STOCK MARKET WATCH, Tuesday August 26

[ozymandius]

Source: du

STOCK MARKET WATCH, Tuesday August 26, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 148
DAYS SINCE DEMOCRACY DIED (12/12/00) 2774 DAYS
WHERE'S OSAMA BIN-LADEN? 2499 DAYS
DAYS SINCE ENRON COLLAPSE = 2790
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

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

---

AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.
$1 USD = EUR 1.06678
$1 USD = JPY 116.6200

AT THE CLOSING BELL ON August 25, 2008

Dow... 11,386.25 -241.81 (-2.08%)
Nasdaq... 2,365.59 -49.12 (-2.03%)
S&P 500... 1,266.84 -25.36 (-1.96%)
Gold future... 825.70 -7.70 (-0.92%)
30-Year Bond 4.40% -0.06 (-1.34%)
10-Yr Bond... 3.79% -0.08 (-1.97%)






GOLD,EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

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

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

[ozymandius]

1. Market WrapUp

Wake-Up Call
BY ROB KIRBY

Last week, widely regarded silver analyst Ted Butler, reported on recent developments during the July 1 – August 5, 2008 time period in the precious metals complex (specifically, open-interest data in COMEX futures).

Butler’s work shows, as of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.

...

To wrap your head around “who” the perpetrator(s) must and categorically do include, just take a peek at the Quarterly Derivatives Report (Q1 / 08, pg. 30) compiled by the Office of the Comptroller of the Currency to see J.P. Morgan sporting 93 billion+ of gold derivatives (futures) on their books.

...

Ladies and gentlemen, the OBSCENE amounts of these financial instruments being thrust through the system – allegedly in the name of 1 bank, amounting to MULTI-TRILLIONS per quarter – CAN ONLY BE THE WORK OF A PRIVATE CENTRAL BANK (read, the FED), because no public entity – bank or otherwise - has the balance sheet maneuverability in an impaired credit environment to conduct such business.

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

[InkAddict]

16. Robert Frost on "imploded" terrorist watchlist?

Nature's first green is gold,
Her hardest hue to hold.
Her early leaf's a flower;
But only so an hour.
Then leaf subsides to leaf.
So Eden sank to grief,
So dawn goes down to day.
Nothing gold can stay.

[DemReadingDU]

20. I wonder what really goes on at that yearly Fed conference

in Jackson Hole, Wyoming


Do they discuss which banks get saved and which ones to fail?

edit: and which banks to get the gold? (JPMorgan?)

[ozymandius]

2. Today's Reports

10:00 Consumer Confidence Aug
Briefing.com 53.0
Consensus 53.0
Prior 51.9

10:00 New Home Sales Jul
Briefing.com 535K
Consensus 525K
Prior 530K

14:00 FOMC Minutes Aug 5

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

[UpInArms]

18. U.S. June home sales 503,000 was lowest since Sept. '91

01. U.S. June home sales 503,000 was lowest since Sept. '91
10:00 AM ET, Aug 26, 2008

02. U.S June new-home sales revised to new cycle-low
10:00 AM ET, Aug 26, 2008

03. U.S. July new-home sales weaker than 521,000 pace expected
10:00 AM ET, Aug 26, 2008

04. U.S. July new-home sales up 2.4% to 515,000 pace
10:00 AM ET, Aug 26, 2008

05. U.S. August consumer confidence above 53 expected
10:00 AM ET, Aug 26, 2008

06. U.S. August consumer confidence 56.9 vs 51.9 in July
10:00 AM ET, Aug 26, 2008

[UpInArms]

19. U.S. Q2 OFHEO home prices down 1.4%

01. U.S. Q2 OFHEO home prices drop moderates vs Q1 decline
10:04 AM ET, Aug 26, 2008

02. U.S. Q2 OFHEO home prices down 1.4%
10:03 AM ET, Aug 26, 2008

[UpInArms]

43. Home prices fall a record 15.9% year over year

http://www.marketwatch.com/news/story/home-prices-fall-record-159/story.aspx?guid=8D836E0A-D228-45D6-A847-E759D04681EB&dist=SecMostRead

WASHINGTON (MarketWatch) -- U.S. home prices fell at a record rate in June, putting more pressure on an already-fragile financial system.

The Case-Shiller index of 20 major metropolitan areas for the month dropped 15.9% from June 2007, Standard & Poor's reported Tuesday.

The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metro-level real-estate values. While only slightly worse than the 15.8% decrease seen in the previous month, June's drop represents a new record decline.

Prices tracked in a separate index of 10 cities fell a record 17.0% in the past year.

"While there is no national turnaround in residential real-estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "Nevertheless, not one market is showing a positive return over the past 12 months and seven of the metro areas are reporting declines in excess of 20%."

Falling house prices make it more difficult for owners to tap their home equity or refinance their mortgages. Economists are also worried about credit-card and other debt.

...more...

[ozymandius]

3. Oil prices rise on worries about Hurricane Gustav

SINGAPORE - Oil prices in Asia rose Tuesday on concerns Hurricane Gustav may disrupt oil operations in the Gulf of Mexico.

...

Light, sweet crude for October delivery was up 58 cents at $115.69 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose 52 cents overnight to settle at $115.11 a barrel.

...

Keeping a lid on oil's gains was a stable dollar. Oil prices typically fall when the dollar strengthens as investors buy commodities as a hedge against inflation and weakness in the U.S. currency. The euro fell to $1.4686 on Tuesday while the dollar gained to 109.74 yen.

...

In other Nymex trading, heating oil futures rose 0.91 cent to $3.16 a gallon, while gasoline prices gained 0.87 cent to $2.86 a gallon. Natural gas futures increased 12.5 cents to $7.95 per 1,000 cubic feet.

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

[ozymandius]

4. Big squeeze hits Chinese oil giant PetroChina

SHANGHAI, China - PetroChina is expected to report that its first-half net profit fell by at least a third, analysts say, as losses in its refining business eroded gains from surging crude oil prices.

Even last year when PetroChina's market value briefly topped $1 trillion by some calculations trouble was brewing at the traded unit of the country's leading oil and gas producer.

....

On Monday, Asia's biggest refiner, China Petroleum & Chemical Corp., or Sinopec, reported a 77 percent plunge in net profit, to 8.3 billion yuan ($1.2 billion), in the January-June half-year. That compared with 37.8 billion yuan in net profit a year ago.

The precipitous decline came despite 33.4 billion yuan ($4.9 billion) in subsidies in the first half of the year, Sinopec said.

http://news.yahoo.com/s/ap/20080826/ap_on_bi_ge/china_petrochina_earnings_preview

[Tandalayo_Scheisskopf]

15. This has become such a naked, transparent market goose.

Every time the wind picks up within 3000 miles of the Gulf, up goes the prices. God forbid a house sparrow farts down there.

On edit: I was reading an article yesterday, about the huge position that CALPERS has in the commodities in general. If I was investigating trading on the commodities markets, I would start right with CALPERS and other institutional investors like them, looking into how they go about their market business.

[ozymandius]

5. Financial worries drive Wall Street down 2 percent

NEW YORK (Reuters) - U.S. stocks fell sharply on Monday as credit concerns hounded financial stocks while global growth worries hurt big technology and industrial companies.

The three major indexes fell about 2 percent each, wiping out gains booked on Friday, though traders said thin, end-of-summer conditions may have exaggerated the moves.

Stocks started the day under selling pressure, led by financials, after regulators late on Friday closed Columbian Bank and Trust, the ninth U.S. bank to fail amid a weakening economy and falling home prices.

American International Group Inc (AIG.N), the world's biggest insurer, was among the top drags on the Dow, with its shares falling to a 13-year low. Credit Suisse cut the company's share price target and forecast a huge loss for the insurer.

http://news.yahoo.com/s/nm/20080825/bs_nm/markets_stocks_dc

[ozymandius]

6. Wall Street futures point to slight recovery

LONDON (Reuters) - Futures for the Dow Jones industrial average, the S&P 500 and the Nasdaq 100 ticked up 0.1-0.2 percent on Tuesday, pointing to a slight recovery on Wall Street after sharp falls on Monday.

* Retailer Big Lots Inc (BIG.N), which specializes in sales of excess inventory, is the only S&P 500 company scheduled to report.

http://news.yahoo.com/s/nm/20080826/bs_nm/markets_stocks_dc

[ozymandius]

7. BankUnited Needs $400 Million to Satisfy Regulators (Update3)

Aug. 25 (Bloomberg) -- BankUnited Financial Corp., Florida's largest bank, may lose its ``well-capitalized'' status under federal rules for financial strength unless it attracts at least $400 million of new capital.

The Office of Thrift Supervision will downgrade BankUnited to ``adequately capitalized'' if the company fails to raise funds, according to a regulatory filing today. More restrictions could be placed on the bank, affecting its financial position and operations, the Coral Gables, Florida-based bank said.

BankUnited said in June it was seeking $400 million to boost capital and offset losses on its $10 billion of home loans. The company has posted more than $200 million in losses in the last three quarters because of record foreclosures.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a95wXzuOPJxk&refer=us

[ozymandius]

8. WSJ: Regulators Step Up Bank Actions

WASHINGTON -- Federal regulators have increased the number of struggling banks they have effectively put on probation, forcing them to fix their problems and try to avoid potentially costly failures.

The Federal Reserve and the Office of the Comptroller of the Currency, two of the nation's primary bank regulators, have issued more of these so-called memorandums of understanding so far this year than they did for all of 2007, according to data obtained from regulatory agencies under Freedom of Information Act requests.

http://online.wsj.com/article/SB121970743771671073.html

---

Companies Featured in This Article: Boston Private Financial Holdings, BankUnited Financial, Imperial Capital Bancorp

[TalkingDog]

28. ABC's list of of troubled banks:

http://abcnews.go.com/Blotter/story?id=5374205

One list prepared by Research Associates of America, a non-profit group in Washington, D.C. funded by labor unions, reported 10 banks with a ratio over 100. (click here to see the list)

(link downloads table.doc -td)
http://www.abcnews.com/images/Blotter/top%20troubled%20banks.doc

[TalkingDog]

31. Flustered

I was listening to the cable news press coverage of the struggling banks. The govt. official who spoke was barely audible except for her occasional nervous laughter. And the loud bluster of the press' deconstruction afterwards put me in mind of a man tap-dancing barefoot on a bed of live coals.

Bottom line: The Govt. has it all under control............... really.....

(stop looking at me like that)

[UpInArms]

9. dollar watch

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

Last trade 77.559 Change +0.730 (+0.95%)

Dow Jones Falls 241 points. What does it mean for USD/JPY?

http://www.dailyfx.com/story/bio1/Dow_Jones_Falls_241_points__1219698652334.html

The U.S. stock market fell sharply on Monday on renewed concerns over the health of several financial firms. Yet, despite the strong correlation between stocks and carry, we expect USD/JPY to rally further on interest rate differentials.



U.S. Stock Markets Fall on Concern over the Health of Financial Firms

The U.S. dollar had a mixed performance on Monday during a trading session with very low liquidity since London financial markets were closed for a public holiday. The greenback was particularly strong against commodity currencies like the New Zealand dollar but continued to lose ground against low yielding currencies like the Japanese yen. Indeed, the USD/JPY was quoted at 109.33 yen on Monday from 109.85 on Friday. To some extent, the U.S. dollar recovered from earlier losses after a surprisingly strong report on home sales. According to the National Association of Realtors sales of existing homes in the U.S. rose by 3.1 percent in July, the highest level in more than six months. Yet, today’s financial media headlines were dominated by the U.S. stock market which fell sharply on Monday on renewed concerns over the health of several financial firms. For instance, shares of Lehman Brothers fell nearly 6 percent on Monday after Jun Kwang Woo, a top South Korean regulator, expressed concern about Korea Development Bank's interest in buying the investment bank.

The correlation between the U.S. stock market and the USD/JPY is not what it used to be

Despite the historical links between stocks and carry, the correlation between the Dow Jones Industrial Average and the USDJPY is not what it used to be. In fact, the correlation seems to have broken down in June 2008 and I expect dollar strength going forward regardless of the short term performance of the U.S. stock market. Indeed, the Japanese yen could be particularly vulnerable against the U.S. dollar on interest rate differentials. In August, the Bank of Japan left its key interest rate unchanged at 0.5% but downgraded its view of the Japanese economy. On the other hand, we expect the Federal Reserve to increase rates by almost 75 bps in the next 12 months in order to keep up with inflation. In addition, a significant U.S. dollar undervaluation is now likely to lead to a substantial improvement of the U.S. Balance of Payments through continued strong export performance and propel USD/JPY to 120.

...more...

Euro Breaks 1.4600 After German IFO Disappointment, Will U.S. Data Keep Dollar Rally Going?

http://www.dailyfx.com/story/topheadline/Euro_Breaks_1_4600_After_German1219750456923.html

The Euro broke below 1.4600 after the German IFO Survey fell to a three year low. German business confidence fell to 94.8 from 97.5 in July and far below the expected 97.2. The EURUSD was already trading heavy have fallen over 100 points in Asian trading ahead of the German GDP report which showed the country’s economy contracted 0.5% in the second quarter. The outlook for Europe’s largest economy is now expected to continue to decline in 3Q, which was evident by the fall in the expectations component of the IFO indicator to 87.0 from 90.0, which was the lowest since February, 1993. Additionally, consumer confidence in the country fell to 1.5, the lowest in five years, declining the prospects of domestic growth.

The German economy shrinking for the first time in four years may be a clear sign for the ECB, that a more accommodative monetary policy is needed to prevent the region from falling into a recession. German efficiency and emerging market demand helped it withstand the head winds from the U.S. longer than expected, but the subprime crisis’s impact on global growth has finally taken its toll. The central bank’s decision to raise credit costs in July has only accelerated the decline and may have brought the region to the brink of a recession, as German growth has masked weakness in other European leaders like Spain and Italy.

The Pound fell to a 25 month low of 1.8368 on the German news, as its prospects for growth declined with its major trading partner’s economy heading for a recession. The outlook for the U.K. economy has become bleaker as it is contending with a housing slump in addition to slowing global growth. Although the BBA report showed home loans increasing to 22,448, it was a minor improvement from the decade low reading of 22,369 in July. Despite inflation well above their 3% threshold at 4.4%, the BoE may be forced to consider a rate reduction by year’s end as export demand and domestic growth continue to slow.

The U.S. calendar is full of releases today with housing, manufacturing and sentiment data on tap. The S&P Case/Schiller housing report is expected to show that home prices fell another 16.2% in June, which is expected to cause new home sales to decline another 0.9%. Although yesterday’s existing home sales report showed a rebound, the gain was mainly due to foreclosure, short sales and price reductions, signaling the housing woes are far from over. Nevertheless, as the European and Asian economies continue to slow, the U.S. economy has become increasingly more attractive for investors which should continue to contribute to the dollar’s recent strength. An expected improvement in the U.S. consumer confidence report and the Richmond Fed Manufacturing Index will also add bullish sentiment.

...more...

[UpInArms]

10. (Chinese Bank) BoCom sold $27 mln Freddie, Fannie bonds in July

http://www.reuters.com/article/bondsNews/idUSSHA18175620080826

SHANGHAI, Aug 26 (Reuters) - Bank of Communications (3328.HK: Quote, Profile, Research, Stock Buzz) (601328.SS: Quote, Profile, Research, Stock Buzz) said on Tuesday it sold $27 million in bonds last month that were issued by U.S. mortgage finance companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) but incurred no losses on the sales.

BoCom President Li Jun also told a news conference that loan growth at the bank, China's fifth-largest and 19-percent owned by HSBC Holdings Plc (HSBA.L: Quote, Profile, Research, Stock Buzz) (0005.HK: Quote, Profile, Research, Stock Buzz), would slow in the second half of this year.

...more...

[Demeter]

37. I Wonder Who They Sold Them To?

If I really cared, I would have phrased that grammatically.

[Tansy_Gold]

44. the question is far more important than the grammar. . . .

. . . . . and no one seems to be offering an answer.


Tansy Gold, who would raise one eyebrow but doesn't know how.

[Demeter]

48. You Have to Be Half Vulcan, Tansy

Then you can do it.

[UpInArms]

51. maybe back to us at a discount and through a hedge fund?

:dunno:

[UpInArms]

11. Regulators step up action on U.S. banks: report (to update "troubled banks list today)

http://www.reuters.com/article/ousiv/idUSN2528449520080826?sp=true

NEW YORK (Reuters) - Federal regulators have raised the number of struggling U.S. banks they have effectively put on probation, forcing them to fix their problems to avoid potential failures, the Wall Street Journal said on Monday.

The two main U.S. bank regulators -- the Federal Reserve and the Office of the Comptroller of the Currency -- have issued more memorandums of understanding this year than they did for all of 2007, the Journal said, citing data obtained from regulators under Freedom of Information Act requests.

Banks don't have to disclose the memorandums, which are an early-warning system about troubled banks but are not meant to imply a bank is at risk of failing, the Journal said. They are often a precursor to more severe, publicly disclosed enforcement actions if conditions do not improve.

The secret agreements can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments, the Journal said.

The Federal Deposit Insurance Corp is scheduled to release its updated list of "problem" institutions on Tuesday, the Journal said. There were 90 banks on its list on March 31. Yet, since July 11 five banks have failed and many other banks are considered at risk by regulators, the Journal said.

...more...

[Demeter]

38. Lo, How the Mighty Have Fallen!

And oh, how they deserved to fail!

[UpInArms]

12. Medicare officials underestimated $700 million in improper payments: report

http://www.reuters.com/article/domesticNews/idUSBNG16783420080826

(Reuters) - Medicare officials had undervalued the amount of improper payments made for medical equipment in 2006 because it failed to review sufficient medical documents, according to a government report.

The report by the Health and Human Services inspector general's office said Medicare had matched purchases only with limited medical records from suppliers and not with orders from doctors.

Medicare had concluded it made about $700 million in improper payments in 2006 for equipment such as wheelchairs, oxygen and surgical supplies. It assumed that 7.5 percent of the claims were incorrect.

The federal report, issued on Aug 22, said the amount "would have been significantly higher" if Medicare had forced its auditors to review additional medical records from physicians and other health care providers.

Medicare had orally instructed its auditor to deviate from written policies by making its determination based on limited medical records available, the report said.

...more...

[UpInArms]

13. Why are pundits silent on return of double-digit inflation?

http://www.marketwatch.com/news/story/its-later-you-think/story.aspx?guid=FFABCF22-E7BB-47F2-AA41-2ACCE3BF27A3&dist=SecMostRead

PORT WASHINGTON, N.Y. (MarketWatch) -- Double-digit inflation has returned to the United States for the first time since the bad old days of 1981. So why are most pundits silent?

Perhaps they are taking their cue from the recent drop in oil prices. After all, the earlier jump in the price of petroleum is generally recognized as the main reason why inflation heated up in the first place.

Or maybe they buy into the argument that the economy will slow enough to prevent business from raising prices and labor from getting pay raises. When times are bad, boosting prices or wages almost always reduces demand for these particular goods and services.

It could also be that these folks are worried that any tightening by the Federal Reserve will exacerbate the already-sick housing market, thereby pushing the economy over the edge and into recession.

Whatever the reasons, those who profess not to be worried that inflation is getting worse are looking at the wrong data, are cockeyed optimists, or are simply keeping their fingers crossed.

But inflation has already reached worrisome levels.

Consumer prices are now 5.6% higher than they were a year ago. This is the largest yearly increase in 17 years.

<snip>

Indeed, the gap between the 12-month rise in consumer prices and the annual increase in average hourly earnings is now the widest in recent memory. Little wonder why people are cutting back, especially since they have little if any savings and are unable to tap the equity in their homes.

...more...

[54anickel]

23. But is it showing up in the "official" numbers that are used as the basis for COLAs? Inquiring mind

and all.

[UpInArms]

50. it's good to "see" you here

I've been missing you

:pals:

[54anickel]

52. Miss you all terribly as well. I still try to keep up with what's going on but I have to

admit I'm baffled as to how we're still afloat. I've been away too long, getting hard to catch up on it all. :pals: :loveya:

[UpInArms]

53. not much to getting caught up

just imagine the eggshell getting thinner as everything in the middle has been completely sucked and now we are just an fragile empty dry husk of an economic giant

:(

[54anickel]

54. I hear that we'll make great worm food now that we're merely a shell - grind em up!

[Demeter]

39. The Elephant In the Room Had Triplets

Pretty soon, we'll all have to move out for all the invisible elephants....

[InkAddict]

14. Why hasn't the automated opening number appeared yet?

I keep refreshing, but it's the same as closing yesterday. NSDAQ, etc...seem to be posting a new trading status?

[DemReadingDU]

21. I noticed that too on CNN, I thought the DOW was down 241

http://money.cnn.com/

The DOW is up by 33

:shrug:

[Wednesdays]

17. Dow down slightly at 10 AM

Dow Jones Industrial Average
(DJI: ^DJI)
Index Value: 11,365.73
Trade Time: 10:00AM ET
Change: Down 20.52 (0.18%)

[Joanne98]

22. Is China's growth story coming unglued?

Something is going on in China that simply does not add up. Let's start with the GDP. ChinaView is reporting China think tank forecasts GDP growth at 10.2% in Q3.


BEIJING, Aug. 8 (Xinhua) -- China will record a GDP growth of 10.2 percent in the third quarter, roughly the same as the second-quarter level, according to a report released on Friday by the State Information Center, a government think tank. The report said consumption would continue to be a major driving force for the national economy. However, auto and home purchases ebbed notably in the first half, adversely affecting consumption in the third quarter.
I doubt 10.2% growth is anywhere close to sustainable in a world economy slowing so fast that a global recession is visible on the horizon. Furthermore China has a major pollution mess that needs to be addressed. China is poisoning its land, air, water, and most importantly its citizens.

Pollution In China

The guardian has a gallery of eleven stunning images of Pollution In China. Here are a few of them.
http://globaleconomicanalysis.blogspot.com/2008/08/is-chinas-growth-story-coming-unglued.html

[54anickel]

24. The Housing Bubble Villains Deny Responsibility

http://www.truthout.org/article/the-housing-bubble-villains-deny-responsibility

The central bankers of the world gathered last weekend for their annual meeting at Jackson Hole, Wyoming. This was an opportunity to talk about the major issues confronting the world economy, as well as an opportunity to spend some time in a very beautiful vacation spot.

When they met in Jackson Hole in 2005, the meetings were devoted to an Alan Greenspan retrospective, honoring his 18-year tenure as Federal Reserve Board chairman, which was due to end the following January. A number of papers were presented analyzing his record at the Fed, including one that raised the question of whether Mr. Greenspan was the greatest central banker of all time.

The elite Jackson Hole crew did not debate whether Greenspan was the greatest central banker of all time this year. The world is now facing the most serious financial crisis since the Great Depression. At least, that is the assessment of Alan Greenspan. With house prices plunging, unemployment and inflation rates rising and banks failures mounting, Greenspan has a pretty good argument.

How did we get here? The centerpiece in this story is the United States allowed an $8 trillion housing bubble to grow unchecked. Between 1996 and 2006, house prices rose by more than 70 percent, after adjusting for inflation. In the previous century, from 1896 to 1996, house prices had just kept even with the overall rate of inflation.

When there is suddenly a sharp divergence from a long-term trend like this, it is reasonable to look for an explanation. Was there some fundamental factor on either the supply or demand side that was suddenly causing house prices to skyrocket?

more...

[Robbien]

25. FBI foresaw mortgage sector mess---but did little as resources went to fight terrorism

WASHINGTON — Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling if little-noticed prediction: The mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators, and billions of dollars in losses were possible.

"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case.

. . .

Swecker, who retired from the FBI in 2006, declined to comment. But sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance.

They ended up with fewer resources, however.

In 2007, the number of agents pursuing mortgage fraud sank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and '90s, said Anthony Adamski, who at the time oversaw financial crimes investigations at the FBI. The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.

. . .

Ormsby says the FBI also is more actively working with other federal investigative agencies. The Secret Service, for example, has assigned more than 100 agents to examine mortgage fraud.

http://www.chicagotribune.com/business/chi-tue-mortgage-fraud-predict-aug26,0,836238.story

They should just label the greedy financial robber barons "terrorists" and they would get all the resources they need. And why not label them terrorists? Spreading fear and terror and destruction is exactly what they are doing.

[Demeter]

40. The FBI is Not Into Truth-Telling

Why else would they go by the nickname of "Fibbers"?

And they only take orders--from the Ruling Class. And this was the Ruling Class committing crime after crime after crime. One can't just go calling our Masters "criminals" or "terrorists", you know. You'll lose your pension and job. Even if it's ture. Especially if it's true!

It's a horrible time to be a public servant. Or as has been noted here before, pubic servant.

[Tansy_Gold]

45. F B I

Fucking Bunch of Idiots.

[Demeter]

47. I'm Afraid To Ask--Is This Personal Knowledge?

[Tansy_Gold]

55. Long story -- read only if you need mindless entertainment

Back in the early 70s there was a particularly gruesome bank robbery and double murder in a small town near where I lived in Indiana. A friend worked at the bank and was actually the first to discover the robbery, but not the murders. Local law enforcement folks putzed around, damaged evidence, generally screwed up, and finally called in the feds.

FBI agents were put up at the local Holiday Inn, the best spot in the area. Another friend was the hostess in the HI dining room, and she frequently had to tell the agents not to discuss the details of the case during meals as it was upsetting the appetites of other patrons.

A guy that I worked with at the time, Fred, had a brother who was an FBI agent. Fred spouted off that they would soon crack the case. Fred was notoriously incompetent himself, and one day our receptionist, who was really not known for her wit, asked Fred, "Do you know what FBI stands for?"

Fred puffed himself up (easy to do; he was more than a bit pudgy) and said, "Federal Bureau of Investigation."

Connie looked him right in the eye and said, "No, it stands for Fucking Bunch of Idiots."

Fred sputtered and turned red. The rest of us laughed our asses off.


As far as I know, to this day the case has never been solved. The only reference to it that I cold find on the google was http://openweb.tvnews.vanderbilt.edu/1971-10/1971-10-15-CBS-22.html, regarding a 40-second segment on the CBS Evening News.

[DemReadingDU]

26. The Roskilde Bank problem in Denmark

From Edward Harrison's blog...

Over the weekend the Danish Central Bank took over bankrupt Roskilde Bank, wiping out shareholders. Tiny Denmark has had a bankruptcy on its hands that is following the script of Northern Rock in the UK to a tee:

* After lending too much money to the wrong people, the government is forced to step in as no private lenders want to have anything to do with the situation. A few months later the losses have mounted.

Will the losses stop at Roskilde or Northern Rock? Probably not. The scenario portends ill for the European and American banking sector and the FT has a good read on why.

This failure has a lot more significance than people might think. The Roskilde bankruptcy is the canary in the mineshaft for US regionals with construction loan and commercial real estate exposure and for small Spanish banks about to lose their shirts over Spanish vacation home overbuilding.
http://www.creditwritedowns.com/2008/08/roskilde-bank-problem.html

**********
Bank failures: Roskilde
Published: August 25 2008 19:36 | Last updated: August 26 2008 09:17

“It is clear that most people don’t believe the financial crisis is over.” With those words the Federal Reserve’s annual confab in Jackson Hole came to a close, and another bank went under. What is noteworthy about the collapse of Denmark’s Roskilde Bank is that it did not fail because of subprime losses (it had almost none) or lack of liquidity (the bank had unlimited access to central bank funds), but due to dud real estate loans kept on its books. As this may be the next shoe to drop in the credit crunch, small Denmark is showing the way for the world.

The country has a proven record as a path-breaker. In 1992, Denmark’s “No” vote to the Maastricht referendum helped throw Europe’s exchange rate mechanism into chaos. Now it has some of the world’s most over-valued homes: since 2004, house price inflation has exceeded even that in the US, UK or Spain. Its consumers are also among the most indebted, with household debt at three times disposable income. This borrowing splurge was fuelled by inappropriately low interest rates imported via the Danish currency’s peg to the euro. Now that the splurge has ended, property prices are crashing. Indeed, Denmark was the first European economy to enter recession.

Refreshingly, bank rescues the Viking way seem to mean no bailouts for shareholders. Having failed to find a private buyer, Denmark’s central bank will inject almost $1bn to keep Roskilde afloat, appoint new managers, and assume its debts and loan book. At some DKr40bn ($8bn) this is a fraction of the $30bn of Bear Stearns assets the Fed took onto its books, or the £20bn of Northern Rock mortgages assumed in the UK. But, given the size of the Danish economy, the bailout could also be proportionately higher. All this from a regional lender with only 26 branches, fewer than 100,000 customers, and top marks from ratings agencies only a year ago. We have been warned.
http://www.ft.com/cms/s/1/75812d8e-72d3-11dd-983b-0000779fd18c.html

[DemReadingDU]

35. PIMCO message to clients on Roskilde

Update from Edward Harrison's blog...

Apparently, PIMCO, the brainchild of Bill Gross and now owned by the German insurance giant Allianz, is concerned enough about the bankruptcy of Roskilde Bank in Denmark to have sent the following e-mail out to its clients. I have put important parts in red not already highlighted in the text.

Note that the bailout plan involves a collective bailout consortium by 100 other financial institutions, in effect spreading the loss thinly across the entire banking system rather than leaving the Danish taxpayer on the hook for the whole enchilada. In return for their taking on the Roskilde as shareholders,the other institutions will likely get a central bank backstop against some further losses -- a moral hazard in my estimation. Moreover, some preferred and other debt from the legacy Roskilde will be subordinated to the equity interests of the consortium and made worthless with limited recovery. Old equity has been wiped out.

Is this a possible solution other markets might try? There seem to be positives and negatives to this solution.

click to read the PIMCO message...
http://www.creditwritedowns.com/2008/08/pimco-message-to-clients-on-roskilde.html

[DemReadingDU]

27. The gears of capitalism are grinding to a halt

8/26/08 Merrill, Wachovia Hit With Record Refinancing Bill By Pierre Paulden

Aug. 26 (Bloomberg) -- Merrill Lynch & Co., Wachovia Corp., Lehman Brothers Holdings Inc. and the rest of the U.S. finance industry are about to find out how expensive credit has become.

Banks, securities firms and lenders have a record $871 billion of bonds maturing through 2009, according to JPMorgan Chase & Co., just as yields are at their most punitive compared with Treasuries. The increase in yields may cost them as much as $23 billion more in annual interest versus a year ago based on Merrill Lynch index data.

Higher refinancing expenses will restrict the ability of banks to borrow in the capital markets and lend, further cutting off credit to consumers and businesses and curbing what is already the slowest growing economy since 2001. Standard & Poor's said last week that it had a ``negative'' outlook on almost half of the 50 highest-rated financial institutions in the U.S. as of June 30, the highest proportion in 15 years.

``The gears of capitalism are grinding to a halt,'' said Mirko Mikelic, senior bond fund manager at Grand Rapids, Michigan-based Fifth Third Asset Management, which oversees $21 billion in assets. ``There is a tremendous concern over the banking sector and a scramble right now for capital.''

The Federal Reserve's quarterly lending survey released Aug. 11 said that more banks tightened credit for consumers and business borrowers. About 65 percent indicated they tightened standards on credit card loans over the previous three months, up ``notably'' from about 30 percent in the April survey.


``The credit crunch is only now beginning because bank capital is so constricted by losses to date, that they will have to begin shutting off credit to households and corporations and that's when we get the defaults,'' David Goldman, the former head of fixed-income research at Bank of America Corp.'s securities unit in New York, said in a Bloomberg Radio interview.


more...
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aQLwsxFqjNQ0


edit: Ilargi explains, from the http://theautomaticearth.blogspot.com/

Ilargi: It’s risky to say something like "The gears of capitalism are grinding to a halt". Many people will feel it is an attack on their very life and values, and react in anger instead of taking the statement at face value.

And it is not 100% true, though it’s pretty close. It is possible to create a capitalist system without levels of debt and credit that reach into the heavens and beyond. Though, then again, one could make the case that all such systems must eventually lead to the same outcome.

To continually allow borrowers to pay the interest rate on credit issued, ever more credit needs to be created. If you borrow $100 at 5% interest, you must somehow have $105 after a year. Which is not possible if only $100 has been issued.

But let’s not dwell on waxing philosophically about theoretically possible systems too much, let’s look at the actual one we have.

What is happening today can be summarized in a few words: credit is disappearing. The reason is that there are no lenders left who have sufficient collateral to justify writing new loans. Well, at least, not on the scale required to keep the machine running.

And there is no way for the lenders to get more collateral. On the contrary, the assets they hold lose value fast, which cuts their collateral even further. The primary lenders can go to the Fed’s discount window, but in order to get credit there they have to give up ... collateral.

For most people, all this merely conjures up the image of not being able to get a cheap enough mortgage or car loan they'd like in order to buy what they would wish to buy. That is where the notion of credit stops for the vast majority.

Unfortunately, credit lubricates a far bigger machine than just the one that fulfills personal wishes. Our entire society runs on credit.

And that means that the consequences of vanishing credit will hurt us much deeper and on a far wider scale than most of us imagine.

The companies we work for cannot function without credit. The communities we live in cannot either: towns, counties, states and entire countries are all dependent on the ongoing availability of credit.

And not just credit, but cheap credit: if you double or triple the interest rate paid at present, many, if not most, companies as well as governments - and individuals- will go broke.

All parties in our economy, including you, have become accustomed to available cheap credit so much that our entire societies closely resemble the just-in-time delivery systems we all know. There’s nothing on the shelves anymore, there are no savings.

In that sense, the statement is undoubtedly true. And if anybody complains, we can always specify it a bit more, and say that "The gears of OUR capitalism are grinding to a halt."

http://theautomaticearth.blogspot.com/2008/08/debt-rattle-august-26-2008-glub-glub.html

[Demeter]

41. This Is the Most Profound Analysis I've Read Yet--Thanks for the Post

[DemReadingDU]

46. Here's another one: Inflation is a deliberate lie

August 19 2008: Inflation is a deliberate lie
Note: ilargi and stoneleigh are the co-authors of http://theautomaticearth.blogspot.com/

Ilargi: It’s not really that hard: in the last few decades, credit has been seen, treated and used as money, as always during economic expansions. In fact, lately an insane amount of it has been used as such.

Now that is over, and the only way to purchase anything will soon be with money, which means cash, gold or silver, because credit will disappear. This will shake our societies to the core, like a quake measuring 9 on the Richter scale.

Wherever you look in our neck of the world, credit finances everything. Without an open credit line, 99% of businesses and governments simply cannot function. WIthout credit, home sales will become extinct, as will new car sales.

But during the sharpest contraction in US money supply in history, the president of the Federal Reserve, the secretary of the Treasury, and all the media are still incessantly talking about inflation -and stagflation- as the biggest problems in the economy.

However, looking at the numbers of the crunching credit and money supply, one thing is obvious: no matter how one defines inflation, the sharpest contraction in history cannot possibly exist alongside inflation. It is impossible.

It's so ridiculous, it is utter nonsense to even suggest it. In any and all serious economic models and schools, it’s 100% evident that this sort of contraction shouts DE-flation. And they know it.

So why do the very people like Bernanke and Paulson, who have access to better data and counsel than anyone else, continue bleating out about what they know to be a lie?

For one thing, because it allows them to make people accept increasing government expenditures, while at the same time depressing wages.

After all, higher wages would lead to inflation, or so is the argument that nobody dares question. And the government needs hundreds of billion extra, if only to fight inflation. And save the bankers without whom society would presumably collapse.

Second, it diverts people's attention away from where they are really losing money. Let them focus on $4 gas, and forget the 30% loss -with more to come- in home values, and the $1.5 trillion doled out, in their names and on their tab, to the financial industry. Just repeat the inflation mantra every day, and they'll forget about what's far more hurtful. Till it's too late.

Inflation is not a few temporary price rises. It’s a money and credit supply that expands relative to what can be purchased with it.

With individuals losing $20-30,000 per year on the value of their homes, banks too broke to write loans, companies losing trillions of dollars in writedowns and falling share prices, and various levels of governments losing money from tax revenues, investments and bonds sales, there is no expansion. Quite the opposite.

What makes the lie so easy is that people have been brought up with the concept of inflation, and what it may lead to. Nobody today has any idea what deflation will mean. Well, that is about to change.

Click to read some articles relative to last Tuesday's introduction, but more importantly, read the comments section for additional discussion about deflation...
http://theautomaticearth.blogspot.com/2008/08/debt-rattle-august-19-2008-inflation-is.html

direct link to the comments section 8/19/08 (ilargi and stoneleigh are the co-authors)
https://www.blogger.com/comment.g?blogID=4921988708619968880&postID=7057526087394104248


If you like reading this blog, here is the direct link for last Monday 8/18/08
http://theautomaticearth.blogspot.com/2008/08/debt-rattle-august-18-2008-tested-for.html

direct link to the comments section 8/18/08
https://www.blogger.com/comment.g?blogID=4921988708619968880&postID=8554804566009814523


edit: stoneleigh also had a lively discussion about deflation at slate
http://www.slate.com/discuss/forums/thread/1525244.aspx

*************
Truly frightening scary times are coming

:scared:

[Robbien]

29. Citigroup Limits Meetings, Pares Color Photocopies

Aug. 26 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, banned off-site meetings among employees and cut back on color photocopying to reduce expenses as investment- banking revenue declines.

Executives in the New York-based bank's institutional clients group will need to ensure spending is ``highly efficient,'' according to an internal memorandum confirmed by a Citigroup spokesman in London today.

. . .

Under the new policy, employee meetings must be held within Citigroup offices and client events will require approval, the memo said. Color photocopiers will be removed from some locations and their use will be limited to client presentations. The memo didn't say how much money the new rules will save.

http://www.bloomberg.com/apps/news?pid=20601103&sid=an2sIjEb_VBU&refer=us

They are looking at the copier room? Not their bonus program or dividend program. Of course not. Better to cut out employees using color in their copies.

[Wednesdays]

30. Really. Talk about re-arranging the deck chairs.

Next thing you know, they'll be stocking a cheaper brand of coffee in their break rooms. Substantial savings!

[ozymandius]

32. Smaller pictures? Smaller words?

Banning off-site meetings is a good idea. We all know how those corporate types love meetings. There are technical alternatives like Web-x and iMeeting these days.

At a corporate environment where I worked years ago, management refitted the toilets and urinals with manual flush mechanisms, instead of the automatic flush devices, to save money on energy and water.

The copier dictum is just silly. I mean: Here's an investment bank that has taken a huge financial hit because of bad choices that were made available to them by re-writing the law governing their conduct (and probably authored by Citi). This is like a family that sees their expenses skyrocket after purchasing two fully-loaded Hummers and attempt to reign-in expenses by cutting back on bread.

[Demeter]

42. Had to Start Somewhere

So they started as far away from the Executive Suite as they could get.

[DemReadingDU]

33. FDIC says list of troubled banks in 2nd quarter grows to 117

8/26/08 Problem bank list keeps growing

FDIC says list of troubled banks in 2nd quarter grows to 117 with $78 billion in assets - up from 90 banks, $26 billion in assets in 1st quarter.

In its quarterly review of the nation's banking industry, the Federal Deposit Insurance Corp. reported Tuesday that the number of firms on its so-called "problem bank" list grew to 117 during the second quarter - its highest level since the middle of 2003. There were 90 banks on the problem list in the first quarter of this year.

FDIC Chairman Sheila Bair expressed little surprise at the increase and warned that the number would grow.

"More banks will come on the list as credit problems worsen and assets of problem institutions will continue to rise," said Bair in a press conference.

The number of troubled institutions has moved steadily higher this year as banks across the country struggle to cope with the fallout in the housing market and rising loan losses.

Problem banks typically face difficulties with their finances, or are suffering through operations or management issues that pose a threat to their existence.

more...
http://money.cnn.com/2008/08/26/news/economy/fdic_banks/index.htm?postversion=2008082615

[ozymandius]

34. Here's the close for a ho-hum day.

Dow 11,412.87 Up 26.62 (0.23%)
Nasdaq 2,361.97 Down 3.62 (0.15%)
S&P 500 1,271.51 Up 4.67 (0.37%)
10-Yr Bond 3.784% Down 0.007
NYSE Volume 3,531,814,000
Nasdaq Volume 1,257,005,625

4:20 pm : The major indices ended Tuesday mixed in a choppy session that marked the lowest volume of the year. Corporate news was light, but there was plenty of economic data and movement in commodities.

The S&P 500 posted a 0.4% gain with seven of the ten economic sectors in the green as traders digested a spike in crude prices and several better-than-expected economic releases. Only 856 million shares exchanged hands on the NYSE, marking the lowest amount of volume in 2008.

Crude prices traded in a volatile manner, falling 2.4% in early trade, and then spiking to a gain of 2.4% on threats of a hurricane disrupting production in the Gulf of Mexico. Crude prices eventually settled with a gain of 1.0% at $116.26 per barrel, while natural gas prices rallied 5.7%.

The energy sector (+1.8%) provided leadership, benefiting from the gains in crude and natural gas prices. Anadarko Petroleum (APC 61.54, +3.70) gave the sector an added boost after the company authorized a share repurchase program of up to $5 billion.

Financials stocks fell to a 1% loss in afternoon trading on news that the FDIC increased the number of problem institutions to 117 in the second quarter from 90, with assets at problem institutions increasing to $78 billion from $26 billion. This headline is not as bad as it seems, considering $32 billion of the asset increase was due to IndyMac (which already failed) and 98% of institutions remain well capitalized. As a result, financials recovered from the knee-jerk reaction to the headlines to finish the day with a 0.7% gain.

The tech sector was the worst-performing area with a 0.4% loss. The tech-heavy Nasdaq composite posted a loss of 0.2% as a result.

On the economic front, July new home sales rose 2.4% to a seasonally adjusted annualized rate of 515,000 from a downwardly revised June reading of 503,000, according to the U.S. Department of Commerce. Economists expected 525,000 sales. New home sales are down 35% from the prior year, but have held somewhat steady near 500,000 in recent months.

The S&P/Case-Shiller 20 city composite posted a 15.9% year-over-year drop in home prices in June. This marks the largest decline on record, but was slightly better than the expected 16.2% decrease. In addition, the acceleration of the decline is moderating, indicating that a bottoming in the housing industry is taking place. A separate report from OFHEO showed flat home prices in June compared to May, which topped expectations. Homebuilding stocks fell 2.9%.

Consumer confidence rose 9.6% month-over-month in August to 56.9, topping the median economist estimate of 53.0. The survey shows increased plans to buy a car, a home and major appliances within the next six months.

Briefing.com does not put much weight into confidence surveys compared to hard data. Nonetheless, the reading counters conventional wisdom that the consumer is going into retrenchment mode.

Separately, the FOMC released the minutes from its Aug. 5 meeting. The minutes did not tell the market anything it did not already known, and as a result had a limited trading impact. DJ30 +26.62 NASDAQ -3.62 NQ100 -0.2% R2K +0.4% SP400 +0.5% SP500 +4.67 NASDAQ Adv/Vol/Dec 1520/1.46 bln/1296 NYSE Adv/Vol/Dec 1961/856 mln/1145

[DemReadingDU]

36. Nouriel Roubini interviewed on CNBC and NPR

8/25/08 Realty Check: Health of Housing
http://www.cnbc.com/id/15840232?video=831726721&play=1

8/23/08 'Dr. Doom' Economist's Dire Warnings Proved Right
http://www.npr.org/templates/story/story.php?storyId=93906380

more...
http://www.rgemonitor.com/roubini-monitor/253422/cnbc_and_npr_interviews_guest_bloggers_and_the_severe_worsening_of_financial_market_conditions_and_of_the_credit_crunch

[JNelson6563]

49. Those futures charts look mighty grim

Of course it may look different by morning, we shall see.

Just now had time to read through the thread to see what happened in the world of finance today. Another fabulous job Marketeers.

:toast:

Julie