STOCK MARKET WATCH, Thursday August 20

[ozymandius]

Source: du

STOCK MARKET WATCH, Thursday August 20, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials In Prison = 6

AT THE CLOSING BELL ON August 19, 2009

Dow... 9,279.16 +61.22 (+0.66%)
Nasdaq... 1,969.24 +13.32 (+0.68%)
S&P 500... 996.46 +6.79 (+0.69%)
Gold future... 944.80 +5.60 (+0.60%)
10-Yr Bond... 3.45 -0.05 (-1.54%)
30-Year Bond 4.29 -0.06 (-1.40%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie, Silver and US$

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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.

Read more: du

[ozymandius]

1. Market Observation

The Most Attractive Sector in the S&P 500?
BY CHRIS PUPLAVA

With the S&P 500 up more roughly 50% from the March lows and sporting a price-to-earnings (P/E) ratio of 18.37, the market is clearly no longer cheap as the low hanging fruit has been plucked by Mr. Market. However, while the overall market may no longer be cheap there are plenty of pockets of value as many industries have been overlooked and under bought in the run up since March, and based on historical valuations, relative performance, and relative valuation, the industrial sector is perhaps the most attractive sector in the S&P 500 currently.

In 2009 the hot sectors have clearly been the beta plays that are the typical favorites after a recession and steep market correction, those being the materials, technology, and consumer discretionary sectors. These three sectors are up high double-digits year-to-date (YTD), with the technology sector coming in at first place (+34.39%) followed by the materials sector (+26.67%) and the consumer discretionary sector (+17.98%) taking the bronze. So far the run up in the aforementioned sectors has not been entirely driven by fundamentals, such as earnings and sales, as an expansion in their price multiples has played a significant factor with all three sectors presenting the highest P/E ratios of the S&P 500. The YTD performance numbers and P/E ratios for the S&P 500 sectors are shown below.

-see charts-

As seen in the tables above, the industrial sector is roughly in the middle of the pack with a P/E ratio of 12.31 and a YTD performance of 1.57%. While the sector may be in the middle of the pack in terms of current P/E multiple and performance, it is the most attractive sector when comparing the average of its historical valuation levels and relative performance and relative valuation levels. Screening all S&P 500 sectors did show some sectors that were at more attractive levels than the industrials on one of the three metrics listed above, but they were not attractive on one ore more of the other two metrics. Only the industrial sector was attractive on all three metrics.

http://www.financialsense.com/Market/wrapup.htm

[ozymandius]

2. Today's Reports

08:30 Initial Claims 08/15
Briefing.com 550K
Consensus 550K
Prior 558K

10:00 Leading Indicators Jul
Briefing.com 0.6%
Consensus 0.7%
Prior 0.7%

10:00 Philadelphia Fed Aug
Briefing.com 1.0
Consensus -2.0
Prior -7.5

www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[UpInArms]

26. Initial Claims @ 576,000 - last wk rev'd up 3,000

U.S. 4-wk. avg continuing claims fall to 6.26 mln
8:30am Today

U.S. continuing claims rise 2,000 to 6.24 mln
8:30am Today

U.S. 4-wk. avg. initial claims rise to 570,000
8:30am Today

U.S. weekly jobless claims rise to 576,000
8:30am Today

U.S. weekly initial jobless claims rise by 15,000
8:30am Today

[UpInArms]

27. U.S. July leading economic indicators rise 0.6%

U.S. July leading economic indicators rise 0.6%
10:00am Today

[UpInArms]

28. U.S. Aug. Philly Fed index rises to 4.2 vs. -7.5

U.S. Aug. Philly Fed index rises to 4.2 vs. -7.5
10:02am Today

[ozymandius]

3. Oil climbs in Asia after big US crude drawdown

SINGAPORE – Oil prices climbed higher Thursday in Asia after jumping the previous day on an unexpected fall in US crude inventories.

Benchmark crude for September delivery was up 18 cents to $72.60 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange.

On Wednesday, the contract jumped $3.23 to settle at $72.42 after the Energy Information Administration said crude in storage fell by 8.4 million barrels last week. Gasoline held in storage fell as well.

.....

In other Nymex trading, gasoline for September delivery was steady at $2.04 a gallon and heating oil held at $1.92. Natural gas for September delivery fell 1.1 cents to $3.11 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[ozymandius]

13. Hedge fund bets millions that gas price will triple

A hedge fund has made a large bet that natural gas prices will triple by winter just as the price of the commodity slides to a seven-year low.

Traders took notice last week when the fund, as yet undisclosed, spent millions for the right to buy US natural gas at $10 (£6.03) per million British thermal units in January and February, up from Wednesday’s spot level just above $3 per mBtu

.....

The bet echoes purchases of call options – contracts that give the holder the right to buy at a fixed price and date – in late 2007 to cash in if oil moved to $150 a barrel by mid-2008.

.....

US gas futures on Wednesday fell to $3.049 per mBtu, the lowest in seven years, as the market remains over-supplied. However, some say there is potential for a recovery once drilling rig shutdowns due to weak demand over the past year start to bite.

http://www.ft.com/cms/s/0/e8a82d0e-8cee-11de-a540-00144feabdc0.html

[UpInArms]

29. Sept. oil up 37 cents to $72.79/brl on Globex

Sept. oil up 37 cents to $72.79/brl on Globex
9:45am Today

[FarCenter]

35. Tapis is $76.85 / barrel, Brent Blend $73.84, Dubai 1M $73.24

West Texas Intermediate tends to be among the cheaper oils.

[ozymandius]

4. New credit card rules may reveal unwelcome details

NEW YORK – The rules your credit card company operates by will start getting much clearer on Thursday. But just because you'll know what they're up to doesn't mean you're going to like what you learn.

Regulations aimed at reining in practices like unexpected interest rate increases and credit limit cuts start with two rules. Consumers will now be given advance warning of any major changes to the terms of their accounts, and get more time to pay their balance after receiving a bill.

These small changes come ahead of more sweeping regulations that will take effect starting in February. Those touch on matters ranging from mandating reviews every six months of accounts that have had rate hikes to limiting the credit that can be offered to students.

.....

And while overlimit fees are gone, Amex changed its fees for making late payments to $19 for balances under $250, and $39 for balances over that line. The prior fees were $19 for balances under $400, and $38 for balances over $400.

http://news.yahoo.com/s/ap/20090819/ap_on_bi_ge/us_credit_cards_mixed_blessing

[ozymandius]

9. Credit card relief: Phase one

NEW YORK (CNNMoney.com) -- Consumers struggling with credit card debt will start to see some relief Thursday as the first steps of the Obama administration's industry overhaul go into effect.

Beginning Aug. 20, credit card issuers will be required to give customers 45 days advance notice before making any significant changes to a contract and will be required to mail bills 21 days before the due date.

.....

Consumers will also have the right to reject changes to their contracts, including interest rate increases, and they will have the option of paying off their balances at their existing rates within five years.

.....

But the more substantial changes are expected in February, when the second half of the act is implemented.

.....

In February, credit card companies will be prohibited from raising interest rates on existing balances unless the borrower is more than 60 days delinquent or the increase is stated in the contract.

http://money.cnn.com/2009/08/19/news/economy/credit_card_reform/?postversion=2009082004

[Po_d Mainiac]

12. Using our money to rip some of us off some more

:donut:

How much more can the banksters fleece from the bottom feeders, before we stop sending people to Washington that don't represent the interests of the "People?"

[Warpy]

30. Well. to be completely accurate here

people have been using their money at bargain basement rates to live large for a couple of decades, at least the irresponsible yuppie types who consumed conspicuously.

It's just amazing to me that none of these people were educated about debt and why it needs to be avoided.

Had they not fallen into the trap, the rate hikes would simply be seen as a return to normal. Unsecured loans have always had a high interest rate.

I do have a certain amount of sympathy for people who are trapped by credit card debt and faced with a lifetime of struggling to pay it off versus bankruptcy. It's extremely unfortunate that no one taught them the basic facts of money management.

However, they'll always have their beautiful memories of living with unlimited spending.

[DemReadingDU]

32. Opinion article to newspaper about bank overdraft charges

This is an opinion article written to Clarksdale, Mississippi newspaper, about assessing customers extra fees through overdraft charges. Basically, a person is charged multiple overdraft fees because the bank held smaller earlier transactions and processed the largest amount first, even though it was the last transaction. This resulted in multiple overdraft charges, instead of one charge. Of course, not all banks do this, but the big banks do. Here is an article about a lawsuit against the big banks.

7/27/09 Wachovia, BofA, Citibank Sued Over 'Bad-Faith' Overdraft Fees
http://www.law.com/jsp/article.jsp?id=1202432536214

Here is the opinion article in the Clarksdale newspaper.
*****************************
Beware the overdraft
15/08/2009
Karl Denninger

You would have to be living under a rock to not know that the banks have received hundreds of billions of taxpayer largesse in the form of direct handouts and various “loan programs,” administered by either our government or The Federal Reserve.

You might not, however, be quite as aware of how banks have quietly set up their processing systems to rip you off at every opportunity.
At the center of this is the “overdraft.” Let’s examine how this used to work.

First, banks all close their “book day” around 2:00 PM. Some sooner, some a bit later, but all have a cut-off for “today” that is not their closing hour of (typically) 5:00 PM. Anything that comes in supposedly gets posted to your account that day.

Prior to these (quietly made) changes if you had $1,000 in your account and wrote a $950 check for rent, a $200 check for the electric bill, a $50 check at the grocery store, a $20 check at the local hairdresser and a $25 check at the cleaners you’d get nailed with a single “overdraft” charge for the $950 check; the others would go through.

It used to be that if you went to the ATM and tried to withdraw $200 but didn’t have it, you’d get a “transaction declined” message and no money. I know: when I was in college I occasionally would try to take out money I didn’t have, only to be told “NO!”

A few years ago the banks started intentionally re-ordering your transactions in order from largest to smallest. That results in the $950 check being paid and the rest overdrawing your account, generating four separate $30 overdraft fees instead of one.

Worse, if you have a deposit for $1,000 the same day, making your account “good” (or so you think) the bank will process the debits (that is, your checks) before your deposits, resulting in overdraft charges even though the money is in fact there!

If you have electronic banking you can actually see this happen – you can go make a couple of $20 purchases with your debit card, log into your bank account, see the $20 charges posted and then later in the day the transactions will be “re-ordered” so as to process the larger items that show up later first.

Insult is added to injury with your debit card. These transactions are electronic: The bank knows if the debit is good (or not) before it processes it. That is, when you’re standing in line at Starbucks if you don’t have sufficient money in your account the bank knows before it “approves” that transaction – but they’ll approve it anyway, turning your $5 latte into a $40 one without any warning to you at all.

Even ATM machines will do this – they’ll “give” you money you don’t have, and most banks will not warn you that you’re about to incur an overdraft fine that averages $30 per offense.
Finally, if you buy gasoline or stay in a hotel the merchant will place a “hold” on your account for more than the final purchase amount as a “guarantee” that your account is good. This is typically $100 at a gas station and can be as much as $100 over your expected bill per night in a hotel. When the transaction is finalized these “holds” are supposed to be removed, but usually are not – they instead expire a couple of days later. Needless to say the “hold” counts against your balance and can easily result in “overdraft” fees that are in fact false – there was more than enough money in the account to clear the transaction but the “hold” caused you get fined – in this case for something you didn’t do.

The effective interest rate on such “overdraft fees” is thousands of percent a year. The banks justify this on “convenience,” in point of fact, however, I’ve yet to find anyone who thinks its “convenient” to pay $40 for a latte or $50 for a movie ticket – all undisclosed at the time of purchase.

This practice resulted in thirty eight billion dollars in profits for banks last year - all of it unearned and a result of nothing other than pure robbery of the people. As a final insult many banks will not allow you to “opt out” of these “automatic” overdraft services (that is, decline transactions you can’t fund instead of paying them and fining you) and none will get rid of the “re-ordering” they do internally.

Our so-called “regulators,” including The Fed and Congress, have refused to address these abuses. Even in the so-called “consumer protections” that The Fed and Congress put in place recently with regards to credit cards, these abusive practices were entirely ignored. Their impact tends to fall on the less-wealthy who live paycheck-to-paycheck and the proliferation of debit cards has just made the situation worse.

I have but one question for the banksters, Federal Reserve and Congress: if you’re going to hold people up, especially those who are of limited means to protest and fight back, don’t you think you should use a gun?

http://www.blues-star.com/

P.S. This newspaper charges $20 subscription to read articles, but if interested you can find reader comments about this opinion letter mentioned in this financial forum, if you have access.
http://www.tickerforum.org/cgi-ticker/akcs-www?post=107425

[Hugin]

36. sigh... Anyone else remember when the biggest banking problem one faced was...

Whether or not to start a Christmas Club account? ;(

[DemReadingDU]

43. My mom did the Christmas Club

With eight kids, it was a handy way to set aside a few dollars from the grocery money for each kid every month, for Christmas.

[ozymandius]

5. U.S. deficit estimate to be trimmed to $1.58 trillion

WASHINGTON (Reuters) – The Obama administration will trim its budget deficit forecast for fiscal 2009 to $1.58 trillion, after scrapping money earmarked for bailing out more banks, officials said on Wednesday.

The record deficit has made investors anxious and threatens to thwart Obama's ambitious domestic agenda to overhaul healthcare, reform education and make the country less reliant on fossil fuels.

Polls show the deficit is one of the top concerns of Americans who fear that it could lead to higher taxes.

An administration official said the drop in the projected deficit was due to the elimination of $250 billion that had been set aside for further possible financial rescues.

.....

The government officials said spending this fiscal year would total $3.653 trillion and revenues would be $2.074 trillion.

http://news.yahoo.com/s/nm/20090820/bs_nm/us_economy_usa_deficit

[ozymandius]

6. Buffett urges Congress to halt debt rise

WASHINGTON – Now that the worst of the economic crisis is past and recovery is slowly under way, Congress must halt the mounting increase in U.S. debt to avoid damage to long-term growth and destruction of the dollar, Warren Buffett is urging.

The plainspoken Nebraska billionaire weighed in with his view in an Op-Ed piece published in The New York Times Wednesday, saying that once recovery is solidified, lawmakers need to exercise "extraordinary political will" and slow the printing of money to finance the spike in debt. That huge spending for financial bailout and economic stimulus was sorely needed to rescue the economy in its greatest peril since the 1930s, Buffett said, but now "unchecked emissions" of dollars "will certainly cause the purchasing power of currency to melt" the way runaway carbon emissions will likely melt icebergs.

With government spending now nearly double what it is taking in, "truly major changes in both taxes and outlays will be required," Buffett wrote. "A revived economy can't come close to bridging that sort of gap."

http://news.yahoo.com/s/ap/20090819/ap_on_bi_ge/us_buffett_meltdown_debt

[ozymandius]

7. Switzerland Selling UBS Stake After U.S. Tax Accord

Aug. 20 (Bloomberg) -- The Swiss government is selling its 6 billion-Swiss franc ($5.6 billion) investment in UBS AG, the country’s biggest bank, a day after signing an agreement with the U.S. on data on bank clients suspected of evading taxes.

The government gave a mandate to three Swiss and foreign banks to sell 332.2 million UBS shares, Peter Siegenthaler, director of the federal finance administration, said by phone. The state is selling the shares at 16 francs to 16.50 francs apiece, after UBS closed at 16.74 francs yesterday, according to terms of the offering obtained by Bloomberg News.

The Swiss government bought UBS mandatory convertible notes last year to help the Zurich-based bank split off toxic assets amid the worst economic crisis since the Great Depression. The settlement of a U.S. lawsuit that sought data on as many as 52,000 UBS clients and the bank’s 3.8 billion-franc capital increase in June strengthened confidence in the bank, the government said.

.....

Swiss and U.S. authorities said yesterday that UBS will divulge information on 4,450 accounts to settle a U.S. lawsuit that sought names of American clients suspected of evading taxes. The bank, which won’t pay any fine under the agreement, will transfer the data to the Swiss government, which will then decide what information gets passed on.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEFsMr0TdNtk

[ozymandius]

8. GLOBAL MARKETS: European Stocks Higher; Commodities In Focus

LONDON (Dow Jones)--European stocks surged Thursday, boosted by a positive close for U.S. markets and a rise in commodity prices.

Additionally, they shrugged off the dramatic drop in China's Shanghai Composite index earlier in the week as Chinese shares rallied.

.....

By 0755 GMT, the pan-European Stoxx 600 index had increased 1.3% to 229.4. London's FTSE 100 had gained 1.0% to 4738.2, Frankfurt's DAX was up 1.3% at 5298.7 and Paris's CAC-40 was 1.4% higher at 3498.6.

.....

Japan's Nikkei 225 increased 1.8% and South Korea's Kospi Composite gained 2.0%. China shares rebounded from Wednesday's losses, lifted by oil companies, which rose after Wednesday's gain in crude oil futures. The Shanghai Composite index was up 4.5%, helping to support confidence in the rest of the region. Hong Kong's Hang Seng index was up 1.9%, helped by Wall Street's and the Shanghai Composite index's gains.

http://online.wsj.com/article/BT-CO-20090820-704036.html

[ozymandius]

10. BBVA Said to Win FDIC Bidding for Guaranty Financial

Aug. 20 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA won the bidding to take over ailing Texas lender Guaranty Financial Group Inc., people familiar with the matter said, in what will be the Spanish bank’s sixth U.S. purchase since 2004.

The acquisition, arranged by the Federal Deposit Insurance Corp., follows the $1.9 billion purchase by Spain’s Banco Santander SA of Philadelphia-based Sovereign Bancorp Inc. in January. BB&T Inc. last week acquired Alabama’s Colonial BancGroup Inc. in a deal also brokered by the FDIC.

The purchase shows “those companies didn’t make serious acquisition errors years ago,” Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland, and a former bank analyst, said yesterday. “As in the case of BB&T buying Colonial BancGroup, it gives BBVA the opportunity to expand on the cheap.”

.....

Guaranty said last month that it was unable to raise capital as demanded by regulators and will probably fail. The Office of Thrift Supervision has taken over board functions, directed the Austin, Texas-based bank to turn itself over to the Federal Deposit Insurance Corp. and is pursuing transactions likely to wipe out shareholders, Guaranty said in a July 23 filing with the Securities and Exchange Commission.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aGxalbvTU0Ho

[ozymandius]

11. Ouch. Colonial Left a Mark! (on Loans)

from Calculated Risk

From Peter Eavis at the WSJ: Colonial Bank Marks a New Low for Loans

In doing the deal, BB&T is marking down Colonial loans and real-estate collateral by 37%, a number that reflects a large amount of estimated losses. The biggest mark is on construction loans; BB&T is cutting their value by 67%.

Yes, Colonial had some really bad loans. Peter Eavis quoted Daryl Bible, BB&T's chief financial officer: "When we looked at Colonial's portfolio versus ours, we saw a lot of borrowers we turned away."

[Po_d Mainiac]

15. Expect further writedowns to 60-65% of face

http://www.frbdiscountwindow.org/announcement090330.cfm?hdrID=21

Current Lendable Value

Lendable Value as of 4/27/09
Commercial and Agricultural Loans (Normal Risk Rated) 65%
Commercial Real Estate Loans 65%
Construction Real Estate Loans 65%
1-4 Family Residential Mortgages 70%
Home Equity 50%
Consumer Loans - Autos, Private Banking, Installment, Etc. 65%
Consumer Loans - Credit Card Receivables, Student Loans 60%
Consumer Loans - Subprime Credit Card Receivables 45%

But the banksters are still claiming this crap on their balance sheets at face value :nuke:

[ozymandius]

17. Many items in print this morning address mark-to-market hijinks.

We know how BB&T was surprised by what it found on Colonial's books. What else is there? Well, we know now that other so-called "healthy" institutions hide their toxic waste, relabeling this asset class with the term "legacy". Really, enough flak has been thrown into the air to provide sufficient cover for banks to pretend, with a straight face, that these pieces of paper are actually worth something. Only now, as more banks (of moderate size compared to the Big 8) fail, with legacy assets on their books - we catch a glimpse of what these assets are worth.

[Po_d Mainiac]

20. Wonder what Colonial's HELOC's look like?

The Fed values HELOC's at 50% :wtf:

[Robbien]

21. New article out on Colonial's partner in crime, Taylor Bean

Mortgage Lender's Practices Questioned in 2002
http://online.wsj.com/article/SB125072554900044621.html

<snip>

Taylor Bean ran afoul of Freddie's rival, Fannie Mae, early in 2002. Fannie was long the main buyer of loans produced by Taylor Bean, a fast-growing mortgage lender owned and run by Lee Farkas, an Ocala entrepreneur. In early 2002, though, Fannie officials became concerned about some of Taylor Bean's practices, according to people involved in the matter. One of the issues involved loans that Taylor Bean had been forced to repurchase from Fannie because the loans didn't meet Fannie's quality standards. Taylor Bean later sold back to Fannie new loans backed by the same homes without properly disclosing the nature of those loans, according to these people.

Fannie officials held a meeting with Mr. Farkas in April 2002 but were unsatisfied with his responses. Fannie, which declined to comment, then stopped doing business with Taylor Bean.

Freddie Mac, however, saw an opportunity to pick up market share from Fannie and began buying large volumes of loans from Taylor Bean. An executive who worked at Freddie at that time said the company believed Taylor Bean had been sloppy in its dealings with Fannie but could be trusted to clean up its procedures. Freddie's decision allowed Taylor Bean to keep growing.

========

So the guy who helped make the decision for Freddie, David Stevens, later went over to head the FHA and had the FHA also do business with Taylor Bean.

========
the article goes on:

Taylor Bean, the nation's 12th largest home-mortgage lender and the third-biggest provider of home loans insured by the Federal Housing Administration, closed its lending operation Aug. 5. That was a day after the FHA suspended it from making loans insured by the government agency.

"FHA won't tolerate irresponsible lending practices," FHA Commissioner David Stevens said in an Aug. 4 press release. The FHA alleged that the Ocala, Fla., lender had misled the FHA about questions raised by Taylor Bean's auditors and fines imposed on the company by state regulators.

[ozymandius]

14. Here is a column that Geithner and Summers will dutifully ignore.

Why we need to regulate the banks sooner, not later
By Kenneth Rogoff

When in doubt, bail it out,” is the policy mantra 11 months after the September 2008 collapse of Lehman Brothers. With the global economy tentatively emerging from recession, and investors salivating over the remaining banks’ apparent return to profitability, some are beginning to ask: “Did we really need to suffer so much?”

Too many policymakers, investors and economists have concluded that US authorities could have engineered a smooth exit from the bubble economy if only Lehman had been bailed out. Too many now believe that any move towards greater financial regulation should be sharply circumscribed since it was the government that dropped the ball. Stifling financial innovation will only slow growth, with little benefit in terms of stemming future crises; it is the job of central banks to prevent bank runs by reacting forcefully in a potential systemic crisis; policymakers should not be obsessed with moral hazard and should forget trying to micromanage the innovative financial sector.

This relatively sanguine diagnosis is tempting, but dangerous. There are three basic problems with the view that the costs of greater bank regulation outweigh the benefits, and that the whole problem was the botched Lehman bail-out.

.....

The fact is that banks, especially large systemically important ones, are currently able to obtain cash at a near zero interest rate and engage in risky arbitrage activities, knowing that the invisible wallet of the taxpayer stands behind them. In essence, while authorities are saying that they intend to raise capital requirements on banks later, in the short run they are looking the other way while banks gamble under the umbrella of taxpayer guarantees.

http://www.ft.com/cms/s/0/c2d523c0-8c21-11de-b14f-00144feabdc0.html

[Robbien]

41. And here is one where they told the CTFC regulator to butt out

Derivatives Proposal Is Too Soft, Regulator Says
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/19/AR2009081903923.html

A top federal regulator has urged Congress to adopt tougher rules to govern betting in exotic financial instruments known as derivatives than the Obama administration has proposed, warning that the administration's new vision of market regulation could contain loopholes.

Gary Gensler, chairman of the Commodity Futures Trading Commission, warned key lawmakers in a letter this week that provisions of the administration's proposed legislation could leave significant elements of the derivatives market out of the reach of regulators and undermine efforts to combat fraud.

. . .

Gensler helped craft an Obama administration plan to police this market for the first time. The proposal would require that most derivatives be traded on exchanges, like stocks and bonds, making the market much more transparent. It would also subject the banks and other firms that deal in the derivatives trade to robust requirements.

However, the legislation contains several exceptions that are the source of Gensler's concern. For example, the administration has proposed exempting certain types of derivatives used to bet on currencies from regulation by the agency. The CFTC worries that traders could structure derivatives that would otherwise be regulated to fit within this exemption.

"There is also a risk that these exclusions may have the unintended consequence of undermining the CFTC's enforcement authority over retail foreign currency fraud," the agency wrote in a memo to Congress.

A second concern is that minor traders in derivatives would not have to meet the robust trading requirements envisioned by the legislation. "This excludes a significant class of end users," the agency said. "This major exception may undermine the policy objective of lowering risk."

. . .

Andrew Williams, a spokesman for the Treasury Department, said the administration appreciates the CFTC's input.

[ozymandius]

16. Market Spike Explained By Second Stimulus Rumor, And Other Observations

Well, I have been spending way too much time trying to understand what China is doing with its economy, how they measure GDP, the way they control their money supply, and the direct impact the goverment actions' there has on asset prices. When we broke last night, I was a little surprised that officials were letting that happen passively it seems. Copper gapped down this morning through 270, confirming huge downside potential. After all maybe talks of concerns in China about inflating a new bubble were in fact very serious, and maybe their government is actually wise enough to let the market correct where it should to build a bright future on a sane base.

What I completely missed in the meantime, is that the US government is not even close to be that smart. That's the problem of a democracy I guess, our elected officials' agenda is, right or left no distinction, to get elected and re-elected, even if that implies to sacrifice the next generation. What has our response been to the crisis... Mmmmm let me see: borrow 13% of GDP so we can keep it flat, change accounting for banks so we don't have to acknowledge losses (while criticizing Japan for allowing zombie banks to continue to operate in unspoken bankruptcy for years), put moratoriums on foreclosures in the most desperate states so the numbers appear to be improving, provide a second bailout to carmakers (but label it an effort for a greener planet, because everyone knows we really care) thereby propping up industrial production and sales (we'll worry about consequences of a drop once the stimulus disappears later).

With all that bullish makeup markets were looking to break lower this morning, and the insolent US dollar seemed like it had made a turn and was about to gain some serious strength. That's when the markets got hit with a rumor of a second stimulus package, stopping the sell-off right in its tracks. On the original bounce to 888, the bredth on the NYSE was 0.7 to 1... that means there was no participation and it was a weak corrective rally as part of a downtrend. All indicators point that way. That's why we really needed a good old fashion rumor.

http://www.zerohedge.com/article/market-spike-explained-second-stimulus-rumor-and-other-observations

[Hugin]

22. Well, it's us consumers who are at fault, y'know.

Take a moment and check out this fine piece of research by a DUer called CoffeeCat.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x68958

I had noticed this push to push the consumer in the Corporate Media, too.

[ozymandius]

18. William Black on the Great American Bank Robbery

This has been posted before. I fell that this video is worth an encore. Edward Harrison of Credit Writedowns offers this synopsis and embedded link to the video:

In the video below, William Black, a well-known Associate Professor of Economics and Law at the University of Missouri – Kansas City and former top regulator at of the Federal Home Loan Bank Board during the S&L crisis, holds court.

His basic premise: the bailouts have been a massive transfer of wealth from the middle class to the monied class. He can be a very entertaining speaker. Watch this video for a few interesting tales and ideas. It runs just under 100 minutes.

http://www.creditwritedowns.com/2009/08/black-the-great-american-bank-robbery.html

[Robbien]

19. FDIC supposedly auctioned off Texas Guaranty Financial Group to a bank in Spain

Spain's second-biggest bank, Banco Bilbao Vizcaya Argentaria, has reportedly won the auction for Texas-based Guaranty Financial Group, which has been warning of bankruptcy for months, according to several media reports, citing people familiar with the matter. The purchase is due to be announced by the end of the week, with banking regulators expected to seize Guaranty, then hand it over to BBVA, according to those people. BBVA was believed to offer loss-sharing protection from the Federal Deposit Insurance Corp. as part of the deal, the Financial Times reported. The only other bidders for Guaranty were regional bank U.S. Bancorp and a consortium of private-equity firms including Blackstone Group and the Carlyle Group, said The Wall Street Journal citing people familiar with the auction process

http://www.marketwatch.com/story/bbva-likely-to-win-auction-for-texas-bank-reports-2009-08-20



Now the FDIC is loss sharing with Spain.

[fasttense]

23. Maybe next time the FDIC will simply sell off Texas. n/t

[AnneD]

31. Fasttense....

some of us are a bit tired of the kick Texas jokes. We fight hard enough with the right wing nuts with out getting it from our 'friends'.

[Dr.Phool]

37. Did ya hear the one about the Texan......

If they do sell Texas, don't come to Florida. It's political climate is probably worse than Texas. Wing nuts everywhere.

[AnneD]

38. Texas and Florida...

the only places that can handle toxic Bush spawn.

[UpInArms]

24. dollar watch

http://quotes.ino.com/chart/?acs=NYBOT_DX&v=i

Last trade 78.529 Change +0.028 (+0.04%)

Pound Erases Gains As Increase In Government Borrowing Raised Fears Of Future Taxation

http://www.dailyfx.com/story/bio1/Pound_Erases_Gains_As_Increase_1250762638211.html

The pound started to erased earlier gains following a report that showed the U.K. government increased its debt level by £8 billion which has raise fears that future taxation will limit growth. It was the worst reading on record for the month which is a time when the government receives tax revenues from companies. The GBPUSD had reached a weekly high of 1.6007 after an initial spike following a 0.4% gain in July retail sales. Sales of household goods rose 4.5% led by furniture purchases adding to the signs of growth for the economy. Sterling was finding support on continued risk appetite prior to the releases and the rise in consumer consumption was looking to add to its appreciation before the government borrowing report derailed bullish sentiment.

Yesterday’s BoE minutes sunk the sterling as several members called for further quantitative easing measures beyond the £50 billion that was announced. However, rising demand for equities and confirmation that the central bank didn’t have knowledge of the most recent inflation report when they made their decision helped reverse losses. The unexpected flat reading in July consumer prices could have made a significant difference in the voting. Nevertheless, the central bank is still choosing to error on the side of caution which may not reflect the true prospects for the economy. The pound has unexpectedly held its ground the past few days and may continue to do so today on the back of higher equity markets. Yet, the GBP/USD continues to find resistance at the 20-Day SMA at 1.6589, which may leave the past of least resistance to the downside.

The Euro has remained in a tight range overnight between 1.4210and 1.4250 as it continues to consolidate it gains from yesterday. An empty economic calendar didn’t provide any fundamental catalyst for price action and we may see the EUR/USD driven by dollar event risk today. However, we did see tow significant Swiss releases which proceed signs that the region’s economy is stabilizing as it is the country’s main trading partner. Swiss exports rose for the first time in three months by 4.1% which is a sign that European demand is rising. Additionally, the Swiss Zew investor sentiment survey jumped to 18.6 from 0 which was the highest since July, 2006. A level to watch today is 1.4047-50.0% Fibo of 1.4448-1.4047 which has provided resistance the past two days and failure to break above could increase downside risks.

The dollar has started to consolidate its losses form yesterday but remains subdued as risk appetite remains firm. Equities continue to trade higher, defying concerns over a limited recovery. Indeed, yesterday’s surprising 8.4 million bbl drop in crude inventories helped erase concerns over weak consumer consumption. Todays expected improvement in initial jobless claims could add to the increasing optimism for domestic demand and further weigh on the greenback. However, if we see labor conditions deteriorate it will reinforce existing fears that unemployment will reach above 10.0% leading consumers to remain retrenched. Meanwhile, the Philadelphia Fed reading is forecasted to rise to -2 from -7.5 continuing the trend of increasing activity. A positive reading would continue the trend of strong manufacturing performances across the country which has been an area that equity bulls point toward in their argument for a stronger recovery. A positive reading from the leading indicators for a fourth straight month will also add to the improving outlook.

...more...

Risk Appetite Drives Volatility But Where Will the Dollar Find Direction?

http://www.dailyfx.com/story/topheadline/Risk_Appetite_Drives_Volatility_But_1250726329271.html

Another week of extraordinary volatility has kept the dollar busy; yet from all of this activity, the market has yet to take a direction. The broader markets seem to be influenced by unusual market conditions complicated by a transition in fundamental concerns. The disconnect between volatility and direction can be partially attributed to low levels of liquidity (frequently associated to the summertime season for the Northern hemisphere when many market participants are on holiday). However, should fundamental convictions line up correctly, liquidity for this characteristically deep market will matter little.



The Economy and the Credit Market



Another week of extraordinary volatility has kept the dollar busy; yet from all of this activity, the market has yet to take a direction. The broader markets seem to be influenced by unusual market conditions complicated by a transition in fundamental concerns. The disconnect between volatility and direction can be partially attributed to low levels of liquidity (frequently associated to the summertime season for the Northern hemisphere when many market participants are on holiday). However, should fundamental convictions line up correctly, liquidity for this characteristically deep market will matter little. There are two prominent drivers that can return the dollar to a certain bearing: risk trends and relative growth forecasts. In the past few months risk appetite has maintained its volatility; but the currency’s correlation to this ever-present theme has weakened with time. In contrast, the focus on the United States’ pace of recovery has increased. Has the extension of the TALF program and policy officials’ liberal policy approach ensured an expedient recovery from recession and (more importantly) established the foundation for a timely return to a true period of growth? Time will tell, but market participants will speculate in the meantime.

...more...

[UpInArms]

25. Sears posts loss as housing market woes weigh

http://www.reuters.com/article/businessNews/idUSTRE57J28920090820?feedType=RSS&feedName=businessNews

WILMINGTON, Delaware (Reuters) - Sears Holding Corp (SHLD.O) reported a quarterly loss on Thursday as the retailer continues to suffer from the crash of the U.S. housing market.

The company said its loss was $94 million, or 79 cents per share, in the second quarter ended August 1, compared with a year-earlier profit of $65 million, or 50 cents per share.

Revenue fell to $10.55 billion from $11.76 billion. Analysts on average were expecting $10.73 billion, according to Reuters Estimates.

The housing recession has hit the company's Sears department stores, which sell Kenmore appliances and Craftsman tools, while its discount Kmart chain has fared a little better by appealing to cash-strapped consumers.

[DU GrovelBot]

33. ## PLEASE DONATE TO DEMOCRATIC UNDERGROUND! ##

This week is our third quarter 2009 fund drive. Democratic Underground is
a completely independent website. We depend on donations from our members
to cover our costs. Please take a moment to donate! Thank you!

[Festivito]

34. Debt: 08/18/2009 11,726,594,754,347.95 (UP 44,050,310,519.23) (Up 36B$.)

(Debt up 36 billion, FICA side up four billion. Island's internet is back. My glasses, now that's a different story.)

= Held by the Public + Intragovernmental(FICA)
= 7,383,334,829,316.71 + 4,343,259,925,031.24
UP 36,282,270,009.21 + UP 7,768,040,510.02

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.77, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,120,742 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $38,182.36.
A family of three owes $114,547.08. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 23 reports in the last 30 to 32 days.
The average for the last 23 reports is 5,482,892,507.16.
The average for the last 30 days would be 4,203,550,922.16.
The average for the last 32 days would be 3,940,828,989.52.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 145 reports in 210 days of Obama's part of FY2009 averaging 7.53B$ per report, 5.24B$/day so far.
There were 220 reports in 322 days of FY2009 averaging 7.74B$ per report, 5.29B$/day.

PROJECTION:
There are 1,251 days remaining in this Obama 1st term.
By that time the debt could be between 13.4 and 18.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
08/18/2009 11,726,594,754,347.95 BHO (UP 1,099,717,705,434.87 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,701,869,857,435.50 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
07/29/2009 +000,733,026,310.02 ------------********
07/30/2009 -026,031,384,097.19 -
07/31/2009 +095,534,108,940.65 ------------**********
08/03/2009 -005,083,538,887.00 -- Mon
08/04/2009 -000,056,382,262.77 ----
08/05/2009 +000,017,974,078.47 ------------*******
08/06/2009 -000,578,106,269.92 ---
08/07/2009 +000,290,467,707.81 ------------********
08/10/2009 +000,222,135,743.03 ------------******** Mon
08/11/2009 +000,246,752,500.45 ------------********
08/12/2009 +000,081,638,592.29 ------------*******
08/13/2009 +004,096,319,823.99 ------------*********
08/14/2009 +000,017,806,259.60 ------------*******
08/17/2009 +012,224,191,599.44 ------------********** Mon
08/18/2009 +036,282,270,009.21 ------------**********

117,997,280,048.08 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power.
Since then US borrowed $2,061,962,951,088.88 in last 334 days.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4021828&mesg_id=4022221

[Festivito]

44. Debt: 08/19/2009 11,718,232,402,326.06 (DOWN 8,362,352,021.89) (Up .7B$.)

(Debt up seven tenths of a billion, FICA side down nine billion.)

= Held by the Public + Intragovernmental(FICA)
= 7,384,038,351,054.48 + 4,334,194,051,271.58
UP 703,521,737.77 + DOWN 9,065,873,759.66

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.77, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,127,942 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $38,154.24.
A family of three owes $114,462.71. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 33 days.
The average for the last 24 reports is 4,906,007,318.45.
The average for the last 30 days would be 3,924,805,854.76.
The average for the last 33 days would be 3,568,005,322.51.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 146 reports in 211 days of Obama's part of FY2009 averaging 7.42B$ per report, 5.17B$/day so far.
There were 221 reports in 323 days of FY2009 averaging 7.66B$ per report, 5.24B$/day.

PROJECTION:
There are 1,250 days remaining in this Obama 1st term.
By that time the debt could be between 13.4 and 18.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
08/19/2009 11,718,232,402,326.06 BHO (UP 1,091,355,353,412.98 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,693,507,505,413.60 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
07/30/2009 -026,031,384,097.19 -
07/31/2009 +095,534,108,940.65 ------------**********
08/03/2009 -005,083,538,887.00 -- Mon
08/04/2009 -000,056,382,262.77 ----
08/05/2009 +000,017,974,078.47 ------------*******
08/06/2009 -000,578,106,269.92 ---
08/07/2009 +000,290,467,707.81 ------------********
08/10/2009 +000,222,135,743.03 ------------******** Mon
08/11/2009 +000,246,752,500.45 ------------********
08/12/2009 +000,081,638,592.29 ------------*******
08/13/2009 +004,096,319,823.99 ------------*********
08/14/2009 +000,017,806,259.60 ------------*******
08/17/2009 +012,224,191,599.44 ------------********** Mon
08/18/2009 +036,282,270,009.21 ------------**********
08/19/2009 +000,703,521,737.77 ------------********

117,967,775,475.83 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power.
Since then US borrowed $2,053,600,599,066.99 in last 335 days.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4023812&mesg_id=4024080

[Robbien]

39. Johnson Dairy culls most of its 9,000-cow herd

EATON - Johnson Dairy, once one of the largest dairy operations in the state and the nation, is culling most of its cows as part of a national herd reduction program designed to help dairy operators limit production and increase depressed milk prices.

Johnson Dairy has been in Chapter 11 bankruptcy proceedings since January, when it filed a petition declaring it had debts of $50 million.

. . .

The National Milk Producers Federation (NMPF), is removing 86,710 cows and 1.8 billion pounds of milk from the current herd retirement program. Since December, a total production capacity of 4.8 billion pounds of milk has been removed from the nation's dairy industry, according to a press from the Arlington, Va.-based NMPF.

NMPF spokesman Jim Tillison said participants in the herd retirement program are being paid up to $5.25 per 100 pounds of milk produced by the culled cows between June 2008 and through May 2009. Tillison said he could not comment on specific deals with specific dairy operators.

http://www.ncbr.com/article.asp?id=101715


There have been many articles out in the last few months about dairy farmers problems with the low price they are receiving for milk. The profit from the high price we pay for dairy products in the store have not found its way back to the farmer.

I don't expect any increase in dairy product prices resulting from this culling will find its way back to the farmer either.

[Demeter]

40. Milk at Krogers Has Dropped from Nearly $4/gallon in winter to $1.49 Today

I think they are using it as a loss-leader.

[DemReadingDU]

42. and cheese is much lower in price too, n/t

When spouse thinks a package of cheese is the serving, I pay attention to what it costs!

4 eight oz packages for $5.00
:)