimulus package into law next week. The legislation will provide one-time rebates of up to $600 for individuals or $1,200 for couples, plus $300 for each child. Low-income people, including retirees on Social Security and disabled veterans who pay no income taxes, would receive checks of $300. With the latest economic date suggesting the U.S. economy is stalling, the bill will inject nearly $152 billion into the economy this year and more than $16 billion next year. Some economists have said, however, that while the measures will buy time, they may not be enough to avert recession.

Attachments

• Bush: Will sign economic stimulus bill next week | Reuters

Financial Sense Online  Market WrapUp with Tim W. Wood  02/08/2008

Notes:

• The Fed Cuts Rates and Saves World From Financial Meltdown? Just as the equity markets were pushing into their anticipated turn point in late January, the Fed makes a 75 basis point cut of the Discount rate. This was the most aggressive rate cut since August of 1982. The very next week at the regularly scheduled Fed meeting they cut yet another 50 basis points. To hear the spin from the mainstream, these cuts were done to save the equity markets from the woes that first began in August. I have heard many of the analysts and commentators explain why the bottom is now in and how the Fed has finally made everything alright. From my perspective I can assure you that the extended 4-year cycle in which I have been so adamant about topped in October. I can also tell you that the Dow theory primary trend change that occurred in November is still intact, in spite of suggestions that the Dow theory is turning bullish. Furthermore, I can tell you that when we look at the facts, rate cuts by the Fed is not likely to stop the ongoing market decline. As a matter of fact, the notion that the Fed can control the markets by manipulating interest rates falls under the category of urban legend. The decline into the 4-year cycle is still alive and well. The Dow theory primary trend change that occurred in November is still alive and well. The ongoing rate cut cycle is also still alive and well. Lowering rates in this environment will not save the equity markets. Furthermore, it was the erroneous belief that was apparently born as a result of the 1982 to 2000 bull market that has everyone convinced that it will. The mis-information by Wall Street and their great propaganda machine is in high gear. The equity markets will bottom when the 4-year cycle low is made and this rate cutting cycle, which is an independent event, will not bottom until my Fed model turns up. Furthermore, the Fed clearly reacts to the natural short-term credit market forces and then spins the news to try to pacify the masses. I realize that this may come as a shock to many. You have been warned! Tim W. Wood

Attachments

• Financial Sense Online  Market WrapUp with Tim W. Wood  02/08/2008

Recession to be longer than usual: UMich | U.S. | Reuters

Notes:

• The U.S. economy has entered a recession that will be more painful and drawn out than the usual downturn, the director of the Reuters/University of Michigan consumer sentiment survey said on Friday. Inflation pressures will linger despite the retrenchment in consumer spending, complicating the task of policy-makers, the University's Richard Curtin said in a report, citing data from industry group The Conference Board. "This is no ordinary recession," he said. "The aftereffects will last much longer than the typical downturn." The new report adds that a rising wealth gap will, even more than usual, lead to disproportionate pain for middle- and lower-income Americans. "Growing income inequality has insulated higher income groups to a greater extent than ever before," the report said. Yet the rich will not go unscathed, with the stock market's recent slide likely taking a bite out of many an investment portfolio.

Attachments

• Recession to be longer than usual: UMich | U.S. | Reuters

U.S. stocks end with weekly declines as commodities soar - MarketWatch

Notes:

• U.S. stocks' losses deepen as economic worries weigh Major indexes on track for weekly declines; commodities prices surge "There is growing concern that it [credit-related trouble] is spreading to some extent to other forms of credit, including mortgage-backed securities, auto loans and credit cards delinquencies," said Owen Fitzpatrick, head of U.S. equity at Deutsche Bank. "The economic numbers keep pointing to a slower economy, and consumer discretionary and financials are two groups that are going to bear the brunt of that," said Fitzpatrick. "The surge in commodities prices serves as a reminder of the persistence of inflation, which has not abated much despite the deep economic slowdown in the U.S., and the difficulties the Fed would have in cutting rates as low as it did in 2003 when the funds rate reach 1%," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.♦

Attachments

• U.S. stocks end with weekly declines as commodities soar - MarketWatch

G7 approves IMF gold sales - Italy econ minister | Business | Reuters

Notes:

• G7 approves IMF gold sales - Italy econ minister Sat Feb 9, 2008 6:41pm IST TOKYO (Reuters) - The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget Morgan Stanley analyst Stephen Jen said the Fund held 103.4 million ounces of gold worth some $92 billion at current market prices. That was up from $23 billion just five years ago. The precious metal gained more than 30 percent in 2007 as safe-haven buying increased due to the credit market turmoil and worries about the health of the dollar as it fell to record lows against the euro. Gold continued its upward march this year. Cash gold hit a record high of $936.50 an ounce on Feb. 1, up about 12 percent since the start of the year, and was quoted at $918.00/918.70 an ounce in late New York on Friday.

Attachments

• G7 approves IMF gold sales - Italy econ minister | Business | Reuters

Related

• Financial Sense Online  Market WrapUp with Rob Kirby 02/11/2008

Kimberly-Clark invests in Peru after trade pact | Industries | Consumer Goods & Retail | Reuters

Notes:

• Kimberly-Clark invests in Peru after trade pact Say Goodbye to another US company They just don't get it!(My note) Kimberly-Clark Corp said on Monday it will pour $60 million into Peru, becoming the first big U.S. company to say it will expand here since Peru signed a free-trade pact with the United States in December. The maker of Huggies diapers and Kleenex tissue will double production in the Andean country by adding onto existing plants.

Attachments

• Kimberly-Clark invests in Peru after trade pact | Industries | Consumer Goods & Retail | Reuters

Financial Sense Online  Market WrapUp with Rob Kirby 02/11/2008

Notes:

• An Inverted Pyramid Scheme BY ROB KIRBY 2/11/08 Last week on February 5, the Australian Central Bank raised interest rates by a quarter-point to 7.00% in an “effort” to rein in inflation. Two days later on February 7, the European Central Bank [ECB] held rates steady at 4.00% while the Bank of England [BOE] lowered interest rates by a quarter-point to 5.25%. Both the ECB and the BOE were reported in the mainstream financial press as ‘weighing concerns’ of inflation against those of a global economic slowdown. These actions along with this reporting, taken together, almost makes you want to believe that interest rates are the sole determinant of inflation, eh? Sadly, almost everyone believes this, usually because some accredited news outlet like Bloomberg or Reuters says so. Interest rates, unto themselves, have very little to do with Inflation. Money Growth on the other hand, has everything to do with inflation. This is why the Federal Reserve canceled M3 Money Supply reporting; they quite simply do not want us to know how fast they are growing the money supply because it would make a complete mockery of their “officially published” inflation reports in the 2 – 3% range: The Reason for the Misreporting The real reason why the Federal Reserve wants to keep us in the dark regarding money growth is that they are responsible for the creation and oversight of our ‘fiat’ money system. Fiat Money: Currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Folks should understand that all fiat money is loaned into existence. Thus, when fiat money is ‘created,’ explicitly, the principal sum [loan] is created out of thin-air, but the interest to be repaid is not. Hence, to service the newly created debt, ever increasing amounts of additional new fiat money must be created. This necessitates an ever-increasing money supply that resembles an ever-expanding ‘inverse’ pyramid: The preservation, perpetuation and obfuscation of this inverted pyramid scheme is the real reason why the IMF reported their intent to “sell gold” at the G7 meeting in Tokyo this past weekend:

Attachments

• Financial Sense Online  Market WrapUp with Rob Kirby 02/11/2008

Related

• G7 approves IMF gold sales - Italy econ minister | Business | Reuters

January stock slump hits assets of U.S. fund firms | Industries | Financial Services & Real Estate | Reuters

Notes:

• January stock slump hits assets of U.S. fund firms Mon Feb 11, 2008 5:06pm EST AllianceBernstein Holding said assets fell 6.1 percent to $751 billion by the end of January from $800 billion at the end of December. Equity assets accounted for the entire $49 billion decline, which was "due primarily to negative equity investment returns," the money manager said in a statement. The firm owns 33.4 percent of AllianceBernstein LP, an operating partnership majority owned by AXA Financial, part of French insurer Axa SA Fears of a U.S. recession and a deepening credit crunch battered global stock markets in January, knocking 4.6 percent off the blue-chip Dow Jones industrial average .DJI , its worst January since 2000. The Standard & Poor's 500 index .SPX shed 6.2 percent, its worst January since 1990, while the Nasdaq composite index .IXIC fell 9.9 percent, its worst-ever January performance

Attachments

• January stock slump hits assets of U.S. fund firms | Industries | Financial Services & Real Estate | Reuters

Bear Stearns sees $125-$175 billion writedown for financials | Reuters

Notes:

• Bear Stearns sees $125-$175 billion writedown for financials Mon Feb 11, 2008 10:32am EST (Reuters) - Bear Stearns said it expects Standard & Poor's 500 financials to recognize mortgage and other credit-related write-downs of $125 billion to $175 billion Golub said since the end of the third quarter, S&P Financials have lost $593 billion in market capitalization and earnings estimates have been downwardly revised by $138 billion to reflect a slower operating environment and need to build additional loss reserves. Profit fell 34 percent at JPMorgan Chase & Co, 38 percent at Wells Fargo, 95 percent at Bank of America and 98 percent at Wachovia. Citigroup, suffered a record $9.83 billion loss, while Washington Mutual , the largest savings and loan, lost $1.87 billion.

Attachments

• Bear Stearns sees $125-$175 billion writedown for financials | Reuters

"Market Commentary" by Sol Palha, FSU Editorial 01/11/2008

Notes:

• Despite the focus on the bad news, despite the so called build in emotional negative feelings which shout and haunt you at night and tell you boldly that the markets are destined to crash and despite the fact that the majority feel that the end is also near; there is something that everyone is missing. The Dow put in a low of 12517 on Aug 16th; since then even more banks have come out to state that they are writing down billions from their books. The number of banks reporting negative news in regards to the housing and mortgage sector is triple if not quadruple that of which was reported prior to the Aug 16 meltdown. Sovereign wealth funds (SWF) These funds are so huge that they could effectively eliminate the need for the Federal Reserve in the short to midterm time frames. These firms are buying stakes in banks that have experienced huge loses in the mortgage markets; in effect they are telling these chaps that they will provide them a life line if they in return offer them a great dividend and a stake in the company. For example the Abu Dhabi Investment Authority (ADIA) took a 5% stake in Citigroup for 7.5 billion dollars. In return for this Citigroup gave them convertible stock yielding 11% annually and the shares are convertible to common stock in prices ranging from 31.83-37.24 from March 2010 to Sept 2011. Just on the dividend alone they are making out like bandits and if their shares should take off they will lock in even more profits. These deals will spur other SWF‘s to go after similar acquisitions. The Government of Singapore investment corp. took a massive 10% stake in UBS for 10 billion dollars, China Investment Corp took a 10% in black stone group, UAE’s Istitmar group bought Barneys of New York for 942 million, Mubadala Development Corp took a 622 million stake in Chip Maker AMD and the list goes on. The Wall Street Journal reports that Government SWF’s have invested over 46.8 billion in European and American firms since 2006; based on the current trends it appears that this spending is only going to gather momentum. If one looks at how much money these funds have one will see that the current situation is just the tip of the Ice berg; ADIA’s huge investment in Citigroup amounted less than 1% of its total assets. In terms of size ADAI is the heavy weight of them all as it has an estimated value of 625 billion dollars and could easily reach a trillion in a few years based on the high price of oil. The next contender which is Norway comes in at a distant 322 billion, Singapore has 215 billion, Kuwait has 213 billion, China is at 200 billion (though they are reportedly adding 20 billion a month and have 1.23 trillion in reserves from which they could draw additional funds) and Russia comes in at 127 billion. There are more but these are the top contenders. If you add up all this money there is a ton of purchasing power just waiting to be deployed and all these funds have one purpose in mind and that is to obtain a better rate of return on their dollar reserves. This means that these chaps are going to be ready and willing to take on more risks which means that they will be eager and ready to provide lines of credit to all the major ailing banks in the US and Europe in return for hefty dividends and for huge positions in these banks. Slowly but surely America and Europe are going to be owned by foreigners. The irony is that congress is trying to keep immigrants out of this country but right in front of their eyes foreigners are slowly gobbling up huge chunks of this country. We expect this buying spree to pick up steam as all these countries now want to earn decent returns on their dollars but remember eventually greed kicks in and then these investment corporations will start to look for outstanding returns which mean they will start speculating aggressively. This in turn will suddenly provide a huge source of liquidity that temporarily evaporated after the mortgage crisis; once the financial markets are flush with money all hell will break lose and the markets will start to heat up. We are entering a new paradigm where the Feds will no longer be the only ones capable of injecting huge sums of money into these markets; SWF’s will soon be the masters in this field.

Attachments

• "Market Commentary" by Sol Palha, FSU Editorial 01/11/2008

GM posts loss, offers workers buyouts | Reuters

Notes:

• GM posts loss, offers workers buyouts Tue Feb 12, 2008 9:13am EST DETROIT (Reuters) - General Motors Corp on Tuesday posted a quarterly loss reflecting a slump in its North American market and losses at former finance subsidiary GMAC and said it would offer buyouts or early retirements to all U.S. hourly workers represented by the United Auto Workers. GM has said the first half of 2008 is likely to be tough for industry sales in North America, but it expects to see a rebound in the second half of the year. For the year, GM expects to post improved global automotive results driven by emerging markets but declined to offer a more specific forecast for the crucial and troubled U.S. market, still its largest. For the fourth-quarter, GM posted a net loss of $722 million, or $1.28 per share, in the fourth quarter, compared with net income of $950 million, or $1.68 per share, a year earlier. GMAC, GM's former financing arm, reported a fourth-quarter net loss of $724 million a week ago. GM sold GMAC to a group led by Cerberus Capital Management, but retained a 49 percent stake that still contributes to the automaker's results.

Attachments

• GM posts loss, offers workers buyouts | Reuters

Morgan Stanley slashes mortgage business | Reuters

Notes:

• Morgan Stanley slashes mortgage business Wed Feb 13, 2008 2:08pm EST NEW YORK (Reuters) - Morgan Stanley will slash 1,000 jobs, scale back its U.S. residential mortgage operations and shut down British home lending unit Advantage Home Loans as new management takes a hard look at the continued deterioration in mortgage markets. The cuts will effect employees that engaged in wholesale and correspondent mortgages, generating loans through brokers and other third parties.

Attachments

• Morgan Stanley slashes mortgage business | Reuters

BBC NEWS | Business | Mortgage insurer reports big loss

Notes:

• Mortgage insurer reports big loss Last Updated: Wednesday, 13 February 2008, 15:37 GMT BBC US mortgage insurer MGIC has reported quarterly losses of $1.47bn (£750m) after being hit by the housing slump and resulting high levels of bad debt. The loss for the last three months of 2007 compares with a profit of $121.5m for the equivalent quarter in 2006. MGIC's losses were more than twice as high as market expectations. Last February, MGIC had agreed to a $5bn merger with its mortgage insurance rival Radian, but the deal collapsed in September after the full extend of bad US mortgage debt led to a plunge in the companies' shares.

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• BBC NEWS | Business | Mortgage insurer reports big loss

Paulson says U.S. economy should dodge recession | Reuters

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• Paulson says U.S. economy should dodge recession Thu Feb 14, 2008 1:06am EST WASHINGTON (Reuters) - The United States is experiencing a "significant" housing market downturn but the economy is fundamentally sound and should avoid recession, Treasury Secretary Henry Paulson will tell Congress on Thursday. "The U.S. economy is fundamentally strong, diverse and resilient, yet after years of unsustainable home price appreciation, our economy is undergoing a significant and necessary housing correction," Paulson is set to testify alongside Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commission Chairman Christopher Cox at a Senate Banking Committee hearing on the U.S. economy and financial markets at 10 a.m. on Thursday. In his testimony, Paulson repeats a call for Congress to pass legislation to enable the Federal Housing Administration to play a larger role in helping distressed U.S. homeowners refinance mortgages and a separate bill to allow states to issue tax-exempt bonds to cover refinancing. "All of these initiatives may help mitigate the housing headwinds, and we remain open to other good ideas as we move forward," One Word. BULLSHIT !! (My note)

Attachments

• Paulson says U.S. economy should dodge recession | Reuters

"Fancy Another Stimulus Package Or Two?" by Adrian Ash, FSU Editorial 02/14/2008

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• Fancy Another Stimulus Package Or Two? by Adrian Ash, Editor, Bullion Vault | February 14, 2008 IN 1984 THE BANK of ENGLAND saved Johnson Matthey Bank The debts covered by the Bank of England, however, totaled $309 million on one estimate The Swedish government then stepped into the Scandinavian banking crisis of 1992, buying the 13% of Nordbanken shares that it didn't already own at a 10% premium. Washington even managed to contain the US savings & loan crisis of the late 1980s, protecting savers but letting more than 1,000 finance companies go under. The direct cost to the US taxpayer was $124.6 billion, All told, the S&L crisis cost "more than the cumulative loss of all US banks during the Great Depression, even after adjusting for inflation, Whereas, by its end, the current banking crisis will see total mortgage-credit losses of $400 billion according to Goldman Sachs' latest guess-timate "One action alone will not solve every problem in the housing market," Jackson said as he gave US home-buyers an extra 30 days to try and stall foreclosure. He could just as easily have been talking about the entire banking industry. And what if we throw in an extra $3.3 trillion of foreign government finance, pouring out of the oil- and export-rich sovereign wealth funds of Arabia and Asia? Might that be enough to wipe the world's greatest-ever credit bubble from history? "So far, institutions have raised nearly $75bn of capital from sovereign wealth funds and public sources Citigroup just managed to raise funds at 5% interest. It is the world's largest bank, after all. But MBIA, the biggest "monoline" bond insurer, was forced to pay 14% on its AA-rated debt as Mason gasps. So step forward Warren Buffett! The stock market initially rallied – and rallied hard – on the idea that the Sage of Omaha might buy up bonds currently insured by bond-insurance giants MBIA, Ambac and FGIC. Yet as Buffett told CNBC, he only wants the municipal bonds these firms insure, and nothing else. Because – get this – municipal bonds are currently cheaper to buy if they come with insurance than without! In France, the state-controlled postal bank La Poste is rumored to be joining the government-owned Caisse des Dépots in developing a bail-out package for Société Générale. The country's second-largest bank, SocGen managed to lose $3 billion on subprime investments – a little-known fact given the $7 billion it lost to "rogue trader" Jerome Kerviel. And in Switzerland, UBS – due to report its first loss in history on Thursday, worth some 4.4 billion Swiss Francs for 2007 as a whole ($4bn)

Attachments

• "Fancy Another Stimulus Package Or Two?" by Adrian Ash, FSU Editorial 02/14/2008

UBS reveals new U.S. loans exposure | Reuters

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• UBS reveals new U.S. loans exposure Thu Feb 14, 2008 5:27am EST ZURICH (Reuters) - Swiss bank UBS has revealed $26.6 billion in exposure to risky U.S. mortgages distinct from subprime loans, increasing its vulnerability to the global credit crisis and sending its shares sharply lower. The bank's shares have lost half their value since the middle of last year, when a credit crisis triggered by a meltdown in subprime mortgages started to gather pace.

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• UBS reveals new U.S. loans exposure | Reuters

Top US accountability officer quits over job constraints - Yahoo! News

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• Top US accountability officer quits over job constraints Fri Feb 15, 12:07 PM ET WASHINGTON (AFP) - The head of the audit and investigative arm of the US Congress announced his resignation Friday, citing "real limitations" on what he could do. He did not elaborate but Walker last year issued an unusually downbeat assessment of his country's future in a report that drew parallels with the end of the Roman empire. He had warned that the US government was on a "burning platform" of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action was not taken soon. There were "striking similarities" between America's current situation and the factors that brought down Rome, he had said.

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• Top US accountability officer quits over job constraints - Yahoo! News

Bleak economic reports signal recession | Reuters

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• Bleak economic reports signal recession Fri Feb 15, 2008 2:32pm EST WASHINGTON (Reuters) - A series of bleak economic reports on Friday showed the mood of American consumers deteriorating in February to a point that has always signaled recession, while factory activity in New York state suffered its biggest drop on record. Adding to inflation warning signs, a Labor Department survey showed U.S. import prices rose 1.7 percent in January, powered by higher prices for oil, while export prices increased 1.2 percent, the largest rise since January 1989, a U.S. government report showed on Friday. "The import price surge is a reminder that as the economy enters recession, inflation is still a concern, coming not just from domestic sources,"

Attachments

• Bleak economic reports signal recession | Reuters

"Profiting & Protecting from Collapsing Paper" by DeepCaster LLC, FSU Editorial 02/15/2008

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• Profiting & Protecting from Collapsing Paper The Coming Climacteric by DeepCaster LLC, deepcaster.com | February 15, 2008 “But for systemic intervention and manipulation by the Federal Reserve, it appears we might be contemplating a collapsed U.S. banking system and a looming deflationary great depression that could have dwarfed the bad times of the 1930s. The Bond Sector There are about $10.4 trillion of dollar-denominated bonds of which $7 trillion are prime AAA and $1.4 trillion are subprime BBB. Of these, the prime bonds have lost 30% of their market value or about $2.1 trillion, the subprime have lost 80% of their value or about $1.1 trillion and the ALT-As have lost another $1 trillion, according to Jim Willie. Since the beginning of the subprime crisis, the total value of bond losses is about $4.2 trillion! The Retail Sector “Real Retail Sales Continue Year-to-Year Collapse…real (inflation-adjusted) annual retail sales will have held in negative territory for two consecutive months, an event rarely seen outside of recession.” The Entire Financial System Now consider overall health of the financial system. Recent Bank for International Settlements (BIS - the Central Bankers Bank) data releases reveal some $516 trillion (notional value - - see below) in OTC (Over-the-Counter) Derivatives outstanding as of June, 2007. Consider also that OTC Derivatives constitute highly risky “dark liquidity” for the several reasons set out in Deepcaster’s April 8, 2007 Alert entitled “Profiting From Dark Liquidity and Other Systemic Risks.” Exchange-Traded Derivatives by contrast are relatively transparent and are typically less risky because a clearinghouse often guarantees their performance. Not so with OTC derivatives. But there are at least three major problems flowing from this mountain of toxic OTC derivatives weapons of financial mass destruction (to borrow a phrase from Warren Buffett). First, they constitute “dark liquidity” transactions in which the “outside world” (and indeed, sometimes one party to the derivatives contract) may not fully know the strength or weakness of their counterparty/ies. And, typically, entities other than the parties and counterparties know little or nothing of those derivatives and their risks, other than, perhaps, that they exist. No Solace from Tangible Sectors This massive Keynesian stimulus produced pitiful economic results. Median real income has declined. The labor force participation rate has declined. Job growth has been pathetic, with 28% of the new jobs being in the government sector. All the new private sector jobs are accounted for by private education and health care bureaucracies, bars and restaurants. Three and a quarter million manufacturing jobs and half a million supervisory jobs were lost. The number of manufacturing jobs has fallen to the level of 65 years ago. This is the profile of a third world economy.” “The Dollar’s Reserve Currency Role is Drawing to an End,” vdare.com, January 25, 2008

Attachments

• "Profiting & Protecting from Collapsing Paper" by DeepCaster LLC, FSU Editorial 02/15/2008

Economic Indicators.gov

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• They will just discontinue the reporting of the following crucial statistics on this website. This means (in my opinion) that in order to obtain these information the citizen has to go through a long and complicated (aka costly) process to request these information under the freedom of information acts and through the department of commerce system... The following information fall under this censorship causd by "budgetary constraints:" * Advance Monthly Sales for Retail and Food Services * Advance Report on Durable Goods * Construction Put in Place * Gross Domestic Product * Manufacturers' Shipments, Inventories, and Orders * Manufacturing and Trade: Inventories and Sales * Monthly Wholesale Trade * New Residential Construction * New Residential Sales * Personal Income and Outlays * Quarterly Financial Report * Quarterly Services * Retail E-Commerce Sales * U.S. International Trade in Goods and Services * U.S. International Transactions all part of the plan... First, change the Government Accounting Office into the Government ACCOUNTABILITY Office - well, we'll give you accountability without any accounting... Then stop publishing M3 Money Supply, so we don't know how many $$$ are being printed... Then put in place a Presidential Directive to remove all authority from local & State governments in the event of ANY CRISIS THE WHITE HOUSE CARES TO DECLARE... Now, even deny the public the knowledge of what the Economic Indicators tell us of the direction of the economy - how to invest, save, plan... Big Brother - we are HERE!

Attachments

• Economic Indicators.gov

"More trouble in River City" by Anthony Cherniawski, FSU Editorial 02/19/2008

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• More trouble in River City by Anthony Cherniawski, The Practical Investor, LLC | February 19, 2008 Some wealthy investors got a jolt this week as Goldman Sachs informed them that they would be unable to withdraw their money from an investment considered “safe as cash.” These investments are so-called “auction rate securities,” credit instruments now caught in the latest liquidity squeeze. Banks and brokerage houses have sold these instruments to investors, claiming them to be safe. The fact is, they are long-term securities on which the banks hold weekly or monthly auctions to set prices and interest rates. This week’s auction was a failure of major proportions. We could have seen this coming, after last week’s U.S. Treasury auction failure, in which notably absent among the bidders were the major foreign banks. That auction failed, sending U.S. Treasury rates higher and causing a major reversal in the bond market. Now bidders have failed to show in the auction rate securities and the banks have failed to step in and make a market for these securities. The Port Authority of New York and New Jersey saw interest rates on its bonds rise from 4.3% to 20% as a result of the failed auction.

Attachments

• "More trouble in River City" by Anthony Cherniawski, FSU Editorial 02/19/2008

America's economy risks the mother of all meltdowns - Yahoo! News

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• America's economy risks the mother of all meltdowns By Martin Wolf Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome"**. The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe." Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor.

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• America's economy risks the mother of all meltdowns - Yahoo! News

Penny-pinching shoppers boost Wal-Mart profit | Reuters

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• Penny-pinching shoppers boost Wal-Mart profit Tue Feb 19, 2008 7:53am EST NEW YORK (Reuters) - Wal-Mart Stores on Tuesday posted a better-than-expected quarterly profit as penny-pinching U.S. shoppers scoured its discount stores for low prices on necessities like food and laundry detergent to offset tough economic conditions. Sales at its U.S. stores open at least a year, a key retail gauge known as same-store sales, rose 1.7 percent in the quarter, compared with a rise of 1.6 percent a year ago, as shoppers headed to its stores for groceries, health care items and electronics. Same-store sales at its namesake discount stores rose 1.6 percent, while they advanced 2.5 percent at its Sam's Club warehouse divisions.

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• Penny-pinching shoppers boost Wal-Mart profit | Reuters

Deep Into The Danger Zone

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• Deep Into The Danger Zone Today, many silver investors are asking why silver doesn't achieve all time highs like gold. Mr. Butler answers this question every week by emphasizing the control of prices on the COMEX by 4 or less traders that hold more than 50% of the net short position. When you hold a position of more than 50%, you control the market. This may be changing now. The short position is the main reason why the price of silver is behind the gold price, but this creates the opportunity to buy silver. ( Israel Friedman)

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• Welcome to Investment Rarities Inc.

Get ready for a recession...in 2009 - Feb. 20, 2008

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• Get ready for a recession...in 2009 High inflation may keep the Fed from lowering interest rates much further...and that could lead the economy to weaken even more next year. By Paul R. La Monica, CNNMoney.com editor at large February 20 2008: 10:52 AM EST Guess what, kids: Inflation isn't going away. And that means the Federal Reserve's job is getting tougher. Oil is hovering around $100 a barrel. And the January Consumer Price Index figures - released Wednesday morning - showed inflation bubbling up. David Joy, chief market strategist for RiverSource Investments, said his biggest concern now is that the Fed may have to boost rates later this year to keep inflation in check. If that's the case, the current economic woes are nothing compared to what lies ahead. Joy also predicts that the unemployment rate will head much higher than current levels next year.

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• Get ready for a recession...in 2009 - Feb. 20, 2008

Continental Airlines posts wider net loss | Reuters

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• Continental Airlines posts wider net loss BANGALORE (Reuters) - Continental Airlines Inc (CAL.N: Quote, Profile, Research) posted a wider quarterly loss, hurt mainly by a non-cash charge, and said rising fuel prices, competition, labor and other costs may affect its financial condition in 2008. The airline posted a fourth-quarter net loss of $32 million, or 33 cents a share, compared with a loss of $26 million, or 29 cents a share, a year ago. The fourth-largest U.S. carrier said it recorded a special non-cash charge of $104 million in its fourth quarter for the increase in its deferred tax asset valuation allowance. what is REALLY interesting about this article? Look at the dateline!

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• Continental Airlines posts wider net loss | Reuters

After Denial Comes Accommodation

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• After Denial Comes Accommodation Buying Busted Condo Projects We’ve formed a new real estate company, Condo Capital Solutions, In a market that’s in freefall, like Florida, buyers and sellers are able to “write their own script” about where future housing prices will land. We bid on a partly-sold-out condo deal in Florida with a $55 million loan balance and a $44 million appraisal, but it was difficult to price in a falling market. The appraiser had to value it at “current market” even though prices for units being sold were in freefall. We offered $29 million, which the seller doesn’t want to accept because it’s below appraisal. Once mortgage volumes start falling, lenders will tighten mortgage underwriting, triggering a feedback loop that produces a crescendo of falling values. Our proprietary liquidity index predicts a downtrend that reflects the past few years’ logarithmic upturn, but in reverse. What other advice? Avoid the financials, particularly banks. They’re just working through the first of three or four perfect storms that are coming. They’re dealing with their subprime problems but they haven’t set much aside for the coming consumer credit card and auto loan recession; they haven’t set much aside for the coming wave of corporate loan defaults, nor have they prepared for a commercial real estate downturn. According to the FDIC, many banks’ commercial real estate exposure is triple their capital. In the meantime, remember: 1. Cash is Emperor 2. Don’t try to catch a falling guillotine

Attachments

• DollarCollapse - Your ringside seat for the global financial crisis

BBC NEWS | Special Reports | UN warns over food aid rationing

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• UN warns over food aid rationing "In some of these developing countries, prices have gone up 80% for staple food," she added. "When you see those kinds of increases, they are simply priced out of the food markets." Even middle-class, urban people in countries such as Indonesia, Yemen and Mexico were increasingly being priced out of the food market or forced to sacrifice education and healthcare, she warned. The US, the world's largest donor of food aid, has since reduced its surplus and instead chosen to provide funding to international agencies.

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• BBC NEWS | Special Reports | UN warns over food aid rationing

The Early Innings of a Gold Boom

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• Shayne McGuire: The Early Innings of a Gold Boom 2/26/2008 by John Rubino Shayne McGuire is director of global research at Texas’ $115 billion Teacher Retirement System, which means he oversees a vast portfolio of high-grade bonds, Blue Chip stocks, and cash. Not the kind of environment that’s usually hospitable to atavistic assets like gold. Yet he recently published a book—a very good book—titled “Buy Gold Now”, in which he explains his belief that the dollar, U.S. bonds and many stocks are headed south, while gold is going to the moon. Here he is on why this will happen and how best to play it: DC: How will we know when the dollar has bottomed and gold peaked? I think gold will have peaked when the rewards offered for holding traditional assets are sufficient to compensate us for surging risks. If we consider that gold peaked when an ounce of the precious metal was near the value of the Dow Industrials index, then perhaps gold needs to rise at least ten-fold or the Dow needs to fall quite a bit. Gold is the most underowned major asset class; it is almost completely absent from the vast majority of major funds in the world that exceed $100 million in value, of which there are hundreds if not thousands. Today, these funds can invest in gold with the click of a mouse and a great many of them are beginning to do so. The global asset market is worth around $140 trillion. If one percent of that moved into the miniscule $5 trillion gold market—less than 5% of which actually trades each year—gold’s value would skyrocket. Lacking a P/E or some other conventional investment metric with which to measure its value, I think gold will rise as high as the market will allow it, and I think we will have a speculative craze, just as we had with the Nasdaq. I think $10,000 an ounce is possible. But who can say what the limit is for an asset that has no P/E? Obviously, there will be a time to sell, but I think that is years in the future. DC: Will we ever use gold as money again? SM: Only if the dollar collapses and takes the Euro down with it.

Attachments

• DollarCollapse - Your ringside seat for the global financial crisis

BBC NEWS | Business | Fresh records for price of wheat

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• Fresh records for price of wheat Wheat prices have hit record levels as supplies dwindle, raising concerns about growing food inflation. Chicago Board of Trade (CBOT) wheat for delivery in March rose the maximum 90 cents allowed to $11.99 a bushel in electronic trading in Asia. High-protein spring wheat on the Minneapolis Grain Exchange rose by almost 25% to record levels on Monday. The 25% rise in Minneapolis on Monday came after all trading restrictions were scrapped. The March futures contract closed at up $4.75 at $24 a bushel, the record price for any US wheat contract. The price of spring wheat has more than doubled since January.

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• BBC NEWS | Business | Fresh records for price of wheat

BBC NEWS | Business | Bush claims no recession for US

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• Bush claims no recession for US President George W Bush has said the US economy is not heading towards recession but is in a "slowdown". He said tax measures, which are due to start in May, were designed to get consumers shopping again. But Federal Reserve chairman Ben Bernanke, said keeping the economy growing was becoming more difficult.

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• BBC NEWS | Business | Bush claims no recession for US

Wall St tumbles on recession fears, AIG | Reuters

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• Wall St tumbles on recession fears, AIG Fri Feb 29, 2008 5:20pm EST NEW YORK (Reuters) - Stocks tumbled on Friday as another round of weak economic data added to U.S. recession fears and a record loss at insurer AIG underscored worries about more write-downs in the financial sector. The major indexes fell more than 2 percent and ended the month in the red for the fourth month in a row. It marks the longest string of monthly losses for the Dow and S&P 500 since 2002.

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• Wall St tumbles on recession fears, AIG | Reuters

Most Americans won't abandon homes: Paulson | Reuters

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• Most Americans won't abandon homes: Paulson Tue Mar 4, 2008 7:36pm EST The vast majority of the 8.8 million Americans with no equity or negative equity in their homes will not walk away from their properties, U.S. Treasury Secretary Henry Paulson said on Tuesday. Paulson reiterated his opposition to some proposals in Congress for a bigger government role in bailing out mortgages and supporting home prices. He said he was focused on private-sector mortgage modification efforts, existing government programs and improving refinancing prospects by modernizing the Federal Housing Administration and increasing tax-exempt bond authority for refinancing.

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• Most Americans won't abandon homes: Paulson | Reuters

BBC NEWS | Business | Credit crunch hits Carlyle unit

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• Credit crunch hits Carlyle unit Carlyle Capital Corporation, the fund manager backed by the giant private equity firm Carlyle Group, has not been able to meet several payment demands. The company said it received margin calls from seven financing groups that totalled $37m and it was not able to meet four of those requests. Carlyle Capital invested in assets backed by US mortgages, which have been hard to value since the credit crunch.

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• BBC NEWS | Business | Credit crunch hits Carlyle unit

BBC NEWS | Business | $200bn Fed move over credit fears

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• $200bn Fed move over credit fears The US Federal Reserve is making $200bn (£99bn) available to major banks in an attempt to ease concerns about a global credit crunch. It has announced increases in the size of its credit auctions to $100bn, and is also making another $100bn available through other means.

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• BBC NEWS | Business | $200bn Fed move over credit fears

Bernanke on the Mortgage Market House of Cards by Gary North

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• Bernanke on the Mortgage Market House of Cards by Gary North The worst is not behind us. The worst is yet to come. I have this on the highest authority – from the man who has openly admitted that his organization has no solutions to offer except month-old data on the extent of the housing crisis. When the public at last figures this out, there will be financial blood in the streets. You want to know what is coming? This: gigantic equity losses. Yes, Bernanke is boring. Read him anyway. The financial media are not reporting on this. He was talking about abandoned homes and equity losses. This is happening already. This is not a maybe. This is a sure thing. The loss of equity will undermine the loans. Look at his estimate: 50% of principal balance. f you think the FED can solve the mortgage crisis, it's time to re-think your understanding of the FED. Bernanke has confirmed Franklin Sanders' aphorism: "The Federal Reserve has only two policy tools: inflation and blarney." Bernanke is running low on blarney.

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• Bernanke on the Mortgage Market House of Cards by Gary North

BBC NEWS | Business | Bush insists US not in recession

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• Bush insists US not in recession Jobseekers at a jobs fair in California The manufacturing and construction sectors have been hardest hit US President George W Bush has said he hopes consumers spending will "spur job creation" after new data showed a decline in jobs in February. US employers cut 63,000 positions from their payrolls in February, the biggest decline since March 2003, Labor Department figures revealed. It shows the effect the housing and lending crisis is having on US firms, and follows 22,000 job cuts in January Bleak picture Despite the drop in payroll employment, the unemployment rate fell to 4.8%, from 4.9%. The discrepancy results from the way the figures are calculated - 450,000 job seekers stopped looking for employment, so are not included in the calculation of the unemployment rate. The Fed said it will increase the amount of loans it will auction to banks on March 10 and March 24 to $50bn (£24.7bn), up from the $30bn originally planned. Analysts say that the central bank may also have to lower interest rates when its policy makers meet on 18 March.

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• BBC NEWS | Business | Bush insists US not in recession

Fed gives shot in arm, but recession looms | Reuters

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• Fed gives shot in arm, but recession looms The Federal Reserve has offered credit markets a quick shot in the arm with a new $200 billion lending facility, and while this will ease some the liquidity problems, it isn't likely to be enough to keep the U.S. economy out of recession. WORST TO COME The worst in the credit crisis is likely still yet to come and that will complicate efforts to re-start U.S. economic growth after what some economists see as the worst housing slump since the Great Depression. others say the Fed's efforts are still going to be looked upon as rather modest given the magnitude of the de-leveraging of financial institutions' balance sheets that is going on. Some Wall Street estimates say these amounts could exceed $1 trillion, eclipsing the $200 billion program unveiled.

Attachments

• Fed gives shot in arm, but recession looms | Reuters

Fed gives shot in arm, but recession looms | Reuters

Notes:

• Fed gives shot in arm, but recession looms The Federal Reserve has offered credit markets a quick shot in the arm with a new $200 billion lending facility, and while this will ease some the liquidity problems, it isn't likely to be enough to keep the U.S. economy out of recession. WORST TO COME The worst in the credit crisis is likely still yet to come and that will complicate efforts to re-start U.S. economic growth after what some economists see as the worst housing slump since the Great Depression. others say the Fed's efforts are still going to be looked upon as rather modest given the magnitude of the de-leveraging of financial institutions' balance sheets that is going on. Some Wall Street estimates say these amounts could exceed $1 trillion, eclipsing the $200 billion program unveiled.

Attachments

• Fed gives shot in arm, but recession looms | Reuters

Recession has already started, CFOs say-survey: Financial News - Yahoo! Finance

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• Recession has already started, CFOs say-survey Wednesday March 12, 12:38 pm ET NEW YORK (Reuters) - A recession has already started and the downturn is likely to last longer than in the recent past, with the economy recovering only late next year, according to a quarterly survey of corporate finance chiefs released on Wednesday. In response, companies are scaling back plans for capital spending and are not planning significant hiring, in part because of high labor costs, according to the survey, which has been conducted for 12 years.

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• Recession has already started, CFOs say-survey: Financial News - Yahoo! Finance

Feb budget gap balloons to record $175.56 bln | Reuters

Notes:

• Feb budget gap balloons to record $175.56 bln The U.S. government turned in a $175.56 billion budget deficit for February, a record for any month, as federal spending grew but a slowing economy caused receipts to fall 12.1 percent from a year earlier, the U.S. Treasury said on Wednesday. The February deficit soundly beat the previous all-time single-month deficit of $119.99 billion in February 2007 and also exceeded Wall Street economists' consensus estimate of a $160.0 billion deficit in a Reuters poll.

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• Feb budget gap balloons to record $175.56 bln | Reuters

Dollar sinks to record low vs euro, currency basket | Reuters

Notes:

• Dollar sinks to record low vs euro, currency basket The dollar plunged to a record low against the euro and a basket of currencies on Wednesday amid uncertainty about the long-term impact of the Federal Reserve's recent efforts to inject money into cash-starved credit markets. The greenback rallied on Tuesday after the Fed said it would lend primary dealers $200 billion in Treasury securities and accept a wider array of mortgage debt as collateral to ease tight credit conditions.

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• Dollar sinks to record low vs euro, currency basket | Reuters

Retail sales tumble in February | Reuters

Notes:

• Retail sales tumble in February Wed Mar 12, 2008 12:36pm EDT Retail sales fell at the fastest pace in at least five years and could tip an already fragile economy into recession, Retail sales tumbled 1.1 percent last month, compared with a 0.2 percent gain in January, said SpendingPulse, the retail data service of MasterCard Advisors "It's definitely the biggest drop in our history,"

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• Retail sales tumble in February | Reuters

BBC NEWS | Business | Euro tops $1.55 for first time

Notes:

• Euro tops $1.55 for first time Scepticism about whether the Federal Reserve's plans to provide liquidity to the banking system will work was one factor weakening the dollar. Speculation that the United Arab Emirates is about to abandon its dollar peg also weakened the US currency. Industrial production in the 15 states that use the euro rose unexpectedly fast in January, growing 0.9% from December and 3.8% from January 2007,

Attachments

• BBC NEWS | Business | Euro tops $1.55 for first time

BBC NEWS | Business | Euro tops $1.55 for first time

Notes:

• Euro tops $1.55 for first time Scepticism about whether the Federal Reserve's plans to provide liquidity to the banking system will work was one factor weakening the dollar. Speculation that the United Arab Emirates is about to abandon its dollar peg also weakened the US currency. Industrial production in the 15 states that use the euro rose unexpectedly fast in January, growing 0.9% from December and 3.8% from January 2007,

Attachments

• BBC NEWS | Business | Euro tops $1.55 for first time

Stocks retreat on credit fears

Notes:

• Stocks retreat on credit fears NEW YORK (AP) -- Stocks tumbled Thursday morning as investors recoiled following a further decline in the dollar, spikes in gold and oil prices and a warning that a Carlyle Group fund is near collapse. The major indexes each lost more than 1 percent; the Dow Jones industrial average at times fell more than 200 points. Gold prices moved above the psychological benchmark of $1,000 an ounce for the first time Thursday, Carlyle Capital Corp., which is managed by Carlyle Group, warned late Wednesday it expects creditors will seize all the fund's remaining assets after unsuccessful negotiations to prevent its liquidation. World markets shuddered last week after the Amsterdam-listed fund missed margin calls from banks on its $21.7 billion portfolio of residential-mortgage-backed bonds. Carlyle's troubles have added to concern that billions of dollars of depressed mortgage-backed securities will flood the market, reducing their value even furthe The Commerce Department said Thursday that retail sales fell by 0.6 percent last month. Analysts had expected an increase of 0.2 percent. . . . and all this by 0900 MDT (my note)

Attachments

• PensacolaNewsJournal.com

Fed and rival bail out Bear Stearns

Notes:

• Fed and rival bail out Bear Stearns Bear Stearns, the nation's fifth-largest investment bank, made its fortune dealing in opaque mortgage-backed securities - a strategy that might be its undoing amid the worst housing slump in a quarter century. The bank has racked up $2.75 billion in write-downs since last year, and faced a possible collapse without some kind of lifeline. Bear Stearns lost half of its value within 30 minutes of the market open, before clawing back a bit to be down 41 percent, or $23.51, at $33.49 by midday. The news rattled investors, pushing the Dow Jones industrial average down about 150 points. JPMorgan Chase said the financing would not expose its company to any material risk, though its shares dropped 1.4 percent, or 53 cents to $37.58.

Attachments

• PensacolaNewsJournal.com

What the Price of Gold Is Telling Us by Ron Paul

Notes:

• What the Price of Gold Is Telling Us by Ron Paul Though our inflation – i.e., the depreciation of the U.S. dollar – has been insidious, average Americans are unaware of how this occurs. For instance, few Americans know nor seem concerned that the 1913 pre-Federal Reserve dollar is now worth only four cents. Since 2001 however, interest in gold has soared along with its price. With the price now over $1000 an ounce, a lot more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold means. Many central bankers in the last 15 years became so confident they had achieved this milestone that they sold off large hoards of their gold reserves. At other times they tried to prove that paper works better than gold by artificially propping up the dollar by suppressing market gold prices. This recent deception failed just as it did in the 1960s, when our government tried to hold gold artificially low at $35 an ounce. But since they could not truly repeal the economic laws regarding money, just as many central bankers sold, others bought. It’s fascinating that the European central banks sold gold while Asian central banks bought it over the last several years. Instead of dwelling on the dollar price of gold, we should be talking about the depreciation of the dollar. In 1934 a dollar was worth 1/20th of an ounce of gold; $20 bought an ounce of gold. Today a dollar is worth 1/1000th of an ounce of gold, meaning it takes $1000 to buy one ounce of gold. There’s no single measurement that reveals what the Fed has done in the recent past or tells us exactly what it’s about to do in the future. Forget about the lip service given to transparency by new Fed Chairman Bernanke. Not only is this administration one of the most secretive across the board in our history, the current Fed firmly supports denying the most important measurement of current monetary policy to Congress, the financial community, and the American public. Counterfeiting the nation’s money is a serious offense. The founders were especially adamant about avoiding the chaos, inflation, and destruction associated with the Continental dollar. That’s why the Constitution is clear that only gold and silver should be legal tender in the United States. In 1792 the Coinage Act authorized the death penalty for any private citizen who counterfeited the currency. Too bad they weren’t explicit that counterfeiting by government officials is just as detrimental to the economy and the value of the dollar. # Since 2001 the dollar has been devalued by 60%. # In 1934 FDR devalued the dollar by 41%. # In 1971 Nixon devalued the dollar by 7.9%. # In 1973 Nixon devalued the dollar by 10%. Economic law dictates reform at some point. But should we wait until the dollar is 1/1,000 of an ounce of gold or 1/2,000 of an ounce of gold? The longer we wait, the more people suffer and the more difficult reforms become.

Attachments

• What the Price of Gold Is Telling Us by Ron Paul

Senate Banking panel to examine JPMorgan-Bear deal | Reuters

Notes:

• Senate Banking panel to examine JPMorgan-Bear deal Wed Mar 26, 2008 "The unprecedented nature of some recent actions by the Federal Reserve, Department of the Treasury, and others merits a full and public examination by the committee,"

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• Senate Banking panel to examine JPMorgan-Bear deal | Reuters

Bush may expand help for struggling homeowners | Reuters

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• Bush may expand help for struggling homeowners Sat Mar 29, 2008

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• Bush may expand help for struggling homeowners | Reuters

Paulson outlines big changes for financial system - Mar. 31, 2008

Notes:

• Paulson: Change rules for Wall Street The plan, which would broadly expand the Federal Reserve's powers, comes as concerns about the housing crisis and its fallout in the financial system continues to fuel calls for change in Washington. The Paulson changes, if enacted, would be largely invisible to consumers but would drastically alter how the financial services industry is regulated. ( My note: Talk about the fox guarding the chicken coop! )

Attachments

• Paulson outlines big changes for financial system - Mar. 31, 2008

Related

• Chaos on Wall Street, explained - Mar. 31, 2008

Chaos on Wall Street, explained - Mar. 31, 2008

Notes:

• Chaos on Wall Street 3/31/08 Giant institutions are, to use the technical term, scared to death. They've had to come back time after time and report additional losses on their securities holdings after telling the market that they had cleaned everything up. It's whack-a-mole finance - the problems keep appearing in unexpected places. Since the Tink market began tanking, so many shoes have dropped that it looks like Imelda Marcos's closet. ( My note: And this is the sucker punch behind the big re-organization of control going on now. What do you bet that when the dust settles they will no longer have to report such things )

Attachments

• Chaos on Wall Street, explained - Mar. 31, 2008

Related

• Paulson outlines big changes for financial system - Mar. 31, 2008

Deutsche Bank to take $4 billion writedown - Apr. 1, 2008