STOCK MARKET WATCH, Friday December 29

[ozymandius]

Friday December 29, 2006

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 752 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2194 DAYS
WHERE'S OSAMA BIN-LADEN? 1899 DAYS
DAYS SINCE ENRON COLLAPSE = 1860
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 7
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54


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




AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON December 28, 2006

Dow... 12,501.52 -9.05 (-0.07%)
Nasdaq... 2,425.57 -5.65 (-0.23%)
S&P 500... 1,424.73 -2.11 (-0.15%)
Gold future... 636.90 +6.60 (+1.04%)
30-Year Bond 4.81% +0.03 (+0.63%)
10-Yr Bond... 4.69% +0.04 (+0.77%)






GOLD, EURO, YEN, Loonie and Silver


PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

[ozymandius]

1. WrapUp by Martin Goldberg

THEMES FOR 2007
Gold and Precious Metals the Most Compelling

It’s the time of year for those yearly inane predictions about the year ahead. Here is mine... As an investment, buy gold, precious metals, and precious metals stocks. While there are other potential successful investments for the year ahead, gold, precious metals, and precious metals stocks present the best combination of fundamental and technical qualities that appear to be sustainable over the long term. While some other ideas appear more suitable to shorter term trading opportunities, the trends in gold, precious metals, and precious metals stocks appear to be both secular and strong. Some charts are presented tonight that describe what I mean.

2007 Theme - Monetary Inflation

For a host of fundamental reasons, the value of paper currencies are being decimated; and while this can be hidden over the short term with the careful spinning of economic data, market manipulation, and rhetoric, in the long term these factors become less effective. There is a relatively new secular trend that is both clear and decisive. This is the relative price of gold compared to other commodities (as represented by the CRB index) as shown in the long term chart below. As you can see, there has been a fairly benign relationship between the two since the mid-1990s. However, beginning in mid-2005, the price of gold has shot up in a linear and consistent manner relative to the price of commodities.

-cut-

2007 Theme - Interest Rates

An important theme of 2007 is the direction of long interest rates. The long bond enjoyed a recent multi-month rally and many an analyst hopped aboard the bullish case for bonds. This case was based upon the Fed reducing short interest rates which was to have a positive effect on the long bond. While the secular trend in interest rates is still down (bond prices up), one cannot ignore that long interest rates may have bottomed several years ago. The chart below of the 30-year treasury yield illustrates the long term down trend of long interest rates. Exactly where you put your trendline is a matter of personal preference; but clearly interest rates are in a secular downtrend. This makes it easy for analysts to jump aboard a bond market rally (interest rate swoon) because they have been mentally conditioned from decades of falling interest rates.

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

[Roland99]

2. "spinning of economic data, market manipulation, and rhetoric"

Too bad we don't hear more about the details behind all of that.

If the M$M would just start providing the TRUTH (or at least a modicum of it) instead of gov't spin, then perhaps the fundamentals of our economy could be corrected before it's too late.

[burf]

14. Here's another prediction for the coming year........

H.J. Cummins: Experts predict 2007 will bring a slowdown in state, U.S. job growth

...Baker said the national unemployment rate will top 6 percent by the end of next year, partly caused by lower home values quashing the equity borrowing that has fueled so much spending recently.

Minnesota state economist Tom Stinson predicted that the state will add 20,000 jobs between the fourth quarter of this year and that of 2007. He projects 9,000 more jobs in health care and social assistance, and 6,000 more in professional and business services, but 6,000 fewer in construction and 2,000 fewer in manufacturing.

"There's a bunch of stuff that's less than sunny going on," he said

But then there's the Feds view:

The Federal Reserve Bank in Minneapolis is on the optimistic side of projections for the Upper Midwest.

Full article is at : http://www.startribune.com/168/story/901305.html

[54anickel]

38. What Everybody Already Knows About 2007

http://www.bullnotbull.com/archive/predictions-2007.htm...

It's that time of year again, when economists, market strategists and pundits all come out with their market predictions, outlooks and forecasts for the New Year. These should more accurately be called guesses, since the future is inherently unknowable, and most of the forecasts are notoriously and invariably wrong. But they are fun to read nonetheless, and hearing a variety of opinions helps you make up your own mind. I especially enjoy reading what others think (since I already know what I think - how boring). So considering that you were just named Time Magazine's person of the year (yes, you!), you'll have your chance to post your opinion at the end of this article, and me and a bunch of other people are going to have fun reading it.

After a day of research I came up with a short list of things that everybody already knows about the year ahead. They know these things because they're printed in black and white in the pages of the popular business press: Barron's, BusinessWeek, Fortune, Forbes the Wall Street Journal - all the usual suspects. Everybody knows this stuff because everybody reads these popular magazines (even if you dismiss a lot of what they say, like I do).

What Everybody Already Knows about 2007

1) The dollar is toast
Everybody knows this -- the opinion on this one is near unanimous. Among many other places, this information can be found in the December 25, 2006 issue of the BusinessWeek "Where to Invest 2007" issue (p.102):
The euro and other currencies have trounced the U.S. dollar since 2002, and the trend is likely to persist into 2007, perhaps longer. The reason: Massive U.S. trade deficits -- $586 billion in the first nine months of 2006 alone -- mean we're flooding the globe with more dollars than foreigners want to hold. With no end in sight to the trade deficit or the U.S. budget deficit, the greenback should be under pressure for years.
Americans -- consumers and the government alike -- are spending money as fast as the Fed can print it. There is no end in sight to this liquidity trend, and everybody knows it. Because Ben is manning the printing presses at the Fed, deflation is an impossibility. He'll just print more money. Everybody knows this.

2) Liquidity is good for commodities

more...

[ozymandius]

3. Today's Reports

10:00 AM Chicago PMI Dec
Briefing Forecast 52.0
Market Expects 50.2
Prior 49.9

10:00 AM Help-Wanted Index Nov
Briefing Forecast 30
Market Expects 30
Prior 30

http://biz.yahoo.com/c/e.html

[ozymandius]

4. Oil prices remain above $60 a barrel

LONDON - Oil prices fell slightly Friday, staying above $60 a barrel on the year's last trading day.

Light sweet crude for February delivery was down 9 cents to $60.44 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. February Brent at London's ICE Futures exchange slipped 11 cents to $60.56 a barrel.

Prices have fallen this week as a mild U.S. winter has depressed demand for home-heating fuels. On Wednesday, crude prices closed at their lowest level in a month.

But they rallied slightly Thursday, rising in response to U.S. government data showing crude inventories plunged last week.

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

[ozymandius]

5. Exxon Mobil asks court for leases

JUNEAU, Alaska - Exxon Mobil Corp. wants a federal court to overturn the state's decision to revoke its leases in the North Slope's Point Thomson oil and gas field.

In a court filing late last week, the company asked for the reversal or "in the alternative, to remand the matter to the commissioner with instructions to make a new and different decision."

Alaska Department of Natural Resources acting Commissioner Marty Rutherford has already reviewed the case once and late Wednesday backed the Nov. 27 decision by the former commissioner, Mike Menge.

Menge found last month that Exxon Mobil — which operated the field on behalf of itself and other companies — failed to come up with a viable plan for developing the field's vast reserves. Menge was the commissioner under former Gov. Frank Murkowski.

http://news.yahoo.com/s/ap/20061229/ap_on_bi_ge/alaska_...

[ozymandius]

6. Winter gas supplies face new threat (E.U.)

The Russian gas giant Gazprom gave warning yesterday that supplies to Western Europe would be interrupted unless a dispute with neighbouring Belarus is settled by the weekend.

In a repeat of the gas war with Ukraine, which sent a chill through Europe last January, Gazprom said that it would halt supplies to Belarus unless a contract for 2007 was agreed by Sunday. About 20 per cent of Russian gas exports to Europe pass through Belarus.

Alexei Miller, the state-owned company’s chief executive, told customers in the European Union that the “destructive position” of Belarus would lead to supply problems.

-cut-

“If a gas supply contract for next year is not reached, Gazprom will have no grounds for deliveries of gas to Belarus as of 10am Moscow time on January 1.” Gazprom accused Belarus of planning to steal gas meant for its EU customers after talks broke down on a new contract. Belarus threatened to halt the transit of Russian gas unless Gazprom dropped plans to more than double the existing price to $105 per 1,000 cubic metres.

http://www.timesonline.co.uk/article/0,,3-2520940,00.ht...

[54anickel]

20. Oil falls below $60 on unusual weather

Crude prices have fallen 20 percent since July when it climbed to a record $78.40; mild weather deters buyers.

http://money.cnn.com/2006/12/29/markets/oil.reut/index....

LONDON (Reuters) -- Oil prices dipped below $60 a barrel on Friday as unusually mild weather deterred buyers and the market looked poised for its first year-on-year decline since 2001.

U.S. crude futures slipped 37 cents to $60.16 a barrel on the New York Mercantile Exchange. Prices reached a session low of $59.99, breaking $60 for the first time since late November.

The market was below last year's close of $61.04 and far below this year's peak of nearly $80 in mid-July. Brent shed 58 cents to $60.09.

Traders closing positions ahead of the year-end has further subdued the market, which has fallen around $2 this week.

"The markets seem to have assumed a year-end liquidation mode with a singular focus on weather," John Kilduff of Fimat said in a research note.

snip>

A Reuters poll of more than 30 analysts forecasts an average U.S. price of $63.48 for 2007.

more...

[ozymandius]

7. Eurozone money supply data boosts case for rate rise

The amount of money in circulation in the 12-nation eurozone increased sharply in the twelve months ending November, raising expectations that the European Central Bank will continue to raise rates early next year.

With growth of corporate loans again accelerating and that of consumer lending remaining strong, M3 money supply - the broad measure used by the ECB to help forecast longer-term inflationary trends - grew an annual 9.3 percent. This was up from 8.5 percent in October, and the highest level seen since 1990.

"These stronger-than-expected figures have definitely strengthened the argument in favour of a quarter-point rate rise some time in the first quarter" of 2007, said Elga Bartsch, an economist at Morgan Stanley.

http://news.yahoo.com/s/ft/20061229/bs_ft/fto1229200607...

[ozymandius]

8. Market Overview: Economic data prompt second day of US Treasuries weakness

A raft of positive US economic data prompted a sell-off in the US bond market on Thursday but failed to inspire the dollar or provide fresh momentum for equities as markets began to wind down for the new year holiday.

Housing market, consumer confidence and manufacturing data were all on the strong side of expectations, prompting a second consecutive day of weakness for US Treasuries as the data dented hopes of an early cut in US interest rates. The yield on the benchmark 10-year Treasury rose 4.4 basis points to 4.698 per cent.

Sales of existing homes hit an annual rate of 6.28m in November, according to a report from the National Association of Realtors, which was above October's 6.24m level and higher than the expected 6.20m.

http://news.yahoo.com/s/ft/20061228/bs_ft/fto1228200616...

[ozymandius]

9. Stock futures flat; Apple again in focus

LONDON - U.S. stock market futures hugged the flat line on Friday on the last trading day of the year, with Apple Computer again in focus as traders await the filing of its annual report and with Marsh & McLennan in the spotlight on a report it's near a deal to sell Putnam Investments.

Dow Jones futures were recently down 11 points, S&P 500 futures rose 0.4 of a point and Nasdaq futures rose 0.8 of a point.

On Thursday, stocks finished lower in a quiet session where market indexes moved between positive and negative territory. The Dow industrials dropped 9 points, the Nasdaq Composite lost 5.7 points and the S&P 500 eased 2 points.

Traders will be waiting for news on whether the New York Stock Exchange will join the Nasdaq in shutting on Tuesday in memory of the death of President Ford.

http://news.yahoo.com/s/ap/20061229/ap_on_bi_st_ma_re/w...

[ozymandius]

10. Marsh to sell Putnam unit for $3.9 billion

NEW YORK (Reuters) -- Financial services firm Marsh & McLennan Cos. Inc. has agreed in principle to sell its Putnam Investments unit for $3.9 billion to Montreal-based holding company Power Corp. of Canada , the Wall Street Journal reported on its Web site on Friday.

Citing people familiar with the matter, the WSJ said the price to be paid by Power Corp. is at the higher end of most estimates and could be good news for Marsh's (Charts) battered shareholders.

While the companies have reached agreement, the deal still needs the approval of Putnam employees who own shares in the company, Putnam mutual-fund shareholders and the board that oversees the funds, the WSJ reported.

-cut-

MMC put its money-manager, Putnam, on the block in September, and MMC's chief executive, Michael Cherkasky, said earlier this month that he would decide whether to sell the unit by early 2007.

http://money.cnn.com/2006/12/29/news/companies/marsh_pu...

[54anickel]

15. Wheeling and dealing to the end

Futures mixed as deal news dominates; AT&T makes concession; Marsh to sell Putnam. Apple files annual report detailing stock options grant process.

http://money.cnn.com/2006/12/29/markets/stockswatch/ind...

NEW YORK (CNNMoney.com) -- Stocks looked set to open mixed Friday after Apple filed its quarterly report and a spate of deal news capped a year abuzz with merger activity.

snip>

Apple (Charts) admitted to falsifying documents but said no current executives were aware of the "irregularity" and that its chief executive Steve Jobs didn't gain financially from back-dated options.

An investigation into the matter has rattled Apple's stock recently, but shares rose 3 percent in pre-market trade after its filing Friday.

In deal news Friday, finance giant Marsh & McLennan (Charts) agreed to sell its Putnam Investments money-management unit for $3.9 billion to Montreal-based holding company Power Corp., according to the Wall Street Journal.

AT&T (Charts) made several concessions to the federal government - including selling off some wireless airwaves, offering a basic high-speed Internet service for under $20 a month, and not charging a fee to content providers for two years - in hopes of winning approval for its $86 billion merger with BellSouth announced earlier this year. Approval could come as early as Friday.

Chatter is picking up about a possible private equity bid for Alltel (Charts), the nation's fifth-largest wireless carrier, the Journal also reported.

more...
Futures are looking rather shiny right now

[ozymandius]

11. Goodyear Workers Ratify New Contract Following Strike (Update2)

Dec. 29 (Bloomberg) -- Goodyear Tire & Rubber Co.'s largest union, out on strike for three months, ratified a new contract allowing North America's biggest tiremaker to shut a U.S. plant.

U.S. members of the United Steelworkers of America voted by a two-to-one margin in favor of the accord, the union said today in a statement. About 15,000 employees at 16 factories in the U.S. and Canada walked out Oct. 5, costing Goodyear $35 million a week. Canadian workers are voting on a separate accord.

The three-year agreement will save the Akron, Ohio-based company $610 million over the contract's term and allow the tiremaker to close a plant in Texas in 2008, eliminating 1,100 jobs. Goodyear says it must trim spending because of higher materials costs and competition from rivals building tires in low-cost countries.

-cut-

Under the new agreement, Goodyear agreed to push back the Tyler, Texas, plant's closure to 2008 from the second quarter of 2007. The company will contribute $700 million cash and as much as $300 million in stock to a fund for retirees' medical care.

http://www.bloomberg.com/apps/news?pid=20601103&sid=adi...

[ozymandius]

12. AT&T Embraces (Some) Net Neutrality

How badly does AT&T Inc. want to complete the BellSouth Corp. merger? It's now willing to formally offer network neutrality as a bargaining chip.

That's one of several concessions outlined in an 11-page letter (not including attachments) sent yesterday from Robert W. Quinn Jr., AT&T's senior vice president handling regulatory affairs, to the Federal Communications Commission (FCC) .

The letter expands on the concessions AT&T pledged on Oct. 13, an offer that left critics with plenty more to demand. (See Critics Consider AT&T Merger Conditions.) The carrier is piling on more "in order to break the impasse, and in the interest of facilitating the speediest possible approval of the merger," the letter states.

It's been nine months since the then-$67 billion merger was announced, and it's still awaiting FCC approval. In part, that's because commissioner Robert McDowell, a potential tiebreaking vote among the five commissioners, has recused himself from voting in a will-he-won't-he drama that AT&T is apparently tired of watching.

http://www.lightreading.com/document.asp?doc_id=113531

[ozymandius]

13. Federal Reserve to delay FOMC minutes to January 3

WASHINGTON (Reuters) - The Federal Reserve Board said on Thursday it will delay the release of minutes for the Federal Open Market Committee's December 12 meeting until 2 p.m. EST (1900 GMT) on Wednesday, January 3, due to memorial arrangements for former President Gerald Ford.

The Fed had originally scheduled release of the minutes on Tuesday, January 2, but the Fed offices in Washington will be closed for a national day of mourning for Ford.

However, the Fed said its 12 regional banks will be open and operating during normal business hours on January 2 and will provide all financial services as usual.

At its last meeting on December 12, the Fed's policy-setting committee kept the benchmark federal funds rate target steady at 5.25 percent for a fourth straight meeting while renewing a warning on inflation risks and acknowledging a "substantial" cooling of the U.S. housing market.

http://news.yahoo.com/s/nm/20061228/bs_nm/usa_fed_minut...

[UpInArms]

16. daily dollar watch

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

Last trade 83.79 Change -0.03 (-0.04%)

Falling U.S. dollar pushes Emirates to convert reserves to stronger euro

http://www.iht.com/articles/ap/2006/12/28/africa/ME_FIN...

DUBAI, United Arab Emirates: The wilting U.S. dollar is pushing the United Arab Emirates, a close U.S. ally, to convert 8 percent of its foreign exchange reserves into the healthier euros, the central bank governor said on Thursday.

The Emirates' nearly US$25 billion (euro18.9 billion) currency reserves are currently 98 percent dollars. That percentage will drop to 90 percent in six to nine months if the bank's directors approve the switch as is expected, Central Bank governor Sultan Bin Nasser al-Suwaidi said.

The sale itself is a small one, worth about US$2 billion (euro1.5 billion). But the implications of a cash-rich friend of Washington selling off its dollars is a sign that central banks elsewhere may be looking to cut losses from a dollar widely expected to slip further in 2007.

"It's a prudent move and it's indicative of broader thinking," said Simon Williams, HSBC's chief Middle East economist. "It's another factor that will exert downward pressure on the dollar."

...more...

[UpInArms]

17. The Case Against a New Plaza Accord

http://www.cato.org/pub_display.php?pub_id=6872

In September 1985, the Group of Five (G5) industrialized nations (United States, Japan, Germany, Britain, and France) met in secret at the Plaza Hotel in New York to coordinate intervention to lower the value of the dollar against the yen and deutsche mark. As today, the United States was running twin deficits, and there was pressure on its major trading partners to let their currencies appreciate with the hope that U.S. exports would become more competitive. China, however, was not a factor. Its economic reforms had barely begun and its foreign exchange reserves were meager.

The dollar was already drifting lower before the Plaza Accord, but central bank intervention-buying yen and marks and selling dollars-led to a further decline in the dollar's external value. To limit yen appreciation and protect the export sector, the Bank of Japan (BOJ) sterilized most of its dollar sales by buying bills in the open market. Any permanent effect on the real yen/dollar rate, therefore, was likely to be small.

In early 1987, the G5 plus Canada met in Paris and agreed to stem the dollar's fall. The Louvre Accord gave the signal for the BOJ to freely supply yen for dollars, fueling money and credit growth, and rapidly expanding foreign exchange reserves. Excessive money growth helped create the bubble economy of the late 1980s.

The BOJ sacrificed monetary stability for the sake of exchange rate intervention designed to stimulate the export sector. When the BOJ applied the brakes in mid-1989, money and credit growth dropped sharply, and asset prices collapsed in 1990. Monetary disequilibrium continued to plague Japan-especially its financial sector-for the next decade.

...more...

[54anickel]

34. Shanghai wrests stock pricing power from Hong Kong

This could get interesting

http://today.reuters.com/news/articlenews.aspx?type=reu...

SHANGHAI/HONG KONG (Reuters) - The soaring share prices of some of China's biggest companies like ICBC (601398.SS: Quote, Profile , Research) and China Life Insurance (2628.HK: Quote, Profile , Research) underline a new trend in the stock markets.

Shanghai, not Hong Kong, is starting to take the lead in setting the values of Chinese firms.

The trend may prompt foreign investors to focus more attention and resources on the domestic Chinese stock markets, even though their buying of yuan-denominated A-shares is limited by strict quotas.

It will also encourage some Chinese firms raising funds, as well as Chinese investors, to go to Shanghai rather than Hong Kong or overseas markets -- which may in the long term help Shanghai win an unchallenged role as the top financial center for China, analysts say.


snip>

Rather than assuming the Shanghai market has become overheated or overvalued, many Hong Kong investors are revising their appraisals of H-shares to follow Shanghai's lead.

snip>

But there are reasons to think Shanghai's pricing power will only continue to increase over the long term. One is the dramatic expansion and deepening of the Shanghai market as Chinese regulators push their policy, launched this year, of having China's top companies list domestically.

Another reason is the relentless appreciation of the yuan <CNY=CFXS> against the U.S. dollar, which is increasing the yuan's importance as a store of value and therefore the attractiveness of yuan-denominated A-shares.

more...

[54anickel]

66. China Lifts Asian Stocks to Record Highs

http://biz.yahoo.com/ap/061229/asia_surging_markets.htm...

AP CENTERPIECE: Asian Markets Soar on China Boom, Stronger Corporate Profits

BEIJING (AP) -- From Tokyo to Shanghai to Bombay, Asian stock markets have surged to record highs as investors race to cash in on China's boom and stocks elsewhere are boosted by stronger corporate profits and lower barriers to capital movement.

China's main market index more than doubled in 2006, hitting a record high as the year ended. Investors snapped up shares in banks, retailers and others with a stake in China's dynamo, with economic growth on track to top 10 percent. Hong Kong markets rose on a multibillion-dollar wave of stock offerings by mainland companies.

"There is really no other economy in the whole world that has the size of the Chinese economy and is growing at the same rate," said Lan Xue, head of China research for Citigroup Inc. "Clearly we are seeing a huge appetite for Chinese equity."

The U.S. economy is the world's largest, but economists expect a growth rate in the October-to-December quarter of 1.7 percent to 2.5 percent, or slightly higher. Growth estimates for the first quarter of 2007 are in the same range.

snip>

The trickle of money from abroad into Chinese markets grew as more foreign financial firms were granted permission to invest in the main "A-shares" usually reserved for domestic investors.

more...

[Gregorian]

36. Personal question- buying Euros

Can someone give their thoughts on buying Euros? I'm about to sell my house, and do not want my money in a bank.

Anything at all. Risks, potential return, taxes on returns. Are CD's a smarter move?

After getting a nearly tax free 30% on my money with real estate over the last ten years, I'm trying to find something where I can pull my money in short notice, have security, yet make more than piddly sums.

[54anickel]

50. I dunno what to tell you. Betting against the buck at a time when everyone

else is might be a bit risky. Buffet paid for that mistake on the first go around. It's a bet against the house, in this case the Fed, Treasury and PPT - a pretty powerful group.

http://today.reuters.com/news/articlebusiness.aspx?type...

ANALYSIS-Traders bet against magazine cover stories on dollar

snip>

After seeing widely-read publications such as The Economist magazine plaster their front pages with stories about the collapse of the U.S. dollar, some traders have come to the ironic conclusion that now is the time to bet in the opposite direction.

Now that mainstream publications have started dissecting the impact of the weakening dollar on the global economy and the everyday American, the move lower in the greenback is likely already over, said Dennis Gartman, independent investment advisor and author of the Gartman Letter.

"Simply put, when the magazines of the world find out about the weak U.S. dollar, it is highly unlikely to become much weaker," he said in his latest missive.

Gartman said on Thursday he promptly closed some trades betting on the dollar to weaken against the euro and the yen after he saw the cover of the December 2nd issue of The Economist, which featured the image of the first U.S. President George Washington with his mouth agape under the headline, "The falling dollar".

snip>

Against the greenback, the euro <EUR=> has shot up to 20-month highs of $1.33 on expectations the U.S. economy will slow and the Federal Reserve will cut interest rates in 2007, while the euro zone economy still shows signs of solid growth.

snip>

A few weeks before the dollar hit a record low against the euro late in 2004, The Economist's cover's headline was, "The disappearing dollar".

Two months later the dollar was up by 7.0 percent against the euro.

more...

[Gregorian]

68. Thanks for the perspective!

It's that kind of thinking I was looking for.

Nobody said making money would be easy. I've been extremely lucky.

[MattSh]

52. Some options.....

I can't answer most of your questions, but can direct you toward some possible options.

1) Well, investing in Euros directly isn't as easy as it should be. Most banks cannot help you here. The only US bank I'm aware of that has accounts that can be held in Euros is Everbank.

http://www.everbank.com/main.asp?affid=eb

2) Another option is the Euro EFT (exchange traded fund), available through brokerages. Symbol FXE.

San Francisco, CA (OPENPRESS) January 12, 2006 -- The world of Exchange Traded Funds continues to expand into uncharted territory. Rydex Investments has launched the first Currency ETF. Each share of the ETF will represent 100 euros plus accrued interest. In this way an investor can gain when the Euro gains in price as well as accruing interest while the fund is held. Of course this would be true if the investor was long the fund. Exchange Traded Funds trade like stocks so if an investor believes the Euro is about to take a drop, the investor could short this fund like a stock is shorted. Each share of the trust represents 100 Euros.

http://www.theopenpress.com/index.php?a=press&id=6843

3) A third option is the PowerShares DB G10 Currency Harvest Fund,” also available through brokerages. Symbol DBV.

DBV buys the three highest-yielding currencies in the world from a list of 10 major currencies, and sells short the three lowest-yielding ones.

The 10 currencies are all from stable countries. They are: U.S. dollars, Japanese yen, Canadian dollars, Swiss francs, British pounds, Australian dollars, New Zealand dollars, Norwegian krone, Swedish krona, and euros.

4) You can also invest in gold, silver, and other precious metals, if you're into that. Either by buying the metals directly, or via an EFT, or even a group like GoldMoney.

[54anickel]

53. Currencies: Don't Let The Dollar Get You Down

http://www.businessweek.com/print/magazine/content/06_5...

The greenback will probably stay anemic, but new ETFs and other instruments offer protection


The euro and other currencies have trounced the U.S. dollar since 2002, and the trend is likely to persist into 2007, perhaps longer. The reason: Massive U.S. trade deficits--$586 billion in the first nine months of 2006 alone--mean we're flooding the globe with more dollars than foreigners want to hold. With no end in sight to the trade deficit or the U.S. budget deficit, the greenback should be under pressure for years.

Whether you want to protect your wealth in a global sell-off or profit from the shrinking dollar, there are new ways to do it. In recent months, eight currency-based exchange-traded funds (ETFs) have been launched, making currency investing as easy as buying and selling stocks. Also, there are now eight currency-focused mutual funds vs. just two five years ago. Go online and you can open bank currency accounts.

As a hedge against the beleaguered greenback, the euro is probably your best bet. "If the dollar will decline, it will decline against its major trading partners' currencies--the euro and the yen," says Frank O. Trotter, president of EverBank Direct, an online bank that deals in 25 currencies. The euro may be the better play for now, though Japan's financial picture is improving. "The euro is establishing itself as a world reserve currency in competition with the dollar, and many countries are looking to sell their dollars and buy into it," says David Reilly, Rydex Investments' director of portfolio strategies. "China's central bank has over $1 trillion it wants to diversify, so it's moving into euros."

more...

[54anickel]

62. How Will the US Dollar Perform in January?

http://www.dailyfx.com/story/special_report/special_rep...

Every currency trader tries to handicap the future direction of the market and they do so using a variety of methods, the most prominent of which are fundamental and technical analysis. From both schools of thought, the most popular view at the moment is for further dollar weakness in 2007. Central banks from around the world have already begun to diversify out of US dollars in fear of lower interest rates in the months to come.
After seven months of tight range trading, the US dollar broke down and has embarked on a major new trend since late November. However, even though both fundamentals and technicals favor further dollar losses in 2007, the dollar could strengthen before it weakens. Prices move in repeated patterns which is the foundation behind technical analysis. Therefore it should be no surprise that there is a unique repeated pattern in the performance of the US dollar in the month of January based upon seasonality.

Euro – US Dollar (EUR/USD)

Over the past 10 years, historical analysis indicates that from January 1st to January 31st, the Euro fell against the US dollar 8 out of 10 times, which is roughly 80 percent of the total sample. In other words, 80 percent of the time, the dollar strengthens in January. There are many reasons to explain this unique seasonality, the most of obvious of which may be beginning of the year repositioning. Typically many foreign investors will repatriate their money year end to dress up their balance sheets or prepare distributions. In the beginning of the year however, they reinitiate new positions and typically that will involve reweighing their investments in US equities and bonds. Therefore even though 2007 may be a tough year for the US dollar, it could at least start the year on a firmer footing.



US Dollar – Swiss Franc (USD/CHF)

The relationship between the US dollar and the Swiss franc is just as strong. The US dollar has strengthened 8 out of the past 10 years against the franc. This is hardly surprising given the inverse relationship between the EUR/USD and USD/CHF. Losses (-2 percent) have also been on average smaller than the gains (3.14%).

more..



http://www.dailyfx.com/story/dailyfx_reports/daily_fund...
Lack of Buyers for the Dollar Weakens the Punch of Strong US Data

· Lack of Buyers for the Dollar Weakens the Punch of Strong US Data

· Euro Rallies on Hawkish ECB Comments and Drop in French Unemployment

· Strong Housing Data Sends the British Pound Higher


US Dollar - Despite overwhelmingly strong US data, the dollar was unable to end the day in positive territory. After having rallied for most of December, there seems to be no more buyers left in the market. The sharp rally after the 10:00am data quickly lost steam and the dollar quietly gave back those gains for the remainder of the day. All three of the key releases that we were expecting this morning beat expectations. Consumer confidence jumped from an upwardly revised 105.3 to 109, the strongest level since April 2006. With the stock market rallying to record highs on a near daily basis in early December and oil prices remaining low due to the warm weather, consumers were optimistic about current conditions as well as the conditions for the months ahead. This should help relieve some of the market's concerns about a weak holiday spending season and keep the EUR/USD trapped within the 1.3050 - 1.3300 trading range. Housing market data was also extremely encouraging. Existing home sales increased 0.6 percent in the month of November by 6.28 million, which was the strongest percentage gain since Feb. Taken together with yesterday's rise in new home sales, we are seeing signs of a potential bottom in the housing market. The manufacturing sector seems to be doing better with the Chicago PMI report rebounding in the month of December after dipping into contractionary territory the prior month. The expansionary conditions in the Chicago region conflicts with the negative Philly Fed number reported last week. This suggests that we may only see a mild moderation in next week’s National ISM survey. This morning’s reports will most likely keep the Federal Reserve on hold for the first quarter of 2007. With another three day weekend ahead of us, there is no more data due for release.

Euro - Hawkish comments from the European Central Bank has helped the Euro retain its bid today. Council member Mersch repeated the central bank’s overall view that interest rates remain low historically and monetary policy remains accommodative despite five interest rate hikes this year. This coincides with the hawkish comments that ECB President Trichet made shortly after their December hike and suggests that we are on track for another quarter point rise in March. French unemployment data (which was released early) came out stronger than expected in the month of November. The unemployment rate fell to 8.7 percent, the lowest level in five years thanks to the 26,000 drop in claimants. Money supply growth will be the key figure that we are watching tomorrow because it is an inflationary indicator. Should money supply grow as quickly as the market expects, it will validate the need for more rate interest hikes and support a further rally in the EUR/USD. Meanwhile Switzerland will be releasing their KoF leading indicator report. The drop in the UBS consumption index earlier this week suggests that leading indicators will decline in the month of December.

British Pound - The British pound is higher today thanks to stronger growth in house prices during the month of December. According to the Nationwide Building Society, house prices grew for the tenth straight month by 1.2 percent in December, bringing the annualized pace of growth up to 10.5 percent, which is the fastest since January 2005. When it comes to UK housing market data, upside surprises are no longer surprises. The housing market has long been the strongest aspect of the UK economy and continues to provide support for further growth in consumer spending. In fact, holiday sales are reported to have been very strong this season which gives the Bank of England a good reason to consider another interest rate hike early next year. Housing market reports are due out tomorrow, which should continue to show strength. The GfK consumer confidence report was rescheduled for mid next week.

more...

[54anickel]

63. 2006 Has Been a Tough Year for the US Dollar

http://www.ameinfo.com/106689.html

- 2006 Has Been a Tough Year for the US Dollar - Euro Surges After Strong Inflation Data Confirms Need for More Rate Hikes- US Dollar Hits 8 Month High Against Canadian Dollar

US Dollar - 2006 has been a tough year for the US dollar. It lost value against the Euro, Swiss Franc, British Pound and Australian dollar while only managing to end unchanged against the Japanese Yen, Canadian and New Zealand dollars. Volatility shrank to record lows and the breakout that we saw in late November lasted for no more than 2 weeks for most of the currency pairs. The US dollar ended the last trading day of the year stronger against every major currency except for the Euro. The calendar was very light with only the help wanted index released this morning. The index remained unchanged and resulted in zero volatility for the greenback. All markets are closed on Monday while the US stock markets will remain closed on Tuesday for National Mourning Day (for former President Ford). Futures markets will be open on Tuesday, but will close early. However, just because the US markets are closed on Tuesday does not mean that traders should not be prepared for the busy week ahead. There are a lot of important data set for release including manufacturing and service sector ISM, the minutes from the last FOMC meeting and non-farm payrolls. With the EUR/USD and GBP/USD consolidating for most of December, next week's data could start the year with bang. Manufacturing ISM is due out Tuesday. After the strong Chicago PMI print yesterday, we could actually see the index rebound, especially since the ISM adjusted Philly Fed index increased in the month December despite the drop in the headline index. Traders will be paying a very close attention to the prices paid component since inflation is still the Federal Reserve's top priority. Recent economic data has been mixed which means that the outlook for the economy is still uncertain. The non-farm payrolls report on Friday should help to clarify things, but in the beginning of the week, the ISM number will help to confirm or deny whether the manufacturing sector is still facing recessionary conditions.

Euro - The Euro is up 11.5 percent against the US dollar this year and is the only currency to strengthen against the dollar in the last trading day of 2006. The outlook for the EUR/USD is bullish both technically and fundamentally. The latest rise was sparked by the sharp jump in M3 money supply in the month of November. The annualized rate of growth hit 9.3 percent, which is the fastest pace of growth since February 1990. The 3 month moving average rose to 8.8 percent, which is the biggest gain since May 1990. The rapid growth is sure to raise the eyebrows of the already hawkish central bankers and will give them an even stronger reason to lift interest rates in the first quarter of next year. This comes in stark contrast to the US Federal Reserve who at best will keep interest rates on hold and at worst, will begin lowering interest rates in the first quarter. The ECB has said loud and clearly that they plan on continuing to raise interest rates. Just yesterday, ECB member Mersch reiterated the central bank's view that interest rates remain very low and monetary policy is still accommodative. Like the US, there is a great deal of Eurozone economic data due for release next week. We are expecting manufacturing, retail and service sector PMI, along with inflation, unemployment, and retail sales. Meanwhile in Switzerland, the KoF leading indicator fell more than expected from 1.75 to 1.60. This confirms the drop in the UBS consumption index reported earlier this week. Swiss PMI and CPI are due out next week with potential weakness in both.

more...

[54anickel]

64. U.S. Criminalizes Coin-Melting: Bad Sign for Dollar? (Sorry about the source)

http://www.thetrumpet.com/index.php?page=article&id=281...

On December 13, United States Mint officials said they were making it illegal to melt pennies and nickels and to take large amounts of the coins outside the country. Under the new law, anyone convicted of melting the coins or leaving the country with more than $5 in pennies and nickels or shipping more than $100 worth could be punished with five years in prison and/or a fine of up to $10,000.

Why the drastic steps? “We are taking this action because the nation needs its coinage for commerce,” stated Mint Director Edmund Moy. “We don’t want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer.”

Because of current zinc, copper and nickel prices, pennies and nickels cost the Mint far more than the coins are worth.

For example, as of the December 13 announcement, pennies (which are 97.5 percent zinc and 2.5 percent copper) were worth approximately 1.12 cents. Similarly, nickels, which are 75 percent copper and 25 percent nickel, were worth 6.99 cents—a whopping 39.8 percent above the nickel’s currency value.

For obvious reasons, when the metal value of a coin exceeds its face value, it makes people wonder if they could make money by selling the coin as scrap metal.

Although melting down U.S. coinage to sell the metal seems unpatriotic and opportunistic to say the least, it is a bit ironic that the Mint is worrying about people taking advantage of the taxpayer—especially since the Mint is now costing taxpayers millions by manufacturing pennies and nickels at a cost far above the value of the coins themselves.

According to the Associated Press, when all production costs are taken into account, the U.S. Mint now spends 1.73 cents to produce each penny and 8.34 cents to produce each nickel.

more...

[54anickel]

18. Bad dreams (subprime mortgages)

http://www.prudentbear.com/articles/show/85

snip>

What happens in the subprime mortgage market is no longer just cocktail chatter at mortgage company Christmas parties. Subprime lending as a percent of total mortgage lending has grown from darn near nothing in 1994 to 20% in 2005, and an estimated 23% in 2006. In dollar terms, that’s a jump from $35 billion to $665 billion. Subprime loans totaled just $200 billion as recently as 2002. That makes the fate of subprime lending a Big Deal for holders of subprime mortgage backed securities, neighbors of foreclosed upon subprime borrowers and the subprime borrowers themselves. In other words – all of us.

One reason for the surge in subprime lending is that the business changed when the adults left the room. In the old days, when a borrower came to face to face with a loan officer, the loan officer knew the mortgage loan would be on the company’s books a long time. Besides, the amount of loans the bank could make was limited by the bank’s capital. A finite number of lending institutions, each with their own capital requirements, placed limits on overall mortgage lending. But with the invention of asset backed securities, the loans moved off the bank’s books, lending constraints were virtually removed, and loans were simply sold off to buyers eager for yield. It was like having the beer distributor park his truck driveway of a college frat house on Saturday night. While specific results can’t be precisely predicated, the smart money is on disaster rather than forbearance.

The Center for Responsible Lending wonders why more wasn’t done to prevent the disasters already unfolding. The Center’s study notes that subprime borrowers in the best of the boom times experienced foreclosure rates similar to those of prime borrowers in the worst markets. In fact, they estimate that one in eight subprime loans originated between 1998 and 2004 ended in foreclosure within five years of origination.

Not only that, thousands of borrowers with problems have been bailed out by rising real estate prices. That’s because borrowers who found themselves unable to make their mortgage payments at least were able to find money for a refi loan backed by the rising value of their real estate. Without the ability to refi their existing delinquent loan balance, or to sell the home outright to pay off the delinquent loan, the Center estimates that the subprime foreclosure rate approached 25%.


With housing prices sinking and ARMs adjusting, the Center does not see a Happy New Year for many subprime borrowers. That’s in part because fewer borrowers who are struggling will have enough equity to refi or sell without taking a loss. Ultimately, the Center predicts that 15.8% of subprime loans originated between 1998 and Q3 2006 will enter foreclosure. While they predict that “only” 9.8% of subprime loans originated in 1998 will fail, the Center projects that 19.4% of loans originated in 2005 and 2006 will be foreclosed upon. In other words, one of out every five subprime loans made today will fail.

more...

[54anickel]

21. Homeowners Cut Prices, Drawing Some Buyers Back

http://www.nytimes.com/2006/12/29/business/29econ.html?...

The sales rate for previously owned homes rose in November for the second straight month, an industry group said yesterday, as homeowners eager to unload their properties in a crowded market cut their prices.

The group, the National Association of Realtors, reported that sales of existing homes increased 0.6 percent over October, to a seasonally adjusted annual rate of 6.3 million. But sales remained significantly behind last year’s levels, falling 10.7 percent from November 2005.

The median price, the midpoint of prices for homes sold, dropped to $218,000 in November, down 3.1 percent from a year earlier.

Economists said falling prices — November was the fourth consecutive month in which the price of a previously owned home declined year over year — were starting to draw back buyers who had been wary after years of double-digit home price increases.

“Prices coming down are bringing people back to the marketplace,” said David Lereah, chief economist of the Realtors association. “That’s bad news for people who own houses, but it’s working.”

While recent signs have led some economists to speculate that the worst of the housing slump has passed, many, including those at the Realtors association, are taking a wait-and-see approach.

more...

[54anickel]

19. 10:00 - open for bidness

Dow 12,513.30 11.78 (0.09%)
Nasdaq 2,433.73 8.16 (0.34%)
S&P 500 1,425.54 0.81 (0.06%)
10-yr Bond 4.72% 0.03
30-yr Bond 4.8360% 0.0230
NYSE Volume 168,601,000
Nasdaq Volume 143,804,000

10:00 am : The major indices shook off their early losses and have sprung back into positive territory. The gains, like the early losses, are modest in scope. The Telecom Services sector (+1.11%) has assumed the leadership post with the wireless service and integrated telecom groups outperforming. The former is being helped by a Wall Street Journal article that suggests Alltel (AT 60.71, +2.40) is a private equity play while the latter is being boosted by reports that AT&T (T 35.99, +0.49) is offering concessions in an effort to win the FCC's aprroval of the BellSouth (BLS 47.53, +0.73) acquisition.

The S&P 500 is up 14.2% year-to-date. That's pretty good, but relative to the year's top three performing markets around the globe, it pales in comparison. Those top three markets are: the Peru Lima General Index (+187.2%), the Venezuela Stock Market (+150.4%), and the Ho Chi Minh Index (+142.6%). DJ30 +12.50 NASDAQ +7.60 SP500 +0.73


09:35 am : The market has started the last trading day of the year on a slightly lower note, which won't alarm anyone given the scope of gains this week and from the July lows. With a dearth of trading catalysts, today has the potential to be one of the dullest - if not the dullest - trading days of the year. Be that as it may, Briefing.com will be guiding you through it per usual.

Be sure to check back regularly as we will be providing 2006 performance review insight with each comment starting at the top of the hour.

Separately, it was just announced that the NYSE will be closed on Tuesday, Jan. 2, in observance of President Ford's death. DJ30 -1.92 NASDAQ -0.81 SP500 -1.41

09:16 am : S&P futures vs fair value: -0.5. Nasdaq futures vs fair value: +1.5.

09:01 am : S&P futures vs fair value: flat. Nasdaq futures vs fair value: +1.5.

08:50 am : S&P futures vs fair value: +0.3. Nasdaq futures vs fair value: +1.5.

08:30 am : S&P futures vs fair value: -0.6. Nasdaq futures vs fair value: +1.5.

06:19 am : S&P futures vs fair value: -1.3. Nasdaq futures vs fair value: -1.8.


edit to add 10:00 yada

[54anickel]

22. Financial Markets to Close Jan. 2 for Ford Memorial (Update1)

http://www.bloomberg.com/apps/news?pid=20601084&sid=aTP...

Dec. 29 (Bloomberg) -- U.S. financial markets plan to observe a national day of mourning Jan. 2 for former President Gerald R. Ford, with the New York Stock Exchange joining the Nasdaq Stock Market in saying it will close.

The Securities Industry and Financial Markets Association recommending U.S. bond markets shut early to honor the country's 38th president, who died this week.

The Jan. 2 closure by the New York Stock Exchange, the biggest equity market, and the Nasdaq, the second largest U.S. exchange, would mean a four-day suspension of trading, including the weekend and New Year's Day. That would be the longest stretch since the six-day halt following the Sept. 11 terrorist attacks in 2001.

``The right thing is to be closed, to pay the proper respect to President Ford,'' Ted Weisberg, a floor broker who's worked at the NYSE for 38 years, said yesterday.

The NYSE, owned by New York-based NYSE Group Inc., has halted trading for at least part of the day for every presidential funeral since William McKinley's in 1901, according to its Web site. The past five presidential deaths, stretching back to Dwight Eisenhower's in 1969, were observed with a suspension lasting all day.

The suspension may disrupt plans for some investors, said Tim Hartzell, who manages $2 billion as chief investment officer at Kanaly Trust Co. in Houston.

``I had expected to come in on the 2nd to actively trade and was going to hit the button on a couple of stocks,'' he said. ``I think it will definitely create anxiety in the markets.''

more...

[54anickel]

23. U.S. stock market shrinks by $600 billion

Fueled by LBOs and buybacks, contraction may bode well for 2007

http://www.marketwatch.com/news/story/incredible-shrink...

SAN FRANCISCO (MarketWatch) -- 2006 was the year of the incredible shrinking stock market, when a record amount of shares left public markets amid a flurry of leveraged buyouts and share repurchases.

If the supply of equities continues to dwindle and retail investors also rediscover their former penchant for U.S. stock mutual funds, it could mean the market in 2007 would get a significant push higher, some strategists said.

Still, others are dubious about the benefits of the recent LBO boom and warned that an unexpected spike in interest rates next year could derail stock markets.

The U.S. stock market is on course for its best year since 2003, with the Standard & Poor's 500 Index up more than 13% through Dec. 28. The benchmark has climbed for four straight years and recently hit six-year highs.

For some observers, this bull market can be partly explained by the fundamentals of supply and demand: The supply, or number of shares outstanding, has declined while demand, in the form of investor optimism, has stabilized and recently begun to increase.

"The more you shrink it, the more it has the potential to rise, all other things being equal," said Rod Smyth, chief investment strategist with Wachovia Securities. "If you're shrinking the market with buyouts, you're putting money back into people's pockets, which in a bull market they're likely to keep re-investing in the market."

more...

[54anickel]

41. The Specter of Deflation

http://www.bullnotbull.com/archive/deflation-1.html

A specter is haunting the US economy - the specter of deflation. The Fed and the Treasury - the central powers of Capitalism itself - have entered a holy alliance to exorcise this specter. The big question is, will they be able to do it?

From what we know of economic history, credit expansions lead to economic booms - this much is clear. What comes next is still up for debate. Austrian economist Ludwig von Mises tells us "The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The credit expansion boom is built on the sands of banknotes and deposits. It must collapse. There is no means of avoiding the final collapse of a boom brought about by credit expansion." (emphasis mine)

Current Fed Chief Ben "Printing Press" Bernanke begs to differ. He earned his nickname in the now infamous 2002 speech, "Making Sure 'It' Doesn't Happen Here" prior to his ascension to the Chairmanship. Though Bernanke never admits to it in his speech, the unspeakable "it" is more than just deflation, but the very "final collapse" that that Mises warns of.

In his speech, Bernanke tells us,
The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, recession, rising unemployment, and financial stress.
He goes on to tell us that the best way to cure deflation is to avoid it altogether by preempting it. After the dot.com collapse and the terrorist attacks of 9/11, the Fed lowered interest rates aggressively, making it clear that there would be liquidity for all - no need to panic - move along - continue on with business as usual. In spite of a mild recession, the Fed's liquidity-for-all program helped the economy avoid a deflationary collapse. By creating the housing bubble.

From this compilation of deflation links that I put together, you'll notice that - at least in the press - the fear of deflation reached its zenith in 2003, shortly after Bernanke's "Printing Press" speech, then all but disappeared. Until this year.

What happened? In my opinion two things: First the Iraq war began in 2003. War is always inflationary, and this one was no exception. Hundreds of billions of dollars were pumped into the economy via government spending on military hardware, software and personnel. One of the leading market sectors since 2003 has been the defense industry.

more...

Hmmmm, wonder if these 2 articles aren't somewhat related in Chopper Ben's Master Plan

[54anickel]

24. The Private Lives of Hedge Funds

http://www.nytimes.com/2006/12/29/business/29insider.ht...

snip>

In 2006, however, some of you discovered the one thing more valuable than your secrecy: permanent money. The Fortress Investment Group, which runs both hedge funds and private equity funds, and Citadel, a multi-strategy hedge fund, both filed prospectuses this year to offer securities to the public. To some, this is preferable to raising more money from investors in the fund because they can redeem their money, with certain restrictions, when they want.

The trend to lock down permanent capital gained even more traction abroad. Funds and funds of hedge funds raced to market, ready to sop up all demand for investments deemed alternative. Exchanges in Britain and Amsterdam raised $4.2 billion in 2006, compared with $454.2 million in 2005, according to Dealogic.

That outpouring of money into hedge funds mirrors another trend in hedge-fund land: that institutions like pension funds and endowments continue to dump money into the sector. But that means hedge funds are themselves becoming institutions, real grown-up businesses, with offices around the globe and extensive legal teams, rather than a few traders and a Bloomberg terminal.

Institutional or not, hedge funds are still more colorful, more outrageous, more impressive and more bizarre than other asset managers. They are the new, new money thing. And they deserve special recognitions of their own.

So let’s hand out the hedge fund awards for 2006.

THE HOUDINI AWARD To Amaranth Advisors and its founder, Nicholas Maounis, for overseeing the evaporation of $6 billion in less than one week......

more...

[54anickel]

25. Negative stats show Mexico is ripe for revolution

http://abqtrib.com/news/2006/dec/26/kent-paterson-negat... /

Amid protests, Felipe Calderon took office Dec. 1 as Mexico's new president. Calderon inherits a country where class polarization, political conflict and escalating criminal violence define the landscape.

Six years after former Mexican President Vicente Fox pledged an immigration accord with the United States, millions of new jobs and a promised educational revolution, Mexico's social and political indicators are in the negatives.

Both the United Nations Development Program and the Organization for Economic Cooperation and Development chide Mexico for continued high poverty rates. Some reports compare sections of the Mexican countryside to Mali or the Sudan. Public high schools and universities are unable to serve all aspirants, who are frequently funneled into private schools of dubious quality and purpose.

With the minimum wage of less than $5 per day buying less than it did 30 years ago, it's no mystery why as many as 4 million Mexicans crossed into the United States during the Fox presidency.

snip>

Driving this social disaster is the implosion of the free-market economic model formalized in the North American Free Trade Agreement, a pact Washington refuses to renegotiate despite the growing clamor in Mexico to revisit the deal.

snip>

How will Calderon address Mexico's crisis? So far, all the evidence suggests that he will stay the course. Calderon's new Cabinet, whose members range from recycled Fox administration officials to U.S.- and British-educated technocrats, portends more of the same.

More than a few Mexican analysts see historical parallels between the current setup and the 30-year Porfiriato of the late 1800s and early 1900s, the era when dictator Porfirio Diaz kept wages low and the population in line for foreign corporations.

more...

[54anickel]

26. Truck shipments in a slowdown (Uh-oh)

http://www.chron.com/disp/story.mpl/business/4431638.ht...

WASHINGTON — In a potentially worrisome sign for the U.S. economy, domestic trucking shipments declined by almost 9 percent in November, marking the largest year-over-year decrease in almost six years, the industry's largest trade association said.

The American Trucking Associations said in a monthly report that its seasonally adjusted truck tonnage index stands at its lowest level since late 2003, following an 8.8 percent decline versus the same month a year ago. The index fell 3.6 percent from the prior month.

Because more than two-thirds of all manufactured and retail goods in the U.S. are carried by truck, the industry is an economic bellwether.

[Ghost Dog]

67. For Whom The Bell Tolls

No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manner of thine own
Or of thine friend's were.
Each man's death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.

- John Donne

[54anickel]

27. Georgia leads nation in bankruptcy filings

Creditor-friendly laws, not economic conditions, drive debtors to court --- especially with a home foreclosure on the horizon

http://www.ajc.com/business/content/business/stories/20...

snip>

Georgia's high ranking doesn't necessarily mean that the state's economic conditions are the worst in the country. It's more likely a reflection of Georgia's slate of creditor-friendly laws.

Because of those laws, when Georgians get into a tough spot, bankruptcy is often the only place to find protection. That's particularly true when a consumer has trouble paying a mortgage.

In Georgia, no court process is required before a lender can foreclose on someone's home. Once a borrower falls behind on a mortgage and a lender initiates foreclosure, a house can be sold on the courthouse steps in as few as 37 days. Only Texas and Tennessee allow foreclosures to proceed as quickly.

Filing for bankruptcy protection puts a foreclosure sale on hold.

"In this state, because foreclosure moves so quickly, the bankruptcy filing is often the only alternative a consumer has to get a little breathing space to work out their situation," Boas said.

Most people facing a foreclosure file for Chapter 13, which allows consumers to hold onto their homes and cars but requires that they repay a portion of their debts. Chapter 13 filings are more common in Georgia than Chapter 7 —- a liquidation in which most debts are wiped out, but so are all of a consumer's assets that aren't protected by exemptions.

The impact of the federal bankruptcy reforms was not as great in Georgia because the reforms targeted Chapter 7 filings, requiring consumers to meet income tests before they can file. The changes also increased the costs of filing for bankruptcy and required debt counseling for consumers.

more...

[Roland99]

28. Households: Worst Financial Shape Since WWII

http://agonist.org/households_worst_financial_shape_sin...

It’s been awhile since I have written about the issue of consumer debt. Please don’t take this as a sign that consumer debt in the US is not an issue anymore. Far from it – the consumer debt issue is still alive and well. In fact, it’s reaching historic levels – as in levels not seen since WWII levels. Paul Kasriel of Northern Trust has done some digging into the most recent Federal Reserve’s Flow of Funds report and found some pretty scary developments. The report is available in PDF format here, under the title Festivus Flow-of-Funds Stocking Stuffers. I would encourage everyone to download this report. The excerpts below reference some of the charts in the report.

Also – a big thanks to the Big Picture economic blog for highlighting this report.

Despite the fact that household mortgage borrowing has slowed in recent quarters, the leverage in owner-occupied real estate reached a record high 46.4% in the third quarter of 2006, as shown in chart 8. If mortgage borrowing slowed, why the increase in leverage? Because, as shown in chart 9, there has been a sharp slowdown in the growth of the total market value of residential read estate. With a still sizeable excess inventory of homes for sale, continued weak growth, perhaps even a contraction, in the market value of residential real estate could reasonably be expected in 2007.

While all of this may sound a bit complicated, it’s really simple when you rephrase the eco-geek language with everyday English. All Mr. Kasriel is doing is to compare the total outstanding household mortgage debt with total household real estate holdings. This is the leverage ratio, and economists or financial people use this ratio to determine if a household has enough assets to cover all its liabilities. For comparison purposes, let’s use the first three quarters of 2005 from the Fed’s Flow of Funds report. Total household residential real estate holdings increased from $17.6 trillion in the first quarter of 2005 to $18.9 trillion in the third quarter of 2005 – or an increase of 7.38%. For the same quarters in 2006, residential real estate increased from 19.9 trillion to 20.5 trillion or an increase of 3%. In other words, residential real estates’ upward appreciation for the first three quarters of 2006 was half the rate as the first three quarters of 2005. Because real estate is slowing in appreciation, the incredibly high amount of outstanding mortgage debt at the national level – 9.5 trillion in the third quarter of 2006 – takes a larger percentage of the value of real estate. Just as importantly, residential real estate now comprises the largest percentage of household assets since 1955.

Conversely, homeowner’s equity – which represents the amount a person actually owns in real estate –- is at a post WWII record low.

I loves me some Bush Doctrine economy!!

[54anickel]

29. SEC change on executive pay gets mixed reviews

http://www.ajc.com/business/content/business/stories/20...

A late-December change by the Securities and Exchange Commission in its new executive pay disclosure rules has been greeted with a mix of concern and praise, possibly reviving a debate about corporate pay "transparency" that seemed to be over.

The SEC on Dec. 22 amended a section of its highly praised disclosure regulations adopted last summer relating to how companies report the value of stock options and outright stock grants to senior executives and directors — an issue that had led in recent years to a veritable shareholder revolt.

In essence, the change allows companies to disclose the value of stock options and stock grants on a year-by-year basis rather than as a multi-year lump sum.

Ann Yerger, executive dircctor of the Council of Institutional Investors in Washington, D.C., said "the SEC has given companies the ability to under-represent the value of options grants."

"In general we were extremely supportive of these changes. Unfortunately the latest change is a big step back for the SEC and the inevesting public," said Yerger, whose organization represents 130 corporate, government and union pension funds.

snip>

Georgia State University accounting professor Lawrence Brown, a specialist in corporate governance, also doubts that the SEC's rule change last week is "a big deal." His basic criticism of the SEC's new rule package is that it does not require companies to disclose what they pay to executives who are no longer employed at the company.

more...

[54anickel]

33. Pay Packages Allow Executives to Jump Ship With Less Risk

http://www.nytimes.com/2006/12/29/business/29whole.html...

It’s called the “golden hello.”

For a chief executive of a large corporation, it is the one thing — more than the corporate jet or any other perk — that must be guaranteed before the executive will move to run another company.

W. James McNerney Jr., a former superstar manager at General Electric, received not one, but two such deals in recent years, worth tens of millions of dollars. In each deal, he was given any bonuses, stock options, restricted stock and pension benefits that he would have abandoned by leaving his previous employer.

Such golden hello payments are intended to make the executive “whole” — in essence to treat the executive as if his career were one smooth ascent with no costly interruptions. And these multimillion-dollar payments and perks are used to draw in not only chief executives, but virtually every member of the executive suite. If “golden parachutes” — rich exit packages of extra cash, stock or retirement benefits — are needed at times to kick out chief executives, golden hellos are increasingly needed to get them in the door.

The career path of Mr. McNerney illustrates the phenomenon. In late 2000, after losing out in the race to become chief executive at G.E., Mr. McNerney jumped to 3M, where he received a pay package worth more than $34 million in guaranteed salary, bonus, option grants and restricted stock to make up for what he left behind at G.E., according to an analysis by Equilar, a compensation research company in San Mateo, Calif.

more...

Whatever happened to that "pull yourself up by the bootstraps" idea? Oh yeah, that only applies to the working folks that get laid off.

[54anickel]

30. Art market is hotter than ever

http://www.ft.com/cms/s/9e496bbc-96a4-11db-8ba1-0000779...

When Picasso’s “Boy with a Pipe” fetched a record $104m (£53m, €79m) at a Sotheby’s New York auction in 2004, it was the talk of the town. Never before had an artwork commanded more than $100m and the deal made news outside the art world.

Two years later David Geffen, the entertainment mogul, sold almost half a billion dollars’ worth of paintings within a few months – one, Jackson Pollock’s “No.5, 1948”, for $140m – and few blinked.

The sales were merely the latest sign of a boom that has seen salerooms packed and art fairs proliferate. The year had already seen Ronald Lauder, the cosmetics heir, pay $135m for a work by Gustav Klimt, “Adele Bloch-Bauer 1”. Steve Wynn, the casino owner, agreed to sell Picasso’s “Le Reve” for $140m to Steve Cohen, a hedge fund mogul – a deal that was pulled after Mr Wynn accidentally tore a hole in the work prior to delivery.

In a fitting climax, 50,000 people descended on Miami this month for a five-day frenzy of art sales under the umbrella of the Art Basel fair. More jets were rented for the event than for the Super Bowl.

Art prices in the US rose this year by an average of 27 per cent – the steepest ever, according to Artprice.com, which tracks global auction prices. Depending on which index you consult, overall prices are either close to or above the level they reached during the peak of the last art boom in 1990. “It certainly feels like a bubble to me,” says one long-standing collector.

snip>

Many in the industry believe that the huge growth in global wealth and historically high levels of liquidity worldwide will underpin art prices for some time yet. Bill Ruprecht, chief executive of Sotheby’s, the auction house, says: “The reason people say this is different from the last boom is that in the 1980s, the market was driven by Japanese real-estate wealth. When that fell apart, the art market fell apart. Now we have Russian wealth, Chinese wealth, Japanese wealth, hedge fund wealth, entrepreneurial wealth, real-estate wealth. There is a huge concentration of wealth at the top of the economic pyramid, a bigger concentration than anyone has experienced before.”

more...

[54anickel]

31. Goldman raises $6.5B for new fund - Will invest in toll roads, airports and electric utilities

Will invest in toll roads, airports and electric utilities in North America and Europe.

http://money.cnn.com/2006/12/28/news/companies/goldman....

NEW YORK (Reuters) -- Goldman Sachs Group Inc. said Thursday it has raised more than $6.5 billion for a global infrastructure fund for investments in toll roads, airports and electric utilities.

The GS Infrastructure Partners fund will most likely focus on investments in Europe and North America. Goldman Sachs (Charts) committed about $750 million of the fund's total capital.

Other investors included pension funds, insurance companies and banks, Goldman Sachs said.

bit more...

[modrepub]

37. Bastards!!!

A friend told me yesterday they had talked to Rendell shortly before he announced the PA Turnpike could be up for sale. Didn't think anything of it until this....

[54anickel]

40. ...

[wordpix]

42. the whole country is up for sale! Along with Iraq...

These repukes have GOT to go. All of them

[citizen snips]

32. Apple says options probe clears Jobs

NEW YORK (CNNMoney.com) -- Apple Computer disclosed in a regulatory filling Friday that chief executive officer Steve Jobs was aware that some stock options granted to him and other executives at Apple between 1997 and 2002 were backdated and that the company was restating financial results for the past few years as a result of the backdating.

But the maker of the popular iPod also said that Jobs did not financially benefit from the options and added that a special committee which investigated the options granting practices at Apple found no wrongdoing by Jobs or other current managers.

Shares of Apple (Charts) surged nearly 4 percent in early morning trading on the Nasdaq as investors appeared to bet that Jobs would not be forced to step down from Apple as a result of the options problems.

In the filing, Apple also conceded that a board meeting in 2001 in which a grant of 7.5 million shares for Jobs was said to be approved never actually took place, which was first reported by the Financial Times. But Apple also cleared Jobs and other current managers of any wrongdoing regarding this matter. Jobs did not financially benefit from the options in question since he never exercised them, the company said.

more...
http://money.cnn.com/2006/12/29/technology/apple_jobs/i...

[54anickel]

35. Apple Restates Earnings Back to 2002 After Options Review

http://www.bloomberg.com/apps/news?pid=20601103&sid=aHa...

Dec. 29 (Bloomberg) -- Apple Computer Inc., the maker of iPod music players, restated earnings back to 2002 to account for backdated stock-option grants.

The company adjusted its results by $4 million for fiscal 2006, $7 million for 2005 and $10 million for 2004, Cupertino, California-based Apple said today in a filing with the U.S. Securities and Exchange Commission. ``Incorrect measurement dates were used for financial accounting purposes for certain stock option grants made in prior periods,'' Apple said.

Apple is one of the most high-profile companies involved in a stock-options scandal that has encompassed more than 190 companies. The company announced in June that it had started an internal review of options grants, including one to Chief Executive Officer Steve Jobs. In October, Apple said it misdated 15 stock-option grants from 1997 to January 2002.

Shares of the company have declined this week on concern about Jobs's potential involvement following news reports. The Financial Times said this week that company records were falsified to make it appear that Apple's full board had considered a grant of 7.5 million stock options to Jobs.

Apple said today that it found ``no misconduct by current management.''

snip>

Jobs Apology

more...

[citizen snips]

39. Marsh & McLennan Shares Rise on Report of Putnam Sale to Power

Dec. 29 (Bloomberg) -- Shares of Marsh & McLennan Cos., the world's largest insurance broker, rose as much as 2.5 percent after the Wall Street Journal reported it would sell its Putnam Investments mutual-fund unit to Canada's Power Corp. for $3.9 billion.

The stock rose 19 cents to $30.91 at 10:23 a.m. in New York Stock Exchange composite trading after earlier touching $31.50. Analysts had valued the Boston-based firm at $3 billion to $4.5 billion.

Marsh, which said in September it would seek offers for Putnam, said earlier this month that a sale was uncertain. Chief Executive Officer Michael Cherkasky hasn't recouped $7.6 billion of the market value the New York-based company lost after a 2004 lawsuit over insurance sales practices. Managed assets at Putnam dipped to $180 billion in June, their lowest level since 1997.

``Now that somebody else has to worry about Putnam and its reputation, it is good news for Marsh,'' said Meyer Shields, an analyst at Baltimore-based Stifel, Nicolaus & Co. who has a ``hold'' rating on the stock. ``It's good that a deal is getting done. There had been some concern.''

more...
http://www.bloomberg.com/apps/news?pid=20601014&sid=aRi...

[Demeter]

74. Help! I Have Some Funds In Putnam's Money Market Fund

What significance does this news have for me?

[citizen snips]

75. I'm sorry but I can't help you

I am new to this investment stuff I only hang around in this thread so I can learn more about stocks and other investments.

[54anickel]

77. I don't think you'd be any worse off under Power Corp than you were.

It might end up being a good thing. You probably need to learn a bit about the "new boss" to understand the significance.

http://www.msnbc.msn.com/id/16396159 /

snip>

The value of Putnam has fallen sharply in recent years as the company, once one of the biggest fund groups in the US, failed to recover from the mutual fund trading scandal of three years ago.

Putnam's funds under management are $191bn, half the level they were at the group's peak in 1999.

Although several other fund companies implicated in the scandal managed to recover, Putnam continued to lose funds, possibly because its fund performance never fully recovered.

As for Power, the acquisition of Putnam would complement and broaden its already substantial financial-services business in North America.

Power, which is controlled by Montreal's Desmarais family, already controls IGM Financial, Canada's biggest mutual-fund distributor by far, with assets of C$105bn (US$90bn) and a 16 per cent market share.

Power also controls Great-West Lifeco, a big insurance group with operations in Canada and the US.

Power has a sizeable, though little-publicised presence in Europe and China. The family patriarch, Paul Desmarais, 79, is a long-time business partner of Albert Frère, the Belgian entrepreneur.

Through two holding companies – Pargesa and Groupe Bruxelles Lambert – the Frère and Desmarais families own stakes in, among others, Suez, the French energy and industrial group, and in Lafarge, the world's biggest cement maker.

[Demeter]

79. ThankYou ! That Was VERY Informative!

[54anickel]

80. You're welcome. But, l must reiterate, you MIGHT be better off. I simply

introduced who the "new boss" will be. I don't know any more about them than what the article I posted says. You should probably research them further on your own and decide if you are comfortable with them. My ass-u-mption (which could make an ass of u and me) in that "you might be better off" comment was based on Putnam's own poor history. The "new boss" might be better, but then again they might be even worse (anything is possible) - I really know nothing about them.

Just want to clarify that my post was meant as an introduction and some background to Power, not necessarily an endorsement.

[54anickel]

43. OT - Baghdad Burning (Riverbend)

http://www.321gold.com/editorials/riverbend/current.htm...

End of Another Year...
You know your country is in trouble when:

1. The UN has to open a special branch just to keep track of the chaos and bloodshed, UNAMI.
2. Abovementioned branch cannot be run from your country.
3. The politicians who worked to put your country in this sorry state can no longer be found inside of, or anywhere near, its borders.
4. The only thing the US and Iran can agree about is the deteriorating state of your nation.
5. An 8-year war and 13-year blockade are looking like the country's 'Golden Years'.
6. Your country is purportedly 'selling' 2 million barrels of oil a day, but you are standing in line for 4 hours for black market gasoline for the generator.
7. For every 5 hours of no electricity, you get one hour of public electricity and then the government announces it's going to cut back on providing that hour.
8. Politicians who supported the war spend tv time debating whether it is 'sectarian bloodshed' or 'civil war'.
9. People consider themselves lucky if they can actually identify the corpse of the relative that's been missing for two weeks.

A day in the life of the average Iraqi has been reduced to identifying corpses, avoiding car bombs and attempting to keep track of which family members have been detained, which ones have been exiled and which ones have been abducted.

2006 has been, decidedly, the worst year yet. No- really. The magnitude of this war and occupation is only now hitting the country full force. It's like having a big piece of hard, dry earth you are determined to break apart. You drive in the first stake in the form of an infrastructure damaged with missiles and the newest in arms technology, the first cracks begin to form. Several smaller stakes come in the form of politicians like Chalabi, Al Hakim, Talbani, Pachachi, Allawi and Maliki. The cracks slowly begin to multiply and stretch across the once solid piece of earth, reaching out towards its edges like so many skeletal hands. And you apply pressure. You surround it from all sides and push and pull. Slowly, but surely, it begins coming apart- a chip here, a chunk there.

That is Iraq right now. The Americans have done a fine job of working to break it apart. This last year has nearly everyone convinced that that was the plan right from the start. There were too many blunders for them to actually have been, simply, blunders. The 'mistakes' were too catastrophic. The people the Bush administration chose to support and promote were openly and publicly terrible- from the conman and embezzler Chalabi, to the terrorist Jaffari, to the militia man Maliki. The decisions, like disbanding the Iraqi army, abolishing the original constitution, and allowing militias to take over Iraqi security were too damaging to be anything but intentional.

more...

[Ghost Dog]

61. DU thread here:

http://www.democraticunderground.com/discuss/duboard.ph...

[54anickel]

65. Thanks GD!!! Hope all is well with you. Still on dial-up?

[Ghost Dog]

69. Yeah, 'fraid so. Mostly reduced to observing here,

this place is so remote. (ed. plus plenty of more local economics/ecology/politics of course - see eg. http://canarias.indymedia.org/index.php ).

BTW, also somewhat OT, I recommend toay's Octafish BFEE thread for everyone's files:

http://www.democraticunderground.com/discuss/duboard.ph...

... By way of sussing out, grokking the overal picture, perceiving the gestalt...

[54anickel]

72. Thanks GD! Gives me some interesting reading for the long weekend. n/t

[54anickel]

44. Economics of Empires

http://www.axisoflogic.com/artman/publish/article_23645...

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms—usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods—the difference capturing the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world’s gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960’s was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ’s Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax—the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of “severing the link between the dollar and gold”, in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond— the world was taxed and it could not do anything about it.

more...

[54anickel]

45. 12:24 lunchtime check-in

Dow 12,507.85 6.33 (0.05%)
Nasdaq 2,429.23 3.66 (0.15%)
S&P 500 1,424.36 0.37 (0.03%)
10-yr Bond 4.71% 0.02
30-yr Bond 4.8270% 0.0140
NYSE Volume 625,908,000
Nasdaq Volume 571,642,000

12:00 pm : If you're checking in on the stock market for the first time today, rest assured that you haven't missed much.

In expected fashion, the major indices have held close to the unchanged mark since the start of trading, having been encumbered by a lack of news catalysts and sparse attendance by market participants.

Apple (AAPL 85.13, +4.26) has contributed one of the few items of note with an acknowledgment that it did improperly date stock options, but that it found no wrongdoing or misconduct by the current management team which, of course, includes CEO Steve Jobs. Investors have been heartened by the news, as evidenced by the stock's outperformance.

Thanks to Apple, the technology sector (+0.41%) has been a pocket of strength for the broader market.

The telecom services sector (+0.96%), however, has been the frontrunner today with the wireless services and integrated telecom groups leading the way. The former is being helped by a Wall Street Journal article that suggests Alltel (AT 61.20, +2.89) is a private equity play while the latter is being boosted by reports that AT&T (T 35.96, +0.46) is offering concessions in an effort to win the FCC's aprroval of the BellSouth (BLS 47.46, +0.66) acquisition.

Stock moves today are really a function of company-specific announcements as there isn't any definitive trading theme to excite the market. The one piece of news that has proven exciting, though, is the word from the NYSE that it will be closed Tuesday in observance of President Ford's death. The translation for stock market participants is that they will get to enjoy a four-day weekend.

2006 Performance Review: the best-performing stock in the S&P 500 this year has been Allegheny Technologies (ATI, +153.3%) while the worst-performing stock has been Whole Foods Market (WFMI, -39.2%).DJ30 +4.89 NASDAQ +4.37 SP500 -0.51 NASDAQ Dec/Adv/Vol 1508/1402/490 mln NYSE Dec/Adv/Vol 1685/1442/303 mln

11:25 am : Not much to report in terms of movement in the major averages as they continue to vacillate around the unchanged mark. With so many participants on vacation, one shouldn't be surprised if that remains the case for most of the day.

2006 Performance Review: the worst-performing S&P industry group this year has been Education Services (-35.0%). It is comprised of a single member, which is Apollo Group (APOL)DJ30 +5.21 NASDAQ +4.49 SP500 -0.48 NASDAQ Dec/Adv/Vol 1409/1447/409 mln NYSE Dec/Adv/Vol 1592/1485/258 mln

11:00 am : The market doesn't seem to be in a hurry to go anywhere as the major indices are holding fairly close to the unchanged mark. Although buyers haven't exerted a strong influence, it is noteworthy that sellers haven't stepped up their efforts either. The same condition existed yesterday and the indices traded in narrow ranges as a result.

2006 Performance Review: the best-performing S&P industry group this year has been Steel (+76.1%). Member components include Allegheny Technologies (ATI, +152.6%), Nucor (NUE, +65.1%), and United States Steel Corp. (X, +52.2%).DJ30 +9.53 NASDAQ +6.66 SP500 +0.20

10:30 am : The market continues to cling to modest gains supported by telecom and technology shares. Apple (AAPL 84.95, +4.08) is a standout in the latter area, as investors have been heartened by the company's acknowledgment that it did improperly date stock options, but that it found no wrongdoing or misconduct by its current management team (which of course includes CEO Steve Jobs).

2006 Performance Review: Much has been written this year about how oil prices have remained at stubbornly high levels and have greatly enriched OPEC's coffers. Ironically, though, the Middle East is where some of this year's worst-performing stock markets were found. Three of the lowliest include: Saudi Arabia's Tadawul All Share Index (-53.3%), the United Arab Emirates' DFM General Index (-44.4%), and Qatar's DSM 20 Index (-35.5%).DJ30 +12.50 NASDAQ +8.71 SP500 +0.78

[54anickel]

46. Ozy, maybe we should change that heading for the Osama count?

Guess we're savoring the days that lead up to that "Success".
Sort of like sucking on that last M&M out of the bag to make it last.

http://www.democraticunderground.com/discuss/duboard.ph...

WH: bin Laden Capture "A Success That Hasn't Occured Yet"

Just when you think the White House spin can't get any wackier.

[54anickel]

47. UPDATE 2-Gold inches higher, seen closing the year up 23 pct

http://investing.reuters.co.uk/news/articleinvesting.as...

LONDON, Dec 29 (Reuters) - Gold edged higher on the last working day of the year to trade just below a three-week high, and was likely to extend gains in 2007, dealers said on Friday.

Lingering worries over Iran's nuclear ambitions and a weakness in the dollar against the euro kept market sentiment positive, they said.


"Having broken through key chart levels at $630 (an ounce), further gains could be in store for gold should it be able to hold above $630 and position for a break higher in the New Year," Standard Bank said in a daily report.

Gold <XAU=> was at $634.60/635.50 by 1043 GMT, against $634.10/635.10 in New York late on Thursday. On Thursday, it rose as high as $635.20 -- the highest since Dec. 8.

Gold is expected to close the year nearly 23 percent above its last price in 2005, but prices are about 13 percent lower than the 26-year high of $730 an ounce set in May.

[54anickel]

55. Precious metals top performers in 2006

http://today.reuters.com/news/articlebusiness.aspx?type...

LONDON (Reuters) - Precious metals provided among the heftiest returns of any asset class in 2006, and prices were expected to stay strong in the new year as investors continue pumping money into the sector through futures and new commodity-backed securities, analysts said.

snip>

Even as weaker energy prices depressed commodity indexes, gold outperformed the fat 16.8 percent return of the Dow Jones industrial stock average, which extended a string of records to an all time high of 12,529 on Thursday.

Total returns for U.S. government bond indexes, year to date, were about 4 percent, while money market funds were paying about 5 percent.

That looked good compared with the 7.7 percent decline in the Reuters/Jefferies CRB futures index, which includes 19 commodities, and a 1.3 percent fall in U.S. crude oil <CLc1>, but not compared with precious metals overall.

Gold, of all commodities, is considered a financial asset, because of its historic monetary role as an alternative to investing in the dollar. Gold was burnished by a 7.9 percent decline in the trade-weighed dollar <=USD> this year.

But its performance paled next to sister metals like silver <XAG=>, which was closing 2006 almost 46 percent higher, at around $12.78/85, after prices spiked to a quarter-century peak of $15.17 an ounce in May.

more...

[54anickel]

56. Gold Has Biggest Annual Gain Since 2002 on Dollar's Decline

http://www.bloomberg.com/apps/news?pid=20601012&sid=aBM...

Dec. 29 (Bloomberg) -- Gold had its biggest annual gain since 2002 as declines in the dollar spurred demand for the metal as an alternative investment.

The metal surged 23 percent this year and climbed to a 26- year high of $732 an ounce on May 12 on investment demand. The dollar fell 8.1 percent against a basket of six currencies such as the euro and yen in 2006, the fourth decline in five years.

``Conditions are in place for gold to move higher as we head into the new year,'' said Philip Newman, a senior metals analyst at London-based metals research company GFMS Ltd. ``We are still expecting the U.S. dollar to weaken considerably and that is one factor that would push gold higher.''

snip>

Selling by mining companies may have limited any gains today. Producers can take advantage of the rally by selling metal before it's mined to hedge against a possible drop in prices.

`Producer Selling'

``We're seeing some year-end producer selling,'' said Simon Weeks, head of precious-metals trading at ScotiaMocatta in London. ``After the first week in the new year, prices will probably start to go lower.''

snip>

``We've gone up from the mid $620s to the $630s on very little volume,'' Weeks said. ``As such, unless we hit the ground running in January, which I don't think will happen, we'll be heading back down to $600.''

Reduced central bank selling will help propel the average gold price to $710 next year from $608.62 this year, said Paul Yusem, an investor in Lombard, Illinois, who has traded gold futures for six years.

more...

[54anickel]

57. Eurosystem Central Bank buys Gold (Bizarre if true - reaching for the tinfoil)

http://www.kitco.com/ind/AuthenticMoney/dec292006.html

The week ended the 22nd December saw one of the signatories of the Central Bank Gold Agreement sell and another BUY gold leaving a net sale of 2.7 tonnes of gold.

Yes, the holidays began at the end of last week even for the Central Banks, so what better time to throw the cat amongt the pigeons. In the seemingly innocuous statement above it seems that we are seeing a change in policy by European Central Banks that we have been expecting should happen, but in these bureaucratic halls felt that the issue was too stacked against it happening without a public drama. If this is the case it has been announced without a whisper, simply as part of their weekly report. The information is huge and in a nutshell is: -

One Signatory to the Central Bank Gold Agreement has bought gold!

We must be cautious here, still, because We don’t know how much was bought or why it was bought, so we cannot say for certain that there has been a major policy shift by one of the signatories. However, so as not to minimize this event, it definitely shows that at least one of the signatories has approved and acted on an approval to purchase gold. Consequently there does appear to have been by one of the signatories of the Central Bank Gold Agreement, a major change of policy on gold in their reserves.

more...

[54anickel]

48. Kim Jong Il may circumvent international sanctions by gold sales in London market

http://www.dailyindia.com/show/97925.php/Kim-Jong-Il-ma...

London, Dec 29 (ANI): North Korean dictator Kim Jong Il is planning to use the London gold market to avoid financial sanctions imposed by the international community.

Kim's cash-strapped Communist regime has relisted its central bank with the London Bullion Market Association this year, and is preparing to sell gold through London.

While gold traders have said they have not seen any sign of the North Koreans disposing of gold in London since the Chosun Central Bank regained its status as a "good delivery supplier" this year, some experts believe North Korea will sell its gold through London once it gets a regular supply from its mines.

According to The Times, the development of the mines is to be assisted by foreign investment and one of the funds seeking to buy into the North Korean gold market is the London-based Chosun Development and Investment Fund.

more...

[citizen snips]

49. Online holiday spending surges

NEW YORK (CNNMoney.com) -- Online retail spending surged this holiday season and for the first time ever will top the $100 billion mark for the entire year, according to a report Friday.

Consumers spent 26 percent more online during the 56 days before Dec. 26 in 2006 compared to 2005, according to comScore Networks, a digital research firm. The number excludes spending on travel.

In the week before Christmas, shoppers spent 38 percent more than they did in 2005.

"Consumers making purchases in those final days expressed both their faith in retailers' ability to pick and pack their orders in a timely fashion and shippers' ability to drop them on recipients' doorsteps in time for Christmas," Gian Fulgoni, chairman of comScore Networks, said in a statement.

more...
http://money.cnn.com/2006/12/29/news/economy/online_ret...

[citizen snips]

51. Chrysler lands deal with Chinese carmaker

DETROIT (Reuters) -- DaimlerChrysler AG's Chrysler Group has signed a letter of intent with China's Chery Automobile Co. to produce a new small car that will carry one of Chrysler's brands, a spokesman said on Friday.

Chrysler Chief Executive Tom LaSorda signed the preliminary deal with Chery representatives several weeks ago, Chrysler spokesman Kevin Vines said.

The deal must still be approved by the DaimlerChrysler (up $0.20 to $61.99, Charts) supervisory board, which meets next in January, and the Chinese government, Vines said.

U.S. automakers such as GM (up $0.39 to $31.01, Charts) and Ford (up $0.04 to $7.54, Charts), after years of competition with Japanese giants Honda (up $0.01 to $39.68, Charts) and Toyota (up $0.37 to $35.87, Charts), now face the prospects of confronting China's growing manufacturing and export ability.

more...
http://money.cnn.com/2006/12/29/news/international/chry...

[citizen snips]

54. Stocks Mixed in Final 2006 Trading Day

NEW YORK (AP) -- Wall Street was mixed Friday in the last trading day of a year most will remember for the stock market's great comeback -- pulling off a year-end rally that pushed the Dow Jones industrials past 12,000 for the first time.

By all accounts, 2006 was a very good year for stocks as bullish investors bounced back from a slumping housing market and the Federal Reserve's two-year campaign of interest rate hikes. The markets approached record levels in the spring, pulled back sharply in the summer, but found a clear direction in the fall to send the major indexes to multi-year highs.

Blue chips were the standouts of 2006. The Dow Jones industrial average, an index of 30 of the nation's biggest companies, hit record levels dozens of times since closing at 12,011.73 on Oct. 19 and has since surged to an intraday high of 12,529.87.

This is the best year for the stock market's most prominent benchmark since 2003, when the market staged a massive recovery from levels sideswiped by a bear market. But, 2006 will really be remembered for the market's soaring to heights not seen since frenzied trading during the height of the dot-com era.

more...
http://biz.yahoo.com/ap/061229/wall_street.html?.v=27

[54anickel]

58. 1:46 -like watching the paint fade - 06 reviews are interesting though

Dow 12,506.65 5.13 (0.04%)
Nasdaq 2,426.38 0.81 (0.03%)
S&P 500 1,423.72 1.01 (0.07%)
10-yr Bond 4.71% 0.02
30-yr Bond 4.8180% 0.0050
NYSE Volume 849,205,000
Nasdaq Volume 755,432,000

1:25 pm : We pointed out earlier that today had the potential to be one of the dullest trading days of the year. So far, the market has lived up to that advanced billing as it hasn't ventured too far from the unchanged mark all session. The current standing of the indices pretty much summarizes the level of excitment in today's trade.

2006 Performance Review: the worst-performing Dow component this year has been Intel (INTC; -18.0%).DJ30 -2.16 NASDAQ +1.19 SP500 -1.39 NASDAQ Dec/Adv/Vol 1656/1353/680 mln NYSE Dec/Adv/Vol 1733/1478/422 mln

1:00 pm : The market has suffered a minor dip since the last update, with the emphasis on the word "minor." The tires & rubber industry group has ascended to the top of the list of best performers in the S&P today. It should be noted, however, that Goodyear (GT 20.89, +0.88) is the sole member of that industry group. Nonetheless, Goodyear is getting a boost following news the United Steel Workers ratified a contract with the tire maker that brings to an end a 12-week strike over the quality of health care for active and retired members of the union.

2006 Performance Review: The best-performing Dow component this year has been General Motors (GM; +59.5%). DJ30 -5.69 NASDAQ +0.17 SP500 -1.94 NASDAQ Dec/Adv/Vol 1657/1316/625 mln NYSE Dec/Adv/Vol 1770/1429/389 mln

12:30 pm : The indices remain stuck in narrow trading ranges and continue to be little changed for the session. Four out of ten economic sectors are trading higher. The biggest laggard of the bunch is Energy (-0.50%) whic is down on broad-based profit taking across associated industry groups such as oil services, oil drilling, and oil and gas exploration.

2006 Performance Review: With a gain of 200.1%, nickel futures have been the best-performing area of the commodity pack this year. Natural gas futures, meanwhile, have been the worst with a decline of 79.3%.DJ30 +5.37 NASDAQ +3.71 SP500 -0.51 NASDAQ Dec/Adv/Vol 1521/1433/559 mln NYSE Dec/Adv/Vol 1657/1508/345 mln

[citizen snips]

59. N.C. offers up to $4.7M to lure Google

RALEIGH, N.C., Dec. 29, 2006 (AFX International Focus) -- North Carolina officials are willing to give as much as $4.7 million to Google Inc. (NASDAQ:GOOG) if it will create a new operation in economically troubled Caldwell County.

The state economic incentive grant, which was approved Thursday, comes after other North Carolina authorities extended financial inducement to the company behind the world's biggest search engine.

'The state has made a good offer, and we hope Google will accept it and decide to locate their facility in North Carolina,' said Gov. Mike Easley. 'This company would provide the kind of good-paying, knowledge-based jobs that North Carolina citizens want. In addition, this kind of investment in Caldwell County would help reinvigorate an area hard hit in the past by the loss of textile jobs.'
Google's media relations office in Mountain View, Calif., did not immediately respond Friday to a telephone message and an e-mail seeking comment.

A company spokesman told The News & Observer via e-mail that the company is evaluating a number of sites, including the one in Lenoir, for an expansion that could bring $600 million in new investment and 210 jobs to a region socked by job and industry losses.

more...
http://money.cnn.com/news/newsfeeds/articles/newstex/AF...

[citizen snips]

60. U.S. loan issuance soars to $1.67 trln in 2006

NEW YORK, Dec 29 (Reuters) - U.S. loan issuance soared to a record $1.67 trillion in 2006 as mergers and leveraged buyouts spurred new sales of loans and high-yield bonds, according to Reuters Loan Pricing Corp.

Loans for non-investment grade companies totalled $612 billion in 2006, exceeding the record $500 billion last year and more than doubling totals seen in 2000.

Companies also sold $137.1 billion of high-yield bonds this year, compared to $100 billion in 2005. J.P. Morgan (JPM.N: Quote, Profile , Research) led U.S. high-yield bond underwriting, followed by Citigroup (C.N: Quote, Profile , Research), and Credit Suisse (CSGN.VX: Quote, Profile , Research), Reuters data showed. J.P. Morgan also was the lead underwriter for loans.

"The boom in M&A and specifically LBO activity has been well supported by the leveraged finance markets," said Meredith Coffey, director of analysis at Reuters LPC. "Both the U.S. high-yield bond market and leveraged loan markets have had a banner year."

more...
http://today.reuters.com/news/articlehybrid.aspx?type=c...

[54anickel]

70. 3:09 heading for the final hour - 12,500! 12,500!!!

Dow 12,502.88 1.36 (0.01%)
Nasdaq 2,420.62 4.95 (0.20%)
S&P 500 1,422.65 2.08 (0.15%)
10-yr Bond 4.71% 0.02
30-yr Bond 4.8180% 0.0050
NYSE Volume 1,107,988,000
Nasdaq Volume 967,571,000

3:00 pm : The major indices are sporting small losses at the moment that put them near their worst levels of the day. That's one way of saying the trading range has been quite tight today since the gap between intra-day highs and lows for each of the indices isn't that wide at all.

2006 Performance Review: With small-cap stocks being highlighted earlier, let's turn our attention to the mid-cap stocks, which also had another very good year. As far as the top-performing stock in the S&P 400 Midcap Index is concerned, it is still too close to call as the final hour will determine whether that honor goes to Polycom (PLCM; +104.9%) or American Eagle Outfitters (AEOS; +104.7%).DJ30 -8.89 NASDAQ -6.17 SP500 -2.88 NASDAQ Dec/Adv/Vol 1913/1143/905 mln NYSE Dec/Adv/Vol 1998/1296/586 mln

2:30 pm : In watching the market today, we're reminded of the scene in National Lampoon's European Vacation where Clark gets stuck for hours in a traffic circle in London, pointing out in crazed fashion to his family with each revolution, "Look, Big Ben, Parliament!" Well, the market has been in a traffic circle so to speak, spending a lot of time going nowhere today.

2006 Performance Review: With the good comes the bad... the worst-performing component in the S&P 600 Smallcap Index this year has been Wellman, Inc. (WLM; -54.0%). DJ30 -3.85 NASDAQ -3.71 SP500 -2.18 NASDAQ Dec/Adv/Vol 1755/1293/816 mln NYSE Dec/Adv/Vol 1812/1448/528 mln

2:00 pm : More of the same for the market, which remains little changed for the day. One can credit a lack of notable news catalysts and sparse attendance by market participants for the dull trading action.

2006 Performance Review: Small-cap stocks had another very good year. Savient Pharmaceuticals (SVNT;+206.4%), however, took the cake as the best-performing stock in the S&P 600 Smallcap Index.DJ30 +5.77 NASDAQ +0.84 SP500 -1.06 NASDAQ Dec/Adv/Vol 1752/1273/754 mln NYSE Dec/Adv/Vol 1826/1399/474 mln

[54anickel]

71. 3:32 and the dreams of 12,500 are shattered

Dow 12,470.84 30.68 (0.25%)
Nasdaq 2,415.19 10.38 (0.43%)
S&P 500 1,418.76 5.97 (0.42%)
10-Yr Bond 4.71% 0.02
NYSE Volume 1,234,798,000
Nasdaq Volume 1,058,976,000

3:25 pm : We're moving into the final stretch of the trading day and the year. The former hasn't been so hot, but the latter has been with the S&P 500 sporting a 13.8% gain for the year. Even more remarkable is that the blue chip average is up 16% from its July low. Separately, the indices just hit an air pocket that has taken them to new lows for the day. Some selling interest ahead of a four-day weekend that will most likely include Saddam Hussein's hanging is to be expected.

2006 Performance Review: The worst-performing component in the S&P 400 Midcap Index has been Westwood One (WON; -56.5%).DJ30 -15.78 NASDAQ -7.35 SP500 -4.21 NASDAQ Dec/Adv/Vol 1921/1150/982 mln NYSE Dec/Adv/Vol 2003/1298/653 mln

[54anickel]

73. Treasuries Fall, Extending First December Loss in Five Years

http://www.bloomberg.com/apps/news?pid=20601009&sid=apC...

Dec. 29 (Bloomberg) -- U.S. Treasuries fell, extending their first December loss in five years, amid evidence the economy is rebounding from two quarters of slowing growth.

The benchmark 10-year note's yield, which moves inversely to its price, touched a seven-week high of 4.72 percent on below-average volume on the last business day of the year. Stronger-than-forecast reports on home sales, consumer confidence and manufacturing this week led investors to pare bets on interest-rate cuts by the Federal Reserve next year.

``The numbers have continued to point to an economy that fits more with the Fed's call'' for moderate growth over the coming quarters ``than the market's pessimistic outlook,'' said Thomas Roth, head of U.S. government bond trading at Dresdner Kleinwort in New York, one of the 22 primary U.S. government securities dealers that trade with the central bank.

snip>

U.S. bond markets shut at 2 p.m. New York time today. U.S. financial markets are closed Jan. 1, and the bond market's trade group advises a 2 p.m. close on Jan. 2 to honor former President Gerald Ford, who died this week. U.S. stock markets will close Jan. 2.

With banks open Jan. 2, ``you need the financial markets to manage risk,'' Micah Green, co-chief executive officer of SIFMA, said in an e-mail. The full-day market close for former President Ronald Reagan's funeral in 2004 ``caused significant funding and operation issues.''

snip>

``What we saw in the last four weeks is a microcosm of what we'll see next year,'' said Ajay Rajadhyaksha, a fixed income strategist at primary dealer Barclays Capital Inc. in New York. ``It's not likely to be a good year for bonds.''

more...

[54anickel]

76. Closing time - put another quarter in and try again

Dow 12,463.15 38.37 (0.31%)
Nasdaq 2,415.29 10.28 (0.42%)
S&P 500 1,418.30 6.43 (0.45%)
10-yr Bond 4.71% 0.02
30-yr Bond 4.8180% 0.0050
NYSE Volume 1,604,128,000
Nasdaq Volume 1,414,092,000

4:10 pm : 2006 was a very good year for the stock market. Today, however, was a different story as the market lacked any real spirit due to a virtual dearth of actionable news and sparse attendance by market participants.

In expected fashion, the indices spent most of the day confined to tight trading ranges that left them hovering around the unchanged mark. There was some late-day profit taking, though, that left them near their worst levels of the session.

The biggest news of the day was the word from the NYSE that it will be closed on Tuesday in observance of President Ford's death. The Nasdaq, the commodity markets, and the Federal Reserve will also be closed. The bond market is going to be open on Tuesday as the U.S. Treasury proceeds with 3-month and 6-month bill auctions, but it will have an early close.

This development means that most market participants will get the benefit of a four-day weekend.

That was about the only real note of excitement on a day that was driven mostly by company-specific announcements. To that end, Apple (AAPL 84.84, +3.97) was a standout after acknowledging that it improperly dated stock options, but that it found no wrongdoing or misconduct by the current management team.

Separately, AT&T (T 35.75, +0.25) reportedly made concessions in a bid to gain the FCC's endorsement of its acquisition of BellSouth (BLS 47.11, +0.31). That news propped up the telecom sector (+0.32%), which was the day's best-performer and the only sector to record a gain.

Losses in the remaining sectors were modest in scope, as Energy (-0.94%) earned the label of being the biggest laggard in today's session. However, the Energy sector closed the year as the second best-performing sector with a gain of 22.6%. It was beaten out by Telecom Services, which surged 32.5%.

2006 Performance Review: Dow Jones Industrial Average (+16.29%), Nasdaq Composite (+9.52%), S&P 500 (+13.62%); Russell 2000 (+17.00%), S&P 400 Midcap index (+8.98%).DJ30 -38.37 NASDAQ -10.28 SP500 -6.43 NASDAQ Dec/Adv/Vol 1835/1256/1.19 bln NYSE Dec/Adv/Vol 2037/1278/964.8 mln


Have a great weekend

Happy New Year!

[54anickel]

78. Late entry - Real Estate and the Post-Crash Economy

Just got Mauldin's newsletter and thought is was worth sharing.

http://www.2000wave.com/article.asp?id=mwo122906

Real Estate and the Post-Crash Economy
By Barry Ritholtz

The Housing boom and bust have been page-one news for what seems like years now. Is there anyone left in the country who doesn't know about the huge run up in home prices during 2002-06, and the subsequent "correction?"

My guess is no one. What most people may not be aware of, however, is just how unusual residential real estate has been in the current cycle. The housing boom has played an enormous role, with few truly appreciating the outsized contributions the "Real Estate industrial complex" has played in the recovery and expansion. It can politely be described as "atypical."

Since the recession ended in 2001, Real Estate has been crucial in enabling enormous consumer spending, and helping to create many new jobs. These two factors have been the primary drivers of the post-crash economy. With this economic expansion now entering its 4th year, the cooling real estate market is increasingly presenting new risks. With the peak of the boom long since past, the current inventory build up, sales slow down, and price decreases are starting to take their toll on economic activity. Given how extraordinary the boom was, we may not be in for a run-of-the-mill downturn.

Few investors seem to have fully considered the impact the boom and subsequent bust will have - for the real estate market, to equities, and to the overall economy. Today's commentary aims to correct that. We want to put Housing's surge into the broader context of this business cycle, and examine what the slowdown will mean to various economically sensitive sectors. To do that, we will look at:

- How this expansionary cycle got started;
- Why this post-recession cycle has been so unusual;
- How this housing market has been "backwards"
- Where these factors are impacting consumption, the economy, and equities.

The Background

more...