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Tue Nov 27, 2012, 07:01 PM

STOCK MARKET WATCH -- Wednesday, 28 November 2012

STOCK MARKET WATCH, Wednesday, 28 November 2012


SMW for 27 November 2012

AT THE CLOSING BELL ON 27 November 2012

Dow Jones 12,878.13 -89.24 (-0.69%)
S&P 500 1,398.94 -7.35 (-0.52%)
Nasdaq 2,967.79 -8.99 (-0.30%)


10 Year 1.63% -0.03 (-1.81%)
30 Year 2.78% -0.03 (-1.07%)









Market Conditions During Trading Hours






Euro, Yen, Loonie, Silver and Gold
















Handy Links - Government Issues:

LegitGov
Open Government
Earmark Database
USA spending.gov





Partial List of Financial Sector Officials Convicted since 1/20/09
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
3/6/12 Allen Stanford, former Caribbean billionaire and general schmuck, convicted on 13 of 14 counts in $2.2B Ponzi scheme, faces 20+ years in prison
6/4/12 Matthew Kluger, lawyer, sentenced to 12 years in prison, along with co-conspirator stock trader Garrett Bauer (9 years) and co-conspirator Kenneth Robinson (not yet sentenced) for 17 year insider trading scheme.
6/14/12 Allen Stanford sentenced to 110 years without parole.
6/15/12 Rajat Gupta, former Goldman Sachs director, found guilty of insider trading. Could face a decade in prison when sentenced later this year.
6/22/12 Timothy S. Durham, 49, former CEO of Fair Financial Company, convicted of one count conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud.
6/22/12 James F. Cochran, 56, former chairman of the board of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and six counts of wire fraud.
6/22/12 Rick D. Snow, 48, former CFO of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and three counts of wire fraud.
7/13/12 Russell Wassendorf Sr., CEO of collapsed brokerage firm Peregrine Financial Group Inc. arrested and charged with lying to regulators after admitting to authorities he embezzled "millions of dollars" and forged bank statements for "nearly twenty years."
8/22/12 Doug Whitman, Whitman Capital LLC hedge fund founder, convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent
10/26/12 UPDATE: Former Goldman Sachs director Rajat Gupta sentenced to two years in federal prison. He will, of course, appeal. . .
11/20/12 Hedge fund manager Matthew Martoma charged with insider trading at SAC Capital Advisors, and prosecutors are looking at Martoma's boss, Steven Cohen, for possible involvement.










This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.



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Reply STOCK MARKET WATCH -- Wednesday, 28 November 2012 (Original post)
Tansy_Gold Nov 2012 OP
Po_d Mainiac Nov 2012 #1
kickysnana Nov 2012 #2
Po_d Mainiac Nov 2012 #4
kickysnana Nov 2012 #8
tclambert Nov 2012 #3
Demeter Nov 2012 #5
Demeter Nov 2012 #6
kickysnana Nov 2012 #9
Hotler Nov 2012 #21
Demeter Nov 2012 #7
Demeter Nov 2012 #10
xchrom Nov 2012 #11
Demeter Nov 2012 #23
xchrom Nov 2012 #29
xchrom Nov 2012 #12
xchrom Nov 2012 #13
Demeter Nov 2012 #31
xchrom Nov 2012 #14
xchrom Nov 2012 #15
DemReadingDU Nov 2012 #16
xchrom Nov 2012 #17
xchrom Nov 2012 #18
xchrom Nov 2012 #19
Hotler Nov 2012 #20
xchrom Nov 2012 #22
Demeter Nov 2012 #24
Demeter Nov 2012 #25
kickysnana Nov 2012 #30
Demeter Nov 2012 #26
Demeter Nov 2012 #27
Demeter Nov 2012 #28
Demeter Nov 2012 #32
Fuddnik Nov 2012 #33

Response to Tansy_Gold (Original post)

Tue Nov 27, 2012, 07:55 PM

1. Beer drinkers needed along the Missouri

As part of an annual process, the Army Corps of Engineers has begun reducing the amount of water flowing from the upper Missouri River into the Mississippi, all but ensuring that the economically vital river traffic will be squeezed even further. If water levels fall low enough, the transport of $7 billion in agricultural products, chemicals, coal and petroleum products in December and January alone could be stalled altogether.

<snip>

The reservoirs along the upper Missouri are already 20 percent below the levels that normally get the region through the coming year’s drought season and that allow commercial navigation on the Missouri between April and November, said Charles Shadie, chief of the watershed division for the Mississippi Valley division; “they are already concerned that they may not have a full navigation season on the Missouri next year.”

http://www.nytimes.com/2012/11/27/us/hit-by-drought-mississippi-river-may-face-more-challenges.html

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Response to Po_d Mainiac (Reply #1)

Tue Nov 27, 2012, 08:32 PM

2. The Mayor of St Paul was considering shutting down the barge facility here

in St Paul and transferring the traffic south of St Paul. But I cannot find the article for specifics.

They moved the road away from the river bank on one side and are planning on swapping the location of the road and bike trails on the other side in what has become a regional park.

Cannot remember nor figure out what the reasoning was behind all of this.

There are quite a bit of brand new condos/apartment buildings along the city side of the River now. Downtown St Paul was dead for shopping but I read that a 39 year old damaged goods grocery had to close because their old customers no longer came and the new customers didn't care for the building and had other alternatives now.

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Response to Po_d Mainiac (Reply #4)

Tue Nov 27, 2012, 11:46 PM

8. Great, right river, wrong city. Time to look into nutritional memory boosters. LOL

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Response to Tansy_Gold (Original post)

Tue Nov 27, 2012, 08:36 PM

3. Thurl Ravenscroft.



Thurl Ravenscroft also did the voice of Tony the Tiger.

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Response to Tansy_Gold (Original post)

Tue Nov 27, 2012, 09:11 PM

5. I had that book memorized

I read it to the Kid every night for years. It would put me to sleep, too.

Every Who down in Whoville liked Christmas a lot.

But the Grinch, who lived just north of Whoville, did not.

The Grinch hated Christmas, the whole Christmas season...


The good old days. I don't think the grandpuppy would be entertained...

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Response to Tansy_Gold (Original post)

Tue Nov 27, 2012, 09:19 PM

6. The Goldman Sachs Project to take over Europe nearly complete

AND WHAT DO THOSE MORONS THINK THEY ARE GOING TO DO WITH IT?

RESURRECT THE ROMAN EMPIRE? FAT CHANCE OF THAT. THERE'S NO GOING BACKWARDS, AND IF THEY HAVE A PLAN FOR GOING FORWARD, THEY HAVEN'T LET A WHISPER OF IT OUT.

http://www.dailykos.com/story/2012/11/26/1164745/-The-Goldman-Sachs-Project-to-take-over-Europe-nearly-complete

Sometimes a person or organization becomes so powerful and Evil that they appear cartoonish. It might seem impossible to find a similar character outside of a James Bond movie or a cartoon about a mouse with an oversized brain. After all, who really wants to take over the world and has a plan to do it, right?

And yet, Goldman Sachs is on the verge of doing what Julius Caesar, Charlemagne, Hitler and Napoleon tried and failed to do.

Carney, a former Goldman Sachs investment banker who successfully helped to steer the Canadian economy through the global crisis, will succeed Mervyn King next year, Chancellor George Osborne told parliament.
"He is quite simply the best, most experienced and most qualified person in the world to be the next Governor of the Bank of England," Osborne said.


The announcement sounds unthreatening until you put it into perspective. For example, in July the Independent had a great graphic that displayed the New Reality in Europe:



Well now that graphic needs to be updated to this.



Everywhere that a nation has gotten into economic trouble, Goldman Sachs has moved into a position of power.

Most companies are usually content to pump-and-dump a stock to the public. Goldman Sachs does it with nations. The normal scenario usually involves helping a nation hide a problem and sell its debt until the problem blow up into a bubble that bursts in a spectacular way. Goldman Sachs makes money selling the overpriced debt, and by betting against the nation. Goldman Sachs then puts their "man" into a position of power to direct the bailouts so that Goldman gets all its money back and more, while the nation's economy gets gutted. 3rd world nations have seen this before, but Goldman Sachs have been sparing no one.

It was a Goldman Sachs man, Mark Carney, now head of the Bank of England, that helped tank Russia's economy in the 1990's.

These policies ended in a severe economic collapse, which just happened to profit Goldman Sachs tens of millions of dollars. In spite of their involvement in a 1.25 billion dollar bail-out of the Russian government, Goldman Sachs appears to have been betting against success.


The fact that Goldman Sachs has felt it necessary to put one of their own in the Bank of England should raise alarm bells about what the future holds for Britain...

THERE'S MUCH MORE, AND IT'S A DISSECTION OF EVIL.

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Response to Demeter (Reply #6)


Response to Demeter (Reply #6)

Wed Nov 28, 2012, 09:48 AM

21. French Razor! nt

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Response to Tansy_Gold (Original post)

Tue Nov 27, 2012, 09:32 PM

7. In other news

Survived another board meeting...with two new members. They passed the first meeting with flying colors. (One unfortunate member left to lose). So things are looking up.

The unfortunate member gave ample reasons why it's unfortunate...just a matter of time. 6-1 is going to be ugly.

I'll post more if insomnia strikes. For now, it's lights out.


And he, he himself, the Grinch, carved the roast beast.


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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 07:09 AM

10. How Coal Brought Us Democracy, and Oil Ended It Matt Stoller

http://www.nakedcapitalism.com/2012/09/how-coal-brought-us-democracy-and-oil-ended-it-lessons-from-the-new-book-carbon-democracy.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Long before politicians mewled helplessly about the power of “Big Oil”, carbon-based fuels were shaping our very political, legal, intellectual, and physical structures. It was, for instance, coal miners who brought us the right to vote. Israel’s founding had a lot to do with British fears of Palestinian labor unrest in coastal energy complexes. And the European Community was a post-WWII experiment to switch that continent to oil, a task begun before World War I by British conservatives to defeat their domestic political opponents. Glass-Steagall crimped financial flows, partially at the behest of the oil industry. In fact, you can’t understand modern democratic or third world political structures without understanding energy, and particularly, coal and oil. That’s the contention of Tim Mitchell’s new book, Carbon Democracy Political Power in the Age of Oil, a history of the relationship between carbon-based fueling sources and modern political systems. It’s a book that tackles a really big subject, in a sweeping but readable fashion, and after reading it, it’s hard to imagine thinking about political power the same way again.

Everything in our politics flows through dense carbon-based energy sources, and has for three to four hundred years. For instance, the invasion of Iraq in 2003 was a pivotal moment in America’s strategic outlook. America, a global hegemon whose empire was weakening, seized the second largest oil deposits in the world as a way of preventing its economic and political decline. Was there any precedent for this kind of action? As it turns out, yes. The last declining global hegemon, Great Britain, also engaged in a brutal and highly controversial British occupation of Iraq, in the 1920s, pressed aggressively by the well-known British conservative, Winston Churchill. Churchill supported this occupation not just because he wanted Iraq’s oil, but because he wanted to defeat democratic forces – particularly militant coal miner unions – at home. Churchill and conservative elites running through British history (most recently Margaret Thatcher) understood that as long as the British power grid, and more importantly the military, was dependent on radical coal miners, his left-leaning labor opponents would be able to demand higher wages, social insurance, voting rights, and a share of the economic gains of the British economy. He preferred to have the British economy running on oil, so he sought imperial strategies to ensure access to resources without being reliant on his political opponents. Globally, in fact, the switch from coal to oil was a fight about labor.

The use of coal and oil in the context of industrialization has always been about who has the power to profit from the surplus these energy forms produce, but until now, no one has pulled the various historical details together into a historical narrative laying bare the fascinating power dynamics behind the rise of Western political systems and their relationship with energy. Carbon Democracy is an examination of our civilization’s 400 hundred year use of carbon-based energy fueling sources, and the political systems that grew up intertwined with them. Rather than presenting energy and democracy as separate things, like a battery and a device, Mitchell discusses the political architecture of the Western world and the developing world as inherently tied to fueling sources. The thesis is that elites have always sought to maximize not the amount of energy they could extract and use, but the profit stream from those energy sources. They struggled to ensure they would be able to burn carbon and profit, without having to rely on the people who extract and burned it for them. Carbon-based fuels thus cannot be understood except in the context of labor, imperialism and democracy.

This book is a response to David Yergen’s The Prize: The Epic Question for Oil, Money, and Power, a classic story of hardy entrepreneurs taking huge risks to find oil in the most remote places. Yergen’s narrative centers on oil scarcity, and its contributions to economic growth in a capitalist framework. Oil is, to Yergen, the prize, solving the key problem of how to supply enough energy for a modern consumer society with a flexible and inexpensive fuel source...

MORE AT LINK

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 08:15 AM

11. happy wednesday to every one! love ya!

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Response to xchrom (Reply #11)

Wed Nov 28, 2012, 10:28 AM

23. The feeling is mutual

How's everything out your way?

We are cold. This will not change for a few months.

Tonight is a paper night, of course. At least no precipitation expected.

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Response to Demeter (Reply #23)

Wed Nov 28, 2012, 11:55 AM

29. Cold but sunny.

Supposed to stay that way.

Stay warm out there!

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 08:17 AM

12. Companies squeezing in dividends to avoid ‘fiscal cliff’

http://www.washingtonpost.com/business/economy/companies-squeezing-in-dividends-to-avoid-fiscal-cliff/2012/11/27/a2068efe-38da-11e2-8a97-363b0f9a0ab3_story.html


Bill O'Leary/WASHINGTON POST - An array of companies, including Wal-Mart will issue special dividends next month or move dividend payouts earlie

For shareholders of companies trying to get ahead of tax hikes at the end of the year, this December will include an especially big Christmas gift.

An array of companies, from Las Vegas Sands to Wal-Mart, will issue special dividends next month or move dividend payouts earlier in order to get ahead of Jan. 1, when the top tax rate on dividends is set to more than double, from 15 percent to 43.4 percent.

The year-end rush is the latest sign from companies that they’re making plans to avoid the “fiscal cliff,” when George W. Bush-era tax cuts are set to expire.

Democrats and Republicans could still hammer out a deal that won’t raise the taxes on dividends quite as high, but companies do not appear to be taking chances.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 08:35 AM

13. SENATE DEMS DIVIDED OVER CUTS TO BENEFIT PROGRAMS

http://hosted.ap.org/dynamic/stories/U/US_FISCAL_CLIFF_ENTITLEMENTS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-11-28-08-12-26

WASHINGTON (AP) -- Deep divisions among Senate Democrats over whether cuts to popular benefit programs like Medicare and Medicaid should be part of a plan to slow the government's mushrooming debt pose a big obstacle to a deal for avoiding a potentially economy-crushing "fiscal cliff," even if Republicans agree to raise taxes.

Much of the focus during negotiations seeking an alternative to $671 billion in automatic tax increases and spending cuts beginning in January has centered on whether Republicans would agree to raising taxes on the wealthy. President Barack Obama has insisted repeatedly that tax increases on the wealthy must be part of any deal, even as White House officials concede that government benefit programs will have to be in the package too.

"It is the president's position that when we're talking about a broad, balanced approach to dealing with our fiscal challenges, that that includes dealing with entitlements," White House press secretary Jay Carney said Tuesday, referring to the mammoth Social Security and Medicare programs.

But even if GOP lawmakers agree to raise taxes, there is no guarantee Democrats can come up with enough votes in the Senate to cut benefit programs - as Republicans are demanding.

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Response to xchrom (Reply #13)

Wed Nov 28, 2012, 04:14 PM

31. The Answer is NO. In fact, the answer is HELL, NO!

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 08:43 AM

14. US FUTURES FALL AS OBSTACLES ON BUDGET DEAL ARISE

http://hosted.ap.org/dynamic/stories/U/US_WALL_STREET_PREMARKET?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-11-28-08-36-30


NEW YORK (AP) -- U.S. stock futures are heading lower along with overseas markets as obstacles blocking the way to a compromise on the U.S. budget grow.

Dow Jones industrial futures are down 34 points to 12,828. The broader S&P futures have slid 4.9 points to 1,392.50. Nasdaq futures are down 7.5 points to 2,633.50.

Senate Democrats are divided over whether programs like Medicaid and Medicare should be part of the discussion as far as cutting the nation's debt load. But some argue that if Republicans agree to raise taxes in some areas, Democrats can't take such benefit programs off the table.

In early European trading, Britain's FTSE 100 fell 0.3 percent to 5,785.40 while Germany's DAX lost 0.2 percent to 7,320.92. France's CAC-40 fell 0.3 percent to 3,491.36.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 08:45 AM

15. SPAIN'S BAILED-OUT BANKS TO SLASH SIZE BY 60 PCT

http://hosted.ap.org/dynamic/stories/E/EU_SPAIN_FINANCIAL_CRISIS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-11-28-08-42-17

MADRID (AP) -- European Union authorities have approved the payment of (EURO)37 billion ($47.96 billion) in bailout loans to four of Spain's struggling banks - provided each of them cut their loans and investments by 60 percent.

The plan cleared Wednesday by the EU Commission in Brussels will see Bankia getting (EURO)18 billion, Catalunya Caixa (EURO)9 billion, Novagalicia (EURO)5.5 billion and Valencia Bank (EURO)4.5 billion.

The (EURO)37 billion is part of a (EURO)100 billion credit line approved by the other 16 EU countries that use the euro to shore up banks hit by the country's 2008 property market collapse.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 09:00 AM

16. Escalating Delinquency Rates Make Student Loans Look Like the New Subprime


11/28/12 Escalating Delinquency Rates Make Student Loans Look Like the New Subprime

Now that student loans are undeniably in bubble territory, the officialdom is starting to wake up and take notice. Evidence that students were taking on so much debt as a group that it was undermining their ability to be Good American Consumers wasn’t enough. A recent New York Fed study found that 94% of recent graduates had borrowed to help pay for their education, and average debt levels among student borrowers is $23,000. Remember, that average includes seasoned borrowers, who presumably borrowed less and also in many cases reduced the principal amount of their loans, so the average amount borrowed by recent grads is certain to be higher. Student debt is senior to all other consumer debt; unlike, say, credit card balances, Social Security payments can be garnished to pay delinquencies. As a result, it has contributed to the fall in the homeownership rate, since many young people who want to buy a house can’t because their level of student debt prevents them from getting a mortgage.

But despite some pious noises about the burden that student loans place on young Americans, there’s been no willingness in the officialdom to do much about it. But that may finally be changing. The latest Federal Reserve data is grim.

Student loan delinquencies are getting into nosebleed territory. The Wall Street Journal, citing New York Fed data, tells us that student debt outstanding increased 4.6% in the last quarter. Repeat: in the last quarter. Annualized, that’s a 19.7% rate of increase* during a period when other consumer borrowings were on the decline. And this growth is taking place while borrower distress is becoming acute. 11% of the loans were 90+ days delinquent, up from 8.9% at the close of last quarter. The underlying credit picture is certain to be worse, since many borrowers aren’t even required to service loans (as in they are still in school or have gotten a postponement, which is available to the unemployed for a short period). And it was the only type of consumer debt to show rising delinquency rates.

This is the new subprime: escalating borrowing taking place as loan quality is lousy and getting worse. And in keeping with parallel to subprime, one of the big reasons is, to use a cliche from that product, anyone who can fog a mirror can get a loan.

more...
http://www.nakedcapitalism.com/2012/11/escalating-delinquency-rates-make-student-loans-look-like-the-new-subprime.html

http://online.wsj.com/article/SB10001424127887324469304578145092893766844.html?mod=djemalertNEWS




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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 09:31 AM

17. Underemployment affects 10.5% of UK workforce

http://www.bbc.co.uk/news/business-20509189

Penny Cook has asked her part-time employer for more hours but has been refused


One in 10 of all workers in the UK is now officially underemployed, according to a study from the Office For National Statistics (ONS).

It says 3.05 million workers want to work more hours each week, out of a total workforce of 29.41 million.

The number of workers in this position has shot up by 980,000 in the four years since the start of the economic recession in 2008.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 09:33 AM

18. BP to raise $1.1bn from North Sea field sale

http://www.bbc.co.uk/news/business-20527045

BP has sold its stakes in several North Sea oil and gas fields to a state-owned Abu Dhabi energy group for $1.06bn (£663m).

Prime Minister David Cameron said the deal highlighted the "North Sea's position as a global energy hub".

The proceeds from BP's sale will help cover billions of dollars in costs from the 2010 Gulf of Mexico oil spill.

Abu Dhabi National Energy (Taqa) will acquire stakes in the BP-operated Harding, Maclure and Devenick fields.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 09:34 AM

19. Philippines economic growth better than forecast

http://www.bbc.co.uk/news/business-20521862


The Philippines economy grew more than forecast in the third quarter, boosted by increased consumer and government spending and a recovery in exports.

Growth was 7.1% in the July to September quarter, from a year earlier. Analysts had forecast a 5.4% expansion.

Compared with the previous three months, the economy grew 1.3%.

The robust numbers, which come amid a volatile global economy, are likely to ease the pressure on the central bank to cut interest rates further.

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Response to Tansy_Gold (Original post)


Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 10:25 AM

22. Hollande warns ArcelorMittal of nationalisation

http://www.france24.com/en/20121127-arcelormittal-mittal-montebourg-france-steel-socialist-uk-london-mayor-boris-johnson

French President Francois Hollande said that “nationalisation is part of the subjects of the discussion", moments before talks with ArcelorMittal steel tycoon Lakshmi Mittal Tuesday.

The talks are the latest development in an increasingly heated dispute between France and the steel giant in which a French minister stated that the multinational is no longer welcome in the country.

Hollande's nationalisation warning came as forty lawmakers from his Socialist party said they favoured a temporary takeover by the French state of ArcelorMittal's plant in Florange.

The talks lasted an hour, a French official said, with Mittal - who ranks 21st on the Forbes list of the world's richest people - entering and leaving Hollande's Elysee Palace discreetly.

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Response to xchrom (Reply #22)

Wed Nov 28, 2012, 10:30 AM

24. Sigh. So masterful!

Wonder where we could get some of that kind of muscle around here....

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 10:57 AM

25. The Fed Is Worried That You Might Be Worried About Uncertainty By Matt Levine

http://dealbreaker.com/2012/09/the-fed-is-worried-that-you-might-be-worried-about-uncertainty/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+dealbreaker+%28Dealbreaker%29

When you are in the business of buying and selling volatility you can get sort of cynical about whether volatility is a thing, and whether it is appropriate to buy and sell it. We talked earlier today about the fact that if you have a client who doesn’t care about something valuable, then you should buy as much of it from him as you can; you can guess where I learned that. It is superficially persuasive to tell a customer “you don’t get any benefit from the volatility of your stock so you should just sell it to us,” but ultimately you can’t eat volatility. You eat buying low and selling high, and so you rigorously translate the customer’s sale of volatility into buying low (from the customer) and selling high (to the customer). Science!

So I started reading this San Francisco Fed note about “uncertainty” with a certain amount of skepticism. Reuters describes the finding as “Uncertainty over the economic outlook has added between one and two percentage points to the U.S. unemployment rate since 2008,” and you might reasonably say “shut up, uncertainty hasn’t increased the unemployment rate, expectations that things will be bad have increased the unemployment rate through perfectly unsurprising self-fulfillingness.” Managers don’t stop hiring just because they think things will be pretty good, but with a small chance of a delightful surprise. It’s the drift, not the variance...The SF Fed’s note does not entirely dispel that concern; it measures “uncertainty” based on a Michigan consumer survey that “has polled respondents each month on whether they expect an ‘uncertain future’ to affect their spending on durable goods, such as motor vehicles, over the coming year,” and I suppose each consumer can make his own choice about translating “uncertain” into “scary.” Here is that uncertainty graphed against the VIX and I submit to you the differences are instructive:



Sure, post-2001-ish VIX and consumer uncertainty track closely, but in the mid-90s boom, stock-market variability remained high without bothering consumer confidence. Nobody stops buying washing machines just because they’re worried that their Pets.com stock might suddenly make them millionaires....Still this note might usefully inform the question: what does the Fed do, anyway? (In the specific context of “when it announces a new quantitative easing program.”) One obvious answer is “lower mortgage rates by buying mortgage-backed securities,” which is unsatisfying, in part because the transmission between MBS and mortgage rates is somewhat broken. Another answer is I guess “lower risk-free rates to the point at which they’re horribly unattractive, forcing people into risky assets,” and that’s fine though dull. But here is a Sober Look / Credit Suisse argument that the (well, a) correct answer is “the Fed reduces uncertainty,” or more technically “the Fed sells volatility.” Credit Suisse describes that in the form of (1) the Fed buys mortgage bonds, which (2) provide a prepayment option to the seller, so (3) the Fed in effect sells prepayment options (i.e., interest rate volatility) to the market. Sober Look notes the parallel to classic Greenspan-put forms like propping up financial markets by unleashing easing whenever they crash too much, as well as the ECB’s parallel support for European government bonds.

You can take this in a simple directional way – now you can prepay your mortgage when rates go down, so you do, so you have more money1 – but you can also think of it from an options perspective. A person or market that is long optionality will tend to buy the underlying when prices drop and sell when they rise. That’s easy to see if the underlying is the mortgage bonds that the Fed is buying – mortgage bond prices can’t go too low (Bernanke put!) or too high (prepayment option!) – but it’s also true more broadly; stocks, for instance, are floored by the QEn put, but that floor loses value if they rally.2 There’s some certainty on either side, and perhaps certainty, rather than just an increase in asset prices, is what is wanted.

MORE AT LINK

FOOTNOTES:



1. One can of course say, as Sober Look does, “artificially suppressing volatility creates a ‘moral hazard’ by forcing markets (including individuals and businesses) to misprice (and learn to ignore) risk,” though one might also be wary of using the word “artificially” to describe actions by market participants, even the ones attached to printing presses.

2. It’s not just a Fed thing; GM’s stock is probably not going to zero, but the implicit put that government support provides loses value, and the prospect of the government flooding the market with shares increases, as it gets above $30.

3. Here’s Graph 6:

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Response to Demeter (Reply #25)

Wed Nov 28, 2012, 12:04 PM

30. Same meme from Small Business spokesperson TV news yesterday. n/t

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 10:59 AM

26. Did the Financial Crisis Cost Us $12.8 Trillion? By Matthew Yglesias

http://www.slate.com/blogs/moneybox/2012/09/17/the_12_8_trillion_financial_crisis_what_s_right_and_wrong_with_better_markets_financial_crisis_cost_estimate_.html



How much did the financial crisis cost us? Having an answer would be good to know because the financial industry complains—as you would expect—that stricter regulation of their practices will carry an economic cost. And so it might. But is the cost greater or less than the benefit?

Better Markets, a group dedicated to lobbying for stricter financial reform, has an estimate of $12.8 trillion. That's a lot. Where'd they get it? Well, first they totaled up the 2008-2018 "output gap," the total amount of lost production due to the recession, and found it was $7.6 trillion. Then they threw in an extra $5.2 trillion as the amount of output we would have lost if not for the "extraordinary fiscal and monetary policy actions" undertaken to prevent collapse.

This is a nice number to have on hand, but I'm not sure how much sense it makes conceptually. If the Federal Reserve hadn't acted to boost the economy in the early aughts, the relatively mild recession associated with the collapse of stock prices would have been much worse. But that doesn't mean the tech investment bubble of 1999 was "really" super costly. The mild recession that really happened is in fact what really happened. Counting countercyclical policy as a cost is confusing—what's costly is the countercyclical policy you don't do.

That said, $7.6 trillion is still a huge number. And that gets us back to the real analytic divide that is between folks who think better supervision of the financial system could have prevented this catastrophe and folks who think that's backward and it's the catastrophe in the real economy that's put banks under.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 11:18 AM

27. Never look a gift rally in the mouth

http://www.macrobusiness.com.au/2012/09/macro-investor-never-look-a-gift-rally-in-the-mouth/

Like many investors, it seems, we were flummoxed by Ben Bernanke’s QE3 announcement, which essentially promised to keep rates ultra low, buy $US40 billion of mortgage-backed securities per month, and do whatever else it takes for eternity until US unemployment figures return to their pre-crisis levels. Was it overkill? Probably. Was it reckless? Possibly. Will it work? Nah. Still, unlike many investors, it seems, we were equally flummoxed by the reaction. Markets just aren’t taking this for what it is: free money! Forever.

As economic prognosticators, it’s our job to be the miserable permabears, not yours. And as signed-up members of the doom-and-gloom brigade, it’s our job to point out the risks, not the market’s. But this market, after a brief and ultimately underwhelming rally on Friday that tapered out Monday, has put on the bear-suit and as such might put us out of a job. All a bit ironic when you consider that Mr Bernanke’s stimulus was designed to keep people employed. Markets were concerned that the Federal Reserve was addressing a structural problem with a cyclical policy tool. Markets were also concerned that by providing an open-ended guarantee, the ultimate signal had been given to feckless Wall Street fat cats to double-up on moral hazard. Ben Bernanke was a hirsute Alan Greenspan by a different name and he was spiking the punchbowl.

But this gives a reason to buy, not to sell. Sure, the risks are still there, nothing has been properly addressed and the global economy is still woefully imbalanced, not to mention slowing, but without any trigger point save a wildcard in Iran or an upset in the Chinese leadership transition, there’s nothing in the short-term that should stop PE averages expanding from 16 to 20 to beyond. Risk is on.
Now of course, there is the small matter of China’s economic slowdown, which may claim its first victim in Fortescue if banking deals and asset sale don’t assuage the short-sellers, and there is the equally small matter of the US Republicans and their desire to follow Europe’s march to fiscal austerity, but when the music is playing you’ve got to dance.

So dismiss those worries in the Strait of Hormuz or the South China Sea. Don’t be afraid of food inflation, climate change or energy prices. Forget the fact that rich-world unemployment is structural, the results of a labour market that has failed to catch-up with the reality of globalisation and technological obsolescence. And forget too that the same problems exist for Chinese workers, only more so. Dismiss from your minds the futility of driving an economy built on debt into a cliff of the mass retiring baby boomers. Cast aside nagging thoughts of hung parliaments, poisoned politics and a legislative process run more by the media cycle then the commonweal. Don’t worry about the rescue deal in Europe that essentially ties bailouts to privatisation and the sacking of public sector workers....in this bull market we need to be the squirrel and the ostrich. Free money has been given and as net present values are put aside to the broom closet of financial analysis, we must buy up all the nuts we can and put our heads in the sand. After all, the view is better from underground and when the rally fades you’ll need all the nuts you can get.


PS: None of this constitutes investment advice. Please see a financial planner before doing anything.

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 11:19 AM

28. My heart isn't really into posting, today

Or maybe it's the empty stomach, bossing me around.

Expect me when you least expect it. I've got a puppy to love, today!

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Response to Tansy_Gold (Original post)

Wed Nov 28, 2012, 04:17 PM

32. Is anybody else creeped out by the Obama/Romney luncheon date?

I just can't stand the sight of ass-licking, even in dogs, who usually just stick to sniffing. And cats only lick their own, not anyone else's.

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Response to Demeter (Reply #32)

Wed Nov 28, 2012, 06:03 PM

33. It's alright as long as the dog washes his mouth out in the toilet bowl before licking your face.

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