Stock Market News & Stocks to Watch from StraightStocks » Henry Paulson

Prieur’s readings (August 11, 2009)

Prieur du Plessis — Tue, 11 Aug 2009 08:31:10 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other thought-provoking articles you would like to share to the comments section.

Stitch in Time

Bill Bonner — Fri, 07 Aug 2009 17:30:44 +0000

pAt least something good has come out of the economic crisis; it blew off the purple robes that clothed economists and exposed their naked flanks. Still, they don’t deserve the beating they’re getting in the press – with snide remarks and sarcastic comments; they deserve better. A beating with sticks! /p pEven Alan Greenspan admitted he had “found a flaw” in his own thinking. We will have to imagine the giggles from the back of the room – if anyone had been awake. It was as if Stalin had confessed to being rude to his mother or Bernie Madoff copped a plea for shoplifting. The mea was fine, but the culpa didn’t seem to measure up to the facts. strongHe, more#8230;/strong/p

Goldman…Goldman…Goldman…

Bill Bonner — Thu, 06 Aug 2009 17:31:21 +0000

p Goldman Sachs Would Have Collapsed If Not For Henry Paulson./p pThe Dow slipped a bit yesterday – only 39 points. Everyone is watching. They want to see how far this rally carries on. Many think it is more than a bear market bounce; they think it is for real./p pThe prevailing opinion is that quick action by the feds avoided a more serious meltdown. Ben Bernanke says he was working to prevent a “second great depression.”/p pAnd now that the crisis is past, the economy is slowly climbing out of its hole. The second quarter showed GDP falling at 1% per year in the US#8230; rather than the 6.4% rate recorded earlier in the year. Housing sales have perked up. Oil is trading#8230;/p

Cash for Liquor Anyone?

Bill Bonner — Wed, 05 Aug 2009 19:30:16 +0000

pThe future cometh#8230;Cash for bankers! Cash for Detroit’s clunkers! From one scam to the next#8230;But first, let us turn to the latest market update. /p pThe Dow rose again yesterday – up 33 points, to close at 9,320. We set 10,000+ as our objective for this bounce. We’ll stick with it for a while longer./p pMake no mistake though. No one knows how long this rally will last – certainly no one here at the a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a vacation headquarters. It will continue until it runs out of gas. That could be tomorrow. It could be months from now./p pIt will run out of gas sooner or later, and probably this fall. A real, durable bull market would require an economic boom – a genuine#8230;/p

Thursday’s Market Recap (06/25/09)

Bullish Bankers — Fri, 26 Jun 2009 11:02:33 +0000

The markets had a good day as all three major indexes were up over 2%, with the Dow up 2.08% to finish at 8472.40. The NASDAQ and S&P were up 2.08% and 2.14% respectively, closing at 1829.54 and 920.26. The 10-year saw price climb over a dollar as the yield ended at 3.544%. Crude oil saw [...]

Ken Lewis: The Fed Made Me Do It! – Analyst Blog

Zacks Market Commentaries — Thu, 11 Jun 2009 19:57:01 +0000

Early today, Kenneth Lewis, CEO of Bank of America (BAC) was testifying before a government oversight committee with respect to his company's January 1, 2009 acquisition of Merrill Lynch.

Considering recent announcements by the company, we would suspect there will be several more inquiries in the future for Mr. Lewis.

Members of the Oversight and Government Reform Committee and the House Oversight and Investigations subcommittee hammered for a rationale as it appeared to them that Mr. Lewis failed to file the appropriate information prior to the December 2009 shareholder vote with respect its then-acquisition target Merrill Lynch, and known widening losses as of November 2009 -- thereby demonstrating that B of A neglected to meet the government's disclosure rules.

The House Oversight and Investigations subcommittee's brought to light that Mr. Lewis was aware of the acceleration of the substantial losses at Merrill Lynch, but did not make the information available to its shareholders before approving the transaction.

In a December 22, 2008 e-mail to agency staff from Federal Reserve Chairman Ben Bernanke, Mr. Lewis was indicated as potentially pressing the agency to "use as a defense" against shareholder lawsuits that the government ordered him to consummate the deal for systemic reasons.

However, other e-mails and comments submitted by Mr. Lewis indicated he was pressed to complete the acquisition. Mr. Lewis stated that after shareholders had approved the transaction (but had not closed), officials from the Treasury and Fed approached him in mid-December 2008 to discuss the idea of breaking up the deal, given is concerns about the acquisition -- and that he was asked to delay any such action, even though he expressed significant concerns about pursuing such an endeavor given the systemic consequences and risks to Bank of America.

Mr. Lewis stated that in February 2009, he alerted New York Attorney General Andrew Cuomo that he was pushed by Ben Bernanke and then-Treasury Secretary Henry Paulson to complete the deal. At this point of time, Messrs. Paulson and Bernanke deny counseling Lewis to finish the acquisition despite his reservations. As the hearing on the acquisition progresses, Bernanke and Paulson are expected to testify at some point of time.

In order to complete Bank of America's acquisition, the Treasury invested $20 billion in Bank of America and also guaranteed $118 billion of assets late last year. In January 2009, Bank of America received another $20 billion in government bailout funds, bringing the total amount of Treasury funds received to $45 billion through the Troubled Asset Relief Program (TARP).

To date, regulators have yet to permit Bank of America the ability to use $45 billion in TARP funds it received. So far, the Treasury required Bank of America to raise $33.9 billion in funds by November to act as an additional capital buffer against potential future losses, of which Bank of America recently issued $7.6 billion in long-term debt not guaranteed by the Federal Deposit Insurance Corp.

While the ability to raising funds without government assistance continues to be a major requirement to be able to repay TARP funds, we would expect that the Treasury could require Bank of America as well as other financial institutions -- such as but not limited to Citigroup (C) and Wells Fargo (WFC) to raise additional capital to create an additional buffer against potential future losses.
Read the full analyst report on "BAC"
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Bigger Than Watergate?

Contrarian Profits — Wed, 06 May 2009 18:06:53 +0000

pReportedly, Bill O’Reilly referred to a recent story out of our nation’s capital as “bigger than Watergate.”br / Whether the story is bigger than Watergate or not, it is definitely a scandal of huge proportions./p pTo sum it up, on April 23, 2009, New York Attorney General Andrew Cuomo sent a letter to Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs Chris Dodd; Chairman of the House Financial Services Committee Barney Frank; SEC Chairwoman Mary Schapiro; and Chairwoman of the Congressional Oversight Panel Elizabeth Warren.br / The letter outlined how former Treasury Secretary Paulson and Fed Chairman Ben Bernanke forced Bank of America’s acquisition of Merrill Lynch – even though Bank of America CEO Ken Lewis and the board of directors#8230;/p

And Then There’s This…Friday, April 24th, 2009

Contrarian Profits — Fri, 24 Apr 2009 21:11:17 +0000

pBoth gold and silver were comatose all night long in the Far East#8230;and all through European trading once again. However, the moment that the London p.m. fix was in, both metals#8217; prices went vertical. Silver got capped before it hit $13#8230;but gold managed to close above $900, and is now above $910 as I write this. As I said yesterday#8230;Friday is options expiry#8230;so be ready for anything. But even I wasn#8217;t expecting that. Today#8217;s New York price action should be enlightening./p pNeedless to say, Ted Butler and I had a discussion about yesterday#8217;s goings-on. His guess [and it's only a guess] is that the #8216;four or less#8217; traders in the Commercial category of the Commitment of Traders#8230;all bullion banks#8230;have covered all#8230;/p

The Recovery That Isn’t

Contrarian Profits — Fri, 24 Apr 2009 13:30:51 +0000

p class="MsoNormal"“We do not want a disclosable event.” Thus spoke former Treasury Secretary Hank Paulson to Bank of America CEO, Ken Lewis, last December. /p p class="MsoNormal"Paulson’s remark came in response to Lewis’ request for a letter from Fed Chairman Ben Bernanke, acknowledging the government’s insistence that Bank of America acquire Merrill Lynch, despite the brokerage firm’s mounting mega-billion-dollar losses./p p class="MsoNormal"This one little phrase probably tells you everything you need to know about Henry Paulson, the man who put the “secret” in Secretary. And this one little phrase certainly tells you everything you need to know about the structure and actual objectives of the bailout campaigns Paulson orchestrated./p p class="MsoNormal"Specifically, the Paulson bailouts sought to divert hundreds of billions of taxpayer dollars toward Wall Street finance#8230;/p

A ‘Rebubble’ Attempt

Bill Bonner — Mon, 13 Apr 2009 14:17:29 +0000

pThe rally is on! The Dow rose another 246 points last week. Enjoy it while it lasts…but keep those trailing stops tight. The “End of the Rally is Nigh,” says Barron’s./p pOur old friend, Marc Faber, says he expects a 10% drop in the stock market before the rally resumes./p pMaybe. This rally is going to end sometime. But it probably has a ways to go. There are still a lot of suckers who haven’t been drawn in./p pAnother old friend, Rick Ackerman, thinks the problem with this rally is capitulation…or rather, the lack of it. There’s been no capitulation, says he. And you can’t have a real bottom without it. No capitulation, no bottom./p pThe news from the economy is bad and getting#8230;/p

Born Biddable

Bill Bonner — Fri, 27 Mar 2009 22:35:58 +0000

pMr. Timothy Geithner was the man who was on watch when the ship ran aground. His job, as head of the Federal Reserve Bank of New York, was to keep an eye on Wall Street. Now, he’s come forward with a new $1 trillion plan to get the boat back on the water. /p pHe should have left it to the ship-breakers. We almost feel sorry for him; Sisyphus had it easier. But Sisyphus was doing honest work. Besides, when Geithner’s tour of duty is finished, the public will pay for his jackass bamboozles for decades, while he moves on to a cushy job at Goldman Sachs…or maybe AIG itself, if it is still in business./p pOf course, we are out of#8230;/p

‘The Cheater’ Speaks

Contrarian Profits — Tue, 27 Jan 2009 15:38:39 +0000

pCurrencies rally#8230; IFO unexpectedly rises#8230; Norway looks good#8230; Gold hits $900 again! And Now#8230; Today#8217;s Pfennig!/p pHey! What a day for the currencies yesterday! Geez Louise, it#8217;s seems like it#8217;s been a month of Sundays since I could say that! And there#8217;s been follow up overnight, although, I do believe I#8217;m seeing some profit taking right now#8230; I went to radiation yesterday with the euro trading around 1.2965#8230; I came back 2 hours later, and it was 1.31! And it didn#8217;t stop there, trading up to 1.3175, but running into a wall of resistance there#8230; But that was temporary, as the overnight market pushed the single unit higher to 1.3250#8230; It did trade all the way up to 1.33 and change#8230;/p

Geithner Promises TARP Overhaul, Regulatory Changes to Solve “Mother of All Financial Crises”

Contrarian Profits — Thu, 22 Jan 2009 15:35:29 +0000

pU.S. Treasury Secretary-nominee Timothy Geithner told the Senate Finance Committee yesterday (Wednesday) that drastic measures are needed to combat the U.S. recession and promised to overhaul the beleaguered $700 billion Troubled Assets Relief Program (a href="http://en.wikipedia.org/wiki/Troubled_Assets_Relief_Program" target="_blank"TARP/a)./p pTestifying after former Fed Chairman Paul Volcker, Geithner told the committee the United States is facing “a href="http://www.bloomberg.com/apps/news?pid=20601087#38;sid=aGRcoK6wHFOg#38;refer=home" target="_blank"the mother of all financial crises/a.” Geithner also urged Congress to quickly pass a robust stimulus plan, strongemBloomberg News/em/strong reported./p p“If our policy response is tentative and incrementalist, if we do not demonstrate by our actions a clear and consistent commitment to do what is necessary to solve the problem, then we risk greater damage to living standards, to the economy’s productive potential, and to the fabric of our financial system,” he#8230;/p

Bank Of America Earnings Disappoint

Daniel Shepard — Sat, 17 Jan 2009 14:20:45 +0000

Saturday January 17, 2009 Navivest Bank of America Corporation (BAC) yesterday reported that for fiscal year 2008, revenue on a fully taxable-equivalent basis, climbed by 8% to $73.98 billion from $68.58 billion a year ago. BofA also reported that net interest income, which is the difference between the interest income that a bank earns from its loans and [...]

Bernanke Casts Doubt on Stimulus, Says Fed May Buy Toxic Assets to Loosen Credit

Contrarian Profits — Wed, 14 Jan 2009 15:03:14 +0000

pWarning that the timing of an economic recovery is “highly uncertain,” Federal Reserve Chairman Ben S. Bernanke said yesterday (Tuesday) that an economic stimulus program might not be enough to do the job. Bernanke went on to say that the government might have to buy or guarantee banks’ toxic assets to revive growth./p p“a href="http://www.bloomberg.com/apps/news?pid=20601087#38;sid=aic5mGSBvQ4E#38;refer=home" target="_blank"The Federal Reserve will do its part to promote economic recovery, but other policy measures will be needed as well/a,” Bernanke said during a speech at the London School of Economics. “The incoming administration and the Congress are currently discussing a substantial fiscal package that, if enacted, could provide a significant boost to economic activity. In my view, however, fiscal actions are unlikely to promote a lasting recovery#8230;/p

Bailout Report Card – The Results Might Surprise You

Investment U — Tue, 13 Jan 2009 20:30:05 +0000

Bailout Report Card – The Results Might Surprise You by David Fessler, Advisory Panelist, The Oxford Club Editor’s Note: A couple of days ago, our colleagues over at The Oxford Club put out their thoughts on the Federal bailout. And from the sounds of it, our readers haven’t been entirely pleased with the grade. Most have given [...]

Risk Aversion Reigns Supreme!

Contrarian Profits — Tue, 13 Jan 2009 20:27:00 +0000

pCurrencies under dollar pressure #8230; How strong can yen get? #8230; TARP#8230; ECB rate questions#8230; And Now#8230; Today#8217;s Pfennig!/p pThe euro is trading at a one month low this morning, and the high yielders are getting stepped on again after enjoying a month a risk taking in the sun. That about explains everything, so I#8217;ll go the Big Finish now#8230; Gotcha! Let#8217;s see what else is up on this cold and blustery Terrific Tuesday#8230;/p pSo#8230; It looks as though Risk Aversion is reigning supreme once again. I just don#8217;t buy into the dollar being the #8220;safe haven#8221; with all that#8217;s going on here. But, that#8217;s the way it is, and I can#8217;t change it. On a side bar, I used to have#8230;/p

And Then There’s This…Tuesday, January 13th, 2009

Contrarian Profits — Tue, 13 Jan 2009 19:54:53 +0000

pGold was under slight pressure right from the open in Sydney on Monday morning. Gold was down $10 about half an hour before the Comex opened. Then the bullion banks pulled their bids and the tech funds found themselves with margin calls#8230;and their contracts got sold into a vacuum of no buyers#8230;so the price plunged. Same old routine. Every rally attempt after that was crushed. Gold never had a chance. Ditto for silver. Both metals closed slightly above their lows of the Comex session. Yep, the US$ was up#8230;but it had nothing to do with the pounding that the precious metals (and their shares) got. /p pThis was a criminal act, pure and simple./p tr a href="javascript:openKKCImage('1231848508-gold13.gif',635,405);"/a /tr tr a style="text-decoration: none;" href="javascript:openKKCImage('1231848508-gold13.gif',635,405);"emclick to enlarge/em/a /tr pFriday#8217;s open interest in gold (after#8230;/p

Shift in China Trade Policy Could Accelerate Western Steelmakers’ Slump

Contrarian Profits — Tue, 30 Dec 2008 14:07:34 +0000

pThe steel business faces its biggest hurdle in 60 years with some analysts predicting double digit production cuts in 2009. Now, a sudden change in China trade policy may spell even more trouble for Western steelmakers, as Beijing is currently considering measures to shore up its ailing steel industry with new export policies. /p pAccording to a href="http://www.worldsteeldynamics.com/"World Steel Dynamics/a, a U.S. steel consulting firm, steel production could fall next year by 13.9% compared with this year. This downturn comes after a long period of growth in the steel industry. In fact, output has grown every year since 1998 - soaring from 777 million metric tons a decade ago to 1.34 billion metric tons in 2007./p pThe catalyst behind the expansion has been#8230;/p

Shift in China Trade Policy Could Accelerate Western Steelmakers’ Slump

Money Morning — Mon, 29 Dec 2008 20:49:53 +0000

By Don Miller Contributing Writer Money Morning The steel business faces its biggest hurdle in 60 years with some analysts predicting double digit production cuts in 2009. Now, a sudden change... Money Morning is here to help investors profit han...

A HUGE Currency Rally!

Contrarian Profits — Mon, 29 Dec 2008 15:45:39 +0000

pGaza bombing has dollar on the run#8230; More proof we#8217;re turning Japanese#8230; Adding to the debt burden#8230; What will deflation do for the dollar? And Now#8230; Today#8217;s Pfennig!/p pThe currencies had a split personality while I was gone too#8230; At first, they rallied like there was no tomorrow, but then sold off, and then range traded. So, we#8217;ll finish the year on a down note for most of the currencies, but knowing all too well that the markets are beginning to realize that the debts the U.S. is chalking up are not going to go away, and in fact they#8217;re just going to get worse, and that spells bad times for the dollar#8230; Eventually#8230;/p pI did a lot of reading on my#8230;/p

CIT To Receive $2.33 Billion Under TARP

Daniel Shepard — Tue, 23 Dec 2008 14:59:25 +0000

Tuesday December 23, 2008 Navivest Commercial finance company CIT Group (CIT) announced today that it has received preliminary approval to receive $2.33 billion from the government#8217;s $700 billion financial bailout fund. CIT will receive the funds from the Troubled Assets Relief Program, or TARP, which congress approved earlier this year, to help bolster the balance sheet of large [...]

President Bush Extends Lifeline To Automakers

Daniel Shepard — Fri, 19 Dec 2008 15:00:47 +0000

Friday December 19, 2008 Navivest Concerned over the effects of what a “disorderly bankruptcy” of the country’s major automakers would have on the nation, President George Bush today announced an emergency bailout of the industry Friday. Under the emergency plan, $17.4 billion in rescue loans will be made to the General Motrs (GM) and Chrysler and in return, [...]

What to Buy as the Dollar Stumbles

Contrarian Profits — Fri, 19 Dec 2008 14:25:37 +0000

pHere are three things you can buy now to capitalize on spiking unemployment, crashing banks and the tumbling dollar. Earlier this week, Chairman Bernanke and his cronies on the U.S. Federal Reserve did the unthinkable, indeed the unimaginable. /p pIn an effort to demonstrate how serious they are about this whole “recession thing,” they stated that their new interbank loan rate target was zero. Zip. Nada./p pWhen asked if this meant they had run out of bullets, Bernanke implied they could always simply inject money directly into the system by buying billions of dollars worth of Treasury bonds./p pThis is actually a peculiar thought, because Treasury bonds are the one asset that is actually in demand these days (whereas dollar demand is actually#8230;/p

Obama, Paulson May Ask for a Combined $1.2 Trillion from Skeptical Congress

Contrarian Profits — Fri, 19 Dec 2008 14:01:33 +0000

pA price tag has emerged for President-elect Barack Obama’s infrastructure stimulus, $850 billion, according to one of his advisers. His team calculates the figure is necessary to create 2.5 million jobs, improve an array of infrastructure projects, and bolster unemployment, health-care, and renewable energy programs, lawmakers told strongemBloomberg/em/strong./p pIn the shorter term, U.S. Treasury Secretary Henry Paulson a href="http://www.bloomberg.com/apps/news?pid=newsarchive#38;sid=a4iEJt6gTlII" target="_blank"may ask for the other half of October’s $700 billion Troubled Asset Relief Program/a (TARP), money originally earmarked for bank rescue but now possibly a source for a highly anticipated auto bailout, strongemBloomberg /em/strongalso reported./p pBut for Obama to begin his spending spree, and for Paulson to continue his, each will genuflect before Congress to get the money. The combined total is about $1.2 trillion, but#8230;/p

Incipient Chinese Yuan Depreciation in Context

Menzie Chinn — Thu, 11 Dec 2008 12:39:21 +0000

Plenty of breathless commentary on how Chinese yuan depreciation against the dollar might trigger conflict. From Barrons:

Reality Check for China
By LESLIE P. NORTON
The currency's decline could dampen foreign speculators' enthusiasm
Last week, China's currency, the renminbi, juddered to its biggest one-day decline against the greenback since Beijing began a managed float in 2005.
Says Win Thin, a currency economist at Brown Brothers Harriman: "The prospect of appreciation is off the table for now." Morgan Stanley now expects China to depreciate its currency by 5% to 10% in the coming year. The current rate is 6.88 to the dollar.

The renminbi can float in a trading band of 0.5% on either side of the U.S. dollar and has gone up 20% against the buck in the past three years. To trim China's fat trade surplus with the U.S., Treasury Secretary Henry Paulson is pushing for further appreciation, and the Obama administration will probably hew to the script.
The dollar's recent jump has pulled the renminbi up sharply against the euro and the currencies of Korea, Taiwan and Indonesia. That's bad news for China. Its exports account for just 8.8% of GDP, but nearly 20% of growth. Now, China is slashing rates and spending $586 billion to stimulate its economy. Last month, Brown Brothers notes, People's Bank of China Gov. Zhou Xiaochuan said he couldn't rule out weakening the renminbi to boost the economy.

While there is nothing wrong in this article, it does miss the context of the predicted RMB depreciation by focusing on the bilateral rate. On a trade weighted, inflation adjusted basis, one can see why Chinese authorities might want the RMB to depreciate.

Figure 1: Log trade weighted value of the RMB (blue) and log USD/CNY exchange rate (red). Dashed line at the float of the RMB in July 2005. Source: BIS, St. Louis Fed FRED II and author's calculations.

And why has the RMB appreciated? Because the dollar has appreciated so drastically.

Figure 2: Log trade weighted value of the RMB (blue) and log trade weighted value of USD against broad basket of currencies (red). Dashed line at the float of the RMB in July 2005. Source: BIS, Federal Reserve Board and author's calculations.

Now, there is a separate issue of whether China should try to make the RMB depreciate against the dollar -- that is there is a difference between understanding why the Chinese authorities are pursuing this policy, and supporting it. Brad Setser argues that -- given China's large and growing trade surplus and forex reserves -- it shouldn't allow RMB depreciation against the dollar. I tend to agree. But I doubt that RMB depreciation against the USD is the biggest issue facing the world economy.

So when you see a headline like Renminbi Depreciation May Stir Trade War, well, it may prove to be true, but then again it might not.

China Blasts U.S. Economic Policy, Expresses Doubt in Financial System

Contrarian Profits — Fri, 05 Dec 2008 14:43:22 +0000

pChina blasted U.S. economic policy yesterday (Thursday) at the Strategic Economic Dialogue, a two-day summit engineered to address long-term issues between the two countries. Chinese authorities have grown more fervent, and more explicit, with their criticism of the U.S. financial system over the past year, evidence of a shift in the balance of power between the nations./p p#8220;Over-consumption and a high reliance on credit is the cause of the U.S. financial crisis,#8221; said Zhou Xiaochuan, governor of the Chinese central bank. #8220;As the largest and most important economy in the world, the U.S. should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits.#8221;/p pThis kind of lecture was a deviation from past#8230;/p

Earnings Preview for Dec 8 – 12 – Earnings Preview

Charles Rotblut — Fri, 05 Dec 2008 00:00:00 +0000

No companies are expected to top expectations. CKE Restaurants, Inc. (CKE) and National Semiconductor Corporation (NSM) could miss estimates.

Just 49 companies have been confirmed to report for the second week of December. Within this group are S&P 500 members AutoZone, Inc. (AZO), Ciena Corporation (CIEN), Costco (COST), H&R Block, Inc. (HRB), The Kroger Co. (KR), National Semiconductor Corporation (NSM) and Pall Corporation (PLL).

(The light earnings calendar is typical for this time of year. Except for a mid-December bump when some early reporters give their end-of-year results, there will not be a significant number of earnings reports until the second-half of January.)

The scheduled economic data should not move the markets significantly. October pending homes sales might get more attention on Tuesday given the recent rebound in homebuilding stocks, but I don't expect it to have a meaningful impact.

Tuesday: October pending home sales
Wednesday: October wholesale inventories, November treasury deficit, weekly crude inventories
Thursday: November import and export prices, October trade balance, weekly initial jobless claims
Friday: November retail sales, preliminary December University of Michigan consumer confidence, November producer price index (PPI), October business inventories

Federal Reserve Governor Randall Kroszner will speak in Geneva about the potential for market instability on Monday. Later in the day, Vice Chairman Donald Kohn will talk about the banking system at a housing forum in Washington, D.C.

The Fed will hold its final scheduled meeting of the year on Dec 16. Futures are pricing a 75-basis point cut.

Congress could hold a vote on whether to extend the Big 3 financing. Many senators were not swayed on Thursday, however, so it is unclear what the future of the bailout is.

Unscheduled events remain a wildcard, including any new actions taken by Treasury Secretary Henry Paulson or new economic proposals from President-elect Barack Obama.

Companies That Could Issue Positive Earnings Surprises

Trends in earnings estimate revisions do not suggest any of the companies reporting will top expectations.

Companies That Could Issue Negative Earnings Surprises

All of the covering brokerage analysts cut their fiscal third-quarter profit projections on CKE Restaurants, Inc. (CKE) over the past few weeks. One reason might have been the company's observation that restaurant operating costs rose 60 to 80 basis points during the quarter. The downward revisions caused the consensus earnings estimate to fall 7 cents to 10 cents per share. CKE has missed during the past 3 quarters. CKE Restaurants is scheduled to report on Wednesday, Dec 10, after the close of trading.

Last month, National Semiconductor Corporation (NSM) revised its fiscal second-quarter revenue guidance. Due to weakness in the wireless handset market, the company expects sales to total between $420 and $425 million. (Previously, NSM predicted sales of $470 to $480 million.) The majority of the covering brokerage analysts quickly cut their profit forecasts, causing the consensus earnings estimate to fall 8 cents to 24 cents per share. The most accurate estimate is more bearish at 20 cents per share. Investors should also note that NSM missed first-quarter expectations by a penny per share. National Semiconductor is scheduled to report on Monday, Dec 8, after the close of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

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Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Dec 8 - 12¹. Prices are as of Thursday's, Dec 4, market close.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time	Price
H & R Block	HRB	($0.41)	($0.42)	(14.3%)	12/8/2008	AMC	$19.79
Gander Mtn Co	GMTN	$0.02	($0.25)	(42.9%)	12/8/2008	AMC	$1.52
Idt Corp-Cl B	IDT	($0.34)	($0.23)	(63.6%)	12/8/2008	N/A	$0.46
Learning Tree	LTRE	$0.14	$0.21	(11.5%)	12/8/2008	AMC	$9.99
Mitcham Inds	MIND	$0.29	$0.24	(27.3%)	12/8/2008	AMC	$4.15
Natl Semicon	NSM	$0.24	$0.34	(2.9%)	12/8/2008	AMC	$10.15
Adc Telecomm	ADCT	$0.12	$0.29	0.0%	12/9/2008	AMC	$5.58
Analogic Corp	ALOG	$0.54	$0.52	5.8%	12/9/2008	BTO	$36.12
Arcsight Inc	ARST	$0.00	N/A	(33.3%)	12/9/2008	AMC	$5.18
Autozone Inc	AZO	$2.20	$2.02	(0.5%)	12/9/2008	BTO	$114.38
Cooper Cos	COO	$0.58	$0.54	3.1%	12/9/2008	AMC	$13.76
Ferrellgas -Lp	FGP	($0.41)	($0.41)	(15.1%)	12/9/2008	N/A	$15.00
Finisar Corp	FNSR	$0.03	($0.03)	100.0%	12/9/2008	AMC	$0.46
G-Iii Apparel	GIII	$1.76	$1.41	8.0%	12/9/2008	AMC	$7.03
Ico Inc	ICOC	$0.15	$0.17	(15.8%)	12/9/2008	N/A	$3.83
Kroger Co	KR	$0.38	$0.37	2.4%	12/9/2008	BTO	$26.88
Ltx-Credence Cp	LTXC	($0.13)	($0.06)	(66.7%)	12/9/2008	AMC	$0.31
Methode Elect-A	MEI	$0.16	$0.24	0.0%	12/9/2008	BTO	$8.33
Navisite Inc	NAVI	($0.09)	($0.08)	(233.3%)	12/9/2008	N/A	$0.43
Oxford Inds Inc	OXM	$0.49	N/A	30.3%	12/9/2008	AMC	$5.84
Pall Corp	PLL	$0.38	$0.34	0.0%	12/9/2008	AMC	$25.62
Pep Boys M M &J	PBY	$0.01	($0.54)	57.1%	12/9/2008	BTO	$4.37
Saic Inc	SAI	$0.29	$0.26	3.8%	12/9/2008	AMC	$17.73
Tier Tech Inc	TIER	($0.17)	($0.07)	71.4%	12/9/2008	AMC	$4.34
Toro Co	TTC	$0.08	$0.16	2.1%	12/9/2008	BTO	$28.45
Vail Resorts	MTN	($0.83)	($0.63)	(52.6%)	12/9/2008	BTO	$20.43
Williams Ctrls	WMCO	$0.31	$0.20	-20.00%	12/9/2008	N/A	$7.50
Biodel Inc	BIOD	($0.45)	($0.42)	4.4%	12/10/2008	BTO	$2.61
Bway Holding Co	BWY	$0.31	$0.13	20.6%	12/10/2008	BTO	$4.50
Cke Restaurants	CKR	$0.10	$0.15	21.0%	12/10/2008	N/A	$7.71
Emcore Corp	EMKR	($0.02)	($0.13)	(150.0%)	12/10/2008	AMC	$1.38
Fifth Street Fi	FSC	$0.28	N/A	9.1%	12/10/2008	AMC	$6.63
Fuelcell Energy	FCEL	($0.31)	($0.25)	(50.0%)	12/10/2008	AMC	$3.78
Greif Bros-Cl A	GEF	$1.21	$1.14	6.3%	12/10/2008	AMC	$30.48
Hooker Furnitur	HOFT	$0.35	$0.50	(21.7%)	12/10/2008	BTO	$6.95
Korn/Ferry Intl	KFY	$0.28	$0.37	20.0%	12/10/2008	N/A	$11.63
Multimedia Game	MGAM	$0.00	$0.02	(75.0%)	12/10/2008	BTO	$2.26
Ocean Power Tec	OPTT	($0.46)	($0.18)	5.0%	12/10/2008	BTO	$7.93
Powell Inds	POWL	$0.58	$0.22	23.2%	12/10/2008	BTO	$20.09
Ciena Corp	CIEN	($0.04)	$0.38	(3.3%)	12/11/2008	BTO	$6.19
Costco Whole Cp	COST	$0.62	$0.59	5.4%	12/11/2008	BTO	$52.75
Esterline	ESL	$1.06	$0.78	6.3%	12/11/2008	AMC	$32.80
Gildan Actvwear	GIL	$0.45	$0.38	2.2%	12/11/2008	BTO	$14.25
Integral Sys/Md	ISYS	$0.20	$0.22	52.8%	12/11/2008	BTO	$21.57
Krispy Kreme	KKD	$0.01	($0.01)	(200.0%)	12/11/2008	N/A	$2.49
Lululemon Athlt	LULU	$0.13	$0.11	28.6%	12/11/2008	BTO	$9.57
Martek Bioscs	MATK	$0.27	$0.23	16.7%	12/11/2008	AMC	$27.39
NCI Bldg System	NCS	$1.12	$1.27	39.3%	12/11/2008	N/A	$13.37
White Electronc	WEDC	$0.07	$0.06	57.1%	12/11/2008	AMC	$3.63

BMO = Before The Market Open, AMC = After Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"NST" Free Stock Analysis: Buy? Sell? Hold?
"PLLA" Free Stock Analysis: Buy? Sell? Hold?
"BLC" Free Stock Analysis: Buy? Sell? Hold?
"CIEN" Free Stock Analysis: Buy? Sell? Hold?
"AZO" Free Stock Analysis: Buy? Sell? Hold?
"PCLB" Free Stock Analysis: Buy? Sell? Hold?
"KR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Earnings Preview for Dec 8-12 – Earnings Preview

Charles Rotblut — Fri, 05 Dec 2008 00:00:00 +0000

No companies are expected to top expectations. CKE Restaurants, Inc. (CKR) and National Semiconductor Corporation (NSM) could miss estimates. The previous version of this week's article had previously listed the wrong ticker for CKE Restaurants. The correct ticker is CKR.

Tuesday: October pending home sales
Wednesday: October wholesale inventories, November treasury deficit, weekly crude inventories
Thursday: November import and export prices, October trade balance, weekly initial jobless claims
Friday: November retail sales, preliminary December University of Michigan consumer confidence, November producer price index (PPI), October business inventories

The Fed will hold its final scheduled meeting of the year on Dec 16. Futures are pricing a 75-basis point cut.

Congress could hold a vote on whether to extend the Big 3 financing. Many senators were not swayed on Thursday, however, so it is unclear what the future of the bailout is.

Unscheduled events remain a wildcard, including any new actions taken by Treasury Secretary Henry Paulson or new economic proposals from President-elect Barack Obama.

Companies That Could Issue Positive Earnings Surprises

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Trends in earnings estimate revisions do not suggest any of the companies reporting will top expectations.

Companies That Could Issue Negative Earnings Surprises

All of the covering brokerage analysts cut their fiscal third-quarter profit projections on CKE Restaurants, Inc. (CKR) over the past few weeks. One reason might have been the company's observation that restaurant operating costs rose 60 to 80 basis points during the quarter. The downward revisions caused the consensus earnings estimate to fall 7 cents to 10 cents per share. CKE has missed during the past 3 quarters. CKE Restaurants is scheduled to report on Wednesday, Dec 10, after the close of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Surprise Trader can help you turn earnings surprises into quick profits. Learn how.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Dec 8 - 12¹. Prices are as of Thursday's, Dec 4, market close.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time	Price
H & R Block	HRB	($0.41)	($0.42)	(14.3%)	12/8/2008	AMC	$19.79
Gander Mtn Co	GMTN	$0.02	($0.25)	(42.9%)	12/8/2008	AMC	$1.52
Idt Corp-Cl B	IDT	($0.34)	($0.23)	(63.6%)	12/8/2008	N/A	$0.46
Learning Tree	LTRE	$0.14	$0.21	(11.5%)	12/8/2008	AMC	$9.99
Mitcham Inds	MIND	$0.29	$0.24	(27.3%)	12/8/2008	AMC	$4.15
Natl Semicon	NSM	$0.24	$0.34	(2.9%)	12/8/2008	AMC	$10.15
Adc Telecomm	ADCT	$0.12	$0.29	0.0%	12/9/2008	AMC	$5.58
Analogic Corp	ALOG	$0.54	$0.52	5.8%	12/9/2008	BTO	$36.12
Arcsight Inc	ARST	$0.00	N/A	(33.3%)	12/9/2008	AMC	$5.18
Autozone Inc	AZO	$2.20	$2.02	(0.5%)	12/9/2008	BTO	$114.38
Cooper Cos	COO	$0.58	$0.54	3.1%	12/9/2008	AMC	$13.76
Ferrellgas -Lp	FGP	($0.41)	($0.41)	(15.1%)	12/9/2008	N/A	$15.00
Finisar Corp	FNSR	$0.03	($0.03)	100.0%	12/9/2008	AMC	$0.46
G-Iii Apparel	GIII	$1.76	$1.41	8.0%	12/9/2008	AMC	$7.03
Ico Inc	ICOC	$0.15	$0.17	(15.8%)	12/9/2008	N/A	$3.83
Kroger Co	KR	$0.38	$0.37	2.4%	12/9/2008	BTO	$26.88
Ltx-Credence Cp	LTXC	($0.13)	($0.06)	(66.7%)	12/9/2008	AMC	$0.31
Methode Elect-A	MEI	$0.16	$0.24	0.0%	12/9/2008	BTO	$8.33
Navisite Inc	NAVI	($0.09)	($0.08)	(233.3%)	12/9/2008	N/A	$0.43
Oxford Inds Inc	OXM	$0.49	N/A	30.3%	12/9/2008	AMC	$5.84
Pall Corp	PLL	$0.38	$0.34	0.0%	12/9/2008	AMC	$25.62
Pep Boys M M &J	PBY	$0.01	($0.54)	57.1%	12/9/2008	BTO	$4.37
Saic Inc	SAI	$0.29	$0.26	3.8%	12/9/2008	AMC	$17.73
Tier Tech Inc	TIER	($0.17)	($0.07)	71.4%	12/9/2008	AMC	$4.34
Toro Co	TTC	$0.08	$0.16	2.1%	12/9/2008	BTO	$28.45
Vail Resorts	MTN	($0.83)	($0.63)	(52.6%)	12/9/2008	BTO	$20.43
Williams Ctrls	WMCO	$0.31	$0.20	-20.00%	12/9/2008	N/A	$7.50
Biodel Inc	BIOD	($0.45)	($0.42)	4.4%	12/10/2008	BTO	$2.61
Bway Holding Co	BWY	$0.31	$0.13	20.6%	12/10/2008	BTO	$4.50
CKE Restaurants	CKR	$0.10	$0.15	21.0%	12/10/2008	N/A	$7.71
Emcore Corp	EMKR	($0.02)	($0.13)	(150.0%)	12/10/2008	AMC	$1.38
Fifth Street Fi	FSC	$0.28	N/A	9.1%	12/10/2008	AMC	$6.63
Fuelcell Energy	FCEL	($0.31)	($0.25)	(50.0%)	12/10/2008	AMC	$3.78
Greif Bros-Cl A	GEF	$1.21	$1.14	6.3%	12/10/2008	AMC	$30.48
Hooker Furnitur	HOFT	$0.35	$0.50	(21.7%)	12/10/2008	BTO	$6.95
Korn/Ferry Intl	KFY	$0.28	$0.37	20.0%	12/10/2008	N/A	$11.63
Multimedia Game	MGAM	$0.00	$0.02	(75.0%)	12/10/2008	BTO	$2.26
Ocean Power Tec	OPTT	($0.46)	($0.18)	5.0%	12/10/2008	BTO	$7.93
Powell Inds	POWL	$0.58	$0.22	23.2%	12/10/2008	BTO	$20.09
Ciena Corp	CIEN	($0.04)	$0.38	(3.3%)	12/11/2008	BTO	$6.19
Costco Whole Cp	COST	$0.62	$0.59	5.4%	12/11/2008	BTO	$52.75
Esterline	ESL	$1.06	$0.78	6.3%	12/11/2008	AMC	$32.80
Gildan Actvwear	GIL	$0.45	$0.38	2.2%	12/11/2008	BTO	$14.25
Integral Sys/Md	ISYS	$0.20	$0.22	52.8%	12/11/2008	BTO	$21.57
Krispy Kreme	KKD	$0.01	($0.01)	(200.0%)	12/11/2008	N/A	$2.49
Lululemon Athlt	LULU	$0.13	$0.11	28.6%	12/11/2008	BTO	$9.57
Martek Bioscs	MATK	$0.27	$0.23	16.7%	12/11/2008	AMC	$27.39
NCI Bldg System	NCS	$1.12	$1.27	39.3%	12/11/2008	N/A	$13.37
White Electronc	WEDC	$0.07	$0.06	57.1%	12/11/2008	AMC	$3.63

BMO = Before The Market Open, AMC = After Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"NST" Free Stock Analysis: Buy? Sell? Hold?
"PLLA" Free Stock Analysis: Buy? Sell? Hold?
"CARL" Free Stock Analysis: Buy? Sell? Hold?
"AZO" Free Stock Analysis: Buy? Sell? Hold?
"CIEN" Free Stock Analysis: Buy? Sell? Hold?
"PCLB" Free Stock Analysis: Buy? Sell? Hold?
"BLC" Free Stock Analysis: Buy? Sell? Hold?
"KR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

China Slams Western Financial Firms

Contrarian Profits — Thu, 04 Dec 2008 13:40:56 +0000

pChina’s $200 billion sovereign wealth fund, China Investment Corp. (CIC), doesn’t plan to open its wallet to foreign financial firms and banks any time soon. /p pStill mindful of losing about $6 billion of the $8 billion CIC invested in Morgan Stanley (a href="http://finance.google.com/finance?q=NYSE:MS"MS/a) and Blackstone last year, chairman Lou Jiwei not only bluntly rejected the notion of putting the government’s money into banks outside of its homeland, a href="http://www.bloomberg.com/apps/news?pid=20601089#38;sid=a4qkZDueQTwA#38;refer=china"but did so citing an overwhelming fear/a./p p#8220;I don’t dare to invest in financial institutions now,#8221; Lou, said today (Wednesday) at a conference in Hong Kong, strongemBloomberg /em/strongreported. #8220;The policies of the developed nations on these institutions are not clear. Until they are clear, I don’t dare to invest in them. What if they go#8230;/p

Why Gold Will Soar As Fiat Currencies Crumble

Contrarian Profits — Wed, 03 Dec 2008 14:58:16 +0000

pThe short-term path of gold is still unclear says strongDavid Galland/strong. But its a good sign that demand for physical gold soars when prices tip towards $750 an ounce. And this threshold is likely to creep upwards as the US dollar loses its worth, and foreign governments convert currency reserves for the precious metal./p pThis from a href="http://www.moneymorning.com" class="alinks_links"Money Morning/a:/p blockquotepOf late, I have read a number of analysts, Jim Rogers even, who have expressed the view that gold could dip to the mid- to low $600 level./p pIt could happen, but I think not. Already, buyers of physical gold are finding anything near $700 to be cheap and are helping to build a floor under the monetary metal. On that topic, a friend sent#8230;/p/blockquote

Gold is a “Buy” at $750 or Less … But in the Low $600 Range, it Will be an Absolute Steal

Money Morning — Wed, 03 Dec 2008 09:30:47 +0000

By David Galland Editor, The Casey Report Of late, I have read a number of analysts, Jim Rogers even, who have expressed the view that gold could dip to the mid- to low $600 level. It... Money Morning is here to help investors profit handso...

Looming RMB depreciation could hurt Asian economies

Jason G. Wulterkens — Tue, 02 Dec 2008 05:15:25 +0000

Is an RMB (yuan) depreciation in the offing? Michael Pettis, a professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets, noted Monday that President Hu Jintao’s speech at this past weekend’s Politburo meeting leaves some wondering. According to today’s People’s Daily, besides warning “that the global financial turmoil will make [...]

Spreading Credit Woes Cause Government Intervention

QualityStocks — Fri, 28 Nov 2008 19:46:49 +0000

When it comes to the financial markets, September was a startling and unsettling month that Americans may never forget. We have witnessed the collapse and/or government rescue of financial services giants that are household names. The financial fears of the public and the resulting stock and bond market volatility have prompted the Federal Reserve and [...]

This Thanksgiving, We Are All Turkeys

Bill Bonner — Thu, 27 Nov 2008 11:56:47 +0000

pUnless you#8217;re a turkey, Thanksgiving is usually a happy holiday. But stronga href="http://www.contrarianprofits.com/articles/author/bill-bonner/" class="alinks_links"Bill Bonner/a /strongsays the crumbling economy leaves all of us fearing the axe this year. The global credit crisis has taken us into unchartered territory. And government bailouts will only draw out the inevitable correction./p pThis from The a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a:/p blockquotep“Until today or tomorrow, the typical turkey enjoyed a fairly decent life#8230;” commented our friend Nassim Taleb, in Zurich yesterday./p pYesterday [Wednesday], the stock market was quiet. The Dow ended up 36 points. Oil held at $50. Gold too#8230;it stayed right where it was, at $820 an ounce./p pBut the slaughterhouses and gold mints worked overtime./p p“You can understand how fraudulent most economic analysis is,” Nassim explained, “just by looking the life of the turkey.#8230;/p/blockquote

Citi Gets More ‘Gov’t Money’

Contrarian Profits — Tue, 25 Nov 2008 13:38:39 +0000

pBailout fuels a rally#8230; How long the rally last? A slew of data today#8230; Thoughts from Jim Rogers#8230; And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Terrific Tuesday to you! Now that was quite the Investment Conference I just attended and gave two presentations to! Someone sent me a headline that appeared on the internet prior to the Conference that read: Three Kings of the Financial World on Tap to Speak for the Next WMI M2#8230; And guess what? They considered me as one of those in the headline! WOW! OK, no#8230; I#8217;m not getting a big head, I#8217;ve got my beautiful bride to keep me humble. She responded to hearing about this article with a heaping helping of, #8220;OK King,#8230;/p

The Trading Plan For Today – 11/25/08

Daniel Shepard — Tue, 25 Nov 2008 13:20:08 +0000

Tuesday November 25, 2008 Navivest Indications on where the stock market, as represented by the Dow Jones Industrial Averages, will open this morning have been moving in and out of positive territory all morning. There are still hopes for some moves to the upside, as U.S. Treasury Secretary Henry Paulson will be announcing a plan to boost consumer [...]

Obama’s economic plans

James Hamilton — Tue, 25 Nov 2008 00:22:38 +0000

President-elect Barack Obama today announced more details of the economic team that will be advising the new president. I find these quite encouraging.

The Wall Street Journal reports:

Speaking at a news conference in Chicago, Mr. Obama unveiled the team that will lead his administration's response to the slumping economy and battered financial markets, confirming that New York Federal Reserve President Tim Geithner will be nominated to replace Henry Paulson at the Treasury Department.... In addition to Mr. Geithner, Mr. Obama said former Treasury Secretary Larry Summers will head his National Economic Council, while economist Christina Romer will lead the Council of Economic Advisors and Melody Barnes will be director of the Domestic Policy Council.

I'm particularly reassured to hear that Larry Summers will head the National Economic Council. How much power this position involves will depend on how the internal White House politics play out, but potentially this appointment could set Summers up to be the single most important architect of economic policy for the new administration. Summers is blessed with a tremendous intellect, and he's exactly the person who can sort through the current complex issues to identify and implement what needs to be done. The fact that Obama picked him for this position means that the president-elect is serious about this whole economy thing-- Obama wanted (and got) the best person for the job, period.

I have also known and admired Berkeley Professor Christina Romer for many years, and consider her an excellent choice to lead the Council of Economic Advisors. I expect that Americans will come to find her clear speaking, keen insight, and common sense to be very valuable and reassuring as we face together the tumultuous months that surely lie ahead.

I'm also pleased by the appointments of Summers and Romer because of what they portend looking past the current crisis. I expect them to be voices of reason counseling against protectionist trade measures that could otherwise have the potential to cause tremendous damage to the U.S. and world economy. I would also expect these thoughtful economists to make sure that the administration understands the potentially disastrous economic consequences of relying on heavy new corporate tax loads as the way to pay for all of the initiatives.

Although I do not know Tim Geithner personally, I can see that his experience would be quite valuable in the current situation. We can't have the new team learning on the job-- they have to hit the ground running. Geithner fits that bill in a way that perhaps no one else in the world could.

I'd also like to comment briefly on the stimulus package that was also brought up in today's news conference. I recall the advice that Larry Summers offered when we were debating this issue last January:

First, to be effective, fiscal stimulus must be timely.... Second, fiscal stimulus only works if it is spent so it must be targeted.... Third, fiscal stimulus, to be maximally effective, must be clearly and credibly temporary-- with no significant adverse impact on the deficit for more than a year or so after implementation.

Although our current situation is more serious than the one we faced a year ago, I still believe that this is a correct articulation of the core principles to keep in mind. Bigger government deficits should not be conceived by anyone as a long-run solution to our economic problems. When economists tell the politicians, "increasing the deficit right now would be a good thing," we run the same risk as if a doctor advises an alcoholic, "a few glasses of wine will be good for your heart."

But I think Obama's announcements today may be just what the doctor ordered. Let us hope that the new president and congress listen carefully to the good doctors' advice, and can later put the deficit drink down with the same enthusiasm that they currently lift it to their lips.

Technorati Tags: macroeconomics, economics, recession, fiscal stimulus, Larry Summers, Christina Romer

Gold in the Low $600s?

Contrarian Profits — Thu, 20 Nov 2008 18:27:35 +0000

Of late, I have read a number of analysts, Jim Rogers even, who have expressed the view that gold could dip to the mid- to low $600 level. Could happen, but I think not. Already, buyers of physical gold are finding anything near $700 to be cheap and so are helping to build a floor under the monetary metal.

On that topic, a friend sent this item along last week…

(Gulf News Nov 12) Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals (Dh12.75 billion) being spent on the yellow metal during the last two weeks.

Demand is expected to rise still higher as more investors turn to gold as…

$ vs. Crude…Hmmm! (9 July 2008 Issue)

Jack Crooks — Thu, 20 Nov 2008 12:11:26 +0000

Key News
• Oil prices fell below $53 to almost a two-year low . (AP)
• The yield on two-year US Treasury bonds hit a record low of 1.06 per cent, responding both to the fresh flight to safety and the prospect of lower interest rates. Eurozone government bond futures hit their highest level since March 2006. (FT)

• World stock markets tumbled Thursday, with benchmarks in Tokyo and Seoul losing almost 7 percent each. (AP)
• Five years after Federal Reserve Chairman Ben S. Bernanke helped stamp out the risk of deflation, the threat is returning as the financial crisis and a worsening economic slump pull inflation lower. (Bloomberg)
• The RBA said in a monthly bulletin today that it bought A$3.15 billion ($2 billion) of its own currency last month, the biggest net purchase on record, as the local dollar posted a record monthly decline.

• U.S. options trading slowed this month from a record pace after hedge funds collapsed and the biggest market swings since 1929 made equity derivatives too expensive to be used as insurance against stock losses. (Bloomberg)
Key Reports (WSJ):
8:30a.m. Initial Jobless Claims For Nov 18 Week: Expected: -11K. Previous: +32K.
10:00a.m. Oct Conference Board Leading Indicators: Expected: -0.6%. Previous: -0.3%
10:00a.m. Nov Philadelphia Fed Business Index: Expected: -38. Previous: -37.5.
10:00a.m. DJ-BTMU Business Barometer For Nov 8: Previous: -0.7%.

Quotable
“Early in life I had noticed that no event is ever correctly reported in a newspaper.”

George Orwell

Best of CC: Below is a reprint of our 9 July 2008 Currency Currents where we examined the break down in the correlation between oil and the dollar—it was telling us something as we suspected. It’s another example of why we pay close attention to intermarket correlations; it can be a very powerful tool for currency traders.

FX Trading – $ vs. Crude…Hmmm! (9 July 2008 Issue)
Can we continue to hang our hat on the view that much of the bad news is already in the price of the dollar? Well, based on the dismal views about the US economy, which we don’t dispute, which we seem to find everywhere we look, the short answer is yes. But it’s not just that belief. Something seems to have changed—though even this is a thin reed of reasoning we grant you.

Back in mid-April the US dollar index made its closing low (and its all-time low in mid-March, the day the Fed saved Bear Stearns). At the time, crude oil was trading at $116 per barrel (heck, downright cheap in retrospect…LOL). By now of course, everyone had caught on to the crude-$ connection that says the dollar goes lower when oil goes higher. But, the problem with this new theory is that crude oil has rallied about $29 since mid-April, or a cool 25%! However, the US $ index has rallied too—up 2%!

Based on the crude-$ connection, that wasn’t supposed to happen.

Chronology of key players’ recent trips to the Middle East (read Saudi Arabia):

• Vice President Dick Cheney – Mid-March
• President George Bush – Mid-May
• Treasury Secretary Hank Paulson – Late-May and Early-June

And on June 1, 2008 this from Reuters:

ABU DHABI (Reuters) - Treasury Secretary Henry Paulson said on Sunday leaders of Gulf oil producing states had told him that abandoning their currency pegs to the dollar will not solve their inflation problems.
Paulson, two-thirds of the way through a four-day trip to Saudi Arabia, Qatar and the United Arab Emirates, said leaders in the region have "quite an awareness that the peg does not influence inflation to a significant degree.
"They recognize that inflation is the overriding issue ... Ending the peg is not the solution to the inflation problem."

Hmmm…

Is it possible the Gulf States were treated to a litany of promises that the dollar was nearing a bottom and now is not the time to abandon said dollar pegs? Again, we have no clue. But, it would be a nice fit with the ongoing lack of correlation between all-time highs in crude and the $ index cautiously trending higher.

Stranger things have happened. Stay tuned.

Regards,
Jack&JR

Interpreting Results

Jeffrey Miller — Tue, 18 Nov 2008 01:13:51 +0000

Continuing with a recent theme, here are two questions of interpretation. Interpreting Market Action During today's trading stocks opened lower, staged a big mid-day rally, trading in positive territory. Finally, stocks closed about 2.4% lower. Here is a chart. With the trading in mind, what do you think of this news story: Dell Downgrade Sends Stocks [...]

Where is all the money going?

Mike Larson — Thu, 13 Nov 2008 14:51:05 +0000

That's a question I'm seeing more people ask, and for good reason. Bloomberg News has been on a little bit of a crusade to find out what the Fed is doing with our money, for instance, and I for one hope they gain some traction. See the following excerpt:

"Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.

At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.

"There cannot be accountability in government and in our financial institutions without transparency,'' Texas Senator John Cornyn said in a statement. "Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.''

"House Republican Leader John Boehner and Republican Representatives Jeb Hensarling of Texas, Scott Garrett of New Jersey and Walter Jones of North Carolina also are pressing Fed Chairman Ben S. Bernanke to elaborate on the Fed's emergency lending. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in the separate $700 billion bailout of the banking system that was approved by Congress last month.

"European Central Bank President Jean-Claude Trichet today urged greater disclosure to help strengthen the global financial system.

"Despite all regulatory advances and progress in information technology, the financial system has been characterized by a lack of transparency about the ultimate allocation of risks,'' Trichet wrote in today's Financial Times, citing as examples "the sheer complexity of structured financial products, which even sophisticated investors are not able to assess properly, and the lack of regulation of certain financial institutions."

"Bloomberg News has sought records of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure."

Then there's the Washington Post story today about the lack of oversight of how the TARP bailout money is being spent. Is the bailout proving to be a case of Ready, Fire, Aim? Only time will tell. But the way we keep lurching from crisis to crisis, from bailout plan to bailout plan, isn't exactly encouraging. More below ...

"In the six weeks since lawmakers approved the Treasury's massive bailout of financial firms, the government has poured money into the country's largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

"Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

"Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

"It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

"In approving the rescue package, lawmakers trumpeted provisions in the legislation that established layers of independent scrutiny, including a special inspector general to be nominated by the White House and a congressional oversight panel to be named by lawmakers themselves.

"Some lawmakers and their aides fear that political squabbling on Capitol Hill and bureaucratic logjams could delay their work for months. Meanwhile, the Congressional Budget Office, which also has some oversight responsibilities, is worried about the difficulty of hiring people who can understand the intensely complicated financial work involved."

Dow Plummets for Third-Straight Day

QualityStocks — Wed, 12 Nov 2008 20:44:03 +0000

By 2:15 pm ET on Wednesday, it was clear that Treasury Secretary Henry Paulson’s comments on the economy were ill-received by investors. In what was quite a reversal of pre-bailout strategy, Secretary Paulson said that the federal government would not be using the taxpayers’ $700 billion to purchase banks’ toxic assets after all. News of [...]

Paulson’s TARP Revision Spooks The Market

Andrew Snyder — Wed, 12 Nov 2008 20:15:41 +0000

The markets are deep in negative territory again today and investors are not too happy with Henry Paulson. Is he changing the rules in the middle of the game, or is he merely reacting because the game has changed?

Earlier today, the Secretary of the Treasury stood in front of an audience of Wall Street reporters and gave the country an update on the Trouble Asset Relief Program (TARP) and his team’s efforts to shore up the nation’s economy. What he had to say is taking some investors by surprise.

Most importantly, Paulson noted he would not use the TARP to buy the troubled assets of the nation’s financial institutions (like the name of the program implies). Instead, the Treasury Department will…

And Then There’s This…Tuesday, November 4th, 2008

Contrarian Profits — Tue, 04 Nov 2008 19:14:00 +0000

Both gold and silver did what you would expect when trading opening early Monday morning in the Far East. But, as per usual lately, someone showed up just after the Sydney close and put an end to the party.

Gold’s attempt to rise over $740 came to an end at noon in London (7:00 a.m. Eastern time) which, oddly enough, is the precise time of the silver fix. From that point, both metals were escorted lower…and every attempt at a rally during regular Comex hours in New York met with fresh selling…and the usual sellers showed up again in after-hours trading on the Globex. The silver price mirrored the gold price…and their respective graphs could have been interchanged with each…

Global Investing Roundups Friday, October 31st, 2008

Contrarian Profits — Fri, 31 Oct 2008 15:55:02 +0000

AmEx Cuts 7,000 Jobs; Oil Down on GDP; Governors Lobby Gov. on Auto Industry; Motorola Downsizes; Kodak Results Less Than Picture Perfect; Waste Management Recession Resistant

American Express Co. (AXP) said yesterday (Thursday) that it plans to cut 7,000 jobs, or 10% of its global work force, in an effort to reduce costs by $1.8 billion in next year, The Associated Press reported. The company will also suspend management-level salary increases next year and institute a hiring freeze. American Express has reported four straight quarters of profit declines.

Oil prices fell more than 2% yesterday (Thursday), after economic data showed a 0.3% decline in gross domestic product (GDP). Light, sweet crude fell $1.54 at settle $65.96 a barrel, after trading as high as $70.60…

Global Investing Roundups Friday, October 31st, 2008

Contrarian Profits — Fri, 31 Oct 2008 15:55:02 +0000

AmEx Cuts 7,000 Jobs; Oil Down on GDP; Governors Lobby Gov. on Auto Industry; Motorola Downsizes; Kodak Results Less Than Picture Perfect; Waste Management Recession Resistant

American Express Co. (AXP) said yesterday (Thursday) that it plans to cut 7,000 jobs, or 10% of its global work force, in an effort to reduce costs by $1.8 billion in next year, The Associated Press reported. The company will also suspend management-level salary increases next year and institute a hiring freeze. American Express has reported four straight quarters of profit declines.

Oil prices fell more than 2% yesterday (Thursday), after economic data showed a 0.3% decline in gross domestic product (GDP). Light, sweet crude fell $1.54 at settle $65.96 a barrel, after trading as high as $70.60…

Gold, Faith and Credit

Contrarian Profits — Fri, 31 Oct 2008 14:48:47 +0000

Like many people, I have been looking at the price disparity between the market prices of gold and silver bullion (averaging about $1,000 an ounce for gold and $16.50 an ounce for silver) versus the prices of gold and silver futures (about $730 and $8.90 respectively).

I am thinking to myself that I would love to get a piece of that luscious arbitrage action where I buy the gold and/or silver futures at a low price while simultaneously selling the same gold and/or silver bullion at a higher price, telling the buyers that they must pay in advance and then wait up to a few months for me deliver their gold and silver, pocketing a hell of a lot of money…

Economy Crumbling

Mike Larson — Sun, 19 Oct 2008 11:57:36 +0000

I invest prudently to help ensure the future financial well-being of my wife and two daughters. And Martin, who visited us recently, shares the same philosophy. But when future history books are written on the twenty-first century, they will probably show that this time — right now ...

Financial Crisis Timeline

Alex Stanczyk — Sat, 18 Oct 2008 00:58:47 +0000

A chronology of the recent global market chaos: September 14/15 - Investment bank Lehman Brothers Holdings files for bankruptcy protection; Merrill Lynch to be taken over by Bank of America Corp. September 16 - U.S. Federal Reserve announces plan for $85 billion (49 billion pound) loan to American International Group in return for an 80 percent stake [...]

Paulson Says to Investors – This Too Shall Pass

QualityStocks — Wed, 15 Oct 2008 19:57:50 +0000

Paulson Says to Investors - This Too Shall Pass Waking up this morning and turning on “Good Morning America,” we heard a new familiar voice. Treasury Secretary Henry Paulson spoke up about the economy stating, “This will take time. There will be challenges.” It’s funny how most people never really knew who he was or what [...]

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Contrarian Profits — Wed, 15 Oct 2008 13:42:05 +0000

The U.S. government yesterday (Tuesday) announced plans to invest $250 billion, more than a third of the $700 billion congressional bailout allotment, into nine of America’s largest banks in an effort to bolster confidence in the financial system. Similar to steps taken by European governments earlier this week, the government will guarantee new debt and take equity stakes in the participating banks.

"Government owning a stake in any private U.S. company is objectionable to most Americans - me included," U.S. Treasury Secretary Henry Paulson said announcing his decision to effectively nationalize the nation’s banking sector. “Yet, the alternative of leaving businesses and consumers without access to financing is totally unacceptable.”

A government investment of $250 billion amounts to about 25% to 30% of the market capitalization for publicly traded banks, Rajiv Sobti, chief investment officer at Nomura Global Alpha, a unit of Nomura Asset Management U.S.A. told BusinessWeek.

The $250 billion investment will be allocated as follows:

Citigroup Inc. (C) JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) each get $25 billion.
Wells Fargo & Co. (WFC) will receive between $20 billion and $25 billion.
Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) each get $10 billion.
The Bank of New York Mellon Corp. (BK) and State Street Corp. (STT) receive between $2 billion and $3 billion apiece.

The remainder, between $124 billion and $131 billion, will be dispersed among smaller banks and thrifts.

Each bank will issue preferred stock to the U.S. government that will pay special dividends at a 5% interest rate, which will increase to 9% after five years. Additionally, the government will receive warrants worth 15% of the face value of the preferred stock.

Participating banks will also have to accept limits on executive pay, the abolition of so-called golden parachutes and improper bonuses, and may be forced to reduce or eliminate dividends.

The government, so far, has insisted that the banks will not have to cut their dividends, nor will any executives be forced to resign. The chief executives of Royal Bank of Scotland Group PLC (ADR: RBS), HBOS PLC (OTC: HBOOY), and Lloyds TSB Group PLC (ADR: LYG) were all forced to resign Monday during the British government’s nationalization process.

While the original U.S. bailout plan indicated that banks would be encouraged to participate on a volunteer basis, the chief executives of the nine largest U.S. banks were summoned to Washington and convinced to take part in the recapitalization effort, as a way to avoid stigmatizing any one bank.

Had any one bank asked for help, it would have been a signal to the world that it couldn’t survive, said Daniel Clifton, an analyst for institutional broker Strategas Research Partners.

Therefore, the Treasury had little choice but to "jawbone them into taking the money in a coordinated fashion all at the same time.”

“These are healthy institutions, and they have taken this step for the good of the U.S. economy,” Paulson said of the financial firms.

Afterwards, Paulson further elaborated on the role these institutions must play in restoring liquidity to the market.

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Paulson said.

In addition to $250 billion recapitalization effort, the U.S. Federal Reserve will start a program to become the buyer of last resort for commercial paper and the Federal Deposit Insurance Corp. (FDIC) will offer an unlimited guarantee on bank deposits in accounts that do not pay interest. The government will also expand deposit insurance to cover all small business deposits.

Over the past several months, small businesses, which typically maintain balances well above insurance limits, have been withdrawing their money in record amounts. The Fed initially tried to solve this problem by raising its deposit insurance limit from $100,000 to $250,000, but that only extended coverage to about 68% of all small business deposits, according to financial services consulting firm Oliver Wyman Group.

Abolishing deposit insurance limits for small businesses altogether would cover the remaining 32%, the New York Times reported.

“Imposing unlimited deposit insurance doesn’t fix the underlying problem, but it does reduce the threat of overnight failures,” Jaret Seiberg, a financial services policy analyst at the Stanford Group in Washington, told the NY Times. “If you reduce the threat of overnight failures, you start to encourage lending to each other overnight, which starts to restore the normal functioning of the credit markets.”

Source: Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Contrarian Profits — Wed, 15 Oct 2008 13:42:05 +0000

The $250 billion investment will be allocated as follows:

Citigroup Inc. (C) JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) each get $25 billion.
Wells Fargo & Co. (WFC) will receive between $20 billion and $25 billion.
Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) each get $10 billion.
The Bank of New York Mellon Corp. (BK) and State Street Corp. (STT) receive between $2 billion and $3 billion apiece.

The remainder, between $124 billion and $131 billion, will be dispersed among smaller banks and thrifts.

Participating banks will also have to accept limits on executive pay, the abolition of so-called golden parachutes and improper bonuses, and may be forced to reduce or eliminate dividends.

Had any one bank asked for help, it would have been a signal to the world that it couldn’t survive, said Daniel Clifton, an analyst for institutional broker Strategas Research Partners.

Therefore, the Treasury had little choice but to "jawbone them into taking the money in a coordinated fashion all at the same time.”

“These are healthy institutions, and they have taken this step for the good of the U.S. economy,” Paulson said of the financial firms.

Afterwards, Paulson further elaborated on the role these institutions must play in restoring liquidity to the market.

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Paulson said.

Abolishing deposit insurance limits for small businesses altogether would cover the remaining 32%, the New York Times reported.

Source: Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Money Morning — Wed, 15 Oct 2008 08:00:45 +0000

By Jason Simpkins Associate Editor The U.S. government yesterday (Tuesday) announced plans to invest $250 billion, more than a third of the $700 billion congressional bailout allotment, into... Money Morning is here to help investors profit hands...

Govt to Follow Buffet’s Lead

Contrarian Profits — Tue, 14 Oct 2008 15:35:14 +0000

Good day...And what a day it was! As I stated in yesterday's Pfennig, Columbus day is just sort of a holiday for the markets. These 'semi-holidays' can create some volatile trading, as not all of the markets are open and many desks are short staffed. So with the Federal Reserve and the banking system closed, the equity markets had the largest one day gain in over seven decades.

I guess the stock jockeys figured they weren't going to get any bad news out of the credit markets, which were closed, so no news is good news!! The rally was certainly welcomed, and hopefully some of the gains will stick today as we return to a normal trading environment.

And I guess some of the credit for the stock rally has to go to finance ministers around the globe who finally agreed on a plan which seems to be able to work. The leaders of a majority of the worlds largest economies borrowed a page from Warren Buffet's playbook and decided to invest directly into some of their largest financial institutions. The Bush administration announced it would invest $125 billion in nine of the biggest US banks. The US move came after France, Germany, Spain, the Netherlands, and Austria committed $1.8 trillion to guarantee interbank loans and take equity stakes in European banks.

The investment represents a new approach for US Treasury Secretary Henry Paulson, who first promoted a bailout targeted at buying up illiquid mortgage-related assets. The government will obtain its stakes by purchasing preferred shares with warrants similar to investments that Berkshire Hathaway Inc. made recently in Goldman Sachs and General Electric. The move could be just what was needed to 'unfreeze' the credit markets and restore some liquidity in the markets.

I really think the new president should do all he can to try and convince Warren Buffet to at least take an advisory position in the new administration. Now that we have followed his lead on the $125 billion we should see what he suggests for the rest of the $700 billion 'rescue' package. Just think, with his guidance maybe the US taxpayers can come out of this whole episode with a bit of a profit!

The move got the backing of former Federal Reserve Chairman Paul Volcker who said the inevitable recession in the US would be made 'more manageable' by the new government plans to invest directly into American banks. The bailout measures were 'distasteful' and 'not consistent with a capitalistic system,' Volcker said at a lecture in Singapore today. 'But however distasteful, they are necessary to restore stability to the financial system.' But Volcker also warned that the global financial system is in 'intensive care' and will remain there for a considerable time before things return to normal.

The largest mover in the currency markets yesterday was the Australian dollar which has surged up 12% vs. the US$ since late last week; the biggest two day gain since it began trading freely in 1983. The Australian dollar gained as investor's confidence was restored and stock markets rallied. Australian Prime minister Kevin Rudd announced a A$10.4 billion spending package aimed at bolstering Australia's economy, adding to his Oct. 12 pledge to shore up the nation's banks. These moves by the Prime Minister should provide some support under the Australian dollar which had been falling fast. But the Aussie dollar will likely still be subject to some volatile swings, as investors continue to buy the Aussie dollar on carry trade investments, which have proven to be very erratic.

With investors moving back into carry trades, and some confidence returning to the equity markets, the Japanese yen fell against the higher yeilders. The yen headed for a record decline vs. the Australian dollar, but fell less against the US$. Japan's currency has become an excellent gauge of risk appetite in the markets, and the currency has risen as investors exited highly leveraged 'carry trades' over the past few months. But risk appetite has returned as we have exited the 'panic mode' and investors have started to move money back into these leveraged trades.

The Bank of Japan said it will hold an unscheduled monetary policy meeting today to discuss ways to make it easier to add funds to money markets. The bank said yesterday it's considering offering an unlimited amount of dollars to financial institutions, following a move by European counterparts to provide lenders with as much of the currency as they want to reduce short-term borrowing costs.

This recent flood of US$ into the markets has seemed to stabilize them, but what will it do to inflation in the US? One of the first lessons in Economics is that increasing money supply causes an increase in inflation. The billions or trillions (I can't keep up with all of the 'rescue' packages they keep announcing) of US$ which have been placed into the markets will eventually create a big up tick in inflation. And the huge amount of dollars which are being printed and pumped into the credit system will undoubtedly lead to an erosion of the value of the dollar. Simple supply and demand tells you that if we continue to throw unlimited supplies of US$ into the market, the value of these dollars will decrease in value.

And who is holding most of these dollars? China! China's foreign-exchange reserves rose to a world record $1.906 trillion at the end of September. Currency holdings rose 32.9% from a year earlier, the People's Bank of China said on its website yesterday. These reserves have helped to strengthen China's finances as the credit crisis threatens to trigger a global economic slump. The world's fourth biggest economy can still expand 10 percent this year and 9 percent in 2009 according to the central bank. Close to $2 trillion in foreign reserves provides China with a strong foundation and more room to adjust policies to enable it to maintain relatively fast growth. The worlds economic engine will continue to purr despite the slowdown in the US and Europe. Internal demand among these fast growing Asian economies will take the place of some of the exports which will undoubtedly slow. I look for the Chinese currency to continue to be a rock solid performer, with no big movements either way.

Watch the Dow Hit 5,000 After This Bear Market Bounce

Bill Bonner — Tue, 14 Oct 2008 14:12:15 +0000

Yesterday, US stocks soared. Today, Asia followed. Europe is up. More gains are on the table in the US.

Who can we thank for the jump start in equities? The mainstream press is tripping over itself to hail the efforts of our dearest leaders. Political titans like Silvio Berlusconi, Gordon Brown, Hank Paulson and, of course, George Walker Bush.

Bill Bonner is more skeptical. He says a bear market bounce is not cause for celebration; it's cause for selling. Bill reckons the Dow will hit 5,000 before long.

Please “Hammer” Don’t Hurt Me

Graham Summers — Tue, 14 Oct 2008 13:30:20 +0000

Oct 14th, 2008: Someone please put the Hammer back in the tool shed

Make it Stop, buy the Banks Already

Stockmasters Staff — Thu, 09 Oct 2008 21:47:42 +0000

Almost another 700 point loss for the Dow, again! The U.S. Government is thinking about stealing a move right out of the European Save the Nation playbook. Buy the Banks. Something has to be done plus if the government makes money, kick some back to us taxpayers. Move people Move!

A New Trading Theme

Contrarian Profits — Thu, 09 Oct 2008 21:31:11 +0000

Coordinated rate cuts... Did the Fed reignite soaring inflation? More pain in Iceland... Revisiting the 90's in Japan... And Now... Today's Pfennig!

Good day… And a Tub Thumpin' Thursday to you! Well… How about those wily veteran central bankers? They all got together and decided to cut rates. The Reserve Bank of Australia (RBA) went first with their 100 BPS cut, and opened the rate cut sea for the rest of the central banks around the world. The European Central Bank, The Riksbank (Sweden), Swiss National Bank, Bank of Canada, Bank of England, and the Bank of China all lined up at the rate cut table. The Bank of Japan, The Norges Bank (Norway), and Reserve Bank of New Zealand did not participate.

The Bank of Japan doesn't have any rate to cut, The Norges Bank will wait until their regularly scheduled meeting on 10/15, and the RBNZ believes that they have taken their toxic waste bond flu shot.

RBNZ Governor Bollard said last night… "New Zealand banks have high-quality assets. Fortunately they do not have the poor quality assets that have proved so damaging overseas." Boy… Given what happened after the European Union's Finance Minister put his foot in his mouth, pointing a blaming finger at the U.S. and putting the EU's fortunes above those of the U.S., only to see the walls crumble down all around him, RBNZ Gov. Bollard, might want to talk low, talk slow, and don't talk much at all!

That's a famous John Wayne line… Just had to use that when I saw it on the Bloomie this morning!

So… The currency traders around the world, stopped when the rate announcements were made, to check the pulse of the markets. At first, we saw calm… But then, traders and investors began to say, "Uh-oh! Maybe things are worse than we imagined if central banks around the world are cutting rates"… So, getting back to the theme I talked about yesterday - where if it looks bad for the United States, buy the dollar, and if it looks good, sell the dollar - we saw the currencies go back and forth… But overnight, calm seems to have settled in, and keeping with the "theme", that means a weaker dollar.

The stock markets of Asia and Europe have generally been stronger, which could lead to a tourniquet being applied to the U.S. stocks… And again - keeping with the "theme" - that would spell a further weakening of the dollar.

This isn't rocket science; it's just what I see happening in the currencies right now. It's like looking into the mirror, as everything is opposite; but that's what's happening right here, right now!

G-7 ministers meet this week, starting tomorrow, I believe. U.S. Treasury Secretary King Henry Paulson, held a press conference yesterday afternoon, and in my opinion, effectively kicked off the G-7 meeting. King Henry was particularly focusing on the coordinated policy moves. I would think we could expect more of these kinds of global policy maneuvers going forward.

I'll tell you this… It's my opinion that the coordinated rate cut didn't do what the central bankers had hoped it would do. And that is, unlock the seized up credit markets… But, you can't blame them; the central bankers are using whatever they have at their disposal to deal with this global mess.

Speaking of messes… It was reported this morning that Kaupthing Bank, the largest Bank in Iceland, has fallen, as the government seized control. The currency CAN'T EVEN TRADE AT SPOT! That means immediate cash isn't available, folks! This is very serious stuff! Somebody expressed dissatisfaction with the price we received in the market the other day at 171. Yesterday, the last spot trades were done at 259! UGH! A foreign exchange dealer at Nordea in Copenhagen said, "Effectively the krona can't be traded at the moment because there are no banks to clear the trade."

Hopefully, that situation will be fixed quickly, and currency transactions can be cleared again, at least for spot… Oh… And that peg to the euro (EUR) that the Governor announced on Tuesday? It was dropped yesterday, because the peg to the euro at 131 could not be defended. Trades were going off at 340 krona per euro. It's a bad situation. Hopefully, a white knight will step in to help here… Unfortunately, banks around the world (except the few mentioned above) have their own problems to deal with right now. Russia made a big loan the other day, and with Russia swimming in cash from oil, maybe they could be the white knight.

Aussie (AUD) and New Zealand dollars (NZD) saw some love last night for the first time in what seems to be a month of Sundays. I wouldn't put too much into a one-night stand for these two. Yes, it's true that they have been beaten up too much and look oversold to me, but that doesn't mean the markets see it that way. We'll have to see if more than a one-night stand is in the cards for these two.

One thing keeping a lid on any big time rally for these two, especially New Zealand, is the fact that the Japanese appetite for anything offshore has gone away. Recall that I told you several times over the years that the Japanese loved to sell their currency and buy kiwi (and Aussie)? Shoot Rudy, they would even issue Japanese bonds issued in kiwi!

With the Japanese appetite for anything offshore going away (at least for now) the financing of the U.S. Current Account Deficit comes back into the worry picture. Recall, that the Current Account Deficit needs about $2 billion per day in foreign investments to keep it properly financed. And if the Japanese are slowing their offshore investments, that means the United States, too - not just New Zealand and Australia!

Stocks Go On A Roller Coaster Ride

Daniel Shepard — Thu, 09 Oct 2008 00:17:41 +0000

The U.S. stock market finished Wednesday 10/08/08 to the downside, despite a globally coordinated emergency interest rate cut that saw the United States, European Union, Sweden, United Kingdom, Canada and Switzerland cut key benchmark interest rates. China, which acted on its own, also cut its interest rate, the second time in three weeks that it [...]

The Month When Reality Invaded

Gary North — Fri, 03 Oct 2008 17:47:39 +0000

September 2008 will go down in the history books as the month in which the bulls finally looked like losers. It took eight and a half years. March 2000 marked the end of the Reagan stock market boom, although the supposed experts did not see this at the time or thereafter. Even after the NASDAQ had declined 80% by 2003, they still told people that the best strategy is to buy stocks and hold them long-term.

They still believed that the stock market was going to produce 15% per annum returns for the foreseeable future. September 2008 and he ended that mantra. On September 3, the Dow Jones Industrial Average was where it had been at its peak in 2000: 11,700. The Standard & Poor's 500 index was lower: 1280 vs. 1529 (close). Subtract from that over 20% price inflation.

The experts on CNBC on September 1 still clung to the illusion that there was no recession, the boom was still in
force, and everything would work out just fine. By the end of September, all that lay in ruins. There is no optimism on CNBC today. There is a kind of stiff upper lip determination not to panic.

It should have been obvious in August 2007 that the end of post-2003 stock market recovery was over. Bernanke had tightened money from the day he took over as chairman of the Board of Governors of the Federal Reserve system in February 2006.

Real estate was the driving force of the expansion, and real estate was in decline. It was obvious to me in late 2005 that the bull market in real estate was over. I said so at the time. It was surreal estate. A handful of us saw this coming, but it seemed so far-fetched at the time that virtually nobody paid any attention. They now pay attention.

Real estate from 2001 to late 2005 was the largest bubble in American financial history. It dwarfed the bubble of the stock market in the 1920s, because that bubble had involved only a tiny fraction of American investors. The residential real estate bubble involved two-thirds of the population, all of whom owned homes. The other third were affected because of rising rents.

People thought that they were going to get rich with leveraged real estate. Instead, something in the range of 40% of all mortgage debtors in the United States will be under water in their mortgages by the end of 2009. People were told by the experts that "this time it's different." It wasn't different. It was just more extreme. The consequences will be felt over the next decade.

In September, confidence was at long last shattered. At the beginning of the month, Secretary of the Treasury Henry Paulson was still assuring people that the banking system was perfectly sound. On Sunday, September 7, he unilaterally announced the Federal government was taking over Fannie Mae and Freddie Mac, along with their $5 trillion of mortgage debt. He did not ask Congress. Congress did not complain. That act ended anything
resembling a free market in housing. Falling equity takes away the credit that Americans need to borrow money to live the good life. They will soon feel betrayed. A widespread sense of betrayal is dangerous for politicians.

A LOSS OF FAITH

We are living in a time in which the fundamental religion of our era has been faith in the redemptive power of the State. Whenever there is a crisis, citizens call upon the State to bail them out. They are convinced that the State has a separate existence which enables it to intervene into the affairs of men, thereby improving the life of almost everyone under its jurisdiction.

This religion of State redemption has been fading in recent years. It gained almost universal acceptance during the Great Depression. The fundamental purpose of the State is no longer seen as justice, but rather to serve as the source of guidance for the free market, without which the economy supposedly cannot sustain long-term economic growth.

There is enormous faith by the public in the ability of bureaucrats to collect data, interpret data, make accurate
predictions, establish incentives that encourage growth, and enforce these incentives without bias. People generally do not believe that God intervenes into the economy with the same frequency and reliability that the State does.

The great redeemer since 1987 has been Alan Greenspan. He had the power of the printing press behind him, and he used it. People concluded that in an economic crisis, under Greenspan's guidance, the Federal Reserve System would be able to overcome all economic setbacks. This faith escalated from 1987 until his retirement in January 2006.

We are now seeing the undermining of this confidence in the ability of the Federal Reserve System to compensate for the downturns in the markets. People are beginning to figure out that Bernanke is in over his head, and the Federal Reserve System seems impotent to overcome the worst economic crisis since the Great Depression.

It is significant that this assessment, namely, that this really is the worst financial crisis since the Great Depression, is now becoming widespread in the media. The assumption that theFederal Reserve, when assisted by the U.S. Treasury, and funded by an extra couple of trillion dollars of Federal debt, will be able to deal with any crisis is now becoming shaky. There are whispers of discontent. Some people are saying that this crisis is more fundamental than what Paulson admitted in the week of September 15.

Banking Crises Around The World

Contrarian Profits — Fri, 03 Oct 2008 15:44:43 +0000

Do government bailouts in times of banking crises work? Crises like this are manageable. They're expensive and painful to resolve, but even more expensive and painful when left to fester.

Philippa Dunne & Doug Henwood of The Liscio Report highlight a major study of 42 fairly recent banking crises around the world. Result? Some types of government intervention works and some don't.

One characteristic that is needed though is speed. Dithering, a la Japan, is a recipe for disaster. This is a brief summary of the report (to which they provide a link) and their conclusions as to the basic outlines of what the US should do. Given that Europe is already in the throws of its own bank crisis, and the rest of the world could experience problems, this should be useful reading. They also provide graphs of banking crises and comparisons with developed countries and the resulting market experience.

One major point? This is like the old Fram oil filter commercial line "Pay me now or pay me later." As this study points out, the tax payers and citizens of the US (and the world) are going to pay for this crisis in one way or another. Either a major recession (with high and persistent unemployment), reduced incomes and tax collections or a collective efforts to stabilize the banking system. The costs of inaction are much higher. It is not a matter of cost or no cost. We are going to have to pay in one form or another.

We cannot avoid the costs given where we are today. The time to avoid cost was years ago reigning in Freddie (FNM) and Fannie (FRE) and proper oversight of the mortgage industry. We (Congress) missed that opportunity. (Sadly, we are going to re-elect the very leadership to both parties largely responsible for the neglect. There is plenty of blame to go around. No amount of partisan finger pointing by Speaker Pelosi shifts that blame.)

However, we can choose the form of the cost will be paid in. Personally, I prefer collective efforts to 10% or more unemployment and the risk of an extended recession and its costs. I know this is not pure free market theory, and sticks in the craw of many of my readers, but when many of my neighbors and friends will be unemployed and businesses are suffering theory will not make a very good meal. Congress must act now. This report is a good reminder of what has worked in the past.

Having rejected Henry Paulson's rescue plan, it's not clear what Congress --or those in the broad population opposed to a "bailout"-- propose to do to keep the financial system from imploding. But a database of systemic banking crises recently assembled by IMF economists Luc Laevan and Fabian Valencia provides a useful map of how crises play out and what does and doesn't work.Laevan and Valencia identify 124 systemic banking crises between 1970 and 2007, and assemble detailed information on 42 of them, representing 37 countries. (Some countries, like Argentina, appear multiple times.)

In almost every case, governments took active measures to mitigate the crisis, so there is no real test of whether rescue schemes actually work; no politician seems willing to face the consequences of letting the chips fall where they may. But the work of Laevan and Valencia does offer some guidance as to what works best.

Dithering Costs

One crucial lesson stands out: speed matters. This is obvious to anyone who followed Japan's dithering in the 1990s; standing aside and hoping the problem goes away is not a good idea. Relatedly, "forbearance" --regulatory indulgence, such as permitting insolvent banks to continue in business-- does not work, as has been established in earlier research. As the authors say, "The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance." This suggests that suspending mark-to-market requirements is not a good idea.

Since forbearance does not work, some sort of systemic restructuring is a key component of almost every banking crisis, meaning forced closures, mergers, and nationalizations. Shareholders frequently lose money in systemic restructuring, often lots of it, and are even forced to inject fresh capital. The creation of asset management companies to handle distressed assets is a frequent feature of restructurings, but they do not appear to be terribly successful. More successful are recapitalizations using public money (which can often be partly or even fully recouped through privatization after the crisis passes); recaps seem to result in smaller hits to GDP. But they're not cheap: they average 6% of GDP, which for the U.S. would be about $850 billion.

Total fiscal costs, net of eventual asset recoveries, average 13% of GDP (over $1.8 trillion for the U.S.); the average recovery of public outlays is around 18% of the gross outlay.

But those who don't want to spend that kind of taxpayer money should consider this: Laevan and Valencia find that "[t]here appears to be a negative correlation between output losses and fiscal costs, suggesting that the cost of a crisis is paid either through fiscal costs or larger output losses." And if the economy goes into the tank, government revenues take a big hit, so what's saved on the expenditure side could well be lost on the revenue side.

Oh, and about half the countries that have experienced crises have had some form of deposit insurance. So merely expanding the FDIC's coverage is not likely to do the trick --and, in any case, it's going to be hard to escape the huge expense of a systemic recapitalization, though using the FDIC might simplify the politics of the rescue.

(A note on the politics of the rescue: an ABC poll shows the public to be far more worried about the economic consequences of the bailout's defeat than Congress seems to be. There's not a lot of enthusiasm for what's seen as handing money over to Wall Street --but if properly structured and sold, say with more cost recovery prospects for the government, more relief for debtors, a rescue is not as unpopular as some would have it.)

Relevant Examples

Most of the countries in the Laevan/Valencia database are in the developing world, and are of questionable relevance to the U.S. But TLR has taken a closer look at four countries that offer more relevant models: Japan, Korea, Norway, and Sweden. Some major stats for the four and the U.S. are in the table at the end of the newsletter, and graphs of some important indicators are there as well.

Sweden, now widely seen as a model of swift, bold action, kept its ultimate fiscal costs relatively low --3.6% of GDP at first, almost all of which was recovered through stock and asset sales-- but was unable to avoid a deep recession. At the other end of the spectrum, Japan, the model of foot-dragging half-measures, saved no money through its procrastination; its fiscal outlay was 24% of GDP, almost none of which was recovered. And it was unable to avoid recession.

Note, though, that some of the worried talk surrounding the financial market impact of bank bailouts looks misplaced, at least on these models. Three years after the outbreak of crisis, inflation was lower and stock prices higher in all four countries, and government bond yields were lower in all but Japan. It's likely that the deflationary effects of a credit crunch outweigh the inflationary effects of debt finance.

Although the U.S. in 2007 had a lot in common with other countries on the brink of a banking crisis, one thing stands out: the depth of the current account deficit. Of the four comparison countries, only Korea comes close to the U.S. level of red ink. The unweighted average current account deficit of the 42 countries in the Laevan/Valencia database was 3.9% of GDP --compared with 6.2% for the U.S. That suggests that the U.S. has more to deal with than just resolving a banking crisis.

Paulson Wrong Again!

Contrarian Profits — Tue, 30 Sep 2008 15:34:59 +0000

Bailout package is voted down! Biggest one day point drop for the DOW! Dollar rallies hard... Carry trades unwind... Again! And Now... Today's Pfennig!

Good day... And a Terrific Tuesday to you! Well... Guess who was wrong AGAIN! That's right, King Henry Paulson, he of the U.S. Treasury Sec. throne... He told the world on Friday, that the bailout package was a "done deal"... And he told us again on Sunday that it was a "done deal"... The markets rejoiced, the stock jockeys danced in the streets, the karma flowed and all the stars were in alignment... And then... A (not so) funny thing happened on the way to the forum...

King Henry's men revolted, and the bailout package did NOT have the votes to pass it, and the "done deal" was "undone"! Once again this man has led investors down the wrong path. I've documented the wrong statements by this man in the past year, and still, investors hang on every word by King Henry... When will they ever learn? When, will, they, ev-er learn?

The Dow posted its biggest one point drop ever... 777 points... It wasn't the biggest percentage drop in one day ever, that belongs to the Crash of October 1987, but still, that was enormous! There needed to be a tourniquet to stop the bleeding, and not one was given to the stock market. The S&P 500 suffered too...

And... Was the bailout package the "only" reason stocks dropped like a rock? Difficult to say... But let me say this so you can hear me now and listen to me later... Even in the face of the other bailout plans (remember Bear Stearns, Fannie & Freddie, AIG, the mortgage bill?) stocks had a difficult time putting together a rally that would last a couple of days... There's an underlying problem here folks... And if you ask me, and I know you didn't, but you'll get my answer anyway! I think it's the recession we're in, but no one wants to admit it. We're so deep into a recession that the NBER doesn't know their way out, much less call it for what it is!

I had a reader chastising me because his currencies aren't going through the roof. Hmmmm... Let's look around the bar room, and take stock of what's going on here... Currencies are performing better than stocks... Bonds... Mutual funds... Housing... Commodities... I wonder where it would have been better to have money? I'm sure there's somewhere... But, for the most point, Currencies may be down... But they are outperforming most other investments!

OK... I had to get that off my chest! So... As I left you yesterday, the dollar was rallying... But that rally was stopped in its tracks early in the U.S. session, as it looked as though the votes would not count up in favor of a bailout package passing. The rally by the euro and other currencies was strong for about an hour, and then range trading set in. However, as I turn on the currency screens this morning, they are back to trading in yesterday's clothes, with the dollar swinging the hammer again.

Some of euro's problem in maintaining a well bid rally the last few days is the rot that's being found in European Banks. As I said yesterday, I thought the Fortis (FORB) problem wasn't going to be a one and done, but I thought the rot on the vine wouldn't be as bad as in the U.S. Well, this morning there's another one Dexia (DEXB)...

The Big Boss, Frank Trotter, sent me a story he found that was quite interesting, as the German Finance Minister was interviewed regarding the financial meltdown... This was a great story, and I can't give you all of it, but, I've put in the highlights... Here we go!

SPIEGEL spoke with German Finance Minister Peer Steinbrück about the roots of the US credit disaster, whether Germany is in grave danger and what the future has in store for world banking.

Steinbrück: We are experiencing the most severe financial crisis in decades, although one should be careful about historic comparisons with 1929. One thing is clear: After this crisis, the world will no longer be the same. The financial architecture will change globally.

SPIEGEL: And is the United States completely to blame?

Steinbrück: The source and focus of the problems are clearly in the United States. There are many causes. After 9/11, a great deal of cheap money was tossed into the market. Apparently some of that money went to people with poor creditworthiness. This led to the growth of the real estate bubble. The banks embarked on a race over profit margins. Then speculation spun completely out of control…

SPIEGEL: The German government is unwilling to participate in America's $700 billion bailout package. Is this your final word?

Steinbrück: I see neither the need for nor the possibility of taking on the responsibility for American banks. Besides, our situation is more robust.

So... There you go... Some statements from the German Finance Minister, who did say at one point regarding the AIG bailout... "We were all staring into the abyss"...

Long time friend and colleague, Ed Bonawitz, sent this note to me yesterday... "Given today's events in Washington and on Wall St.; the winner of the presidential election will probably ask for a re-count!"

Yes, funny... But oh-so-true! The bailout package, if passed, was going to leave a lot of important decisions in the hands of the next president. I can't imagine why anyone would want that job!

Looks like the Senate will try to revive the bailout package, after watching the carnage in stocks yesterday...

The Japanese yen pushed the envelope VS the dollar yesterday while stocks were circling the bowl, yen was in favor... This is a classic example of risk trades, like the Carry Trade, getting unwound during times like this... And when Carry Trades get unwound, the Japanese yen rallies. I would think that we should expect more of this... But then, I've thought that for almost a year now... Last November, speaking at the New Orleans Investment Conference, I emphasized that I expected risk events to be in play in 2008, and that would unwind Carry Trades. This was repeated in February at the Orlando Money Show, and every speaking engagement since...

Yesterday... Personal Income and Spending data was a little skewed, but here it is anyway... Personal Income for August "jumped" .5%, gaining back some of July's -.6% loss... Personal Spending failed to rise, and July's number was revised down...

Personal Income is still volatile due to the stimulus checks, etc. but the spending figures are encouraging and disheartening at the same time... Encouraging because maybe, we, as Americans, have stopped spending what we don't have or shouldn't be buying... But disheartening, because consumer spending makes up a huge chunk of GDP... Without consumer spending, economic growth is left with Government spending... That's no way to grow an economy!

Today, we'll see the color of July's S&P CaseShiller Home Price Index, which is expected to continue its fall. The Chicago Purchasing Manager Index (Manufacturing) will show a weaker print... And Consumer Confidence for this month is expected to weaken... Shoot Rudy, this data should fall through the trap door of falsely supported data! We'll have to see if the markets pay attention to the data today... I kind of think they will continue to be focused on the bailout package.

Gold sure shot up yesterday, gaining $30 and going back over $900... But that was short-lived... The shiny metal has given back $15 in the London market this morning. Profit taking? I would certainly think that has something to do with it. I just keep coming back to the conversations I hear on the desk every day from our metals traders, Kristin and Jen... They can't find coins or bars in Gold or Silver anywhere! There's a shortage folks... And there's no price adjustment in Gold or Silver going on! This has the all the makings of the PPT keeping the prices low...

I know, I don't like thinking that this isn't a "free market" any more than the next guy... But that's exactly what's going on, eh? There's no such thing as a shortage, it's merely in need of a price adjustment... And if there's no price adjustment, then it's being held down artificially... But by who? There's only one choice... The Plunge Protection Team... PPT...

This is no solace to Gold & Silver holders... They want their holdings to rise in value in a free market environment! Our free market, as we know it, may be the thing going into the abyss in my opinion... Think about what's happened since March... And then tell me if you think this is a free market, or one that is controlled by the Gov't...

OK, I'll get down from my soapbox now... Just think a little about that today, OK? Wow! I can really get off on tangents, eh?

So... Wachovia (WB) actually went to the highest bidder, Citicorp (C)... Yesterday morning, the Wall Street Journal was reporting that Wells Fargo was the "winner"... Well, that fell through, and Citicorp came riding in on the white horse. Citicorp bought Wachovia's banking operations... I wonder what happens to the old St. Louis Brokerage, A.G. Edwards, that was purchased by Wachovia last year? I know people that work at the brokerage, so this hits home a bit.

The dollar has gained another 1/2 cent VS the euro since I've been here this morning, so this is getting ugly... Something has to turn this around and get this ship headed in the right direction again!

And... Finally... Don't look for this to be reflected at your gas station any time soon... But the price of Oil has fallen below $100!

Currencies today 9/30/08: A$ .8065, kiwi .6760, C$ .9550, euro 1.4325, sterling 1.7990, Swiss .9080, ISK 102.20, rand 8.30, krone 5.80, SEK 6.8325, forint 169.60, zloty 2.3780, koruna 17.22, yen 104.90, baht 33.88, sing 1.4290, HKD 7.77, INR 45.97, China 6.8460, pesos 11, BRL 1.9630, dollar index 78.20, Oil $98.89, Silver $12.92, and Gold... $894

Chuck Butler

Source: King Henry Was Wrong Again!

Indian Inflation Doesn’t Budge While Forex Reserves Rise and the Rupee Falls

Edward Hugh — Sun, 28 Sep 2008 12:49:00 +0000

India's inflation held steady in the week to September 13, rising 12.14 percent from a year earlier, thus maintaining the same pace as in the previous week. The rate has now been trending slightly down from the recent peak of 12.63 percent hit on the 9 August. If this trend continues it should give the central bank the necessary room to hold borrowing costs unchanged and thus avoid placing funding pressures on a banking system which is struggling in the wake of the most recent bout of financial turmoil in the United States.

India's financial system is evidently showing signs of strain as the impact of both local policy tightening and the global credit crunch steadily take hold. The rate at which Indian banks lend to each other climbed to an 18-month high of 15.125 percent on Sept. 19, following the failure of Lehman Brothers Holdings and the U.S. government takeover of American International Group. As a result the Indian finance ministry responded by allowing companies building roads, ports, utilities and other infrastructure projects to borrow more overseas - thus giving them access to cheaper funds - while the central bank announced measures to boost cash in India's financial system.

Indian banks have borrowed an average 642.8 billion rupees from the central bank in the last two weeks, more than five times the average 113 billion rupees in the previous fortnight, further indicating a shortage of funds in the banking system.

Foreign Exchange Reserves Rise Slightly

India’s foreign-exchange reserves rose by the most in five months in the week ended September 19, according to the latest data from the Reserve Bank of India. The rise has surprised many observers, but it should be borne in mind that it coincided with the rise in the dollar against a number of other currencies (and in particular the euro, which the RBI also holds in reserves) on the back of the euphoria about the possible bailout of the US financial system.

Total foreign-exchange reserves rose by $2.51 billion to $292 billion in the week ended Sept 19, while foreign-currency assets - which form the lions share of the reserves -climbed $2.5 billion to $282.8 billion during the week. As we can see from the chart (below) the value of foreign exchange reserves has stabilised since mid-August, so the rot, it would seem, has definitely stopped. I think it is significant that we saw a positive initial response across the key emerging markets to the proposed US bailout, and while we are now seeing considerable volatility as people become nervous about whether it will, finally, arrive.I think when the package is introduced the key emerging market economies will be the principal beneficiaries, as the so called "risk appetite" will bounce back, especially given that the aftermath of the package will be a lower growth period in the OECD economies as the cost of the bailout has to be assimilated.

Even given the recent decline, it is important to bear in mind that India's foreign-exchange reserves, including overseas currencies, gold and special drawing rights with the International Monetary Fund, have increased $56.1 billion in the past year.

Money Supply Continues To Grow

Meanwhile, money supply in India grew year on year by 21 % in the two weeks ended Sept. 12, same rate as in the previous fortnight, according to data from the RBI. M3 - which largely consists of currency in public circulation, bank deposits and money invested in other saving plans, stood at Rs 42,26,143 crore as on September 12.

M3 has been rising at an average rate of 21% since the current fiscal year began on April 1, and has been consistently above the central bank’s target of 16.5% to 17% for the fiscal year ending March. At the same time, total bank loans rose by Rs 32,914 crore in the two weeks ended Sept 12, the biggest fortnightly increase since March. Outstanding bank credit was up by 26.1% year on year and reached Rs 24, 91,248 crore. Food credit was up by Rs 847 crore to Rs 45,190 crore, while non-food credit increased by Rs 32,067 crore to Rs24,46,058 crore. Total bank deposits rose by 22.5%, or Rs 6, 25,282 crore, in the same period to Rs reach 34, 05,377 crore.

The Rupee Weakens Again

The rupee has declined almost 17 percent so far this year and is the second-worst performer among the ten most-active Asian currencies excluding the yen. This week it declined for the seventh consecutive week, the longest run in more than 2 1/2 years. The rupee was down 5.6 percent in September, and is thus headed for its worst month since the Asian financial crisis in 1997.

Foreign investors were net sellers of Indian stocks for a fifth straight month in September, and have offloaded $9 billion so far this year, according to data from the Securities & Exchange Board of India. They bought a record $17.2 billion in stocks last year. Indian stocks fell, with the benchmark posting its biggest weekly drop in six months, after talks on a U.S. credit market rescue plan stalled and Washington Mutual Inc. became the biggest bank failure in American history.

The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 445, or 3.3 percent, to 13,102.18. The index had its biggest weekly drop since the week ended March 7. The S&P CNX Nifty Index on the National Stock Exchange slid 125.30, or 3.1 percent, to 3,985.25. The BSE 200 Index declined 3.2 percent to 1,590.58. Nifty futures for October delivery fell 3.9 percent to 3,995.

Standard & Poor's 500 Index futures slid 1.7 percent when negotiations on a $700 billion bailout plan for U.S. credit markets were thrown into doubt by a group of House Republicans who said the plan drawn up by Treasury Secretary Henry Paulson wouldn't work.

The decline in Indian stocks is more a reflection of global sentiment towards emerging market stocks and bonds than it is an indicator of any specific local issue. The MSCI Emerging Markets Index of stocks has been falling since last May - as can be seen in the chart below - and dropped 1.74% percent on Friday to 823.694, its lowest level since Sept. 15. The index is now down 13.6% so far this month, and 33.87% so far this year. But if you look carefully you can see that it peaked up again after 20th September, as speculation increased that there would be a major bailout of the US banking and insurance sector. This bounce back unwound towards the end of last week, as uncertainty grew about the arrival of the package.

A similar picture can be seen of the JPMorgan EMBI+ emerging bonds index (see below), which has been down significantly since the end of August. Since the US package seems now about to be approved for the US congress, as a result we should see sentiment improve significantly, and India may well be one of the principal beneficiaries of this change in sentiment. The coming weeks should clear all this up quite quickly.

Agreement Reached on Bailout – Analyst Blog

Charles Rotblut — Sun, 28 Sep 2008 12:42:28 +0000

Early Sunday morning, an agreement was reached on the proposed $700 billion bailout of financial firms. A vote still needs to be held, but it seems likely that the revised package will be approved by both the House and the Senate.

It is Congress, however, and nothing will be official until a bill reaches President Bush's desk and he signs it into law. Nonetheless, things are looking positive.

The Wall Street Journal, and several other news sources, have a summary of latest version of the proposal. Key provisions include:

Half the $700 billion will be paid in the future and is dependent on Congressional review
Some bad loans will be insured rather than purchased by the government
Taxpayers will receive warrants in participating companies
If government is unable to recoup losses within 5 years, a 2% tax will be placed on participating companies to pay back the bad debt
CEO compensation will be restricted
Oversight is greatly improved
The government can modify mortgages

Though not perfect, the latest plan is vastly improved over the original version. The revisions help to protect taxpayers, while still providing much needed liquidity to the financial sector.

Keep in mind that the proposal is not a magic cure for companies like Comerica (CMA) or National City (NCC). It also does not automatically improve business conditions for MBIA (MBI) or PMI Group (PMI).

History will be critical of this bailout and in hindsight, we will find other solutions that would have worked better. However, in a crisis situation, action is better than no action. Henry Paulson and Ben Bernanke deserve credit for coming up with a creative solution.

Read the analyst report on Comerica

Read the analyst report on MBIA

Read the analyst report on National City

Read the analyst report on PMI Group

"PMI" Free Stock Analysis: Buy? Sell? Hold?
"MBI" Free Stock Analysis: Buy? Sell? Hold?
"CMA" Free Stock Analysis: Buy? Sell? Hold?
"NCC" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

This Sucker Could Go Down

Matt Hougan — Sun, 28 Sep 2008 00:06:20 +0000

Betting on a bottom in the financial sector is gambling, Jim.

It may be a good bet or a bad bet, but it's a bet all-the-same. Let's not pretend otherwise.

We are in completely unchartered waters here. We have no idea what the financial services industry will look like in six months. We cannot even be sure what it will look like in six days.

We've got the House Republicans playing political football with the bailout; Henry Paulson trying to appoint himself czar; Wall Street banks begging with one hand and lobbying with the other; and Presidential candidates who refuse to comment on the most pressing financial crisis in eighty years.

There is a black hole of leadership in this country, and that's frightening.

The only reason there isn't panic on Main Street is that people don't understand the credit markets. The credit markets have stopped functioning. LIBOR spreads, money markets, CDS contracts, muni's ... the market is in chaos. This will hit Main Street in a very real way if it isn't corrected soon: companies will be unable to meet payroll, factories will be shuttered, etc.

A few points to remember:

We don't know for sure that the bailout will go through (although it looks like it will).
We don't know for sure that the bailout will work.
We don't know for sure what regulations will be enacted next year by Congress to constrain the financial sector in the future.

That last point is a big one. Regulators are going to rewrite the financial laws next year. The days of 33-1 leverage are over, and that means that profit growth and P/E ratios will shrink in the Financial sector.

I'm as tempted as you are to call a bottom in Financials and pick up some bargains. I've almost bought XLF myself a few times over the past week or two. I may do it yet. Over the next few years, there's probably a good chance you make money on that trade.

But with all the uncertainty and poltical brinksmanship going on, no one ... no one ... has any real insight into how this will turn out.

In the best-case scenario, banks will not return to their 2006/2007 profit levels for many years to come.

In the worst case ... well, our fearless President said it best:

"If money doesn't get loosened up, this sucker could go down."

---Sign of the Apocalypse---

According to Ali Velshi, senior business correspondent for CNN, reporters at the station are not allowed to use words like "meltdown" or "free fall" to describe the markets without prior approval.

A spokesman for the Wall Street Journal says the paper is "staying away from" words like "crash," "panic," "apocalypse" and "pandemonium."

I understand that this is the most reflexive market we've ever had; a big confidence game. But when the media starts banning words, that doesn't exactly inspire confidence, does it?

Words from the (investment) wise for the week that was (September 22 – 28, 2008)

Prieur du Plessis — Sat, 27 Sep 2008 20:20:30 +0000

As I am travelling at the moment, this week’s edition of "Words from the Wise" does not provide the customary review of the financial markets' movements and economic statistics. Given time constraints, today I will only share with you a number of vid...

Market Wrap for September 25th, Repeat After Me: “Capital Preservation”

Joshua Hayes — Fri, 26 Sep 2008 11:12:03 +0000

By Thursday’s closing bell, the S&P 500, DJIA and NYSE all finished at least 1.7% or higher on heavier volume than the previous session, which technically means we had ourselves a follow-through day. The Nasdaq lagged, however, as did the Nasdaq 100; as for the Russell 2000 and S&P 600 –well, both got [...]

Is The Bailout Broken?

Sean Brodrick — Fri, 26 Sep 2008 11:11:42 +0000

Apparently, House Republicans are in open revolt against the Wall Street bailout plan put forth by the White House and Treasury Secretary Henry Paulson. Part of it may have to do with all the changes that the Democrats made to the plan to make it palatable to their constituents, like allocating 20% of profits made by the US Treasury on the deal to a program to help low-income folks keep their homes.

As the AP reports ... A White House summit meeting on Thursday meant to shore up John McCain's shaky campaign "devolved into a contentious shouting match." And that's how McCain's own campaign described it.

The meeting revealed that President Bush's $700 billion bid to combat the worst financial crisis in decades had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.

By midnight, it was hard to tell who had suffered a worse evening, Bush or McCain. McCain, eager to shore up his image as a leader who rises above partisanship, was undercut by a fierce political squabble within his own party's ranks.

The consequences could be worse for Bush, and for millions of Americans if the impasse sends financial markets tumbling, as some officials fear. Closed-door negotiations were to resume Friday, but it was unclear whether House Republicans would attend.

And this next part is very dramatic, and should make for a good scene when this fiasco is inevitably turned into a TV mini-series ...
Treasury Secretary Henry Paulson literally bent down on one knee as he pleaded with House Speaker Nancy Pelosi not to withdraw her party's support for the package over what Pelosi derided as a Republican betrayal, according to the New York Times.Not all Republicans in the House are opposing the plan, but the conservative wing, led by House Republican leader John Boehner of Ohio, wants to take a different route, founded on more "conservative" principles.

Wait, it gets better! The New York Times reports that McCain sat silently at the meeting he'd called for about 40 minutes. So, Obama tried playing mediator. Again, witnesses report that Obama first tried to reason with Boehner, and asked him to detail what his plan was. According to witnesses at the meeting, Boehner put forth (somewhat heatedly) the right wing plan: deregulation, capital gains tax cuts, and an insurance plan. The new House Republican plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them.

After he did this, Obama asked Paulson if it would work, and Paulson said that it would NOT work.

According to AP ...

Then Obama said it was time to hear from McCain. According to a Republican who was there, "all he said was, 'I support the principles that House Republicans are fighting for.'"

And that, say witnesses, is when the shouting started.

Now, Treasury Secretary Paulson has called the House Republicans' plan a non-starter. So where does this leave us? Maybe we'll go with a plan designed by the Democrats, like the one proposed by James Galbraith. Writing in the Washington Post, he said the bailout as proposed was "A Bailout We Don't Need," and added ...

Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.

The rest of Galbraith's plan is investment in infrastructure and renewable energy to help pull us out of what he sees as an inevitable coming recession.

Now, I'm happy to see Paulson's plan, as proposed, go away. I'd be happier with other alternatives that have been proposed -- Galbraith's plan for example -- that probably have a better chance of success.

But we can't forget that the reason that Paulson, Bernanke and other leaders in Washington were so keen on their plan in the first place -- they are terrified of what comes next if some kind of bailout isn't passed.

What the Democrats are really trying to get is a bailout of Main Street, not Wall Street. Without credit, Main Street cannot function. Without it, as one observer said, "we are possibly looking at Great Depression II, and the sequel is always worse than the original."

What does this mean for investors?

If there is no bailout deal, it's probably bad for oil prices. It's certainly bad for stock prices, especially financial stocks. Industrial materials and industrial stocks are also going down. Short-term Treasuries and the yen will probably rally hard, as investors fly to safety.

That said, I still think we'll see some kind of deal over the weekend. There is too much at stake. If Paulson's plan is dead, and if the House Republican plan is a non-starter, maybe they'll go back to square one and start with a Democratic plan. We may not like a Democratic plan ... and it may not fix the problem either. But if we have a plan on Monday, oil will probably head higher, and we'll probably have a strong market rally.

I hate the fact that we have to rush into this. I'd like some careful deliberation ... a real attempt to find out what the problems are and find workable solutions. I hope we get the time we need.

We'll see. It should be an interesting day.

It’s all going the shape of a pear now…

Bernard Hickey — Fri, 26 Sep 2008 06:03:30 +0000

It’s been another frantic week that for a moment or two seemed to include a few signs of light at the end of the tunnel. But as I prepare to jump on my bike and go home I see that Senator John McCain has thrown a toolbox into the works in Washington. Sensing he needs to do [...]

Emotions Running High Over $700B Bailout

QualityStocks — Wed, 24 Sep 2008 19:12:20 +0000

According to a recent poll, 55 percent of Americans do not believe that any taxpayer dollars should go to rescuing private companies, regardless of the effect that their collapse would have on the overall economy. Outrage over the plan proposed by Henry Paulson and Ben Bernanke has been steadily growing, with many citizens believing that [...]

The US Will Never Be Able to Pay Off its Debts

Gary North — Wed, 24 Sep 2008 14:40:44 +0000

We were all misled by the assurances of 'experts' over this crisis, says Gary North in The Daily Reckoning. The $700 billion Paulson plan will not be the last bailout. And the ever-growing national debt will never be paid off with the US dollar at its present value. Gary says it is time to name and shame those who tried to deceive us...

Your assignment, if you accept it . . . Help me compile statements by every so-called expert on how the financial markets were safe, the stock market was going to rise, and “people should not panic and sell stocks.”

For months, high-level government officials assured us that America’s financial markets were safe. They continued to assure us right up until Treasury Secretary Henry Paulson on September 18 said a $700 billion bailout is required to save the economy from a collapse comparable to the Great Depression.

Our leaders, including Paulson, did not have a clue as to what was going on.

The World Wide Web has preserved their assurances. It is now time to collect them in one place. I propose to call this place The Gallery of the Clueless.

The assurances began in August 2007. They accelerated right through September 18.

It did not matter that Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were nationalized without vote by Congress on a Sunday afternoon, September 7. The experts remained optimistic.

It did not matter that a week later, also on a Sunday, Merrill Lynch (NYSE:MER) sold itself without a vote by its Board of Directors to Bank of America (NYSE:BAC), which also did not ask for a vote by its Board of Directors.

It did not matter that on Monday, September 15, Lehman Brothers Holdings (NYSE:LEH) declared bankruptcy—the largest bankruptcy by far in American history, dwarfing Enron and WorldCom combined. We were assured on September 15 that everything was under control.

It was not just Paulson, Bernanke, and the President who assured us. It was also almost every talking head from the financial world who appeared on television. The main exception was Prof. Nouriel Roubini, whose grim forecasts have come true, one by one.

On Sunday, September 14, he said that no investment bank would survive. He said the model was fundamentally flawed. Two went bust within 24 hours: Merrill Lynch and Lehman. The other two were bailed out by a change in their legal structure on Friday, September 19. Both Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) surrendered their status as investment banks, switched to holding companies, thereby coming under Federal regulation, and immediately becoming eligible for bailout money.

We have seen a stream of ex-geniuses depart as multi-millionaires: Angelo Mozilo (Countywide Financial), Charles Prince (Citigroup), Stan O’Neal (Merrill Lunch), and Dick Fuld (Lehman). They join the legendary Franklin Raines (Fannie Mae), who had departed years earlier, and who today is an Obama advisor. Then there were the recent heads of Fannie and Freddie. The head of AIG will be replaced soon.

OH, YEAH?

In 1931, Viking books published a slim volume titled “Oh, Yeah?” It was a collection of quotations from the nation’s former experts of why the stock market was a great place for your money in 1928 and 1929. These quotations were identified as to who said what, when, and where.

I own a copy of this compilation. It ended with a 1931 quote from Calvin Coolidge, who was in retirement: “The country is not in good condition.” I intend to assemble a digital equivalent of “Oh, Yeah?” I will post it free of charge on the Web. I want to make it easy for journalists and historians to see just how blind the nation’s leaders were.

This collection will serve as a warning to future investors: ”Don’t trust the assurances of self-interested people whose careers and reputations are at stake.” The new Administration will return to Congress for more rounds of bailouts. Each will be presented as “the final request.” Each will be sold to Congress as last shoe to drop.

The result so far has been a gigantic increase in the nation’s debt. We have gone beyond the point of no return.

Voters know now that the national debt will never be paid off, at least not with dollars worth what they are worth today.
But they think they are helpless. They will let Congress get away with this.

WHAT I NEED FROM YOU

Do a Google search for such topics as these for 2007 and 2008:

“money is safe”, panic AND not “should not sell”, confidence AND banks, confidence AND FDIC, “economically sound” “fundamentally sound”, Paulson AND assurance, Bernanke AND assurance, Dodd AND assurance.

Maybe you can think of others. Look for links after page 1 on Google. Go as far as page 5. Look for juicy ones. Then extract the quotation using cut & paste (Ctrl-c, Ctrl- v). Paste it into an email letter (Ctrl-v). Then paste in the link to the Web source. Repeat the process using YouTube in the search box. If you find some choice videos, send them along with the links.

Put “clueless” in the subject box. Send it to garynorth@garynorth.com.

To Sign Up Click Here

Bailout Plans Offer No Magic Bullets – Zacks Analyst Interviews

Dirk Van Dijk — Wed, 24 Sep 2008 00:00:00 +0000

Even a relatively savvy investor might have a tough time keeping things straight regarding Treasury bailout proposals that have come out in the past few days. Director of Zacks Equity Research Dirk van Dijk, CFA was on hand recently to help boil this issue down for us.

WhatÂ’s the main difference in the Treasury bailout plan from Senator Chris Dodd from that of Treasury Secretary Henry PaulsonÂ’s the previous day?

The Dodd plan has far stronger oversight provisions than the Paulson plan, which has virtually none, and explicitly disallowed any review by the courts or any other agency. In the Dodd plan, there would be monthly reports to Congress as well as weekly press reports on the progress of the plan. There would be an oversight board, which would include the heads of the Federal Reserve, the SEC, the FDIC and one non-governmental employee picked by each party. That is, the Democrats might pick someone like Warren Buffet and the GOP might pick someone like Mitt Romney.

It also requires the Government get contingent shares in any institution participating in the bailout. If the taxpayer is able to sell the acquired assets at a profit, as some have suggested -- but which I see as extremely unlikely -- then the Government would not get any stake in the companies. However if the taxpayer takes a hit, the government would end up with a big stake in the institutions.

This would significantly dilute the existing shareholders, and would provide some solution to the huge moral hazard issues raised by the bailout. The proposal would also allow judges to modify the terms of mortgages if a homeowner declares bankruptcy (as they can with car loans or even second home loans).

So at a glance, which do you feel would be the better of the two plans?

While the Dodd proposal is not perfect, it represents a substantial improvement over the original Paulson plan. It is important to do something quickly, but it is just as important to do the right thing. "Quickly" means within a few weeks, not within a few hours. Congress should seriously reconsider its plans to adjourn at the end of the week to hit the campaign trail, and instead work on getting this right. It should also not load up this plan like a Xmas tree with every favored little project -- however worthy -- attached to it.

Regardless of which plan is enacted (and I suspect the final result will be a combination of these two plans, perhaps with additional modifications) there has been enough economic damage inflicted that we are going to have a pretty severe economic slowdown.

What do you see as the two sides of the coin here?

If we get it right, it will be just a pretty bad recession. We have lived through many of those in the past. If we get it wrong, we face some extremely rough economic times ahead. Those warning about the potential of a second Great Depression are not kidding, but such an awful outcome is far from the only possibility.

How would you advise investors to proceed at this time?

Invest under the assumption that we will have a significant economic slowdown. That means buy companies where there is demand for the products through good times and bad, and which have very strong balance sheets. Some of the Consumer Staples names seem to fit the bill, like Kraft (KFT), Procter & Gamble (PG) and PepsiCo (PEP). The Integrated Oil companies like Exxon (XOM), Chevron (CVX) and Conoco (COP) also look like safe harbors in this storm.

Dirk van Dijk, CFA is the Director of Zacks Equity Research.
"PG" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Wracked by Problems, the U.S. Economy Keeps Digging Its Way Out

William Patalon lll — Mon, 22 Sep 2008 05:30:11 +0000

By William Patalon III Executive Editor Money Morning/The Money Map Report Where to start? Market volatility is sure to continue for the indefinite future as investors, economists,... Money Morning is here to help investors profit han...

Paulson bailout

James Hamilton — Sun, 21 Sep 2008 22:17:24 +0000

Let me begin with the point on which I am in complete agreement with Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke-- it is hard to overstate just how scary this week's developments in financial markets could be.

Prior to the establishment of the Federal Reserve in 1913, the United States would periodically experience events that are often referred to as "financial panics." Rick Mishkin noted that these usually occurred after a recession began and a major financial institution had failed, and were characterized by a sharp increase in the spread between the interest rate paid by higher risk versus lower risk borrowers.

The graph below plots the difference between the interest rate on 3-month certificates of deposit and 3-month treasury bills. The alarming behavior of this spread began in August 2007, when it spiked up to 243 basis points, higher than anything seen in the previous 20 years. Aggressive responses from the U.S. Federal Reserve and other central banks last August succeeded in bringing banks' borrowing costs back down, though we saw subsequent comparable spikes in December 2007 and March 2008.

Gap between interest rates on 3-month certificates of deposit and 3-month treasury bills, from Federal Reserve Statistical Release H.15.

But those events would barely be noticed when compared with what happened last week. Following the bankruptcy of Lehman Brothers, the spread reached 527 basis points on Thursday.

Financial intermediaries, who earn their profit by lending at a modest markup over their borrowing cost, simply can not be expected to function in this kind of an environment. Lending institutions that had been solvent before this week would not remain so for long if this situation were to persist. Only the safest customers could be expected to obtain loans, and only after paying very high interest rates.

To respond to this situation, Treasury Secretary Paulson has proposed a plan whose key feature is the authorization to spend $700 billion to purchase troubled assets from financial institutions.

By my count, the Federal Reserve has already extended something on the order of $455 billion in loans collateralized by some of these same troubled assets, namely $125 billion in repos, $150 billion in the term auction facility, $50 billion in "other loans", $30 billion from the Bear Stearns deal, and $100 billion in "other Federal Reserve assets". That $455 billion total does not include this week's $85 billion loan to AIG, nor the $180 billion in reciprocal currency swap lines.

My primary criticism of these previous unconventional actions by the Fed is that they are better characterized as fiscal policy rather than monetary policy. They unquestionably represent an implicit potential commitment of Treasury dollars. If the latest $700 billion Treasury proposal were to take these assets off the books of the Federal Reserve and put them onto the Treasury's balance sheet, and have Paulson rather than Bernanke be the guy who makes these calls of when and where to put the taxpayers at risk, I would be all for it.

But I gather that instead the $700 billion is construed to be in addition to the comparable sum that's already been committed by the Federal Reserve. And it seems to be in addition to the $1.7 trillion in debts from Fannie and Freddie that the U.S. Treasury has now apparently assumed, and is in addition to the guarantees on $3.1 trillion in agency MBS for which the Treasury has again apparently assumed responsibility.

And do you think that this week's $700 billion is going to be the last such request?

Granted, these numbers I've been adding up represent loans or guarantees, which are something very different from outright expenditures. Actual losses should only amount to a small fraction of this sum. But even a small fraction of $6 trillion is still a huge number.

Before we can solve these problems, we need to agree on what caused them. In a narrow mechanical sense, that seems straightforward to answer. Reckless underwriting standards and excessively low interest rates contributed to bidding up house prices to unsustainable levels. Real estate price declines have now engendered current and prospective future default rates that translate into large capital losses for institutions holding assets based on those loans. This erosion of capital makes creditors wary of extending any new funds to these institutions.

But there is also a deeper question here that is harder to answer. How did the financial system come to be susceptible to such a profound degree of miscalculation and inappropriate leveraging of risk in the first place? My answer would be that the core problem was financial arrangements in which the gains went to one group but the downside risk was borne by somebody else. The loan originators offered unsound loans, but still made big profits because they sold those bad loans off to the loan aggregators. Fannie and Freddie earned themselves nice income while the loans were performing, but the taxpayers absorbed the loss when the loans went bad. CEOs and fund managers earned huge bonuses while the boom went on, leaving stockholders and investors holding the bag when things went sour.

And I agree with the Financial Stability Forum that the key changes we need to make to avoid such problems are more transparency in accounting and stronger capital requirements. Transparency is vital so that that creditors, shareholders, fund investors, and regulators can better perceive the risks to which they are exposed. Stronger capital requirements are necessary to ensure that the principal actors are risking their own capital and not just somebody else's.

How you get from our current situation to one where financial institutions are adequately capitalized is of course one of the key challenges of the moment. We can't just impose tougher requirements and expect everybody to extricate themselves from the mess they're in without some federal contributions. But I do not see that a clear vision of exactly what is expected and required, in the way of modified capital standards and risk management procedures, for any institution that receives federal assistance is a key part of any of the proposals. And it should be.

Transparency strikes me as something that ought to be easier to achieve. I would start with a centralized clearing house for reporting all derivative contracts and collateral pledged for them, and requiring financial statements such as annual reports to communicate clearly the specific exposures that those entail. Perhaps there's a fear that if we had a clear communication of exactly who is holding the bag, that could exacerbate the kinds of destabilizing capital flights with which we've been fighting. But I think the uncertainty itself may be even more destabilizing.

Before the taxpayers are asked to commit such sums, we are owed a coherent and compelling explanation of why this kind of problem is never going to occur again.

There's lots of other good analysis out there in the 'sphere. Brad DeLong has a nice exposition of the conditions in which a government intervention could be successful and desirable, and when it could fail. Calculated Risk offers details of how he would run the bailout. Yves Smith and Paul Krugman [1], [2] express their reservations about the Paulson plan. Representative Barney Frank (D-MA) wants to see a cap on executive compensation be part of any bailout. For some comic relief (and heaven knows we could use some at the moment), see the Washington Post (hat tip: Greg Mankiw).

And your thoughts, dear readers?

Technorati Tags: macroeconomics, economics, Federal Reserve, interest rates, credit crunch, Bernanke, financial crisis

Some Observations on the Ongoing Crisis: Causes and Opportunity Cost Again

Menzie Chinn — Sat, 20 Sep 2008 03:15:00 +0000

There's a lot of commentary -- more comprehensive and up to date than I can provide -- on the crisis and the attempts to resolve the logjam in the financial markets.[0], [1] But I stilll have a couple of thoughts about the causes, and the implications, of the process that has resulted in so much turmoil this week.

First, what is the source of the crisis? Is it as is asserted here in this statement from John McCain today?

....
There are certainly plenty of places to point fingers, and it may be hard to pinpoint the original event that set it all in motion. But let me give you an educated guess. The financial crisis we're living through today started with the corruption and manipulation of our home mortgage system. At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac.
These quasi-public corporations lead our housing system down a path where quick profit was placed before sound finance. They institutionalized a system that rewarded forcing mortgages on people who couldn't afford them, while turning around and selling those bad mortgages to the banks that are now going bankrupt. Using money and influence, they prevented reforms that would have curbed their power and limited their ability to damage our economy. And now, as ever, the American taxpayers are left to pay the price for Washington's failure.
...

I certainly concur with the first sentence. But I do wonder about the assertion that the problem started with and is fundamentally driven by Fannie Mae and Freddie Mac. After all, neither of these two institutions were at the heart of the massive surge in subprime mortgages that are the most toxic component of these asset backed securities. Smarter people than me (Justin Fox, Tanta at CR h/t Mark Thoma) have been similarly dubious.

Moreover, the originating entities for these subprime mortgages were not Fannie Mae and Freddie Mac, by large, but rather the banks that the Federal government refused to let state agencies regulate. Or the ones the Treasury's OTS itself failed to regulate. To refresh memories, consider this article from December 18, 2007 NYT:

WASHINGTON-- Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.
In 2001, a senior Treasury official, Sheila C. Bair, tried to persuade subprime lenders to adopt a code of "best practices" and to let outside monitors verify their compliance. None of the lenders would agree to the monitors, and many rejected the code itself. Even those who did adopt those practices, Ms. Bair recalled recently, soon let them slip.
And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading.
John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.
"He never gave us a good reason, but he didn't want to do it," Mr. Gnaizda said last week. "He just wasn't interested."
Today, as the mortgage crisis of 2007 worsens and threatens to tip the economy into a recession, many are asking: where was Washington?
An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry's excesses. Both the Fed and the Bush administration placed a higher priority on promoting "financial innovation" and what President Bush has called the "ownership society."
...
On Tuesday, under a new chairman, the Federal Reserve will try to make up for lost ground by proposing new restrictions on subprime mortgages, invoking its authority under the 13-year-old Home Ownership Equity and Protection Act. Fed officials are expected to demand that lenders document a person’s income and ability to repay the loan, and they may well restrict practices that make it hard for borrowers to see hidden fees or refinance with cheaper mortgages.
It is an action that people like Mr. Gramlich and Ms. Bair advocated for years with little success. But it will have little impact on many existing subprime lenders, because most have either gone out of business or stopped making subprime loans months ago.
...
The Fed was hardly alone in not pressing to clean up the mortgage industry. When states like Georgia and North Carolina started to pass tougher laws against abusive lending practices, the Office of the Comptroller of the Currency successfully prohibited them from investigating local subsidiaries of nationally chartered banks.
Virtually every federal bank regulator was loathe to impose speed limits on a booming industry. But the regulators were also fragmented among an alphabet soup of agencies with splintered and confusing jurisdictions. Perhaps the biggest complication was that many mortgage lenders did not fall under any agency's authority at all.
...

And for some more concrete examples of how deregulatory zeal had an effect, consider this account from the WSJ (March 22, 2007):

Regulators appointed by President Bush often have been more sympathetic to industry concerns about red tape than their Clinton administration predecessors. When James Gilleran, a former California banker and bank supervisor, took over the OTS in December 2001, he became known for his deregulatory zeal. At one press event in 2003, several bank regulators held gardening shears to represent their commitment to cut red tape for the industry. Mr. Gilleran brought a chain saw.
He also early on announced plans to slash expenses to resolve the agency's deficit; 20% of its work force eventually left. When he left in 2005, Mr. Gilleran declared that the OTS had "exercised increased diligence in its review of abusive consumer practices" while reducing thrifts' regulatory burden. But his successor, Mr. Reich, a former community banker, has reversed many of Mr. Gilleran's cuts. Citing "understaffing," he hired 80 examiners last year and plans to add 40 more this year. A spokeswoman for Mr. Gilleran, now chief executive of the Federal Home Loan Bank of Seattle, said he wasn't available to comment.

So, from my perspective, locating the source of the current crisis in corruption/influence peddling surrounding Fannie and Freddie exhibits a misreading of recent history. (More important might have been lax monetary policy and the saving glut, and exemptions from capital requirements for certain investment banks... [see Ritholtz])

Second, how hard will the rescue be given the reckless decisions of the past? It seems that whatever entity is established to purchase these bad assets will require some fiscal outlay. Estimates are all over the place, given that there is so much uncertainty over how much the assets will be bought for and eventually sold; here is one account:

U.S. Debt May Grow $1 Trillion on Rescue, Barclays' Pond Says
By Sandra Hernandez
Sept. 19 (Bloomberg) -- The U.S. may have to borrow an extra $700 billion to $1 trillion to fund the biggest rescue of the financial system since the Great Depression, according to Barclays Capital Inc.'s Michael Pond.
Federal takeovers of Fannie Mae, Freddie Mac, and American International Group Inc.; the central bank's expansion of lending to financial firms; and a slowing economy will add $455 billion to the Treasury's borrowing needs, the New York-based interest-rate strategist estimated. Pond said Treasury Secretary Henry Paulson's plan to rid banks of "hundreds of billions" of troubled assets would bring the amount to $700 billion assuming the plan costs $200 billion.
"We could easily add up to an additional trillion to the outstanding Treasury debt just from the initiatives announced over the past couple of weeks," said Pond, ranked the best Treasury Inflation-Protected Securities analyst in 2008 by Institutional Investor magazine.
The government's liabilities swelled in past weeks as policy makers sought to arrest a growing financial crisis by taking over financial institutions threatened by a shortage of capital.
The Treasury on Sept. 7 took over mortgage-finance companies Fannie Mae and Freddie Mac and said it would buy mortgage-backed debt in the open market. The Fed this week boosted its Treasury auctions to bond dealers by $25 billion, loaned $85 billion to the insurer AIG, and quadrupled the amount of dollars foreign central banks can auction to $247 billion. Paulson today said the government will buy illiquid assets from banks' balance sheets and insure money-market mutual fund holdings.
Deficit Widens
"The odds of the deficit becoming enormous are certainly there," said Nils Overdahl, a bond fund manager in Bethesda, Maryland, at New Century Advisors, which oversees $500 million. "I suspect you will see issuance at a variety of maturities."
The deficit will likely widen to $650 billion in fiscal 2009 because of the U.S. rescue of Fannie and Freddie, analysts at JPMorgan Chase & Co. wrote in a Sept. 12 report.
Over the next decade, the gap between spending and receipts will swell to $5.3 trillion, Goldman Sachs Group Inc. analysts wrote Sept. 10, revising a previous forecast of $3.6 trillion. The non-partisan Congressional Budget Office forecast a record $438 billion deficit for 2009 on Sept. 9.
"The deficit will soar to enormous proportions,'' said Lou Crandall, the chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. ``Even before this week's events, estimates based on visible factors were pointing to a deficit above $500 billion next year, with the prospect of billions of mortgage- backed securities on top of that."

Some Observations on the Ongoing Crisis: Causes and Opportunity Cost Again

Menzie Chinn — Sat, 20 Sep 2008 03:15:00 +0000

First, what is the source of the crisis? Is it as is asserted here in this statement from John McCain today?

....
There are certainly plenty of places to point fingers, and it may be hard to pinpoint the original event that set it all in motion. But let me give you an educated guess. The financial crisis we're living through today started with the corruption and manipulation of our home mortgage system. At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac.
These quasi-public corporations lead our housing system down a path where quick profit was placed before sound finance. They institutionalized a system that rewarded forcing mortgages on people who couldn't afford them, while turning around and selling those bad mortgages to the banks that are now going bankrupt. Using money and influence, they prevented reforms that would have curbed their power and limited their ability to damage our economy. And now, as ever, the American taxpayers are left to pay the price for Washington's failure.
...

WASHINGTON-- Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.
In 2001, a senior Treasury official, Sheila C. Bair, tried to persuade subprime lenders to adopt a code of "best practices" and to let outside monitors verify their compliance. None of the lenders would agree to the monitors, and many rejected the code itself. Even those who did adopt those practices, Ms. Bair recalled recently, soon let them slip.
And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading.
John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.
"He never gave us a good reason, but he didn't want to do it," Mr. Gnaizda said last week. "He just wasn't interested."
Today, as the mortgage crisis of 2007 worsens and threatens to tip the economy into a recession, many are asking: where was Washington?
An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry's excesses. Both the Fed and the Bush administration placed a higher priority on promoting "financial innovation" and what President Bush has called the "ownership society."
...
On Tuesday, under a new chairman, the Federal Reserve will try to make up for lost ground by proposing new restrictions on subprime mortgages, invoking its authority under the 13-year-old Home Ownership Equity and Protection Act. Fed officials are expected to demand that lenders document a person’s income and ability to repay the loan, and they may well restrict practices that make it hard for borrowers to see hidden fees or refinance with cheaper mortgages.
It is an action that people like Mr. Gramlich and Ms. Bair advocated for years with little success. But it will have little impact on many existing subprime lenders, because most have either gone out of business or stopped making subprime loans months ago.
...
The Fed was hardly alone in not pressing to clean up the mortgage industry. When states like Georgia and North Carolina started to pass tougher laws against abusive lending practices, the Office of the Comptroller of the Currency successfully prohibited them from investigating local subsidiaries of nationally chartered banks.
Virtually every federal bank regulator was loathe to impose speed limits on a booming industry. But the regulators were also fragmented among an alphabet soup of agencies with splintered and confusing jurisdictions. Perhaps the biggest complication was that many mortgage lenders did not fall under any agency's authority at all.
...

And for some more concrete examples of how deregulatory zeal had an effect, consider this account from the WSJ (March 22, 2007):

Regulators appointed by President Bush often have been more sympathetic to industry concerns about red tape than their Clinton administration predecessors. When James Gilleran, a former California banker and bank supervisor, took over the OTS in December 2001, he became known for his deregulatory zeal. At one press event in 2003, several bank regulators held gardening shears to represent their commitment to cut red tape for the industry. Mr. Gilleran brought a chain saw.
He also early on announced plans to slash expenses to resolve the agency's deficit; 20% of its work force eventually left. When he left in 2005, Mr. Gilleran declared that the OTS had "exercised increased diligence in its review of abusive consumer practices" while reducing thrifts' regulatory burden. But his successor, Mr. Reich, a former community banker, has reversed many of Mr. Gilleran's cuts. Citing "understaffing," he hired 80 examiners last year and plans to add 40 more this year. A spokeswoman for Mr. Gilleran, now chief executive of the Federal Home Loan Bank of Seattle, said he wasn't available to comment.

U.S. Debt May Grow $1 Trillion on Rescue, Barclays' Pond Says
By Sandra Hernandez
Sept. 19 (Bloomberg) -- The U.S. may have to borrow an extra $700 billion to $1 trillion to fund the biggest rescue of the financial system since the Great Depression, according to Barclays Capital Inc.'s Michael Pond.
Federal takeovers of Fannie Mae, Freddie Mac, and American International Group Inc.; the central bank's expansion of lending to financial firms; and a slowing economy will add $455 billion to the Treasury's borrowing needs, the New York-based interest-rate strategist estimated. Pond said Treasury Secretary Henry Paulson's plan to rid banks of "hundreds of billions" of troubled assets would bring the amount to $700 billion assuming the plan costs $200 billion.
"We could easily add up to an additional trillion to the outstanding Treasury debt just from the initiatives announced over the past couple of weeks," said Pond, ranked the best Treasury Inflation-Protected Securities analyst in 2008 by Institutional Investor magazine.
The government's liabilities swelled in past weeks as policy makers sought to arrest a growing financial crisis by taking over financial institutions threatened by a shortage of capital.
The Treasury on Sept. 7 took over mortgage-finance companies Fannie Mae and Freddie Mac and said it would buy mortgage-backed debt in the open market. The Fed this week boosted its Treasury auctions to bond dealers by $25 billion, loaned $85 billion to the insurer AIG, and quadrupled the amount of dollars foreign central banks can auction to $247 billion. Paulson today said the government will buy illiquid assets from banks' balance sheets and insure money-market mutual fund holdings.
Deficit Widens
"The odds of the deficit becoming enormous are certainly there," said Nils Overdahl, a bond fund manager in Bethesda, Maryland, at New Century Advisors, which oversees $500 million. "I suspect you will see issuance at a variety of maturities."
The deficit will likely widen to $650 billion in fiscal 2009 because of the U.S. rescue of Fannie and Freddie, analysts at JPMorgan Chase & Co. wrote in a Sept. 12 report.
Over the next decade, the gap between spending and receipts will swell to $5.3 trillion, Goldman Sachs Group Inc. analysts wrote Sept. 10, revising a previous forecast of $3.6 trillion. The non-partisan Congressional Budget Office forecast a record $438 billion deficit for 2009 on Sept. 9.
"The deficit will soar to enormous proportions,'' said Lou Crandall, the chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. ``Even before this week's events, estimates based on visible factors were pointing to a deficit above $500 billion next year, with the prospect of billions of mortgage- backed securities on top of that."

Uncle Sam to the Rescue

QualityStocks — Fri, 19 Sep 2008 18:30:10 +0000

President George Bush, joined by Fed chairman Ben Bernanke and Treasury secretary Henry Paulson, issued a statement on Friday regarding the government’s intent to resolve the current economic catastrophe. The plan involves the use of hundreds of billions of tax dollars to purchase defaulted mortgages, and other problematic sources of debt. While the trio acknowledged [...]

Bernanke & Paulson Get Creative – Analyst Blog

Zacks Market Commentaries — Fri, 19 Sep 2008 09:19:38 +0000

This week has been more volatile than I could have imagined, especially given that we have had three days with intraday Dow moves of 500 points or more.

Traders are reacting quickly to the ever evolving events, which has included the bankruptcy of Lehman (LEH), the government takeover of AIG (AIG), the closing of a Putnam money market fund, an infusion of liquidity by several central banks and a proposal for a massive bailout of financial firms. Not to mention that short-selling has been banned on nearly 800 financial stocks here in the U.S.

In describing the week's events to David Gaffen, who writes the excellent MarketBeat blog for the Wall Street Journal, I opined, "Throughout the year there's been so many people saying this is bottom, and we hear about (the major financial firms) throwing in everything including the kitchen sink, but now we're finding they're throwing in the dishwasher, the refrigerator, and who knows what else."

Treasury Secretary Henry Paulson's and Fed Chairman Ben Bernanke's latest response to the financial crisis is the creation of a new entity that would purchase a significant amount of the distressed debt plaguing many financial firms. The assumption is that if the toxic debt can be moved off of corporate balance sheets, calm will be restored to the financial system.

Taxpayer money could be used to fund this entity, which is why the proposal is being brought before Congress. And, since this is an election year, it is highly likely that some type of bailout for homeowners at risk of defaulting on their mortgages will be included.

Rest assured, the decisions being made right now will be criticized in the future. But in a crisis situation, fast action is often better than no action. Give Bernanke and Paulson credit for being creative.

At the root of the credit crunch is a psychological problem - lenders don't trust borrowers. The entire financial system is based on the expectation that both parties engaged in a transaction that will meet their obligations. When counter-parties don't trust each other, deals don't get done and loans don't get made. It was a lack of trust that caused Bear Stearns to collapse so quickly, and it is a lack of trust that has created questions about the viability of Morgan Stanley (MS) as a stand-alone firm.

Strategies for the Current Environment

I wish I could tell you that a bottom was established earlier this week and that a rebound in the markets is underway, but there are too many variables at play.

What Thursday did show everyone is the importance of maintaining an allocation to stocks. Anyone who did not have money allocated to stocks at lunchtime on Thursday missed out on the big rally. The biggest rallies happen very quickly and without any forewarning.

Therefore, it is important to continue to focus on the long-term. Over time, stocks have consistently created more wealth than any other investment vehicle. A diversified portfolio will weather bear markets and will thrive in bull markets.

Investors looking to use the current environment to get back into the market should consider researching shareholder friendly companies such as CSX (CSX) and Smith International (SII). Both pay dividends and are buying back stock.

I would warn that the risks of investing in MBIA (MBI), PMI Group (PMI), National City (NCC) and Zions Bancorp (ZION) remain high. The latest proposal is still under discussion, and therefore we don't know how it will affect those or many other financial firms.

Read the full analyst report on LEH

Read the full analyst report on AIG

Read the full analyst report on MS

Read the full analyst report on CSX

Read the full analyst report on SII

Read the full analyst report on MBI

Read the full analyst report on PMI

Read the full analyst report on NCC

Read the full analyst report on ZION

"PMI" Free Stock Analysis: Buy? Sell? Hold?
"NCC" Free Stock Analysis: Buy? Sell? Hold?
"ZION" Free Stock Analysis: Buy? Sell? Hold?
"MS" Free Stock Analysis: Buy? Sell? Hold?
"LEH" Free Stock Analysis: Buy? Sell? Hold?
"AIG" Free Stock Analysis: Buy? Sell? Hold?
"" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Earnings Preview for Sep 22 – 26 – Earnings Preview

Charles Rotblut — Fri, 19 Sep 2008 00:00:00 +0000

The big bailout will be a key focus of the markets.

Congress is expected to meet over the weekend to discuss legislation proposed by Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson. The details of the proposal, and any additional measures designed to help homeowners struggling with mortgage payments, could impact market direction.

The temporary ban on short selling could also affect trading early in the week. Part of Friday's rally was the result of quadruple witching. Traders are being forced to close short positions rather than roll them over into new contracts.

On the earnings front, we have confirmed reports from 33 companies. Included in this group are S&P 500 members Autozone (AZO), Bed Bath & Beyond (BBBY), Discover Financial (DFS), Jabil Circuit (JBL), KB Home (KBH), Lennar (LEN), McCormick (MKC), Nike (NKE) and Paychex (PAYX). I expect only limited reaction to the homebuilders (KBH and LEN), because of the proposal under discussion.

The economic calendar includes two reports on August home sales, but is otherwise light.

Wednesday: August existing home sales, weekly crude inventories
Thursday: August durable goods orders, August new home sales, weekly initial jobless claims
Friday: Final September University of Michigan consumer confidence survey, final Q2 GDP

Bernanke has three scheduled appearances before Congress.

On Tuesday, he will discuss the financial markets before the Senate banking committee. The chairman will provide his economic outlook to the Joint Economic Committee on Wednesday. Finally, on Thursday, Bernanke will review the recent proposals and actions before the House financial services committee.

Companies That Could Issue Positive Earnings Surprises

AutoZone Inc. (AZO) has topped market expectations twice in the last three quarters. Ahead of the company's fiscal fourth-quarter report, brokerage analysts have raised their forecasts. The consensus earnings estimate now calls for earnings of $3.90 per share, a penny higher than a week ago. The most accurate estimate is even more bullish at $3.92 per share. Autozone is scheduled to report on Monday, Sep 22, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

H.B. Fuller (FUL) recently cut its profit forecast, citing high costs of raw materials. The chemical manufacturing company now expects third-quarter earnings of 35 cents per share, excluding a tax benefit. Brokerage analysts responded by lowering their forecasts to 35 cents per share from 48 cents per share. FUL has missed consensus earnings estimates in two consecutive quarters. H.B. Fuller will report on Tuesday, Sep 23, after the close of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Surprise Trader can help you turn earnings surprises into quick profits. Learn how.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Sep 22 - 26¹.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time
3Com Corp	COMS	$0.06	$0.02	50.0%	9/22/2008	AMC
Autozone Inc	AZO	$3.90	$3.23	3.1%	9/22/2008	BTO
Carmax Gp (Cc)	KMX	$0.11	$0.29	(31.8%)	9/22/2008	BTO
Factset Resh	FDS	$0.64	$0.58	3.2%	9/23/2008	BTO
Fuller(Hb) Co	FUL	$0.35	$0.46	(2.2%)	9/23/2008	AMC
Lennar Corp -A	LEN	($0.53)	($3.25)	(43.4%)	9/23/2008	BTO
Qualstar Corp	QBAK	($0.03)	$0.02	(200.0%)	9/23/2008	AMC
Worthington Ind	WOR	$0.58	$0.27	71.43%	9/23/2008	AMC
Bed Bath&Beyond	BBBY	$0.46	$0.55	11.1%	9/24/2008	AMC
Neogen Corp	NEOG	$0.23	$0.21	5.0%	9/24/2008	BTO
Nike Inc-B	NKE	$0.93	$0.92	1.0%	9/24/2008	AMC
Paychex Inc	PAYX	$0.41	$0.40	0.0%	9/24/2008	AMC
Red Hat Inc	RHT	$0.13	$0.09	(38.5%)	9/24/2008	AMC
Accenture Ltd	ACN	$0.67	$0.50	7.3%	9/25/2008	AMC
Analogic Corp	ALOG	$0.52	$0.60	1.9%	9/25/2008	BTO
Christopher&Bnk	CBK	$0.03	$0.09	23.1%	9/25/2008	AMC
Cra Intl Inc	CRAI	$0.89	$0.72	41.2%	9/25/2008	BTO
Diamond Foods	DMND	$0.13	$0.06	16.7%	9/25/2008	AMC
Discover Fin Sv	DFS	$0.35	$0.42	16.7%	9/25/2008	BTO
Mccormick & Co	MKC	$0.48	$0.45	0.0%	9/25/2008	BTO
Phc Inc-A	PHC	$0.03	$0.04	(75.0%)	9/25/2008	N/A
Research In Mot	RIMM	$0.87	$0.50	(1.2%)	9/25/2008	AMC
Rite Aid Corp	RAD	($0.14)	($0.10)	(122.2%)	9/25/2008	BTO
Smart Modular	SMOD	$0.04	$0.17	(16.7%)	9/25/2008	AMC
Spectrum Contrl	SPEC	$0.16	$0.22	(11.1%)	9/25/2008	AMC
Synnex Corp	SNX	$0.58	$0.46	7.7%	9/25/2008	AMC
Texas Inds	TXI	$0.85	$0.64	(31.0%)	9/25/2008	BTO
Tibco Software	TIBX	$0.06	$0.03	0.0%	9/25/2008	AMC
Vail Resorts	MTN	($0.17)	($0.88)	(8.2%)	9/25/2008	BTO
Amer Greetings	AM	$0.15	$0.16	(55.0%)	9/26/2008	BTO
Azz Inc	AZZ	$0.80	$0.66	51.8%	9/26/2008	BTO
Jabil Circuit	JBL	$0.25	$0.26	69.2%	9/26/2008	BTO
Kb Home	KBH	($1.57)	($6.19)	(258.7%)	9/26/2008	BTO
Solera Holdings	SLH	$0.29	$0.23	10.7%	8/27/2008	AMC
Sport Supply Gp	RBI	$0.15	($0.03)	13.6%	8/27/2008	BTO
Sws Group Inc	SWS	$0.28	$0.25	33.3%	8/27/2008	AMC
Synovis Lif Tec	SYNO	$0.11	$0.10	11.1%	8/27/2008	BTO
Talbots Inc	TLB	($0.33)	($0.25)	75.0%	8/27/2008	BTO
Tivo Inc	TIVO	($0.02)	($0.11)	500.0%	8/27/2008	AMC
Valuevision Cla	VVTV	($0.27)	($0.11)	(28.1%)	8/27/2008	AMC
Xeta Tech Inc	XETA	$0.05	$0.04	0.0%	8/27/2008	AMC
Aruba Networks	ARUN	($0.06)	($0.04)	(16.7%)	8/28/2008	AMC
Ata Inc-Adr	ATAI	$0.06	$999.00	N/A	8/28/2008	N/A
China Fin Onlin	JRJC	$0.14	$0.08	25.0%	8/28/2008	AMC
Conns Inc	CONN	$0.38	$0.40	19.1%	8/28/2008	BTO
Credence Sys Cp	CMOS	($0.05)	$0.09	(25.0%)	8/28/2008	N/A
Del Monte Foods	DLM	($0.05)	$0.03	11.5%	8/28/2008	BTO
Delias Inc	DLIA	($0.17)	($0.16)	(62.5%)	8/28/2008	AMC
Dell Inc	DELL	$0.36	$0.34	11.8%	8/28/2008	AMC
Dollar Finl Cp	DLLR	$0.59	$0.48	(1.8%)	8/28/2008	AMC
Energy Conv Dev	ENER	$0.20	($0.16)	725.0%	8/28/2008	BTO
Esterline Tech	ESL	$0.64	$0.61	9.1%	8/28/2008	AMC
Fleetwood Entrp	FLE	($0.18)	($0.03)	46.2%	8/28/2008	BTO
Freds Inc	FRED	$0.10	$0.08	12.5%	8/28/2008	BTO
Genesco Inc	GCO	$0.04	$0.00	55.6%	8/28/2008	BTO
Jamba Inc	JMBA	$0.02	$0.04	(55.6%)	8/28/2008	AMC
Kirklands Inc	KIRK	($0.12)	($0.29)	63.3%	8/28/2008	BTO
La Barge	LB	$0.27	$0.18	0.0%	8/28/2008	BTO
Layne Christens	LAYN	$0.62	$0.60	0.0%	8/28/2008	BTO
Magma Design	LAVA	$0.00	($0.03)	(11.1%)	8/28/2008	AMC
Marvell Tech Gp	MRVL	$0.13	($0.04)	266.7%	8/28/2008	AMC
Micros Sys	MCRS	$0.33	$0.33	3.5%	8/28/2008	AMC
Net 1 Ueps Tech	UEPS	$0.38	$0.31	23.7%	8/28/2008	AMC
Netezza Corp	NZ	$0.03	($0.19)	0.0%	8/28/2008	BTO
Novell Inc	NOVL	$0.03	$0.01	25.0%	8/28/2008	AMC
Omnivision Tech	OVTI	$0.16	$0.15	(15.0%)	8/28/2008	AMC
Petsmart Inc	PETM	$0.28	$0.36	3.2%	8/28/2008	AMC
Royal Bank Cda	RY	$1.05	$1.03	(32.0%)	8/28/2008	N/A
Sears Hldg Cp	SHLD	$0.36	$1.17	(394.4%)	8/28/2008	BTO
Sourceforge Inc	LNUX	($0.01)	$0.01	0.0%	8/28/2008	AMC
Telvent Git Sa	TLVT	$0.28	$0.19	19.4%	8/28/2008	BTO
Tiffany & Co	TIF	$0.55	$0.45	22.0%	8/28/2008	BTO
Toronto Dom Bnk	TD	$1.40	$1.18	(7.0%)	8/28/2008	BTO
Williams-Sonoma	WSM	$0.08	$0.24	400.0%	8/28/2008	N/A
Wind River Sys	WIND	$0.02	$0.05	144.4%	8/28/2008	AMC
Zale Corp New	ZLC	($0.55)	$0.00	2.33%	8/28/2008	N/A
Knightsbridge	VLCCF	$0.54	$0.42	(20.9%)	8/29/2008	N/A

BMO = Before The Market Open, AMC = After Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"MCM" Free Stock Analysis: Buy? Sell? Hold?
"KBH" Free Stock Analysis: Buy? Sell? Hold?
"LEN" Free Stock Analysis: Buy? Sell? Hold?
"NIKE" Free Stock Analysis: Buy? Sell? Hold?
"PAYX" Free Stock Analysis: Buy? Sell? Hold?
"JBL2" Free Stock Analysis: Buy? Sell? Hold?
"AZO" Free Stock Analysis: Buy? Sell? Hold?
"HFL" Free Stock Analysis: Buy? Sell? Hold?
"BBUY" Free Stock Analysis: Buy? Sell? Hold?
"DFS3" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Staying Focused on the Long-Term – Market Analysis

Charles Rotblut — Fri, 19 Sep 2008 00:00:00 +0000

Quadruple witching has led the fourth day of triple-digit intraday moves for the Dow. The ban on short-selling forced many traders to close out their positions rather than roll them over.

The big gains on Friday were really just an extension of what we saw on Thursday. Anyone who did not own stocks at lunchtime on Thursday missed out on the rally. The rally happened too fast for most investors to take advantage.

The speed and intensity of the rally demonstrated the importance of maintaining an allocation to stocks. The biggest rallies often happen without much forewarning.

Our Strategy for the Focus List

In managing the Focus List, we treat each stock pick as an investment, not a trade. We are willing to move quickly when conditions change, but day-to-day swings in the market are not going to change our management style. Our plan is to continue to find fundamentally sound stocks with rising earnings estimates that are trading at attractive valuations.

In accordance with this objective, we will be adding ReneSola (SOL), Smith International (SII) and Sohu.com (SOHU) to the Focus List. All three stocks are trading at an attractive valuations and have rising earnings estimates.

SII provides a complete range of oilfield drilling products and services, from the rig floor to the drill bit. A sizeable portion of its business is tied to long-term projects in the Eastern Hemisphere, which historically has provided less volatile revenue streams. Smith International is also a shareholder friendly company, having both raised its dividend and repurchased stock. Zacks Equity Research analyst Sheraz Mian recently upgraded SII to a long-term buy.

SOHU is the leading Internet search engine and web portal in China. The company has been experiencing rapid growth in both revenues and earnings, but recent weakness in the Chinese stock market has made shares of this company a bargain. SOHU trades at just 18x projected 2008 earnings of $3.55 per share and is a Zacks #1 Rank ("strong buy") stock.

SOL manufactures solar wafers and supplies many of the major manufacturers of solar cells and modules. Unlike many other alternative energy companies, ReneSola has been profitable. Equally important, the company's earnings are projected to rise approximately 60% next year to $2.16 per share. SOL is a Zacks #1 Rank stock trading at just 10.6x projected 2008 profits.

The Focus List does not have any exposure to the industries in which these companies operate. Therefore, adding these companies will improve the diversification of the portfolio, which in turn reduces its volatility.

Regulatory and Market Events

I'm going to reiterate what I said on Zacks.com concerning the week's events and new regulatory proposals.

Traders are reacting quickly to the ever evolving events, which has included the bankruptcy of Lehman (LEH), the government takeover of AIG (AIG), the closing of a Putnam money market fund, an infusion of liquidity by several central banks and a proposal for a massive bailout of financial firms. Not to mention that short-selling has been banned on nearly 800 financial stocks here in the U.S.

In describing the week's events to David Gaffen, who writes the excellent MarketBeat blog for the Wall Street Journal, I opined, "Throughout the year there's been so many people saying this is bottom, and we hear about (the major financial firms) throwing in everything including the kitchen sink, but now we're finding they're throwing in the dishwasher, the refrigerator, and who knows what else."

The Markets

The S&P 500, and other major averages, set new lows for the year, only to bounce right back into their previous ranges. Trading this week was not driven by technicals, but rather speculation and reaction to news events. I expect more of the same next week as we start to learn the details of the proposed bailout.

The VIX shot well above 30 this week, signaling an elevated level of fear. Recently, spikes above 30 have signaled short-term bottoms. Given the ban on short sales and the proposed bailout, it's very possible that another bottom has been set.

Charles Rotblut, CFA, is the Senior Market Analyst for Zacks.com. He can be reached at crotblut@zacks.com.
"SII" Free Stock Analysis: Buy? Sell? Hold?
"SOL3" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Bulls Rushed in on Word of a Rescue Plan – Closing Market Commentary

Alex Kolb — Fri, 19 Sep 2008 00:00:00 +0000

After all the hoopla this week, the Dow ended at 11,388.44, which is pretty much where it left off last Friday. The blue chip index advanced by 368.75 points, or 3.35%, for the day.

Broader indexes also ended higher Friday. The S&P 500 index increased 48.57 points, or 4.03%, to 1,255.08, and the Nasdaq gained 74.80 points, or 3.40%, closing at 2,273.90.

TodayÂ’s rally was fueled by the governmentÂ’s announcement that it will step in to help rescue banks from bad bets on mortgages. Treasury Secretary Henry Paulson explained that a bailout is necessary though he offered little in terms of specifics. Paulson said that he will meet with members of congress over the weekend to hammer out the details.

The government announced other actions as well in order to help facilitate a less turbulent environment in the financial system. The Federal Reserve will expand its emergency lending program, allowing commercial banks to finance purchases of asset-backed paper from money market funds.

The central bank also infused another $20 billion in temporary reserves into the U.S. financial structure. Additionally, the Fed plans on buying short-term debt obligations that are issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Covering of short positions also played a role in todayÂ’s bullishness. The U.S. Securities and Exchange Commission announced a temporary ban on short selling of 799 financial companies. The intent behind this move is to help stabilize the plummeting shares in the financial arena. As a result, some investors scrambled to cover short positions, which translated into share price gains.

Oil joined in on FridayÂ’s rally. Light, sweet crude for October delivery jumped $6.67, settling at $104.55 per barrel on the New York Mercantile Exchange. Gold, however, did not take part in the rally. The precious metal settled nearly 3.6% lower for the day.

The Focus List

Focus List holdings benefited from todayÂ’s upswing. The portfolio ended FridayÂ’s session 2.87% higher. Several holdings staged wide advances, while very few moved down.

Some of the bigger gainers included FPL Group Inc. (FPL), which was the subject of an analysts upgrade today. Shares of the electric utility company closed 6.33% higher.

Westinghouse Air Brake Technologies Corp. (WAB) saw the largest share price increase, rising 9.5% Friday. No major news was released on WAB. However, analyst earnings estimates for the 2009 year were increased by 4 cents to $3.08 per share over the past 7 trading days.

Watson Wyatt Worldwide Inc. (WW) declared a regular quarterly dividend of 7.5 cents per share. The company noted that the dividend is payable Oct. 15 to shareholders of record Sept. 30.

"WW" Free Stock Analysis: Buy? Sell? Hold?
"WAB" Free Stock Analysis: Buy? Sell? Hold?
"FPL" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Market Forecast 9-18-08 – And the Volatility Keeps On Churning -

Steve Warshaw — Thu, 18 Sep 2008 21:43:40 +0000

Oh boy was today fun. Several of my short picks were up over 8% to start today, and WHAMO, the federal government strikes back. Today, US Treasury Secretary Henry Paulson MENTIONED forming an entity similar to the Resolution Trust Corp which bailed out the savings and loan crisis in the late 1980’s. Minutes later, the markets [...]

The United States May Be The Next Banana Republic

Alex Stanczyk — Thu, 18 Sep 2008 20:19:23 +0000

With this announcement, the US has stepped into a realm formerly reserved for such lofty icons of global financial dominance as the Wiemar Republic, Argentina, and Zimbabwe. We are now officially directly monetizing debt, and creating money out of thin air. God forgive us for what we are about to do to our children. September 17, 2008 HP-1144 Treasury Announces [...]

Too Big to Suffer a Loss – Doug Noland

John Lee — Mon, 15 Sep 2008 21:28:18 +0000

For the week, the Dow gained 1.8% (down 13.9% y-t-d) and the S&P500 increased 0.8% (down 14.8%). The Utilities rose 2.6% (down 14.8%), and the Morgan Stanley Consumer index gained 2.2% (down 5.1%).

Continue reading

U.S. Economy: Are We Nearing the End of the American Dream?

Money Morning — Sat, 13 Sep 2008 10:15:27 +0000

Three unlikely catalysts have been driving the U.S. economy off a cliff. This FREE report tells you how long the U.S. economy will suffer before it recovers… That sound you hear…... Money Morning is here to help investors profit handsome...

The Reserve Bank bares its impotence for all to see

Bernard Hickey — Thu, 11 Sep 2008 21:25:07 +0000

Look past the headlines and you will find the Reserve Bank achieved little yesterday to lower mortgage rates for most people. The effects will dribble through to home owners over the coming year or so, but not as quickly and not as much as the Reserve Bank would like. This is not the Reserve Bank’s fault. [...]

Jim Rogers and Warren Buffett at Odds on Fannie/Freddie Bailout

Money Morning — Tue, 09 Sep 2008 00:52:51 +0000

By Jason Simpkins Associate Editor Few analysts have abstained from voicing an opinion about the U.S. government’s plan to seize control of Fannie Mae (FNM) and Freddie Mac (FRE), the... Money Morning is here to help investors profit hands...

Freddie and Fannie Shareholders to be Wiped Out

Alex Stanczyk — Mon, 08 Sep 2008 11:20:07 +0000

Alex’s Notes: Wow are these guys nuts? Let me see if I can sum this up. 1. A whole bunch of banks get stupid all at once, and create a whole industry of liar loans (the sub-prime mess) allowing people who never should have been given the debt to take out a half million dollar mortgage an [...]

WSJ: Treasury is Close to Bailout Plan err Backstop for Fannie (FNM), Freddie (FRE)

Trader Mark — Fri, 05 Sep 2008 17:24:00 +0000

Not that they need it because their business model is just fine thank you - but your tax dollars are on the way... this administration is infamous for doing their best bailout... err assistance ... plans on the weekend. I wonder if this was leaked to Goldman Sachs... err to someone, and that caused the [...]

The GSE End Game?

Mike Larson — Fri, 22 Aug 2008 07:30:00 +0000

This week, shares of the two Government Sponsored Enterprises, or GSEs, imploded again: Fannie Mae lost 39% between last Friday and yesterday's close. Freddie Mac tanked 46%. ...

Rationing of Silver Eagles by the US Mint is Illegal

Alex Stanczyk — Thu, 05 Jun 2008 15:38:02 +0000

This letter was recently sent to the Secretary of the Treasury Henry Paulson from Bix Weir: Henry Paulson US Secretary of The Treasury 1500 Pennsylvania Avenue, NW Washington, DC 20220 Edmond C. Moy Director of The US Mint 801 9th Street, NW Room 8S23-3 Washington, D.C. 20220 RE: US Silver Eagles Illegal Rationing Dear Sirs: It has come to my attention that 1oz US Silver [...]

A Magic Decoder Ring

Graham Summers — Mon, 02 Jun 2008 19:25:53 +0000

Jun 2nd, 2008: Want to know what the powers that be really mean? Look at the charts.

Listening to Opinions on Market Turmoil

Richard Shaw — Tue, 21 Aug 2007 01:19:05 +0000

Sometimes it’s better to listen than to talk. That’s where we are today concerning the current market turmoil. The following are excerpts from the PIMCO montly letter and a piece in Fortune Magazine called “Crisis Counsel” . Bill Gross (Chairman, PIMCO) “[August newsletter] No longer will double-digit LBO returns be supported by cheap financing and shameless covenants. [...]

Stock Market News & Stocks to Watch from StraightStocks » Henry Paulson

Prieur’s readings (August 11, 2009)

Stitch in Time

Goldman…Goldman…Goldman…

Cash for Liquor Anyone?

Thursday’s Market Recap (06/25/09)

Ken Lewis: The Fed Made Me Do It! – Analyst Blog

Bigger Than Watergate?

And Then There’s This…Friday, April 24th, 2009

The Recovery That Isn’t

A ‘Rebubble’ Attempt

Born Biddable

‘The Cheater’ Speaks

Geithner Promises TARP Overhaul, Regulatory Changes to Solve “Mother of All Financial Crises”

Bank Of America Earnings Disappoint

Bernanke Casts Doubt on Stimulus, Says Fed May Buy Toxic Assets to Loosen Credit

Bailout Report Card – The Results Might Surprise You

Risk Aversion Reigns Supreme!

And Then There’s This…Tuesday, January 13th, 2009

Shift in China Trade Policy Could Accelerate Western Steelmakers’ Slump

Shift in China Trade Policy Could Accelerate Western Steelmakers’ Slump

A HUGE Currency Rally!

CIT To Receive $2.33 Billion Under TARP

President Bush Extends Lifeline To Automakers

What to Buy as the Dollar Stumbles

Obama, Paulson May Ask for a Combined $1.2 Trillion from Skeptical Congress

Incipient Chinese Yuan Depreciation in Context

China Blasts U.S. Economic Policy, Expresses Doubt in Financial System

Earnings Preview for Dec 8 – 12 – Earnings Preview

Earnings Preview for Dec 8-12 – Earnings Preview

China Slams Western Financial Firms

Why Gold Will Soar As Fiat Currencies Crumble

Gold is a “Buy” at $750 or Less … But in the Low $600 Range, it Will be an Absolute Steal

Looming RMB depreciation could hurt Asian economies

Spreading Credit Woes Cause Government Intervention

This Thanksgiving, We Are All Turkeys

Citi Gets More ‘Gov’t Money’

The Trading Plan For Today – 11/25/08

Obama’s economic plans

Gold in the Low $600s?

$ vs. Crude…Hmmm! (9 July 2008 Issue)

Interpreting Results

Where is all the money going?

Dow Plummets for Third-Straight Day

Paulson’s TARP Revision Spooks The Market

And Then There’s This…Tuesday, November 4th, 2008

Global Investing Roundups Friday, October 31st, 2008

Global Investing Roundups Friday, October 31st, 2008

Gold, Faith and Credit

Economy Crumbling

Financial Crisis Timeline

Paulson Says to Investors – This Too Shall Pass

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Paulson Announces New Plans to Buy Equity Stakes in Banks and Revive Credit Markets

Govt to Follow Buffet’s Lead

Watch the Dow Hit 5,000 After This Bear Market Bounce

Please “Hammer” Don’t Hurt Me

Make it Stop, buy the Banks Already

A New Trading Theme

Stocks Go On A Roller Coaster Ride

The Month When Reality Invaded

Banking Crises Around The World

Dithering Costs

Relevant Examples

Paulson Wrong Again!

Indian Inflation Doesn’t Budge While Forex Reserves Rise and the Rupee Falls

Agreement Reached on Bailout – Analyst Blog

This Sucker Could Go Down

Words from the (investment) wise for the week that was (September 22 – 28, 2008)

Market Wrap for September 25th, Repeat After Me: “Capital Preservation”

Is The Bailout Broken?

It’s all going the shape of a pear now…

Emotions Running High Over $700B Bailout

The US Will Never Be Able to Pay Off its Debts

Bailout Plans Offer No Magic Bullets – Zacks Analyst Interviews

Wracked by Problems, the U.S. Economy Keeps Digging Its Way Out

Paulson bailout

Gap between interest rates on 3-month certificates of deposit and 3-month treasury bills, from Federal Reserve Statistical Release H.15.

Some Observations on the Ongoing Crisis: Causes and Opportunity Cost Again