STOCK MARKET WATCH, Wednesday May 7

[ozymandius]

Source: du

STOCK MARKET WATCH, Wednesday May 7, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 259
DAYS SINCE DEMOCRACY DIED (12/12/00) 2663 DAYS
WHERE'S OSAMA BIN-LADEN? 2388 DAYS
DAYS SINCE ENRON COLLAPSE = 2679
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
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 May 6, 2008

Dow... 13,020.83 +51.29 (+0.40%)
Nasdaq... 2,483.31 +19.19 (+0.78%)
S&P 500... 1,418.26 +10.77 (+0.77%)
Gold future... 877.70 +3.60 (+0.41%)
30-Year Bond 4.64% +0.06 (+1.33%)
10-Yr Bond... 3.89% +0.05 (+1.25%)






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 [email protected]

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

[ozymandius]

1. Market WrapUp: Mad Cow & Economics Mumbo-Jumbo Media Babble

BY FRANK BARBERA, CMT

Last Friday’s economic headlines were suitably upbeat on the surface, validating the stock market rally of the last few weeks. Implied in the headlines was the message that everyone can relax about the recession, the recession is not so bad; in general, “chill out” folks. Of course, the penetrating analysis that goes into what passes for news media reporting took the BLS bait hook, line and sinker, barraging the masses with a blitz of calming headlines. At Investors Business Daily, the headline read, “Job Losses Less Than Expected,” “April US Job Loss Softer Than Feared; Unemployment Falls.” At CNN Money, the headline read, “Wall Street extends advance after April employment report adds to hopes that the economy is stabilizing” and never to be out done, at perennially bullish CNBC the lead headline was:

“Jobs Report Fuels Hopes Economy Has Hit Bottom” followed by:

“Fewer U.S. jobs were lost in April than economists feared and the unemployment rate unexpectedly improved, raising hopes an economic downturn was not gathering steam as the second quarter opened. The Labor Department said on Friday that 20,000 jobs were shed last month, far fewer than the 80,000 that economists had anticipated. The national unemployment rate fell to 5 percent from 5.1 percent in March. "The economy is just barely treading water," said Richard Yamarone, chief economist for Argus Research in New York, after the jobs figures were issued. "It's not imploding but it's not desirable either."

......

All of this sounds very mild, nothing to be concerned about, but unfortunately, all of this is just a statistical mirage. In the official release from AP, the total job losses of 240K were obtained by adding up the prior reported figures for March –81K, Feb –83K, and Jan –76K. However, what the media are not reporting, and what is not getting sufficient attention is the BLS Birth-Death Model. Yes, we have written about this in the past, and perhaps it is asking too much of reporters to actually look for the ‘numbers behind the numbers,’ but the end run effect is disingenuous at best, and an outright lie at worst. In the case of the BLS Birth-Death Model, this is a complex ARIMA Model that seeks to extrapolate prior cycle job gains and losses for the current cycle on the premise that prior history can be used to impute/refine today’s data. Unfortunately, this is not the case as the American economy has undergone traumatic fundamental changes in the last two decades, with the rise of Corporate Capitalism and the exportation of the US Manufacturing base. Call it the 'Return to the Guilded Age,' or more euphemistically, a ‘Transnational Restructuring of the American Economy,’ or simply, ‘The Rise of Globalism;’ any way you slice the baloney, today’s US economy does not resemble anything seen in the 40’s, 50’s, 60’s, 70’s or 80’s. (Well, OK. I’d have to concede that we do have a revival of the late 1970’s stagflation, except, before we are done, this is likely to prove an even stronger brand, but that’s a story for another day).

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

[AnneD]

30. Morning Marketeers....

:donut: and lurkers. I reported during the summer of last year that I noticed lunch and dinner crowds were getting noticeably sparse with the gas price increases. I noticed it in the Southwest portion of the city first. Well last night I was in the more well to do area (very solid upper upper middle class). Dinner 'Rush' consisted of six customers and 2 takeout orders. THAT'S IT. My fav order-house special crispy pan fried noodles jumped $2 in the last 4 months. It was altered with cheaper veggies less meat and a smaller portion. I am thankful we moved closer to work a year ago. I used a little under a tank a week when we lived in the SW. It cost me $20 per week to fill up a year ago. I use a half tank a week now and it takes me about $20-25 to fill up (that would be $50 every week if we had my old address...$80+ vs $200+). I don't think most folks COLA covered that increase. And about our tab at the cafe.....What was once under $25 with drinks was now $32 without drinks.

I do a budget (it's been a bit crazy lately with graduation)and I am going to have to sit down this weekend and readjust the allotment to my categories. I have fallen short in more categories lately (which tells me what the real inflation rate is)and I have not been saving enough to do another credit card payoff as soon as I would like. Of course child support payments will end soon and I will have more money but I want to save for retirement and a house. I am doing well because I am careful but frankly-the economy is sucking bilge water. Can't wait to see what the summer brings.

Thank God I am in better shape than the last time this happened in Houston. My tomatoes, peppers, and onions are looking good. And my spices are fantastic now.

Happy hunting and watch out for the bears.

[ozymandius]

2. Today's Reports

08:30 Productivity-Prel Q1
Briefing.com 1.6%
Consensus 1.5%
Prior 1.9%

10:00 Pending Home Sales Mar
Briefing.com NA
Consensus -1.0%
Prior -1.9%

10:30 Crude Inventories 05/03
Briefing.com NA
Consensus NA
Prior 3848K

15:00 Consumer Credit Mar
Briefing.com $6.0B
Consensus $6.0B
Prior $5.2B

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

[UpInArms]

16. Productivity-Prel Q1 - frightened workers work harder and faster for less pay

01. U.S. Q1 hours worked down y-o-yr for second straight quarter
8:30 AM ET, May 07, 2008

02. U.S. Q1 unit labor costs smallest y-o-yr rise since 2004
8:30 AM ET, May 07, 2008

03. U.S. Q1 unit labor costs up 0.2% y-o-yr vs 0.9% Q4
8:30 AM ET, May 07, 2008

04. U.S. Q1 productivity up 3.2% y-o-yr vs 2.9% Q4
8:30 AM ET, May 07, 2008

05. U.S. Q1 unit labor cost up 2.2% vs 2.6% expected
8:30 AM ET, May 07, 2008

06. U.S. Q1 productivity up 2.2% vs.1.8% expected
8:30 AM ET, May 07, 2008

[UpInArms]

27. U.S. March pending home sales index fell 1%: NAR - Index is down 20.1% from March 2007

01. U.S. March pending home sales index fell 1%: NAR
10:00 AM ET, May 07, 2008

http://www.marketwatch.com/news/story/pending-home-sales-index-fell/story.aspx?guid=%7B9B1F04BE%2DACB1%2D4BE0%2DB5DB%2DB778905A7962%7D&dist=hplatest

WASHINGTON (MarketWatch) -- An index of sales contracts on previously owned U.S. homes fell 1.0% in March from the prior month, the National Association of Realtors reported Wednesday. The index, which is considered a leading indicator of existing home sales, was down 20.1% from the March 2007 level. By region, March's pending home sales index rose only in the Northeast, with a 12.5% gain. The index declined 10.4% in the Midwest, 1.4% in the West and 0.1% in the South. February's level was revised to a decline of 2.8% from a prior estimate of a 1.9% drop.

[UpInArms]

28. February's level was revised to a decline of 2.8% from a prior estimate of a 1.9% drop.

:wow:

[Hugin]

29. Likewise.

:wow:

[DemocratInSoCal]

66. Yeah, But That's February, Old News

Don't worry, by the time they report how bad March really was, it will by then be old news also.

The secret is in reporting it when nobody is paying attention anymore.

Remember, the future is what matters, and things will be turning around in the 2nd half of 2008. That's what they say, so it must be true.

[UpInArms]

50. Charge! U.S. March consumer credit up $15.2 bln, or at 7.2% rate

02. U.S. March consumer credit growth fastest since Nov.
3:02 PM ET, May 07, 2008

03. U.S. March consumer credit up $15.2 bln, or at 7.2% rate
3:02 PM ET, May 07, 2008

[UpInArms]

52. details:

http://www.marketwatch.com/news/story/us-march-consumer-credit-up/story.aspx?guid=%7BBEC0F629%2DE23A%2D40D3%2DA2B3%2DAA1851F63F14%7D&dist=morenews

WASHINTON (MarketWatch) - U.S. consumers took on more debt of all types in March, the Federal Reserve reported Wednesday. Total seasonally adjusted consumer debt increased by $15.2 billion, or a 7.2% annual rate, in March to $2.56 trillion. This is the fastest pace of credit expansion since November. Credit-card debt rose by $6.3 billion or 7.9% in March to $957.2 billion, faster than the 5.0% gain in February. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $9.0 billion, or 6.9% to $1.60 trillion, slightly faster than the 2.0% rise in February.

[AnneD]

56. Some folks are so desperate.....

I don't take ANY comfort in these numbers.

[Tansy_Gold]

73. You're so correct, Anne

You have to wonder how much of this increase is attributable to people putting groceries and utility bills on the credit card.

I think it would be interesting to look at retail sales by different sectors -- groceries vs. high end restaurants, for example -- to see what the growth vs. decline is, and then look at the percentages that are cash/debit/check sales vs credit sales.

There are probably a lot of devils hiding in the details.



Tansy Gold

[ozymandius]

3. Oil prices steady above $122 a barrel after record

SINGAPORE - Oil prices steadied in Asian trading Wednesday after hitting a record near $123 a barrel in the previous session on worries over supply disruptions.

Prices were supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack. The main militant group in Nigeria's oil-rich southern region said Tuesday it is willing to cease hostilities if the federal government allows conflict mediation by a former U.S. president.

.....

Light, sweet crude for June delivery rose 21 cents to $122.05 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract on Tuesday soared to a record $122.73 a barrel before retreating to settle at $121.84, up $1.87.

.....

The rise in crude futures also gained momentum Tuesday as investors bought on a Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years.

Expectations that U.S. crude supplies increased last week were helping to limit oil's rise ahead of the release of the U.S. Energy Information Administration's report on fuel inventories later Wednesday.

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

[ozymandius]

4. Poll: When do you think oil prices will reach $150/bbl?

I stand by the date August 20th. Any takers?

[AnneD]

17. I'm game.....

But I won't due a date-I'll say it will go over that with the first tropical depression that starts forming in the Gulf waters. I'll do the pool report this Friday so those that need to change the date-get your thinking caps on.

[Hugin]

26. I'll go much sooner...

I'm thinking it'll really kick in at the beginning of the "travel season".

Not now when people are making plans... But, later, when it's too late to tell the kids they
won't be going to Disney this year. (Yeah, I think Big Oil isn't opposed to using your own kids
against you... Hell, they've used every other angle in the book. Bastids. *spits* )

So, I'll take the last couple of weeks of May and the first couple of June.


What I think of the Gas Tax Holiday Issue? While I think Sen. Obama is correct in wanting something bigger
and a true change. If Sen. Hillary could give consumers a little break now and keep her promise of wringing
the difference out of Big Oil, it's probably worth a shot. However, what I suspect would happen is that they
would raise their prices accordingly and pass even her "Have the Oil Cartels pay the difference." on to
once-again, Us! Gotta have some teeth to make Hillary's plan work. What do I think of McSame's plan? :rofl:

[happyslug]

42. Memorial Day weekend is the traditional date for the highest price for the year.

The reason for Memorial day was refineries converting from making more Gasoline then heating oil starting in March, which required a shut down in the refineries (and to do maintenance on the equipment). There is greater demand for Gasoline in the Summer then in Winter do to the people going on vacation. In the fall the switch is to home heating oil, but it is later in the year do to people waiting to the last minute to buy home heating oil (and buying home hearing oil as late as April, do to cold days in April and to heart hot water in the Summer). Thus you have a much shorter time period in the Spring to make the switch then in the fall. For this reason Gasoline prices goes up in the Spring (as it has been) peaks on or around Memorial Day and then enter a slow decline all summer.

Now the above has NOT been the case the last couple of years, no decline in the Summer, some in the fall, but NEVER back to the price it was in the Spring. Such an additional pressure on prices this time of year. I see $4 a gallon by Memorial Day in most of the US (In my area it just hit $3.65 a gallon, I know the West Coast is already over $4 a Gallon). This assumes NO major disruptions.

Possible Disruptions (And a sharp increase do to such disruptions):
1. Major Hurricane in the area of Louisiana. This would cause a shut down of the off-shore oil platforms, which is where new oil wells have been drilled since the 1990s. Any Hurricane that MIGHT come near is grounds to close down the rigs, and with it the supply of oil into the Refineries along the coasts of Louisiana and Texas. A Hurricane in Texas would have some affect on price, but minor unless it threatens the oil rigs off the coast of Louisiana.
2. Some sort of air attack on Iran, which leads to Iranian military response (i.e. closing the Straits of Hormuz). This is unlikely, given the latest in the year (Major Dust storms hit Iraq and Iraq starting in May and lasting till after September) but if such an attack occurs, expect a spike.
3. Revolution in a Major Persia Gulf OPEC nation, Possible, but not probable.
4. Major Fighting in Nigeria, probable, but even ex-president Carter is working to prevent this.
5. Major Coup attempt in Venezuela. Unlikely, but given US hostileity to Chavez not impossible.
6. Chavez shifts oil to China, Unlikely given that the refineries that can handle Venezuela oil are all in Texas, not China, but Chavez can export the oil to Texas for refining and then export the refined oil to China.
7. Europe gives up on trying to keep the Euro down compared to the Dollar. For the last year Europe has been buying Dollars to keep the Euro from increasing in value in terms of Dollars. This is done to secure exports to the US. If Europe finally decides it has enough Dollars (or worse to many dollars and start to sell them) the price of oil, in terms of Dollars will shoot upward (In terms of Euros, the price of oil will be stable). Given that both Russia and Iran has said they want Euros and Yens, NOT dollars for their oil, a much higher possibility then in past years. The issue is when will Europe get fed up with having to buy Dollars to keep up Exports, thus subsidizing Bush's Administration's agenda? Right now the need to export exceeds the cost in terms of inflation, but if the cost of Inflation exceeds the cost of maintaining exports, the dollar will drop like a rock in terms of the Euros AND oil.

Notice the disruptions vary as to cause and nature, but all makes my prediction untenable. I just do NOT see any of them occurring before May 31st, but if one should hit I see most of them following: i.e. if the US attacks Iran, I see Chavez abandoning selling oil to the US, the US trying to overthrow him (and his shipment of oil to China). This will lead to unrest in the Persian Gulf and major inflation in Europe (which Europe will handle by abandoning the peg to the Dollar of the Euro).

The Hurricanes may do the same, forcing Chavez to sell his oil to China when the US needs it the most. Europe abandoning the Dollar do to high inflation of oil, do the the subsequent US demand for oil to replace its lost oil from the Gulf Coast, which leads to massive inflation in the US, and the inability of the US Military to buy oil for our ships and troops in the Persian Gulf. Leading to unrest in the Persia Gulf Nations and US attacks on Iran to show that the US wants to keep who is on power in power in those Persian Gulf nations.

Yes, all of the above are interrelated, I use the above as worse case scenarios, the scenarios mentions above have a good chance of NOT occurring, but even if the above do NOT occur to the full extent I mentioned, the price of oil will still spike.

[Hugin]

43. Very thorough description, happyslug.

Thanks for sharing your thoughts! :)

[AnneD]

58. I don't know if you all are aware but ...

the PM of Iran has been making deals with India and Pakistan to supply natural gas to these areas. Been in all the Asian newspapers. It is a BIG deal. I will dig up some info on that. Iran can be sanctioned by Europe but India and Pakistan will continue to do business with Iran no matter what the world thinks.

[happyslug]

63. I was looking at US prices, not Iran, India or Pakistan

The issue was the price of Gasoline in the US, not the price of Natural Gas in Asia. It was bad enough that I mentioned other users of oil, let alone bring natural gas into the picture. Natural gas is a factor, but if we add every little factor, the decline in Russian and Mexico oil Production is a larger factor in the price of gasoline in the US then the sale of Natural Gas in Asia. My point was the price of Gasoline in the US, not elsewhere unless it would affect US prices.

[AnneD]

70. I was not replying to your remarks in particular...

I am very familiar with refinery switch over and the pricing structure. In fact Houston is hosting the OTC right now (the biggest oil trade show in the world). When you've worked in the biz, your city's economy is wrapped up in it, and your friends are into it-you tend to learn these things.

My post was placed in among the oil news so as to let folks see oil news in one section of the SWT as opposed to it being scattered about-like sections of a newspaper. The Asian papers I read have made a big deal of these things. Off the top of my head I can't remember, but one of our big oil companies is building a huge spanking new refinery in India. We will have more intense competition for petroleum. The lack of new, descent refineries will come back to bite us in the butt. You can't expect a car or a plane that is over 50 years old to run as well or efficiently as a new one.

Sorry for the confusion. I will snoop around a bit more on those Iran pipeline stories.

[freefall]

72. I'll say June 20th. n/t

[ozymandius]

5. Taxing oil profits: Proceed with caution

NEW YORK (CNNMoney.com) -- Politicians are eyeing oil profits like a fat juicy glazed ham.

With all the money Big Oil is making - the top five publicly traded firms pocketed over $120 billion in 2007 alone - and with an election on the horizon, it's easy to see why.

The leading Democratic presidential candidates want a windfall profits tax to do various things, and although their plans differ slightly they generally want to use the money to give Americans a break from skyrocketing energy prices and jumpstart research into renewable energy.

House Democrats have also warned of punitive measures if these massive profits continue at the expense of American consumers.

http://money.cnn.com/2008/05/06/news/economy/oil_profits_tax/index.htm?postversion=2008050612

[ozymandius]

6. My opinion:

The oil production/refining chain should be partially nationalized. Considerable attention needs to be given to further nationalization of these resources and their subsequent production.

I believe that we clearly see the net sum effect of what happens when a resource that we all use is allowed to remain price deregulated and open to market speculation at every step of production. Post-production speculation also weighs heavily on the exaggerated price increases we have experienced over the past (seven) years. Specifically, I mean price speculation based on static inventory and distributable inventory of the refined petroleum products.

Here in Georgia, as elsewhere, we know well the gains we have seen in our monthly bill since the natural gas industry was deregulated. For me, my math shows that prices have tripled since our monthly gas bill is pegged to the NYMEX price plus a surcharge (being the retailer's profit) and additional fees that companies add to the bill, such as the one we customers pay for having our meter read.

EDIT: I must say that our legislators have taken gas deregulation into account when it was considered to repeat this fiasco for electricity markets.

Californians, I am sure you have a tome-full of lament since your electricity market was deregulated.

So evidence abounds to testify to the hostile nature of free market energy pricing.

[AnneD]

19. Texas deregulated electricity.....

it has been a disaster with no lower prices in site. Free market my my ass. Just another way to complicate the situation to keep your attention....WHILE THEY PICK YOUR POCKET.

[UpInArms]

11. Total 1Q profit jumps 18 percent on record energy prices

http://news.yahoo.com/s/ap/20080507/ap_on_bi_ge/earns_france_total

PARIS - French oil company Total SA said Wednesday its first-quarter net profit jumped 18 percent amid record-high energy prices.

The world's fourth-largest oil and gas company reported net profit rose to 3.6 billion euros ($5.6 billion) in the first quarter from 3.05 billion euros a year earlier. Results were driven by its "upstream" division — which covers the exploration, recovery and production of oil and gas.

Chief Executive Christophe de Margerie noted "new record highs" in oil prices and a substantial increase in gas prices. He said average Brent crude prices in the first quarter of 2008 were 67 percent higher than a year ago, and 9 percent higher than the previous quarter.

Oil prices, which on Tuesday hit a record $122.73 a barrel, are making big profits routine in the oil industry. Total's competitors Chevron Corp., Exxon Mobil Corp., ConocoPhillips, BP PLC and Royal Dutch Shell PLC have also reported booming first-quarter earnings.

Total's results don't fully reflect the price of oil because unlike some of its rivals, the French company reports in euros. Because crude is sold on the global market in dollars, which have been falling compared to the European currency, it translates in to fewer euros for Total.

...more...

[Demeter]

41. Gas Up 30 Cents in a Week

It took them 2 stages, but still--it never went down when the futures did, either. This state is in a Depression--don't the oil companies get the message?

[UpInArms]

47. Crude oil has climbed even higher, hitting $123.79 per barrel.

ugh!

[UpInArms]

51. June crude up $1.69 to close at $123.53/brl in NY

01. June crude up $1.69 to close at $123.53/brl in NY
3:06 PM ET, May 07, 2008

[ozymandius]

7. Stocks poised for losses

LONDON (CNNMoney.com) -- U.S. stock futures declined early Wednesday after the previous session's rally as investors reacted to a cautious outlook from tech giant Cisco Systems.

At 5:17 a.m. ET, S&P futures were lower and pointing to a negative start for Wall Street.

Cisco (CSCO, Fortune 500) reported sales and earnings that exceeded analysts' expectations after the close Monday, but the tech bellwether issued a conservative sales outlook.

Oil futures held near $122 a barrel in electronic trading. The front-month crude contract rose to a new trading high near $123 a barrel in the previous session.

Companies to watch Wednesday include Microsoft (MSFT, Fortune 500). Chairman Bill Gates told reporters in Tokyo that the company isn't considering other deals after withdrawing its takeover offer for Yahoo.

http://money.cnn.com/2008/05/07/markets/stockswatch/index.htm

[ozymandius]

8. Fannie's Alt-A Issue

Fannie Mae is supposed to be prime, but its reporting some issues with loans involving less than perfect credit.

On Tuesday, Fannie Mae (nyse: FNM - news - people ) executives told analysts that 43.0%, or $946 million, of the $2.2 billion in losses incurred during the first quarter involved Alt-A loans. They also said that the company's "Alt-A book will continue to drive an outsize portion of our overall credit losses." Fannie also reported $344.6 billion current Alt-A exposure and a limited strategy for stemming future losses.

These types of loans are attractive to lenders because the rates are higher than rates on prime classified mortgages, but they are still backed by borrowers with stronger credit ratings than subprime borrowers. However, with the higher rates comes additional risk for lenders because there is a lack of documentation--including limited proof of the borrower's income.

http://www.forbes.com/markets/2008/05/06/fannie-mae-closer2-markets-equity-cx_md_0506markets50.html

---

Yikes! "Is supposed to be" is the same thing as saying "used to be". I have yet to see any company that can keep the good stuff from being sullied by the bad stuff.

[UpInArms]

14. Fannie Mae may lose $2 bln-$2.5 bln more this year: FBR

http://www.reuters.com/article/bondsNews/idUSBNG31788020080507

May 7 (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research) will likely lose another $2 billion to $2.5 billion in the next three quarters, said Friedman, Billings, Ramsey, which widened its 2008 loss estimate for the firm after Fannie Mae posted a massive quarterly loss, cut dividend and set plans to raise $6 billion of fresh funds.

Credit costs for the largest U.S. provider of home financing is expected to remain at elevated levels over the next four to six quarters, as the U.S. housing market will continue to show weakness throughout 2009, analyst Paul Miller said.

On Tuesday, Fannie Mae posted a quarterly loss, its third straight, that was greater than even the most pessimistic forecast and said it will slash its common dividend to 25 cents a share from 35 cents, starting with its third-quarter payout.

Fannie Mae also said it plans to raise $6 billion in new capital through common and preferred stock offerings, after which its regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), said it intended to reduce the amount of surplus capital the firm needed to hold.

<snip>

Fannie Mae's latest quarterly loss and its need to raise capital reflect the plight of financial services companies worldwide, which have written off more than $330 billion in soured mortgage securities and raised more than $200 billion to shore up depleted balance sheets.

...more...

[UpInArms]

18. Markets see Fannie Mae profits, OFHEO says - CNBC

http://www.reuters.com/article/bondsNews/idUSN0755874620080507

markets expect Fannie Mae, the biggest provider of funding for U.S. home loans, can reverse losses by applying $6 billion in fresh capital toward profitable investments, the company's federal regulator told CNBC on Wednesday.

Fannie Mae (FNM.N: Quote, Profile, Research) shares rose 8.9 percent on Tuesday after the company reported its third straight quarterly loss, and said it would raise capital to cushion itself from losses and maintain its ability to support the mortgage market.

"I think the marketplace thinks the money will be put forth profitably," James Lockhart, director of the Office of Federal Housing Enterprise Oversight, said in the CNBC interview.

[ozymandius]

9. Fed's Hoenig says inflation troublesome and too high

DENVER (MarketWatch) -- A veteran U.S. central bank official said Tuesday he's worried about a deteriorating inflationary environment, and suggested that when the Federal Reserve begins to raise rates, it could do so swiftly.

Federal Reserve Bank of Kansas City President Thomas Hoenig said rising inflationary pressures are "troublesome" and a "serious" matter, and now stand at "unacceptably high levels." He added, "the bigger concern is that these increases are beginning to generate an inflation psychology to an extent that I have not seen since the 1970s and early 1980s."

.....

He tied rising prices primarily to overseas factors, including a "sizable decline" in the U.S. dollar's value, and noted that given the long running rises in food and energy prices, he is increasingly focused on movements in overall inflation. Fed officials have long looked more closely at so-called "core" measures, which strip out food and energy moves, believing they predict future overall inflatoin rates more reliably.

.....

Hoenig fretted that some of the Fed's efforts to right conditions in financial markets may be leading market participants to believe they'll be bailed out in the future, in what's known as "moral hazard." In particular, some have fretted the Fed's radical intervention to save foundering investment bank Bear Stearns Cos.in March set a bad example for market participants, and reinforces a notion some financial institutions are too big to fail, even when they deserve such a fate.

http://www.marketwatch.com/news/story/feds-hoenig-says-inflation-troublesome/story.aspx?guid=%7B28BE1F1B-63B0-41CE-B49D-E8A6B4C91AF9%7D&dist=msr_1

[UpInArms]

15. the operative sentence is: "Hoenig isn't a voting member of the FOMC."

http://www.marketwatch.com/news/story/us-stock-futures-slip-inflation/story.aspx?guid=%7BB1389A83%2D08EF%2D48BE%2DBCEE%2D5CB2684D33EC%7D&dist=MostReadHome

excerpt:

The latest comments form Federal Reserve Bank of Kansas City President Thomas Hoenig also will be scrutinized, as he said late Tuesday that rising inflationary pressures are "troublesome" and a "serious" matter, and now stand at "unacceptably high levels." Hoenig isn't a voting member of the FOMC.

The dollar advanced against major rivals, up 0.6% to 105.29 yen and up about 0.4% on the euro, which exchanged hands at $1.5460.

After another record setting day for crude-oil futures, weekly inventories data due out at 10:30 a.m. Eastern will be closely watched. Crude futures rose 12 cents to $121.96 a barrel in electronic trade.

...more...

[DemReadingDU]

20. Here is link to Hoenig's speech

If interested, here is the link...16 pages
http://www.kansascityfed.org/SpeechBio/HoenigPDF/Denver.05.06.2008.pdf


more from Calculated Risk blog:
http://calculatedrisk.blogspot.com/2008/05/feds-hoenig-serious-inflation-risks.html

[UpInArms]

10. dollar watch

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

Last trade 73.410 Change +0.404 (+0.55%)

Dollar Trades Lower As Risk Aversion Recants Bullish Outlook

http://www.dailyfx.com/story/bio1/Dollar_Trades_Lower_As_Risk_1210114642546.html

Despite a quiet economic calendar, the US dollar was on the retreat Tuesday against most of its major counterparts. For those majors that weren’t caught up in cross fundamental currents, the greenback selloff was partly a carry through on the single currency’s ongoing reversal of last week’s strong rally. There was also a more active component to the decline in the form of a general souring in risk appetite – but more specifically, American risk. Ben Bernanke and his fellow Federal Reserve policy makers have made a remarkable effort to head off a recession and stabilize the broad financial markets with a cumulative 325 basis points of rate cuts and unusual means for injecting liquidity into the frozen credit markets. In fact, after last week’s quarter point cut from the FOMC, the market is pricing in an 86 percent chance that the Fed Funds rate will be left unchanged at 2.00 percent. However, recent data has offered little reason to suspect financial conditions are improving nor that the economy would avoid a contraction in the second quarter. Today, an article on Bloomberg News quoting a study from Jupiter eSources LLC revealed bankruptcy filings among businesses rose 49 percent in the year through April – the most in a year. With individual filings included, the rise over the same period measured 31 percent. This highlights an often overlooked concern: that the Fed’s efforts haven’t been passed through to the consumer – a necessity if growth is to recover. Looking ahead to tomorrow fundamental activity picks up modestly with March pending home sales and credit spending. Both indicators have little market moving precedence.

...more...

ECB: Will Trichet Back Off From His Hawkish Bias This Week?

http://www.dailyfx.com/story/topheadline/ECB__Will_Trichet_Back_Off_1210092676542.html

The European Central Bank is widely expected to leave rates steady this week at 4.00%, but the big question for the markets is: will he remain hawkish or focus more on mounting downside risks to growth? Estimates for Euro-zone CPI during April did ease to 3.3 percent from 3.6 percent, but this is still well above the ECB’s 2 percent target, and as a result there’s little doubt ‘price stability’ will be the foremost concern for Trichet. However, if he suggests that price pressures will moderate in the near-term – as they have recently started to do – or that feeble financial market conditions and the US economic slowdown are a major threat the Euro-zone growth, the euro could actually sell-off across the majors on Thursday.

US Fed: Credit Markets Will Likely Remain A Problem, But Rate Cut Cycle May Be Over

As expected, the Federal Open Market Committee reduced the target fed funds rate by 25bps to 2.00% last week, but there were indications that the current rate cut cycle may be nearing an end. While the FOMC clearly remains concerned about the economy, the Committee said for the first time that their past easing of monetary policy “substantial.” This comment along with concerns that “inflation expectations have risen” and removal of the phrase saying that "downside risks to growth remain" suggests that steady rates may be on the way. However, lingering credit market concerns following the announcement of multi-billion dollar losses at Fannie Mae and UBS is keeping hopes alive for more accommodative policy in at the FOMC’s next meeting. Nevertheless, futures are currently only pricing in a mild 16% chance of a 25bp cut in June, with the odds in favor of the target fed funds rate staying pat at 2.00%, as the FOMC will likely continue to try to confront liquidity issues with expanded lending facilities like TAF and TSLF.

...more...

[UpInArms]

12. UBS executive held by US authorities in tax evasion probe

http://news.yahoo.com/s/afp/20080507/bs_afp/switzerlandbankingcorporatecrimetaxcompanyubs

ZURICH (AFP) - UBS bank said on Wednesday that one of its senior executives had been detained by United States authorities, with the status of a witness, in relation to a tax evasion investigation.

"We are cooperating with the authorities, but it is too early to say what would be the consequences" of this investigation, a UBS spokesman told AFP, after the Financial Times had reported the matter.

The bank said in a statement received by AFP that the US Department of Justice was looking into whether some of its citizens had sought "with the assistance of UBS client advisors, to evade their US tax obligations".

The US Securities and Exchange Commission was also investigating if Swiss-based client advisors from the bank had engaged in activities that should have required UBS Switzerland to register with the commission as a broker-dealer or investment adviser.

The bank added that it was cooperating with the investigations.

UBS did not give the identity of the detained banker, who was identified by the FT report as Martin Liechti, who was based in Switzerland and headed the bank's international wealth managment business for North and South America.

...more...

[UpInArms]

13. Fed seeks approval to pay interest on reserves: report

http://news.yahoo.com/s/nm/20080507/bs_nm/fed_interest_dc

NEW YORK (Reuters) - The U.S. Federal Reserve, led by Chairman Ben Bernanke, is formally asking Congress for authority to pay interest on commercial bank reserves starting this year, the Wall Street Journal reported on Wednesday.

The Federal Reserve's move is an attempt to wield more control over interest rates and better leverage to fight the credit crunch, the report said.

Earlier this week, senior central bank staffers talked about the topic with congressional committees that oversee the Fed, the Journal said, citing people familiar with the talks.

Key Democratic and Republican lawmakers would view the request positively, people familiar with the talks said, adding that quick passage of the request is uncertain given the political sensitivity of any steps that could help banks.

<snip>

Federal Reserve staffers have pointed to two ways Congress could go forward -- allow the Fed to pay interest on all reserves at a cost of about $150 million a year, according to people briefed on the estimates, or let it pay interest only on reserves in excess of banks' required minimum.

...more...

looks like more reverse Robinhooding is about to commence :grr:

[DemReadingDU]

21. Frustrated owners try to unload their guzzlers

5/6/08
After paying $75 to fill his black Dodge Ram pickup truck for the third time in a week, Douglas Chrystall couldn't take it anymore.
more stories like this

Feeling pinched at the pump, and guilty as well, Chrystall, a 39-year-old father from Wellesley, is putting ads online to sell the truck, and the family's other gas-guzzler, a Jeep Grand Cherokee. He knows it will be tough to unload them because he is one of a growing number of consumers downsizing to smaller, more fuel-efficient cars.

Americans are turning away from the boxy, four-wheel-drive vehicles that have for years dominated the nation's highways. Sport utility vehicles and pickup trucks - symbols of Americans' obsession with horsepower, size, and status - are falling out of favor as consumers rich and poor encounter sticker shock at the pump, paying upward of $80 to fill gas tanks.

The sale of new SUVs and pickup trucks has dropped precipitously in recent months amid soaring gas prices and a weakening economy: SUV sales for the month of April alone fell 32.3 percent from a year earlier and small car sales rose 18.6 percent. This fundamental shift comes against a backdrop of relentless gas increases, and growing concerns over the environment and US oil consumption, according to auto analysts and car dealers.

"The SUV craze was a bubble and now it is bursting," said George Hoffer, an economics professor at Virginia Commonwealth University whose research focuses on the automotive industry. "It's an irrational vehicle. It'll never come back."

more...
http://www.boston.com/lifestyle/green/articles/2008/05/06/frustrated_owners_try_to_unload_their_guzzlers/?page=1


edit to add snippet from another article...

4/27/08 Goodbye SUV, hello small cars
Surge in gas prices leads to scaling down of the vehicles Americans drive.

Demographics also play a role. Baby boomers are trading in larger vehicles as their nests empty, and their children are now of car-buying age. Half of the next generation will pick small cars for their first set of wheels, said George Pipas, Ford's top sales analyst.

"Gas prices are important because they've accelerated these shifts, but the shifts were going to happen anyway," Pipas said. "SUVs were not going to roam the Earth in this decade as they did in the 90s."

more...
http://money.cnn.com/2008/04/25/autos/SUV_AP.ap/


5/7/08 Death of the SUV
interesting comments from Mish...
http://globaleconomicanalysis.blogspot.com/2008/05/death-of-suv.html

[Viva_La_Revolution]

It will be a beautiful day when the last of these monstrosities is towed to the junkyard. nt

[Tansy_Gold]

22. Time for another of Tansy's questions about derivatives. . .

I know that it takes a thousand billions to make a trillion, and I know that the November 2007 estimate was that the value of the derivatives market was over $500 trillion. So we're talking about 500,000 billion dollars in "notional" value, if I understand this all correctly (which I probably don't).

My question then is this: As these various banks and investment firms and others write down the value of various mortgage-backed and other failing assets by $10 billion here, $8.6 billion there, and a few billion tucked away in an off-balance sheet partnership, what effect does this have on that $500+ trillion in derivatives value? Does it have any effect at all? Does it just drop the $516 trillion by a few billion, a tiny fraction of a percent? Or does the same inverted pyramid that led to the $516 trillion decrease proportionally with the written-off billions?

Or have I misunderstood the whole concept? Is the "market" value of the derivatives a total of all the trading that goes on, so that if Bank A sells $1bn in derivatives and Bank Q sells that $!bn for %2bn, we now have a $3bn market?


From the inquiring mind of


Tansy Gold

[Tace]

23. The Risk Economy (James Kunstler)

James Kunstler -- Clusterfuck Nation

As the West's industrial regime sputters toward a cheap-energy-crackup conclusion, there have been attempts to recast what our economy is actually about, how to account for whatever wealth we manage to produce, and project what our society will actually be organized to do in the years ahead.

For a while in the 1990s, the idea was a "service economy," kind of like the old fable of the town whose inhabitants made a living by taking in each other's laundry -- only in our case it was selling hamburgers to tourists on vacation from their jobs making hamburgers elsewhere, or something like that.

Then came the idea of the "information economy" in which making things of value would no longer matter, only the processing and deployment of information (sometimes misidentified as "knowledge"). This model seemed to suggest a yin-yang of software engineers who made up games like "Grand Theft Auto" serving the opposite cohort of people who bought and played the game. If nothing else, it certainly explained how lifetimes could be frittered away on stupid activities.

That illusion yielded to the housing bubble economy, which actually did produce a lot of things, but not necessarily of value -- for instance, houses made of particle board and vinyl 38 miles outside of Sacramento. It was a tragic and manifold waste of resources, as well as an insult to the landscape. But the darker side of the housing bubble lay in the world of finance, where a vast empire of swindles was constructed to support the Potemkin facade of production homebuilding.

Now we are in a strange period when those swindles are unwinding. The people who run the finance sector -- the Wall Street investment banks, hedge funds and ratings agencies, the Federal Reserve, and the U.S. Dept of the Treasury -- in desperately trying to prevent the unwind, have rapidly ramped up another new economy based entirely on the buying and selling of risk. Risk, as a pure abstraction unconnected to any real capital activity, is all that's left to buy and sell after all other plausibly practical vehicles for finance have failed.

more

http://www.worldnewstrust.com/wnt-original/news/the-risk-economy-james-kunstler.html

[UpInArms]

25. Kunstler proves once again that he "gets it"

thanks for posting this here, Tace

:toast:

[Tansy_Gold]

31. "Risk, as a pure abstraction unconnected to any real capital activity. . . ."

Oh, am I ever glad to see this in print!

This is what I've been thinking/believing ever since the whole Enron collapse, and folks, that's goin' on eight years ago, and rather than take credit for an "I Told You So!" moment, I'm just delighted to know there are knowledgeable people out there who are thinking the same thing.

THERE'S NO THERE THERE!!!!!



Tansy Gold, thinking she ought to take a picture of her "I.T.Y.S." rubber stamp for all to see. . . . .

[Hugin]

32. You win Tansy Gold.

It's an empty bag. But, those of us who are members of the so-called Generation Jones have known that for quite some
time.

[Warpy]

34. Right, it's nice to be validated in print media sometimes

I've been saying for years that the stratosphere of the financial markets, with their ever more exotic securities that nobody knew how to price but everybody was willing to bid up as they changed hands, was nothing but a bunch of worthless paper held up by hot air and wishful thinking.

Don't you just love being right as everything collapses in slow motion just like you and I said it would when people waved some of the smoke aside and looked behind the mirrors?

Damn, makes us all warm and fuzzy as we start realizing just how far down "down" is.

[Tansy_Gold]

60. "all warm & fuzzy" -- not. :-(

Oh, there's a sense of validation, to be sure, but damn, it is a loooooooong way down, isn't it? and it ain't gonna be a fun ride.

Somebody oughta do a real "reality" show, a documentary about what happens to real people in the real world when they lose their job or a spouse dies or is disabled or walks out and the ARM kicks in to raise the mortgage payment $200 a month and gas goes through the roof and the trade-in value of that 8-year-old SUV drops to something less than $0 so you have to keep driving it even though it only gets 9.3 mpg on the freeway at 2 a.m. with a strong tailwind.

What's it like to be 55 or 58 or 61 and looking for a job? Those of us who have skills acquired 20 or 30 years ago when there was still a manufacturing base to the economy now discover that no one needs cost accountants or inventory controllers or machine operators. So we're overqualified for half the jobs there are, and unqualified for the rest.

What's it like to finally get called for an interview and then discover you don't have the right clothes? You've been out of work so long, or taken so many casual jobs to fill the gap that now your old business wardrobe either doesn't fit or is hopelessly out of style, to the point that the 25-year-old HR manager who's going to interview you will struggle to keep from laughing.

What's it like to be forced into defaulting on your mortgage because there just isn't enough money left at the end of the month to make the payment? What's it like to tell your kids they have to pack up their toys and clothes and cram everything in the car and leave under cover of night?

What's it like to lie awake at night and try to figure out how to make the $538 remaining in the checking account cover the $1075 worth of bills that are due this month?

What's it like to decide you just can't afford the $350 monthly private health insurance premium because it's a choice between that or groceries, and then you get to lie awake at night hoping every little exaggerated ache or pain isn't a symptom of some major illness that will wipe out every asset you ever had?

What's it like to turn down invitation after invitation to join friends for a night out because there just isn't the spare change to cover it? They're comfortable because they worked for companies that provided fat pensions and early retirement bonuses, but your company got bought out by some huge corporation that had to increase profits for the stockholders so they decertified your union and erased your pension, and now you're struggling to supplement social security with a minimum wage service sector job.

What's it like to postpone routine maintenance on your car or your house when you know damn well you need to do it, but the choice is between an oil change or paying the electric bill?

I guess what bugs me is that the mortgage crisis gets a lot of attention and everyone seems for the most part to feel genuinely sorry for the people who are losing their homes through no fault of their own, but no one seems to be looking at what those people went through before they reached that point. How often did they put the groceries on a credit card because the only other option was starvation, and they hoped they'd have a new job or something would turn up to cover the credit card payment but it didn't and the hole got deeper and there was no way out of it.

So, yeah, there's a validation in being right, but it doesn't do much to ease the agony of watching the collapse, because like everyone else, I'm caught in the catastrophe, too. And so are you. So are we all.

It's fucking depressing.


Tansy Gold

[Hugin]

61. All I can offer is...

:grouphug:

;(

[UpInArms]

62. "So are we all."

:grouphug:

[PassingFair]

71. Hey, sounds like the idea I had for a show called "FORECLOSURE!"

Follow a different family every week through the
HELL of losing the family home.

I suggested it to Michael Moore, but I guess
it would be TOO much of a "reality" show....

It might balance out the "flip this house" shows
that spam my weekends.

[specimenfred1984]

37. It's will all just happen over and over again unless repukes are jailed for life

The same swindlers will repeat some new version of the crimes because that's what they do, they are criminals. Too bad most Americans are still such die-hard wimps that "just want to get along with everybody". Personally, I'm voting for whatever (D) says they'll jail the bastards because that is the one and only thing that'll prevent huge societal scams like "trickle down" and "deregulation" from ever happening again.

[specimenfred1984]

55. BTW, I could care less about spelling or punctuation

especially here on what I call "SmearUnderground". Anyone ever check out the primaries section or the greatest page? Damn, those people call themselves members of the democratic party too. It does a huge disservice to this entire site to let dem-bashing like that go on. I log in now just to ignore the entire section.

[UpInArms]

24. Legg Mason swings to quarterly loss: Investment manager hit by money-market woes; plans to raise $1

http://www.marketwatch.com/news/story/legg-mason-swings-loss-plans/story.aspx?guid=%7B902FBB5F%2D8AC5%2D47BC%2DAD7B%2D88039F1A0E7C%7D&dist=hpmymw

BOSTON (MarketWatch) -- Legg Mason Inc. posted its first quarterly loss as a public company in what its chief executive said was among the toughest periods it has ever seen, as the investment manager also announced plans to raise $1 billion through an equity offering.

The Baltimore-based firm (LM: 56.30, -6.46, -10.3%) reported a fiscal fourth-quarter loss of $255.5 million, or $1.81 a share, compared with a profit of $172.5 million, or $1.19 a share, in the same period a year earlier.

Legg Mason said the results for the three months ended March 31 included a $291 million charge related to previously announced support for money market funds hit by the credit storm. The company has buttressed troubled structured investment vehicles, or SIVs, that are held by money market funds.

Other investment managers, such as Bank of America Corp. (BAC: 39.24, +0.27, +0.7%) and Wachovia Corp. (WB: 30.08, +0.30, +1.0%) , have been forced to provide support to their money market funds to prevent them from "breaking the buck," or falling below a net asset value of $1 per share. Legg Mason has cut down its exposure to SIVs, which were threatened by liquidity issues.

Legg Mason also took an after-tax charge of $94.8 million in the latest quarter for a reduction in the value of acquired management contracts held by a wealth-management subsidiary since the time of its acquisition.

...more...

[antigop]

33. Is your money fund safe?

http://money.cnn.com/2008/05/06/magazines/fortune/money_fund_benner.fortune/index.htm?postversion=2008050705

Money market mutual funds are known for being both liquid and solid. Liquid because you can get your money out of them at any time; solid because they maintain a steady value of $1 per share. And they're popular because they tend to pay slightly higher rates than Treasury bills or bank savings accounts. Individuals and institutions alike use them to park cash they are waiting to deploy and to ride out market storms. Amid the turmoil of the past year, assets have soared 45%, to $3.5 trillion. But with the credit crunch casting doubt on many formerly safe-seeming securities, the big question for many investors has become, Is my money fund safe?

The short answer is yes, with some caveats: Money market funds have been around since the mid-1970s, and since then no retail investors have lost a cent in one. "Money market funds have endured crises in the past and are still safe," says Alyce Zollman, a financial consultant at Charles Schwab. But investors are right to be concerned. "There is so much less risk with money market funds relative to other funds that people view them as risk-free," says Robert Plaze, an associate director in the Securities and Exchange Commission's division of investment management. "But they're not insured by the government. Saying there's no chance for problems is not accurate." The danger: A fund could suffer losses on its holdings and "break the buck" - see the value of a share fall below $1.

Money market funds typically hold a mix of short-term corporate bonds, Treasury bills, and other high-quality debt. But in recent years they also bought more exotic stuff: specifically, paper issued by structured investment vehicles (SIVs) - entities set up by banks to hold debt off their own balance sheets. "Last August, over half of money fund managers were buying SIV-related debt, which amounted to about 5% of money market fund holdings," says Peter Crane, whose firm, Crane Data, tracks money market funds. Crane goes on to explain that when the market for a security dries up, as it did for SIV debt, the value drops, even if the risk of default hasn't increased. And in a fund where even 1% of the assets have no buyers, says Crane, "the fund could break the buck."

[DemReadingDU]

38. I hope so!

My money market fund looks fairly safe, except maybe for the small portion in Commercial paper

U.S. Government & Agency 54%
Certificates of Deposit 34%
Commercial Paper 10%

[Hugin]

35. ~11:35 EST: That's probably it for today...

Index Last Change % change
• DJIA 12965.79 -55.04 -0.42%
• NASDAQ 2478.67 -4.64 -0.19%
• S&P 500 1412.09 -6.17 -0.44%

I'll check back later to see if today's mysterious "Afternoon Delight" has kicked in...

[Robbien]

36. Bush's new nominee for the SEC is not a fan of hedge fund regs

Bush nominated a law professor to the Securities and Exchange Commission who has criticized the agency’s attempts at hedge fund regulation as an overreaction to market scandals.

Troy Paredes, who is on the faculty of Washington University Law School, was nominated by President Bush for a five-year term to replace Republican SEC Commissioner Paul Atkins Tuesday. Atkins said on Monday that he is stepping down from his post.

Paredes wrote that political and psychological influences on the SEC may have been responsible for the 2004 regulation requiring hedge funds to register. That regulation was overturned by a federal appeals court in 2006.

The law professor viewed the 2004 regulation as being the SEC’s response to corporate scandals like Enron and WorldCom, which caused the agency to engage in over-regulation.

“The SEC did not want to get caught flat footed and embarrassed again,” Paredes wrote.

http://www.hedgefund.net/publicnews/default.aspx?story=8755


Before joining Washington University, Paredes was a corporate and regulatory lawyer working on leveraged buyouts, mergers and acquisitions, and private-equity financing.

Another fox in the henhouse.

[specimenfred1984]

57. He should be fired as soon as dems take power

Otherwise the criminal will just proceed to obstruct justice, falsify everything he can, cover-up anything and everything he can and I hate to say it but, he'll just keep acting like another gay Bushbot sycophant in order to get ahead, kissing everyone's butt he has to, literally and figuratively.

[DemReadingDU]

39. Vallejo, California, Officials Vote for Bankruptcy

May 7 (Bloomberg) -- Vallejo, California's city council voted to go into bankruptcy, saying the city doesn't have enough money to pay its bills after talks with labor unions failed to win salary concessions from fire fighters and police.

The city council's unanimous decision makes the San Francisco suburb the largest city in California to file for bankruptcy and the first local government in the state to seek protection from creditors because it ran out of money amid the worst housing slump in the U.S. in 26 years.

The city of 117,000 is facing ballooning labor costs and declining housing-related tax revenue that have left it near insolvency. The city expects a $16 million deficit for the coming fiscal year that starts July 1. Under bankruptcy protection, city services would keep running. It would freeze all creditor claims while officials devise a plan for emerging from bankruptcy.

``Nobody wants bankruptcy but there doesn't appear to be a whole lot of options left,'' said city councilwoman Joanne Schivley. ``We are going to be out of money by June 30. It's all a numbers game now.''

more...
http://www.bloomberg.com/apps/news?pid=20601103&sid=atl3yFmV508A&refer=news

[lovuian]

46. Get a look at the coming America

we are getting closer and closer

[DemReadingDU]

40. Numbers, Numbers, Numbers

and a picture of Dorothea Lange. For those who don't regularly follow The Automatic Earth blog, there is usually a picture of Dorothea Lange at the beginning of each day, or a picture of another depression era family. Just page forward throughout the blog, and at the end of the page, view the older posts.

Many links to other articles in this blog, as well as interesting commentary to read.

http://theautomaticearth.blogspot.com/

[antigop]

44. Banks: Law can't bother us

http://tpmcafe.talkingpointsmemo.com/2008/05/06/banks_law_cant_bother_us/

With the mortgage crisis smeared across the headlines every morning, you would think that the mortgage holders would keep their heads down. You would be wrong. The national banks are floating a new idea: they shouldn't have to obey state law when they foreclose on someone's home.

Pre-emption has been a gravy train for the national banks, insulating their credit card business from state consumer protection laws. Some banks now want another ride on the pre-emption train, claiming that they shouldn't have to follow local foreclosure laws when they take people's homes.

Tomorrow Congressmen Brad Miller (D, NC) and Steve LaTourette (R, OH) will introduce HR 5380 to make it clear that the banks have to follow the state law foreclosure laws that they have always followed. Here is the scary part: this is expected to be a close vote.

HR 5380 is a small, but smart piece of legislation. It says that if the states want to pass laws to deal with the current foreclosure crisis, then they are free to do so. In other words, this bill says that Congress may not be ready to fix the crisis, but it will at least stay out of the way so that the states can do so.

If banks don't like the state laws, they are free to fight them in the state legislatures or the state courts. They can even make constitutional arguments about takings. But Congressmen Miller and LaTourette say they can't claim that Congress gave them a free pass.
...
But in the past few weeks, national banks have started making a new argument: state laws are pre-empted whenever a national bank holds the mortgage, so the states can't make them follow the local rules. Pre-emption has been used successfully by the credit card companies to fight off state regulation, so now the banks want to escape local restrictions on foreclosure as well.

[Hugin]

45. Charming.

:eyes:

[Robbien]

53. Now even banks are ignoring Congress

Congress can't get anyone to pay them any mind these days.

[AnneD]

68. By kowtowing to this administration....

and by not pressing for Independent Prosecutors, and by taking Impeachment off the table...they have made THEMSELVES irrelevant.

[Robbien]

69. Amen

I keep wondering why Cheney keeps fighting to keep from going before a Congressional hearing. One would think he would love sitting before them thumbing his nose to their faces.

There are no consequences these day to admitting to Congress that you are committing crimes.

[AnneD]

67. It is this same thinking....

that the credit card companies used to get around the usary laws that individual states had. THAT is what made the credit card companies the beasts they are today. Now if everyone screamed at Congress and the debt reform bill (that Credit Card cos wrote and passed several last year anyway)-what makes one think that Congress will listen to warnings about this now. This violates States Rights. AND with the SCOTUS ruling the way they have....you can forget about home ownership having ANY real meaning in this country.

[UpInArms]

48. 2:21 EST red numbers and oily blather

Dow 12,926.38 94.45 (0.73%)
Nasdaq 2,458.65 24.66 (0.99%)
S&P 500 1,406.07 12.19 (0.86%)
10-Yr Bond 3.883% 0.01

NYSE Volume 2,333,458,250
Nasdaq Volume 1,453,401,125

2:00 pm : The stock market is under selling pressure, as it falls to fresh session lows. The decline has been broad-based, with the exception of the energy sector (-0.1%), which is trading near its best level of the session. Crude oil has climbed even higher, hitting $123.79 per barrel.

Within the S&P 500, 73% of stocks are in the red. The main laggards are financial stocks, including AIG (AIG 46.80, -1.60), Wells Fargo (WFC 30.16, -0.80) and JPMorgan Chase (JPM 47.15, -1.05). IBM (IBM 124.25, +1.93) and Disney (DIS 34.76, +1.03) are providing leadership.DJ30 -88.50 NASDAQ -24.79 SP500 -11.71 NASDAQ Dec/Adv/Vol 1791/982/1.36 bln NYSE Dec/Adv/Vol 1877/1164/664 mln

1:30 pm : The major indices fall to fresh session lows as crude oil spikes 1.4% to a new all-time high of $123.56 per barrel. The gains in crude come in the face of a higher-than-expected increase in inventory stockpiles, which is normally bearish for crude prices. Crude prices and the S&P 500 have traded inversely throughout the session.

Nine of the ten economic sectors are now in the red, with only materials holding on to a slight 0.2% gain. Financials (-1.8%) are posting the largest decline, and is the only sector down more than 1%.DJ30 -78.57 NASDAQ -15.82 SP500 -9.72 NASDAQ Dec/Adv/Vol 1732/1023/1.23 bln NYSE Dec/Adv/Vol 1803/1208/610 mln

[UpInArms]

49. 2:32 EST and off the cliff it goes

Dow 12,860.92 159.91 (1.23%)
Nasdaq 2,449.10 34.21 (1.38%)
S&P 500 1,398.79 19.47 (1.37%)
10-Yr Bond 3.873% 0.02

NYSE Volume 2,445,337,750
Nasdaq Volume 1,511,495,500

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54. 3:28 EST and now down more than 200

Dow 12,806.13 214.70 (1.65%)
Nasdaq 2,435.84 47.47 (1.91%)
S&P 500 1,391.67 26.59 (1.87%)
10-Yr Bond 3.867% 0.026

NYSE Volume 3,016,630,250
Nasdaq Volume 1,859,225,750

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59. SEC to Come Under Scrutiny (of Senate)

http://online.wsj.com/article/SB121004548182970067.html

WASHINGTON -- The Securities and Exchange Commission's oversight of investment banks will come under scrutiny at a Senate hearing Wednesday, setting the stage for a debate about changes to regulation of financial markets and securities firms.

The collapse of Bear Stearns & Cos. and subsequent temporary opening of the Federal Reserve's lending window to securities firms has raised questions as to whether the Fed should have greater oversight of investment banks. The Treasury Department has published recommendations that would give more oversight authority to the Fed while potentially reducing the SEC's role.

"Before you can go ahead and start proposing new arrangements you have to understand the strengths and shortcomings of the current arrangement. That's at the heart of what we're trying to do," said Rhode Island Sen. Jack Reed, chairman of a subcommittee of the Senate Banking Committee, which is holding the hearing on SEC oversight.

The SEC has maintained that its oversight was adequate by ensuring that no investor funds were misused amid the turmoil at Bear Stearns.

It is also investigating potential manipulation of Bear Stearns and Lehman Brothers Holdings Inc. stock, according to people familiar with the matter. SEC Chairman Christopher Cox told members of Congress in recent weeks that he will support making the SEC's currently voluntary top-down oversight official by writing it into law.

Separately, Republican SEC Commissioner Paul Atkins announced Monday that he won't seek nomination for another term but will stay on until a successor arrives. Two nominees for vacant Democratic commissioner slots are awaiting confirmation hearings.

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64. end of the day grimness

Dow 12,814.35 206.48 (1.59%)
Nasdaq 2,438.49 44.82 (1.80%)
S&P 500 1,392.57 25.69 (1.81%)
10-Yr Bond 3.867% 0.026

NYSE Volume 4,045,936,250
Nasdaq Volume 2,285,477,500

After descending gradually during afternoon trading, the stock market made a sudden and precipitous drop to fall below the 1400-level. Buying interest returned momentarily in the final leg of trading, but proved unsustainable. All three of the major indices finished at their session low.

Pessimism prevailed despite a batch of better-than-expected earnings results from several marquee names, all of which are components of Briefing.com's active portfolio. Tech bellwether Cisco (CSCO 25.78, -0.55) announced after Tuesday's session earnings of $0.38 per share for its most recent quarter, which exceeded the consensus earnings per share estimate by two cents. Despite noting weakness in the U.S., the company still offered in-line earnings guidance for the current quarter.

Dow component Walt Disney (DIS 34.70, +0.97) generated $0.58 per share for its second fiscal quarter, surpassing the average analyst estimate of $0.51 per share.

Transocean (RIG 157.40, -0.45) announced this morning strong earnings of $3.80 per share. Analysts, on average, were expecting profits of $3.33 per share. Transocean saw significant growth as a result of its acquisition of GlobalSantaFe and higher dayrates, stemming from demand for crude oil.

Notably, crude oil prices continue to set new records. Oil closed $1.74 higher on the Nymex, finishing the session at $123.58 per barrel. That marks a new record closing high for crude prices. Oil also posted a new record intraday high of $123.80 per barrel.

On a related topic, the Department of Energy announced a larger than expected increase in oil reserves. Stockpiles for the week ending May 3 increased by 5.7 million barrels, which is more than the 1.6 million barrel increase that economists came to expect.

In other economic news, first quarter nonfarm productivity rose at a 2.2% annual rate, which was more than the consensus estimate of 1.5%. Unit labor costs, an inflation gauge, registered a 2.2% rate of increase. That was better than the expected 2.6% rate of growth.

In a separate report, March U.S. pending home sales fell 1.0% month-over-month on a seasonally adjusted annual rate, according to the National Association of Realtors. The decline was in-line with expectations. February sales were revised lower to a decrease of 2.8% from the previous reading, which showed a 1.9% slide. This leaves the year-over-year decline at 20.1%.

Sprint Nextel (S 9.16, -0.03) and cable company Clearwire (CLWR 16.22, -0.24) are entering a definitive agreement to combine their wireless broadband businesses, to be named Clearwire. Several companies will be investing a total of $3.2 billion into the new entity, including Intel (INTC 23.17, -0.41), Time Warner Cable (TWC 29.35, -0.06), and Google (GOOG 579.00, -7.36).

All ten of the major economic sectors closed with losses. Financials (-3.7%) fared the worst. Large-cap names Citigroup (C 24.48, -1.39), JPMorgan Chase (JPM 46.57, -1.63), and Bank of America (BAC 38.00, -1.24) all weighed on the sector.DJ30 -206.48 NASDAQ -44.82 SP500 -25.69 NASDAQ Dec/Adv/Vol 2065/785/2.28 bln NYSE Dec/Adv/Vol 2243/876/1.28 bln

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65. The discreet charm of other people's money:James Saft

http://www.reuters.com/article/reutersComService4/idUSL0554872020080507?sp=true

LONDON (Reuters) - If you get paid for hammering, everything looks like a nail.

One of the clearest lessons of the debt market debacle is how poorly constructed and dangerous many compensation arrangements in financial services are.

In short, a lot of people have made a lot of money in recent years taking risks with assets that do not belong to them, taking a hefty share of the profits if bets pay off but not sharing equally in the losses.

What to do about it is, of course, a lot less clear.

"Banks have come to realize in the recent crisis that they are paying the price for having designed compensation packages which provide incentives that are not, in the long run, in the interests of the banks themselves, and I would like to think that would change," Bank of England Governor Mervyn King said in an appearance before lawmakers last week.

<snip>

Hedge funds make most of their money by sharing in the gains of their funds, but only if they clear certain hurdles. The study, which analyzed results of 2,800 hedge funds operating in a 13-year period, found that hedge funds took on far more risk when their funds were substantially below the point at which their incentive fees kick in.

It's a bit like betting more on the last race of the day at the track to make up earlier losses, but with the crucial difference that it is not your money if it is lost, but you get to keep some if you win.

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