STOCK MARKET WATCH, Monday March 24

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday March 24, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 303
DAYS SINCE DEMOCRACY DIED (12/12/00) 2619 DAYS
WHERE'S OSAMA BIN-LADEN? 2345 DAYS
DAYS SINCE ENRON COLLAPSE = 2636
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

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

---

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

AT THE CLOSING BELL ON March 20, 2008

Dow... 12,361.32 +261.66 (+2.16%)
Nasdaq... 2,258.11 +48.15 (+2.18%)
S&P 500... 1,329.51 +31.09 (+2.39%)
Gold future... 920.00 -25.30 (-2.68%)
30-Year Bond 4.17% -0.06 (-1.35%)
10-Yr Bond... 3.33% -0.03 (-1.01%)






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

[truthisfreedom]

1. Could not be a more appropriate cartoon.

[DemReadingDU]

28. I thought the same thing

[wordpix]

61. brilliant, indeed

[ozymandius]

2. Today's Report

10:00 AM Existing Home Sales Feb
Briefing Forecast 4.85M
Market Expects 4.86M
Prior 4.89M

http://biz.yahoo.com/c/ec/200813.html

[UpInArms]

54. Chicago Fed nat'l activity index points to recession

http://www.reuters.com/article/bondsNews/idUSCHB00044120080324

CHICAGO, March 24 (Reuters) - An index of U.S. economic
activity fell in February to its weakest since April 2003, a
report from the Federal Reserve Bank of Chicago showed on
Monday.

A less-volatile three-month moving average of economic
indicators also fell sharply, and revisions to previous data
suggest a recession may have begun as early as December.

The Chicago Fed said its National Activity Index was -1.04
in February versus a downwardly revised -0.68 in January, first
reported at -0.58. The index has been negative, indicating
below-trend growth, since August 2007.

The index's three-month moving average dropped to -0.87
from -0.73 in January, originally reported at -0.60. Revisions
also pushed the December average below -0.70.

When the three-month value drops below -0.70 following a
period of economic expansion, "there is an increasing
likelihood that a recession has begun," the Chicago Fed said.

"Thus, February marked the third consecutive month the
three-month moving average remained below this threshold," the
Chicago Fed said.

February's reading matched the April 2003 level, hit just
after the start of the U.S. war in Iraq.

...more...

[UpInArms]

68. U.S. Feb. existing-home sales rise 2.9% to 5.03mln pace

18. U.S. Feb. existing-home sales up first time in 7 months
10:01 AM ET, Mar 24, 2008 - 1 hour ago

19. U.S. median home price falls record 8.2% in past year
10:01 AM ET, Mar 24, 2008 - 1 hour ago

20. U.S. Feb. home inventories fall to 9.6-month supply
10:01 AM ET, Mar 24, 2008 - 1 hour ago

21. U.S. Feb. existing-home sales better than 4.85mln expected
10:01 AM ET, Mar 24, 2008 - 1 hour ago

22. U.S. Feb. existing-home sales rise 2.9% to 5.03mln pace
10:01 AM ET, Mar 24, 2008 - 1 hour ago

[ozymandius]

3. Oil drops on worries about weaker demand

SINGAPORE - Oil prices slipped nearly $1 a barrel Monday as traders worried that the flagging U.S. economy would cause oil demand to soften.

Oil's sharp decline started last week. Crude futures started plunging after the U.S. Federal Reserve-backed sale of Bear Stearns Cos. to JPMorgan Chase & Co. created fears of deeper economic problems. Prices dropped around 10 percent during the shortened trading week from a trading record of $111.80 hit last Monday.

"The collapse of Bear Stearns has caused investors to focus more on how a recession in the U.S. would cut oil demand," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Today we're seeing some pullback and some profit taking too."

Light, sweet crude for May delivery dropped 84 cents to $101 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.

The contract on Thursday fell 70 cents to settle at $101.84 a barrel. The market was closed for Good Friday.

Shum said oil's price swoon may not last for long.

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

[ozymandius]

4. China facing renewed fuel shortages

SHANGHAI, China - China's leaders are facing renewed pressure over shortfalls in diesel and gasoline, with lines growing at filling stations in major cities Monday as the gap widens between international crude oil values and centrally controlled fuel prices.

The shortages, first reported in southern and inland China, appeared to be spreading to the wealthier areas in the north and east as filling stations struggled to get shipments from refiners. Four stations contacted Monday in Shanghai said their daily diesel shipments had not yet arrived.

.....

Shortages in the second half of last year briefly affected Shanghai and other major cities. But those shortfalls soon disappeared after the government ordered oil companies to ensure supplies, and then raised fuel prices by about 10 percent.

http://news.yahoo.com/s/ap/20080324/ap_on_bi_ge/china_fuel_shortages

[ozymandius]

5. Lundberg Survey: Gas prices rise 7 cents

.....
The average price of self-serve regular gasoline on Friday was $3.26 a gallon, mid-grade was $3.38 and premium was $3.50. That's all according to the Lundberg Survey of 7,000 stations nationwide released Sunday.
.....

-very brief-

http://news.yahoo.com/s/ap/20080323/ap_on_bi_ge/gas_prices

[radfringe]

14. although gas prices dropped a penny or two in my area

it's still above the $3.25 range for regular

heating oil - costing us over $450 for 125 gallons, that's in the $3.50/gallon range, it was just under or little over $1 when bush was first planted in the oval office

stopped for gas on friday morning, one man in the pump next to me griped about prices, I noticed the "sportman for bush" bumper sticker and could resist replying "what did you expect when there are two oil guys in the white house?"

he shot back with, "yeah, but if the democrats get in they'll raise taxes"

me: "would you rather have a slight increase in your taxes, or a huge jump in oil prices, and if you think these gas prices are bad now, wait until you see the ones if McCain gets in"

he got into his big SUV with a snort...

some people just don't get it.






PM me if you want to know where I've been

[Demeter]

30. The Corporations Stand on OPF: Other People's Feet!

[appleannie1]

33. Some people are so stupid that gas can go up .20 cents a gallon

on Monday and come down .02 cents on Wednesday and they say 'gas is coming down"

[wordpix]

62. worries? It's a GOOD thing oil demand is fading. Up is down in this BushWorld economy

[ozymandius]

6. US ponders: How deep is economic abyss?

NEW YORK - For months, Americans have been subjected to a sort of economic water torture — a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.

Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $2 per share.

To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter — an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.
.....

On top of an economy that was already groaning under the weight of a downturn, Bear Stearns came down like an anvil.

It tied together so much of what's wrong with today's economy — the housing crash, the credit crunch and a loss of confidence among investors and consumers alike.

http://news.yahoo.com/s/ap/20080324/ap_on_bi_ge/economy_on_the_edge

[Ghost Dog]

7. Japan Companies Say Business Conditions Are Worsening

March 24 (Bloomberg) -- Confidence among Japanese manufacturers fell to the lowest level in at least four years, adding to evidence that the economy's longest postwar expansion is faltering.

Sentiment among manufacturers with more than 1 billion yen ($10 million) in capital was minus 12.9 points this quarter compared with 5.2 three months earlier, a government survey showed today. That's the lowest since the report began in 2004.

Today's result may indicate the state of business sentiment before the April 1 release of the Bank of Japan's Tankan survey, the nation's most closely watched gauge of corporate confidence. That index will probably fall for a second quarter, marking the biggest drop in more than six years, according to economists surveyed by Bloomberg News.

...

Large manufacturers plan to cut spending on factories and equipment by 6.1 percent in the year starting April 1, according to today's survey, which was jointly conducted by the Cabinet Office and Finance Ministry. They expect capital investment to rise 2.6 percent in the year ending March 31.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=a9IMor2F2opY&refer=asia

[Ghost Dog]

8. Japanese 10-Year Bonds Advance After Local Stocks Erase Gains

March 24 (Bloomberg) -- Japan's 10-year bonds rose on speculation investors sought the safety of government debt after the local stock benchmark erased earlier gains.

Benchmark yields also approached the lowest in 2 1/2 years on concern the sale of assets by hedge funds last week due to credit-market losses reduced investor appetite for risk, said Hitomi Kimura, a bond strategist in Tokyo at JPMorgan Securities Japan Co., one of 26 primary dealers obliged to bid at government debt sales.

``Equities fell at the end of the day, which pushed bond yields up,'' Tokyo-based Kimura said. ``Investors are not keen about adding more risk at the moment.''

The yield on the 1.4 percent bond due March 2018 fell 2 basis points to 1.25 percent as of 5:08 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.18 yen to 101.331 yen. A basis point is 0.01 percentage point.

Ten-year bond futures declined 0.25 to 140.65 at the afternoon close on the Tokyo Stock Exchange and the Nikkei 225 Stock Average lost 0.02 percent after earlier gaining as much as 0.8 percent.

Endeavour Capital LLP, the London-based hedge-fund firm founded by former Salomon Smith Barney Inc. traders, sold ``substantially all'' of its Japanese government debt last week, Chief Executive Officer Paul Matthews said on March 19.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=aI93bryr1hMU&refer=asia

[wordpix]

63. and if we BOYCOTT Japanese goods until they stop killing whales, their economy will sink even more

:evilgrin:

[Demeter]

9. Did the Fed Prevent a Financial Chernobyl?

http://www.nakedcapitalism.com/2008/03/did-fed-prevent-financial-chernobyl.html

There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns.

A New York Times article, "What Created This Monster," is very much worth reading despite its shortcomings. It attempts to say how we got to where we are today, but lacking a clear problem definition (are the markets in trouble due to excessive leverage? Overly complex instruments? Lack of transparency? Poorly thought and inadequate regulations? Those negative real interest rates under Greenspan?) it comes off being unfocused. However, it interviews a lot of Big Names and have some fascinating moments. My fave is this one:


Two months before he resigned as chief executive of Citigroup last year amid nearly $20 billion in write-downs, Charles O. Prince III sat down in Washington with Representative Barney Frank, the chairman of the House Financial Services Committee. Among the topics they discussed were investment vehicles that allowed Citigroup and other banks to keep billions of dollars in potential liabilities off of their balance sheets — and away from the scrutiny of investors and analysts.

“Why aren’t they on your balance sheet?” asked Mr. Frank, Democrat of Massachusetts. The congressman recalled that Mr. Prince said doing so would have put Citigroup at a disadvantage with Wall Street investment banks that were more loosely regulated and were allowed to take far greater risks. (A spokeswoman for Mr. Prince confirmed the conversation.)

It was at that moment, Mr. Frank says, that he first realized just how much freedom Wall Street firms had, and how lightly regulated they were in comparison with commercial banks, which have to answer to an alphabet soup of government agencies like the Federal Reserve and the comptroller of the currency.

Eeek. Barney Frank is really smart and diligent as Congressmen go, and he didn't know this? Ooh, we are in for a rough ride...The other sighting of the evening is Ambrose Evans-Pritchard's "Fed's rescue halted a derivatives Chernobyl." The piece is a little more breathless than I like, but argues that the reason that the Fed intervened with Bear was to prevent a crisis in the CDS market. Unlike the New York Times piece, the Evans-Pritchard has a few useful factoid that I have not seen elsewhere.

The flaws in both pieces ultimately are not those of the authors, but reflect the inherent difficulty in researching complex, largely or completely unregulated over the counter markets. Data is scarce, so a reporter is heavily dependent on triangulating among source.

And the scary bit is that the regulators are not much better able to get information than the press.

From the Telegraph:

We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance.

"If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital.

"There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."

All through early March the frontline players had watched in horror as Bear Stearns came under assault and then shrivelled into nothing as its $17bn reserve cushion vanished.

Melcher was already prepared - true to form for a man who made a fabulous return last year betting on the collapse of US mortgage securities. He is now turning his sights on Eastern Europe, the next shoe to drop.

"We've been worried for a long time there would be nobody to pay on the other side of our contracts, so we took profits early and got out of everything. The Greenspan policies that led to this have been the most irresponsible episode the world has ever seen," he said.

Fed chairman Ben Bernanke has moved with breathtaking speed to contain the crisis. Last Sunday night, he resorted to the "nuclear option", invoking a Depression-era clause - Article 13 (3) of the Federal Reserve Act - to be used in "unusual and exigent circumstances".

The emergency vote by five governors allows the Fed to shoulder $30bn of direct credit risk from the Bear Stearns carcass. By taking this course, the Fed has crossed the Rubicon of central banking.

To understand why it has torn up the rule book, take a look at the latest Security and Exchange Commission filing by Bear Stearns. It contains a short table listing the broker's holding of derivatives contracts as of November 30 2007.

Bear Stearns had total positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms. The contracts were described as "swaps", "swaptions", "caps", "collars" and "floors". This heady edifice of new-fangled instruments was built on an asset base of $80bn at best.

On the other side of these contracts are banks, brokers, and hedge funds, linked in destiny by a nexus of interlocking claims. This is counterparty spaghetti. To make matters worse, Lehman Brothers, UBS, and Citigroup were all wobbling on the back foot as the hurricane hit.

"Twenty years ago the Fed would have let Bear Stearns go bust," said Willem Sels, a credit specialist at Dresdner Kleinwort. "Now it is too interlinked to fail."

The International Swaps and Derivatives Association says the vast headline figures in the contracts are meaningless. Positions are off-setting. The actual risk is magnitudes lower.

The Bank for International Settlements uses a concept of "gross market value" to weight the real exposure. This is roughly 2 per cent of the notional level. For Bear Stearns this would be $270bn, or so.

"There is no real way to gauge the market risk," said an official

"We don't know how much is backed by collateral. We don't know what would happen in a crisis, and if we don't know, nobody does," he said.

Under the rescue deal, JP Morgan Chase will take over Bear Stearns' $13.4 trillion contracts - lock, stock, and barrel.

But JP Morgan is already up to its neck in this soup, with $77 trillion of contracts. It will now have $90 trillion on its books, a sixth of the global market.

Risk is being concentrated further. There are echoes of the old reinsurance chains at Lloyd's, but on a vaster scale.

The most neuralgic niche is the $45 trillion market for credit default swaps (CDS). These CDS swaps are a way of betting on the credit quality of companies without having to buy the underlying bonds, which are less liquid. They have long been the bête noire of New York Fed chief Timothy Geithner, alarmed that 10 banks make up 89 per cent of the contracts.

"The same names show up in multiple types of positions. These create the potential for squeezes in cash markets, magnifying the risk of adverse dynamics," he said.

"They could increase systemic risk, by amplifying rather than dampening the movement in asset prices," he said.

This is what happened as the banking crisis gathered pace. The CDS spreads measuring default risk on Bear Stearns debt rocketed from 246 to 792 in a single day on March 13 amid - untrue - rumours that the broker was preparing to invoke bankruptcy protection.

Was it the spike in spreads that set off the panic run on Bear Stearns by New York insiders? Or are the CDS spreads merely serving as a barometer?

In the old days it was hard for speculators to take "short" bets on bonds. Credit derivatives open up a whole new game.

"It is now much easier to short credit, " said James Batterman, a derivatives expert at Fitch Ratings in New York. "CDS swaps can be used for speculation, and that can cause skittish markets to overshoot," he said.

For now the meltdown panic has subsided. Yet the hottest document flying around the City last week was a paper by Barclays Capital probing what might happen in a counterparty default.

It is not for bedtime reading. Direct losses from a CDS breakdown alone could be $80bn, but the potential risks are much greater.

In theory, the contracts are matching. One sides loses, the other gains, operating through a neutral counterparty (ie Bear Stearns). But if the system seizes up, the mechanism is not neutral at all. It becomes viciously one-sided.

"Upon the default of the counterparty, derivatives would be immediately repriced, with spreads widening dramatically," said the Barclays report.

This is "gap risk", the stuff of trading nightmares. Fortunes can vanish in a moment.

One side would suddenly be trapped with staggering losses on their books. Yet the winners would be unable to collect their prize from the insolvent bank in the middle. It would take years to unravel all the claims in court. By then the financial landscape would be a scene of carnage.

Warren Buffett famously described derivatives as "weapons of mass financial destruction". The analogy is suspect, of course. Allied troops never found the alleged weapons in Iraq.

This time, Washington's pre-emptive shock and awe may have been well-advised.

[MilesColtrane]

39. Prevent, or delay?

[Demeter]

42. That's the $64 Trillion Question

[kineneb]

75. delay

more shoes waiting to drop... advise replacing tinfoil headcoverings with hardhats...

[Joanne98]

10. Report: JPMorgan Could Up Bear Offer

JPMorgan Reportedly in Talks to Increase Bear Stearns Offer to $10 a Share


NEW YORK (AP) -- JPMorgan Chase & Co. was discussing a deal that would increase fivefold its offer for Bear Stearns Cos. to $10 a share, The New York Times reported Monday.

The talks Sunday were an attempt to satisfy Bear Stearns stockholders upset over JPMorgan's offer of $2 a share for the struggling investment bank, the newspaper said on its Web site, citing people involved in the negotiations.

The original price for Bear Stearns was part of a deal struck last week at the urging of the Federal Reserve and Treasury Department.

The Fed, which would need to approve any change in the agreement, was balking at the new price, the Times said. Such opposition could postpone the new agreement or derail it entirely.
http://biz.yahoo.com/ap/080324/jpmorgan_bear_stearns.html

In an attempt to speed majority shareholder approval, Bears board was trying to authorize the sale of 39.5 percent of the firm to JPMorgan, the Times said. State law in Delaware, where the companies are incorporated, allows a company to sell up to 40 percent without shareholder approval.

[Demeter]

12. Yeah, I Saw That--Squeaky Wheels, You Know

How can Bernanke look like a hero when the damsel in distress whaps him in the face with her pocketbook?

[Robbien]

36. If taxpayers are kicking in on this deal

doesn't this increase mean that all we are doing is handing the money over to Bears stockholders?

[Demeter]

11. "How sovereign wealth funds were left nursing multibillion losses"

http://www.nakedcapitalism.com/2008/03/how-sovereign-wealth-funds-were-left.html

A nice recap in the Guardian of how far underwater the various sovereign wealth funds are on their investments in large Western financial institutions. The tally is not pretty. It isn't simply that the losses are large in percentage terms, but the falls came fast, making the buyers look like chumps. And these were high profile deals by funds that are very visible in their home countries.
Thus, even if the fund managers can be persuaded that further investment in damaged financial firms would be a winner, the domestic politics make it a non-starter. It's highly unlikely they will make another high profile deal (save perhaps those funds that have not yet been burned) until a bottom has clearly been reached. But by then, the urgent need for capital will also have passed.

From the Guardian:


The financial crisis enveloping the world banking sector has left the sovereign wealth funds, controlled by governments from Singapore and China to Abu Dhabi and Kuwait, nursing multibillion-dollar losses after helping to bail out major western banks.

In recent months, banks including Citigroup, Morgan Stanley and UBS have turned to investment funds, including the Government of Singapore Investment Corp (GIC), its sister fund, Temasek, and China Investment Corp, for funding that western investors were unwilling to give as stockmarkets plunged.

But the dramatic fire sale of the US investment bank Bear Stearns and subsequent stockmarket run on HBOS this week have depressed banking stocks further and deepened the climate of fear in the world's stockmarkets.

Singapore's GIC, for example, which with funds of more than $330bn (£166bn) is one of the world's largest sovereign wealth funds, spent more than £5.5bn on a 9% stake in UBS last year. Shares in the Swiss bank are down 46% so far this year. It spent a further $6.88bn in January as part of a $14.5bn funding round for the embattled US bank Citigroup,

Two months before, the Abu Dhabi Investment Authority (ADIA), which with assets estimated at up to $900bn is reckoned to be the world's largest sovereign wealth fund, invested $7.5bn in Citigroup bonds that will convert to shares in 2010 and 2011 at prices from $31 to $37.

But since then Citigroup has become one of the most high-profile casualties of the sub-prime mortgage crisis in the US, and its share price has plunged as low as $20 - nearly 40% lower than when the ADIA made its investment.

The pain shows no sign of letting up. Two months ago, Citigroup announced it had plunged into the red over the past three months of 2007 and sliced its dividend almost in half as it wiped more than $18bn off the value of its assets because of exposure to sub-prime mortgages. But Wall Street analysts reckon the firm could record a further $15bn write-down for this financial quarter.

China Investment Corporation's investment in Morgan Stanley, made just before Christmas, is also facing a significant loss. The securities it picked up for $5bn will convert to stock at $48 to $57 a share in two years' time. At present, however, Morgan Stanley's share price is closer to $42.

Another Beijing-backed money manager, China Development Bank, has also suffered as the stake in Barclays it bought in July has plunged in value. When it acquired the 3.1% shareholding, the bank's shares were trading at about 680p each. On Thursday, they were at 429p.

The Singaporean fund Temasek is also nursing losses on the 2.1% Barclays stake it bought last year, although its investment in the London-listed bank Standard Chartered has fared better. The bank, which has little involvement in the US sub-prime crisis, has weathered the storm better than many of its peers.

The losses sustained by sovereign wealth funds are relatively insignificant when compared with the $3.2tr they are believed to have at their control. Morgan Stanley reckons that with the price of commodities such as oil set to remain high, this amount will balloon to $12tr by 2015. But the losses may dampen their appetite for further involvement in bailing out western banks
.

[burf]

38. I saw and posted this on Friday

The US Treasury said Thursday it had reached a series of agreements with two powerful sovereign wealth funds based in Abu Dhabi and Singapore covering investments in US markets.

The agreements were hammered out in a meeting at the US Treasury hosted by Treasury Secretary Henry Paulson and come amid mounting congressional scrutiny of foreign government funds, some of which are buying up large stakes in corporate America.

"The US welcomes sovereign wealth fund investment and looks forward to continuing to work with these two countries and others to support the initiatives underway at the IMF and OECD to develop best practices for sovereign wealth funds and recipient countries," the US Treasury chief said

http://rawstory.com/news/afp/US_strikes_investment_accords_with__03202008.html

My question is if these SWF lost their asses in previous interventions, why are they entering into new ones? What did Paulson do to sweeten up the pot? The dateline on this was the 20th, so the news came out on Good Friday when the markets were closed. Does the administration, treasury in particular, use this in their propaganda that "Its not so bad, see these SWF are will to invest". So, then the talking heads will go on about the renewed confidence in the markets. Just wondering.

[Demeter]

44. Interesting Question

It's not like they will ever tell us the unwashed.

[Ghost Dog]

13. Asia stocks rise, led by Taiwan; oil falls

SINGAPORE, March 24 (Reuters) - Asian shares rose in holiday-thinned trade on Monday, led by a 4 percent gain for Taiwan after an opposition win in the presidential election boosted expectations for better trade ties and less political tension with China.

Oil fell back towards the $100 mark a barrel as top producer Saudi Arabia reassured consumers of its plans to boost supply and gold fell back, giving respite to the battered U.S. dollar and easing concerns about inflation.

"Unreasonably high commodities prices are returning to normal and this, along with the perception that U.S. financial markets have hit bottom, is boosting investor sentiment," said Kim Hak-kyun, an analyst at Korea Investment & Securities.

Activity was subdued in Asia, however, as markets in many parts of the region as well as in Europe remaining closed for the Easter holiday, with investors waiting for U.S. trade to resume later in the day.

U.S. stock index futures SPc1 DJc1 signalled that Wall Street would likely extend last week's gains.

Shares in Seoul added 0.6 percent and Singapore's benchmark climbed 2.5 percent. MSCI's index of shares outside Japan .MSCIAPJ rose 1.3 percent, although it is still down 18 percent so far this year.

The MSCI ex-Japan index of financials .MIAPJFN00PUS extended gains to notch up a 1.4 percent rise by 0617 GMT after a report in the New York Times said JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) was in talks to quintuple its offer to buy Bear Stearns Cos (BSC.N: Quote, Profile, Research) to $10 per share, suggesting that there may be more value in financial assets than previously thought. Continued...

/... http://www.reuters.com/article/marketsNews/idINSP3918820080324?rpc=44

[Demeter]

15. Light at end of tunnel or false dawn? By Emily Kaiser

http://news.yahoo.com/s/nm/20080323/bs_nm/economy_weekahead_outlook_dc_1



WASHINGTON (Reuters) - The world economy may be in for a painful reality check this week, should a heavy slate of housing-related data point to more mortgage malaise.

In the aftermath of the Federal Reserve-orchestrated rescue of investment bank Bear Stearns and deep interest rate cuts, some analysts have begun to speculate that the worst may soon be over for battered global financial markets. They point to encouraging news in the form of stronger-than-expected earnings from Wall Street bellwethers, including Goldman Sachs and Morgan Stanley, some easing of pressures in credit markets, and a well-received initial public offering from credit card giant Visa. Yet the sense of panic was still palpable last week as stocks tumbled on the faintest rumor that another bank could be poised to announce more write-downs of bad debt.

"Psychology has now overwhelmed economics," Alan Blinder, economics professor at Princeton University and a former Fed vice chairman, wrote in an editorial in the Washington Post.

So far, U.S. economic data has shown deterioration in the manufacturing sector, a sagging job market and a decline in consumer spending -- three worrisome signs that a recession may have begun.
However, not all the news has been gloomy, with exports in particular providing much-needed support. While the rest of the world economy has cooled somewhat, fears of a U.S.-led global recession have yet to materialize. Indeed, the Organization for Economic Cooperation and Development said on Thursday that euro-zone growth would continue.

"The sky's not falling in," Jorgen Elmeskov, the OECD's chief economist, said in a Reuters interview.

GOT TO WONDER ABOUT THESE PEOPLE....

[kineneb]

76. oncoming train headlight... step off tracks... nt.

[Joanne98]

16. Wall Street Firms Cut 34,000 Jobs, Most Since 2001 Dot-Com Bust

March 24 (Bloomberg) -- Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Citigroup Inc., Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far. After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in the next two years, according to the Securities Industry and Financial Markets Association.

The collapse of the subprime mortgage market last year and the ensuing credit contraction have saddled the world's largest financial institutions with at least $200 billion of writedowns and losses. Bear Stearns Cos., once the fifth-biggest U.S. securities firm, became the emblem of panic on Wall Street two weeks ago, when it was forced to submit to an emergency takeover backed by the Federal Reserve as clients and lenders deserted the company. More bank losses are likely, according to analysts.

``This crisis is much worse than 2001 and we don't know how long it's going to last,'' said Jo Bennett, a partner at executive search firm Battalia Winston International in New York. Job cuts ``could be more than 100,000 in a few years.''
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTARUhP3w5xE&refer=home

[ozymandius]

17. Bank of America may face $6.5 billion loan loss: analyst

NEW YORK (Reuters) - Bank of America Corp (BAC.N), the largest U.S. retail bank, may set aside a record $6.5 billion in the first quarter to cover possible future loan losses, including in its mortgage and home equity portfolios, according to a banking analyst.

Richard Bove of Punk Ziegel & Co also slashed his earnings forecasts for the bank through 2010, though he still expects a first-quarter profit.

He said actual losses in the portfolios should be "somewhat less" than the amount he expects set aside, suggesting the bank would be conservative in its forecast of future credit trends.

"I do not foresee the economy plunging to a level that will substantiate this reserve build," wrote Bove, who has a "buy" rating on the bank, in a report dated March 24. "It is my impression that the management has made a decision to try to take, upfront, the potential losses that it believes may be nascent."

.....

In January, Chief Executive Kenneth Lewis said he expected full-year profit would top $4 per share. He predicted credit costs would rise by more than 20 percent, largely in consumer portfolios, but that such an increase would be manageable.

http://news.yahoo.com/s/nm/20080324/bs_nm/bankofamerica_credit_losses_dc

[MilesColtrane]

43. Buyer's Remorse?

"The all-stock transaction values Countrywide at $7.63 per share, which is 32 percent above Countrywide's Thursday closing price of $5.78. The gap reflects some investors' expectations that Bank of America might at least try to renegotiate the merger terms because the housing market has weakened."

[Demeter]

45. Whom Would They Renegotiate With?

The golden parachutists? The FBI? Spitzer? The mind boggles.

You bought it, you break it!

[Demeter]

18. Commodities continue to plunge as MASSIVE speculative excess is forced out.

http://benbittrolff.blogspot.com/2008/03/commodities-unravel-confidence.html

Platinum Futures in Tokyo Drop Amid Concern U.S. Growth Waning: “Platinum futures in Tokyo fell by the exchange-imposed limit after the Federal Reserve lent money to non-banks for the first time since the Great Depression, adding to evidence a recession looms in the U.S.

The Fed lent $28.8 billion as of March 19 to the biggest securities firms to try to stabilize capital markets stymied by losses on investment in notes based on subprime mortgages.

Platinum for February 2009 delivery dropped the daily maximum 300 yen, or 5 percent, to close at 5,745 yen a gram ($1,794 an ounce) on the Tokyo Commodity Exchange. The most- active contract has plunged 23 percent from the record 7,427 yen a gram set March 6.”

Investors should be worried about demand. Everybody and his momma is long. With nobody on the bid, getting out is going to be a real BITCH.

Oil Falls in N.Y. on Concern U.S. Slowdown May Limit Demand: “Crude oil fell for a second day in New York on growing concern a U.S. economic slowdown will curb demand for commodities.

Oil has dropped 8.9 percent from a record this week, tracking declines in gold, wheat and metals, as the dollar strengthened, reducing the need for hedges against inflation. U.S. fuel demand in the past four weeks averaged 3.2 percent less than last year, the Energy Department said yesterday.”

Fuel demand is just beginning to weaken. As the recession really starts to bite deep expect some fairly dramatic drops in demand… along with a serious plunge in the entire energy complex, from crude to gasoline.

“Commodities such as oil and gold, which reached records as equities and currencies tumbled, are no longer attracting demand as investors now need to free up money to cover losses in other assets, said Robert Laughlin, senior broker at MF Global Ltd. in London.”

What did you think would happen? That is EXACTLY how de-leveraging works. This is the correlation contagion. When forced liquidations hit some critical point, correlations across asset classes all approach one as everybody is forced out. Fundamentals become irrelevant. Capital preservation and return OF capital becomes the only thing that matters.

“Commodities are undergoing “cyclical weakness” and fundamentals will reach their “weakest point” in April as economic conditions and high prices weigh on demand, Goldman Sachs Group Inc. analysts wrote in a report today.”

You see, there never was supply shortage and if those feared geopolitical nightmares don’t actually occur, well then the entire energy complex will be re-valued. Quickly.

Dollar Gains Versus Euro, Yen as Fed Acts to Restore Confidence: “The U.S. dollar posted its first weekly advances against the euro and the yen in a month on speculation Federal Reserve moves to revive lending among banks will restore confidence in financial markets and the economy.

The greenback also strengthened to at least one-month highs versus currencies of commodity producing nations from Norway to Australia after raw materials including gold and oil tumbled the most in five decades. The Fed cut interest rates, agreed to accept a wider range on collateral on loans and extended credit to securities firms for the first time.”

I first wrote about the dollar strength on January 28th, 2008 in the post The Dollar Smile Theory and then again on February 11th, 2008 in the post Global Decoupling Theory, Correlation Contagion. That critical inflection point fast approaching now. Economic reality is slowly sinking in. In Euroland the economic numbers are coming dangerously weak. That will put the massively overvalued Euro into a swan dive as the ECB is finally forced to cut rates as well. Commodity producing economies will get whacked as their main engine of growth, Chindia, finally stalls out. These are export economies and the US and Euroland were their final destinations. It’s a closed system and the feedback loop is very real. Those economies will all be as badly off or worse. The US dollar will gain significantly as huge quantities of capital are repatriated, especially from emerging economies.

“The euro has some room to adjust lower. We're getting confirmation that subprime is shifting to the European financial sector. The euro-zone economy will start to slow from here on.” –Kengo Suzuki, Currency Strategist, Shinko Securities

“Commodities -- one of the few remaining long trades -- have turned south. The currency market is next in line, forcing investors out of yielding positions. We underline our bearish commodity currency call. The dollar will rebound.” –Hans-Guenter Redeker, Stragesit, BNP Paribas

Canada's Dollar Falls Most Since 1985 on Plunge in Commodities: “Canada's dollar plummeted the most in more than two decades this week as investors shunned commodities on concern that a slowing U.S. economy will curb global demand for energy, metals and grains.

The currency dropped 3.3 percent, the steepest since 1985, as commodities slumped. Gold declined 11 percent from a record earlier in the week, and copper posted its biggest weekly decline in 10 months. Crude oil fell more than $13, going below $100 a barrel for the first time since March 5. Commodities account for about half of Canada's exports. The oil sands in Alberta contain the largest crude deposits outside the Middle East.”

Duh. What did you think would happen to global demand? China isn’t building factories for internal consumption. Not yet. They’re building them for us. To make shiny, fancy stuff for us. We buy less and they buy and build less. That means demand for commodities drops PRECIPITOUSLY. Nuff said. Trade accordingly.

(In five or ten years China WILL build for internal consumption. But not yet. That is another rung up on the economic development ladder. THEN we will see real, sustained demand for commodities. But not yet.)

Don’t forget about them there ‘monolines’ either. Ambac, MBIA and others are still in the same stinking mess. NOTHING has been resolved yet although they haven’t been in the news for a couple of weeks now.

FGIC, Bond Insurer Unit Ratings May Be Cut by S&P (Update2): “FGIC Corp. and its bond insurance unit may have their ratings cut again by Standard & Poor's because of doubt about their ability to raise capital and take on new business.

Financial Guaranty Insurance Co.'s A rating and holding company FGIC's BBB ranking were put on CreditWatch with “negative implications,” S&P said today in a report.

FGIC, owned by Blackstone Group LP and PMI Group Inc., has proposed splitting in two to protect the ratings on municipal bonds it guarantees after the insurance unit lost its top AAA credit ratings. Bond insurers including FGIC and MBIA Inc. use their AAA ratings to back about $2.4 trillion of debt. Losing that imprimatur jeopardizes the debt rankings of thousands of schools, hospitals and local governments around the country.”

In fact that financial stresses are spreading. CIT Group Inc. (CIT), the biggest independent U.S. commercial finance company, said it expects to raise $5 billion to $7 billion in the first quarter from asset sales, which won't include the New York-based company's four “marquee” commercial finance units. CIT also tapped an emergency line of credit for $7 billion.

CIT Plans Asset Sales to Quell Concerns About Cash Shortages: “CIT Group Inc., trying to quell concerns about a cash shortage at the biggest independent U.S. commercial lender, may raise as much as $7 billion from asset sales and said it has enough money to last through 2008.

CIT Taps $7.3 Billion of Bank Lines Amid `Disruption' (Update3): “CIT Group Inc. shares and bonds plunged after the largest independent U.S. commercial finance company fell victim to the freeze in short-term debt markets.

The company drew on its entire $7.3 billion of emergency credit lines today after ratings downgrades left it unable to finance itself with commercial paper, or debt due in nine months or less. Chief Executive Officer Jeffrey Peek said the “protracted disruption” in capital markets may also force the New York-based company to sell assets. CIT has started seeking a “strategic funding partner” he said on a conference call.”

Considering the company WASN’T actually profitable going into this mess, I’m going to say ‘good luck’ to Mr. Peek and CIT shareholders because they are really going to need it.

Related Headlines:
Hungarian Retail Sales Fell for 12th Month in January (Update1)
Crude Oil May Fall as Dollar Rises, Demand Wanes, Survey Shows
Fed Denies Report It's Involved in Talks on Buying Mortgages




March 22, 2008 9:40 PM
a said...
I don't think the ECB will cut rates because of a softening economy. It will cut rates only because inflation is no longer a problem. That will mean that it will keep rates up longer than the Anglo-Saxons expect.

March 23, 2008 3:02 AM
Ben Bittrolff said...
Goldman, Lehman Rating Outlook Cut to Negative by S&P (Update3)

I think Thursday's action was dominated by short covering into a four day weekend. Therefore, I don't expect Monday to be pretty. The Goldman, Lehman Negative watch won't help.

Just you wait until more people begin to seriously question the valuations used for all the street's Level 3 Assets.

March 23, 2008 10:41 AM
Ben Bittrolff said...
A,

Agreed. The ECB will most certainly hold out the longest on the rate cutting front.

You'll be surprised by how quickly 'inflation' pressures vaporize. You have to understand that commodities were bid up in a SPECULATIVE frenzy beyond any fundamentals. On top of that the record pace of credit destruction will absolutely suck the oxygen out of the entire global demand side of the equation.



March 23, 2008 12:35 PM
Ben Bittrolff said...
tdave23,

I'm referring to investment fund flows reversing course. Everybody and his momma went long any and every emerging market in a big way. Most of that capital came from North America. It will come back, voluntarily (as investment opportunities dim) or involuntarily (general de-leveraging especially as the margin clerks start working the phones in a big way).

Think about it. How many individual investors bought into the Chindia, the BRICK countries and the commodity stories via mutual funds and ETFs... especially if you subscribed to the Global De-coupling Myth. I know the hedgies did in a big way...

What do you think will happen when they start scrambling to get out (more than they are already I mean)?



March 23, 2008 2:32 PM
tdave23 said...
Some further clarification -

Consumers are cutting back from excessive levels of past years and banks are slashing HELOC available credit lines and limits on cards.

Given consumer pullbacks, businesses are slowing investment as capacity is not constrained domestically nor globally, and hence an attendant reduction in project finance, if there was available capital given the credit crisis.

The US economy is sliding first and fastest into recession, corporate earnings are decelerating at an increasing pace, especially on Wall St and the financial sector, making forward earnings or cashflow valuation extremely difficult.

Home prices are in free fall and the debt extended to finance them are increasingly of lower values, yet there is a huge supply of available housing and more coming as the home builders haven't stopped and foreclosures rates are increasing (the evicted will rent from another struggling real estate investor or in an apartment).

Real yields on short term treasuries have reached negative levels, given taxes and official inflation. You've seen the treasury yield curve, yes?

The Fed is entering a liquidity trap and new debt to expand the money supply is minimal, except for what the Fed is injecting into the banking and shadow banking system to keep their inherent leverage levels from imploding them.

So the repatriated cash is going to go where? Equities? Treasuries paying negative yields? Munis with increasing unbalanced local budgets, albeit these are safer than mortgage backed securities, except maybe GNMA's...

If the capital slosh comes back into equities, it will be sold into by currently trapped longs IMO.

The credit markets are in total disarray and even the Repo market is experiencing fails.

Actual commodities or other hard assets with supply demand imbalances (food, fuel, essentials) appear to me to be some of the few remaining stores of wealth...





Disclaimer
The Financial Ninja is a collection of my thoughts and opinions about current economic and market conditions. These are not buy and sell recommendations. Use your head and do your own research. This is a forum to stimulate discussion and debate.

About Me
Ben Bittrolff
Toronto, Ontario, Canada
I started trading during the tech bubble when I was still in high school. My trading has financed my education and I have since completed a BA in Economics and an MBA with a concentration in Finance. I have worked as both a proprietary equity and fixed income derivatives trader.
View my complete profile

[formercia]

23. Gambling addiction

chasing losses like a losing gambler, stampeding from stocks to commodities and hoping to catch the leading edge of the envelope that is being manipulated by the big players is only making the brokerage houses wealthy.

We little guys are fucked.

[Warpy]

72. We are if we follow the stampede

The guys who get in on the bottom, the big fish who decide over cigars and alcohol what will be the next thing to manipulate, will always make out like the bandits they are.

The little fish start to see something tick up, stocks, commodities, bonds, real estate, whatever, and follow the big fish in. That's what causes the tick to become a substantial hike. The big money gets out quick and the little fish are holding a big empty bag while the big fish made all the money.

That's why the suggestion is always to go long on investments. Since the trend is vaguely up as the currency inflates (and fiat currency does that), the occasional gut wrenching drops as big money plays the bubble game don't mean as much.

[Demeter]

19. Delong Sounds the Alarm

http://calculatedrisk.blogspot.com/2008/03/delong-sounds-alarm.html

"Stage III of a financial crisis is when a central bank runs out of ammunition--when pushing interest rates too the floor and swapping out all of its assets does not restore the good equilibrium. Then you face a threefold choice: depression, inflation, or public intervention. Depression is to be avoided. Inflation--resolving the financial crisis by printing enough money to boost the price level far enough that all of a sudden everyone's incomes and real asset values are high enough to pay off their nominal debts--is generally best avoided too. As John Maynard Keynes wrote more than eighty years ago: "The Individualistic Capitalism of today, precisely because it entrusts saving to the individual investor and production to the individual employer, presumes a stable measuring-rod of value, and cannot be efficient--perhaps cannot survive--without one."

So if Depression is unthinkable, and inflation is best avoided, this leaves public action. If the good equilibrium has vanished - as it looks like it has - because the supply of risky assets is too large for financial intermediaries to want to hold them given their capital, then the central government has to take action: to boost or to make financial intermediaries boost their capital so that they will demand more risky assets at high prices, and to diminish the supply of risky assets offered on the financial markets by either a) guaranteeing some of them or b) by buying up some of them itself.

It's time to start thinking. If we don't want to wind up in a deep depression or a big inflation, it is time to recognize might well run out of ammunition in dealing with this financial crisis, and figure out what kind of government action we want to see, and how we can set in in motion quickly if it becomes necessary."
I do not believe we've reached what Professor DeLong calls Stage III of a financial crisis - and I don't think the Fed is out of ammunition - but I think DeLong is correct that we should be planning ahead. The Fed can only do so much, and DeLong is arguing we should be prepared if it becomes clear the Fed is ineffective.

Along those lines, Professor Krugman writes: Weird Interest Rates.
Treasury rates have plunged close to zero, even though Fed funds is still 2.25%. Since open-market operations take place in Treasuries, I take this to mean that the Fed may not actually be able to reduce short-term rates much from current levels — which means, in turn, that conventional monetary policy has been taken off the table.

[Ghost Dog]

20. GLOBAL MARKETS WEEKAHEAD-Finishing out a ferocious quarter

LONDON, March 23 (Reuters) - This is the last full week of the first quarter, when markets are normally driven at least in part by window dressing as professional investors seek to make their quarterly or annual performance look good to clients.

Some window dressing, indeed, appeared to have started last week as investors improved the look of their portfolios by booking profits on assets such as gold that have been notably successful over the first three months of the year. Hedge funds, too, will be keen to lock in profits they have made -- a strategy that may add to pressures on various markets.

But with a quarter as brutal at the latest one has been, traditional stock investors have little scope for beautification efforts.

...

With a week to go, this has so far been the worst quarter for global stocks in general and the U.S. S&P 500 .SPX and pan-European FTSEurofirst 300 in particular since the third quarter of 2002, after the internet bubble burst.

For Japan's Nikkei average .N225 it is the worst since the third quarter of 2001.

Morever, global stock losses in this quarter and part of the last have been enough combined to wipe out all the gains of 2007 and some of 2006's as well, based on MSCI's benchmark world stock index .MIWD00000PUS.

LONG ROAD AHEAD

There is little expectation that any of this is likely to be eased either this week or well into the next quarter, despite efforts by the U.S. Federal Reserve and others to pump money into a stalling and liquidity-starved economy.

The mood at the Reuters Fund Summit in Luxembourg last week, where executives met to discuss the current climate for professional investors, was not panicky, but it was decidedly gloomy. (For reports from the summit, see here)

Expectations were that the current crisis -- a combination of dwindling confidence, frozen lending and U.S.-led economic worries -- could go on longer than first imagined.

It was also seen as carrying with it real dangers that have not been seen for decades, even as far back as the Great Depression triggered by the 1929 Wall Street crash.

...

There are fears that the distress at Bear Stearns (BSC.N: Quote, Profile, Research), with its Fed-supported bailout and fire sale, is only the tip of an iceberg. Many investors want to hear more from banks about how big their losses are, not totally trusting what they have heard so far.

...

One new wrinkle for investors this week, meanwhile, may come from commodity markets, where a sell off began last week after months of record rises.

...

"The commodity market has grown extremely volatile, and daily fluctuations of several percentage points are now commonplace," Commerzbank Corporates and Markets analyst Eugen Weinberg said in a note.

"We do not expect all this to mean the end of the commodity high, but some more cautious investors will no doubt be wondering whether the commodity sector really is such a safe haven after all," it said.

/... http://www.reuters.com/article/marketsNews/idINL233420220080324?rpc=44

[Demeter]

21. Alan Greenspan Loses His Mind

http://paul.kedrosky.com/archives/2008/03/21/alan_greenspan_8.html

Judging by a just-released Washington Post interview, ex-Fed chair Alan Greenspan has gone mad. There is an upside, of course, in that he has delivered the quote of the year so far.

Here is Alan, talking in an interview about how misguided his critics are for suggesting that the recently-ended real estate bubble had its roots in the post dot-com bubble low rates. Implicit in this, of course, is that he should have increased rates sooner to arrest the real estate bubble's expansion:

"Those who argue that you can incrementally increase interest rates to defuse bubbles ought to try it some time."

Well, there's no denying you can't get any evidence on the matter from Greenspan's career: He avoided raising rates during both bubbles with which he was faced.

And Greenspan continues, offering the following:

"If it weren't the subprime crisis it would have been something else," he said. That is because an era was ending that had seen "disinflationary forces" from developing countries such as China and a "protracted period" in which there was an "underpricing of risk."

Really? Really? Greenspan's Fed didn't prick the real estate bubble because it was saving us from another bubble, whatever it was, that would have been worse? What was it? A lava dome under Los Angeles? Sewer gas under New York? Something else? Because it's really hard to imagine what would have been worse than the real estate bubble, but maybe I lack imagination.

But the tricksy Mr. Greenspan doesn't stop there. Having first said that raising rates doesn't prick asset bubbles, and then sneaking around the side of the issue by arguing that another bubble would have formed anyway, he then spun about and said the following:

Even after the Fed starting raising short-term rates, long-term rates did not rise. He said that at the time "it became apparent that we lost control" of long-term interest rates "as did the Bank of England and all the central banks. As a consequence, we had very little ability to put a brake on the rise in home prices."

Oooh, awesomely argued Alan. In short, even if you had raised rates -- which you wouldn't have, because the Fed can't prick bubbles, and because another worse (unnamed) bubble would have happened anyway -- nothing would have happened, because the Fed lost control of long-term rates. You were totally boxed, and anyone who criticizes you is a clueless nitwit for not seeing that.

Does anyone buy that? I know I don't. Greenspan ably demonstrated that he would cut rates in the face of falling asset prices, so why so skittish about raising them in the face of rapid asset price increases? Something doesn't work in that illogic.

Then again, what does Greenspan care. He has built a career out of this sort of thing, of dancing around clumsy questioners' questions, and this is easy stuff for a skilled obfuscator. Greenspan's minting money as a hedge fund advisor, speaker, and author, and likely giggling every day at the mess that he left on Ben Bernanke's desk.



INTERESTING COMMENTARY AFTER THE ARTICLE FROM AUSTRALIA, TOO...

[Karenina]

82. Clinton Proposes Greenspan Lead Foreclosure Group

:rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3240340&mesg_id=3240340

[Demeter]

22. Paul Krugman Wonders Whether He Is Dumb. I Say: "NO!!"

http://delong.typepad.com/sdj/2008/03/paul-krugman-wo.html


Paul Krugman Wonders Whether He Is Dumb. I Say: "NO!!"
He writes:

Fed funds question (seriously wonkish, and possibly dumb too): The target Fed funds rate is now 2.25%. Everyone expects it to be reduced further; Citi economists predict that it will be down to 1% by mid-year. But I have a possibly naive question: can the Fed really cut the Fed funds rate that far?... The Fed actually conducts monetary policy through open-market operations in Treasuries: the FOMC tells the open-market desk to buy or sell Treasuries from banks until the Fed funds rate is close to the target. Normally this puts Treasury interest rates close to the Fed funds rate, since one short-term loan to a very safe customer is a lot like another.

But right now Treasury interest rates are much, much lower than the Fed funds rate -- around half a percent on both 1-month and 3-month bills. Weirdness like negative rates on repos aside (I'm still trying to wrap my mind around that one), basically the Fed can only drive Treasury rates down by about another half-point -- which would still seem to leave Fed funds well above 1%.

How is it possible for the Fed funds rate to be higher than the Treasury rates? Well, one interpretation is that banks don't trust each other.... Fed fund loans, after all, are unsecured. In other words, the Fed funds rate may be more like LIBOR than the Treasury rate -- and it may be being held up by a premium similar to the TED spread.

Am I being really stupid here? Or is it possible that the fear factor will soon make it impossible for the Fed even to achieve its target on the interest rate it supposedly controls?

No, this is not stupid. As Clouse and Elmendorf (1997) http://www.federalreserve.gov/pubs/feds/1997/199730/199730pap.pdf write: "Because funds-market trading is typically not collateralized, the funds rate can also differ across borrowers according to their perceived riskiness." This has in fact been happening since last August--what the (average) fed funds rate is on any given day depends on who is doing the borrowing.

As Jim Hamilton wrote last August:

Econbrowser: Their objective is defined in terms of a volume-weighted average of all the transactions during the day (referred to as the "effective" fed funds rate), with the target for the effective rate currently declared to be 5.25%. The Fed usually makes at most one such intervention early in the day, and is then content to allow the actual fed funds rate at which banks choose to borrow or lend to each other fluctuate above or below the target. Often at the end of the day, and especially on the last day of the two-week period in which banks have to complete the satisfaction of their required average holdings of reserves, one will see the fed funds rate spike up, if some bank finds itself unexpectedly needing funds at a time when everybody else is finished trading for the day, or fall to practically zero, if some bank unexpectedly finds itself with excess funds that nobody else is interested in borrowing. As William Polley noted, this last week these intraday fluctuations have been particularly dramatic, with one trade last Wednesday (a settlement day) as high as 6% and another on the same day for only 0.25%.

Why does the Fed allow so much intra-day variability in the interest rate it is intending to target? One reason is that the Fed does not want to be in a position of subsidizing individual banks that choose to make unusually risky investments. If a bank knew that, no matter what it did, it could always obtain an unlimited source of funds at a 5.25% rate, the bank would have an incentive to borrow a huge quantity of such funds and use them to make higher yielding, but potentially quite risky, investments.... The Fed intentionally allows different banks, in different circumstances or at different times of the day, to pay a higher or lower rate for fed funds than do other banks, as one way of making sure that banks face immediate consequences of any extra risk-taking....

Of course, there is an inherent tension between the goals of serving as lender of last resort and making sure that banks are disciplined for risky behavior, and this tension is at the heart of the current policy dilemma facing the Fed. To help to achieve these twin objectives, the Fed has a separate tool, the discount window, through which it offers to lend directly to banks, temporarily giving them newly created reserves while holding high-quality assets as collateral for such loans. Again there have to be some institutional checks to prevent excessive risk-taking for banks using this facility. Historically, the Fed achieved this by placing additional limitations and regulatory oversight on banks that borrowed too much or too frequently at the discount window. Partly as a result of these, the discount window acquired a certain stigma...

INTERESTING COMMENTS AFTER THIS AT LINK, AS WELL...

[DemReadingDU]

35. The TED Spread

Initially, the TED spread was the difference between the interest rate for the three month U.S. Treasuries contract and three month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped the T-bill futures, the TED spread is now calculated as the difference between the T-bill interest rate and LIBOR. The TED spread is a measure of liquidity and shows the flow of dollars into and out of the United States.

The TED spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the rate associated with the Eurodollar is thought to reflect the credit risk of corporate borrowers. As the TED spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the risk of default is considered to be decreasing.
http://en.wikipedia.org/wiki/TED_spread


Here is a chart for the TED spread. You will notice that it was high last August 2007, and high in late November 2007. The TED spread is creeping up again.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND


edit to add commentary:
12/1/07
The willingness of banks to LEND TO EACH OTHER is truly measured by the TED spread. The TED spread is the difference between 3-month LIBOR and 3-month Treasuries.
The significance of this spread is that it represents the spread between the rate charged for lending to a bank and the rate charged for lending to the government.
It effectively measures the perceived credit risk of banks relative to the government (the credit risk premium).
That spread generally indicates how much FEAR is in the banking system (about the banking system ITSELF).
Even though the media doesn't focus much attention on this indicator (AS IT SHOULD), it should not be dismissed or taken lightly. It is very serious.
The spread has risen sharply to 200 basis points now---very close to the peak it hit last August. Prior to that, the highest reading recorded was about 270 basis points in 1987.

Written by Bernard on 2007-12-01 08:33:06
http://www.rgemonitor.com/blog/roubini/229674

[Demeter]

41. Thanks! Very Educational

maybe you could teach the Fed something...

[DemReadingDU]

96. TED Spread improves!

3/24/08
The TED spread has declined to 1.52% (from over 2% last week).

Note: the TED spread is the difference between the three month T-bill and the LIBOR interest rate. Usually the TED spread is less than 0.5%. The higher the spread, the greater the perceived credit risks (compared to "risk free" treasuries).

The third wave of the liquidity crisis appears to have peaked.

http://calculatedrisk.blogspot.com/2008/03/ted-spread-improves.html

[Ghost Dog]

24. This crisis could bring the euro centre-stage

By Wolfgang Münchau
Published: March 23 2008 15:22 | Last updated: March 23 2008 15:22

We know the credit crisis is a clear and present threat to the global economy. But its most important long-run legacy may not be economic, but geopolitical.

I was reminded of that possibility when reading a recent analysis by Professors Menzie Chinn at the University of Wisconsin and Jeffrey Frankel of Harvard*. They ran a simulation showing that the euro would replace the dollar as the world’s largest reserve currency within the next 10 or 15 years. Their analysis is not based on this crisis. But the crisis could easily accelerate the trends they have identified.

...

Professors Chinn and Frankel state two underlying reasons for the decline in the international role of the US dollar. The first is persistent current account deficits combined with a long-term decline in the dollar’s exchange rate – and perhaps imperial overreach, too. The second is the emergence of a genuine alternative to the dollar. Neither the yen nor the D-Mark had a realistic chance of replacing the greenback. But the euro is a real alternative. The eurozone economy is almost as large as that of the US and may surpass it as it continues to enlarge. London is the eurozone’s de facto financial centre, even though the UK itself has not adopted the euro. Also, the eurozone bond markets are now almost as deep and liquid as their US counterparts.

The projected speed at which the dollar will lose its predominant position as a global reserve currency obviously depends on your assumptions. The work of Professors Chinn and Frankel shows that this could happen shockingly fast. Some of those trends are accelerating right this minute. The reckless monetary policy of the Federal Reserve has speeded up the dollar’s decline and caused a rise in inflationary expectations. I would expect US inflation to pick up significantly once the present recession ends. Future inflation will weigh heavily on the global role of the US dollar.

...

Another factor that pushes in the same direction is the weakening of the US financial sector. This has been a crisis of Anglo-Saxon transaction-based capitalism. Not too long ago, it was considered to be vastly superior to the eurozone’s old-fashioned relationship finance. I doubt that in a few years’ time people will continue to assess the relative strengths of the Anglo-Saxon and continental European financial systems in quite the same way. I would also expect the eurozone economy to withstand the economic shocks of the credit crisis in relatively better shape.

...

The potential geopolitical implications of such a projected shift are immense. For a start, the US will lose its exorbitant privilege – the ability to achieve permanently higher returns on foreign assets than the returns paid to foreigners who invest in the US. The dollar will suddenly cease to be “our currency, and your problem”. Influence in international financial institutions will wane. Losing the dollar as the world’s leading international currency not only leads to a loss of political power. It constitutes loss of power.

There is little politicians can do to prevent such a seismic shift. I suspect the US political establishment is not yet aware of what is going to hit it. Then again, the same can be said of European political leaders, who have not given us any hint yet that they are ready to deal with the responsibilities that come with running the world’s leading currency.

/FT comment article... http://www.ft.com/cms/s/0/5fe5773a-f8eb-11dc-bcf3-000077b07658.html?nclick_check=1

[Ghost Dog]

31. Public money to save Western banks

Last week, we were wondering how deep the recession in the US economy would be. The next question is how much is the Eurozone going to help the American economy overcome its problems? Unfortunately it appears that the answer to the second question depends greatly on what one has to say in relation to the depth of the American problems, and, as the Bear Stearns case showed last week, nobody can answer the first question before the sequence of bank failures comes to an end.

Then again, the parity of the Euro to the dollar gives an indication about the cost to the Eurozone from the helping European hand to our American friends. There is no doubt that from this recession nobody will come out intact. Even oil and gold prices took a big dive last week when some investors had no other way to get ahold of cash other than selling some of their positions in those precious placements. Liquidity is undoubtedly the king of all investments right now but the cash comes only from public coffers.

The depth of the problems that the US economy faces can be measured indirectly from the volume of the reactions by the American monetary and political authorities. Liquidity injections and a series of interest rate reductions by the US central bank, the Fed, and the politically-managed save of Bear Sterns, showed the magnitude of what the Americans were prepared to do to keep the markets afloat. More than USD 30 billion of public money was handed over to JP Morgan to save Bear Sterns, and there will be more if the need appears.

Central banks on both shores of the Atlantic have, over the past six months, been injecting hundreds of billions of dollars and Euro of public money to save western - mostly American banks - from their grave problems in the US sub-prime loan market. If this is not “state capitalism,” then we have lost the meaning of words.

On this side of the Atlantic, the European Central Bank’s Eurozone has played its role for months in keeping money markets liquid without, however, forfeiting its ability to face future inflationary problems. That is why the OECD said last week that the Eurozone does not run increased dangers and increased its prediction for growth in Europe over the first quarter of the year and reduced its estimates for the American economy.

With all western financial and stock markets closed on March 21 and March 24 for the Easter holiday, the opening on March 25 will show what markets believe about the future. We already have an idea of what their judgment will be just by looking at what happened last week. All and every international market was convinced the US authorities were determined to do what it takes to keep the financial system liquid. This direct public intervention obviously is to take the form of injections of central bank - that is state - money into the system at low interest rates for all and every investment or commercial bank to serve itself from this bonanza.

/. http://www.neurope.eu/articles/84529.php

See also: "Euro: A safe haven for value" (same source).

[Zynx]

64. On a side note, Professor Chinn wrote a letter of reccomendation for me recently.

His work on foreign exchange is certainly worth reading. He argues, correctly, that the trade imbalance will not be corrected by a dollar slide alone.

[Demeter]

25. Investing in a Post-Fact Society (a/k/a, Were the Good Times a Mirage?)

http://bigpicture.typepad.com/comments/2008/03/were-the-good-t.html

... there was much more -- and less -- to the post 2001 recession recovery than met the eye.
Several years ago, this was a controversial position. We first suspected we were on to something, however, when the many critics of this view found it much easier to use epithets (negative, naysayer, perma-bear) than to do the credible critiques of our positions, or any kind of critical analysis. It reminded me of an old lawyer's joke: "When the facts go against you, stress the law; when the law is against you, emphasis the facts; when your case has both the law and the facts against it, call the other lawyer an asshole."


As of March 22, we are still in the early stages of any sort of widespread understanding about this post-recession recovery cycle. Many people are just starting to realize how much fertilizer has been spread around.

Many of the stated economic gains have been a false ghost. Whether it was overstated job creation (NFP), understated inflation (CPI) or "inflated" growth (GDP), a shocking amount of the debate about the economic expansion has been primarily spin.

That's what attracted me to this book by Farhad Manjoo: Learning to Live in a Post-Fact Society. That such a book is even necessary boggles the mind. Consider the myriads of benefits and standards of living improvements we have seen from the reality-based community -- and by that, I mean Scientists (Physicists, Biologists, Medical Doctors) and Engineers (Technology, materials and mechanical). Why so many people would turn their backs on this belief system leads me to Arthur C. Clarke's 3rd law: "Any sufficiently advanced technology is indistinguishable from magic."

While a "Post-fact society" might being intellectually appealing for the slavish followers of a given political or religious order, the same philosophical approach invariably proves very costly for investors -- if not financially fatal.

Consider these elements that are of interest to investors:

1) What objective reality is;

2) The variant perception: What the widespread belief system is versus this objective reality;

3) How far these two are out of alignment;

4) And most importantly to Traders, when the variant view recognizes its error and embraces either a more realistic, or an even more fantastic, view on reality.

For example, as weak as many of the traditional metrics have actually been, some sectors of the economy have enjoyed strong legitimate gains: Everything energy related has been on fire for at least half a decade; the entire agricultural explosion has been for real; all things China related have enjoyed strong growth (tho it certainly became frothy this past year). Metals and Miners have done well, and Transports have had a terrific run, be they rails or shipping. If the economy was truly strong and healthy, these sectors would be ones to avoid.

Consider also the US industrials -- they boomed courtesy of a weak dollar (not healthy) and improved production management (very healthy). What is being called Web 2.0 is seeing genuine innovations, functional business models, and increasing significance in the economy (also healthy).

If you correctly identified where things were healthy or not, the right themes before the crowd caught on, there was plenty of financial gains to be had.

Philosophically, I want to explore -- beyond the legitimate gains mentioned above -- a nagging question about the spin and artifice. Why have we as a nation been increasingly reluctant to confront objective reality? What is it about the present social mood, political leadership, and economic environment that has so totally led us to a world of denial? Up is down, black is white, good is bad -- its all very Orwellian.

One of the world's great cautionary lessons are the significant contributions made towards mathematics by the Islamic Arab Empire, circa 8th century to 15th century. While European intellectual progress had ceased -- blame the rise of church extremism -- enormous gains were being had elsewhere. Sometime around 18th or 19th centuries, the cultural roles seem to reverse. After the Age of Enlightenment, the Europeans rejected religious extremism, and prospered, while the Arab Empire embraced extremism, and suffered -- at least until the discover of Crude Oil. There are societal lessons to be learned from this.

I have long railed against superficial headline data that belied the weakness underneath. There were a parade of syncophants and cheerleaders who, despite knowing better, continued to cheerlead punk data. These pundits, politicos and pinheads are now confronting the ugly reality they can no longer ignore. Consider the progression the motley crew of fools and liars went through: First they denied what was happening, then we got the whole contained thingie, then they blamed da Bears. Now, they have unwittingly embraced Marx, and have successfully pled for the central planners to rescue them from their own stupidity.

~~~

Here's my question: Are we stuck with these fantasists? Has Truthiness replaced Truth? Are we going to be saddled forever with these damaging, hallucinatory hacks?

[Demeter]

26. Spitzer Expose Video Crosspost

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=385&topic_id=109338&mesg_id=109338

[Demeter]

27. "You Weren't Meant to Have a Boss" Crosspost

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=347606&mesg_id=347606

[DemReadingDU]

29. 2nd Healthcare fraud trial in Columbus, Ohio - update

3/22/08 Judge: Tapes signal deceit
Bribery case will go forth, he rules

Federal Judge Algenon L. Marbley swiftly rejected attempts by lawyers yesterday to have a bribery case against two businessmen thrown out, saying evidence so far has shown plenty of criminal intent.

"It really does sound like conspiracy," Marbley said as he tossed out motions from attorneys representing Lance K. Poulsen and Karl A. Demmler in their witness-tampering trial in U. S. District Court in Columbus.

He said recordings played in court, in which the defendants referred to government witness Sherry Gibson as "Mary" and "our friend" rather than her real name, smacked of attempts to hide their actions rather than help Gibson, as the defense has contended.

"It suggests knowledge that what they were doing was wrong," Marbley said.

The judge's decision came during the fifth day of the jury trial, which will continue Monday.

Poulsen and Demmler are accused of trying to pay Gibson to lie when she testified for the government in its upcoming fraud case against Poulsen, the former president of Dublin-based National Century Financial Enterprises.

The company, which financed health-care providers, went bankrupt in 2002. Investors lost $1.9 billion, leading to the nation's largest case of fraud involving a private company. Five other National Century executives were found guilty last week. Gibson, a company vice president, pleaded guilty to fraud in 2003 and spent three years in prison.

Prosecutors rested their case yesterday after putting Gibson and FBI Special Agent Jeffrey Williams on the stand for several days and playing numerous recorded conversations between Gibson and Demmler, and Demmler and Poulsen, from 2007.

In recordings played yesterday, Demmler told Poulsen in a phone conversation that Gibson could be paid monthly checks of no less than $5,000 -- but not the same amount every month -- through a company with which he was involved.

Poulsen said on the tape that he would wire the money to Demmler from a Charles Schwab account.

Attorneys for Poulsen and Demmler have contended that they wanted to give Gibson money so she could afford a new attorney.

Poulsen also urges Demmler in telephone calls played in court to persuade "Mary" to fire her attorney and hire one recommended by Poulsen's attorney, Thomas Tyack.

"If Mary will do that, then we can help Mary," Poulsen said.

Williams testified that the FBI's theory was that Poulsen was trying to separate Gibson from her attorney so she could give testimony favorable to her former boss.

The tape recordings come from wiretaps of Poulsen's phones and from a wire Gibson wore when meeting with Demmler.

Tyack also took the stand yesterday and testified that he thought Gibson might have gotten bad advice when she reached a plea agreement, and he thought she could benefit from having another attorney.

In a taped conversation between Demmler and Tyack, Tyack refuses to discuss how Gibson would pay for a new attorney.

"All I'm doing is giving possible names," Tyack said. "I'm not setting up a financial deal, you understand?"

Poulsen is expected on the stand Monday.

http://www.columbusdispatch.com/live/content/business/stories/2008/03/22/bribedayfive.ART_ART_03-22-08_C12_NN9NFU4.html?sid=101


link to previous articles...
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3237046&mesg_id=3237143

[Ghost Dog]

32. China's foreign exchange reserves jump massively

Reuters Published: March 23, 2008, 00:46

Beijing: China's foreign exchange reserves jumped $57.3 billion in February to $1.6471 trillion, almost matching January's surprising leap of $61.6 billion, two sources said.

The leap, which complicates the central bank's task of managing monetary policy, will fan talk of a continued surge in speculative hot money coming into China; the increase is more than three times greater than February's combined inflows from the trade surplus and foreign direct investment (FDI). These totalled $8.6 billion and $6.9 billion respectively.

Economists have offered various explanations for the $61.6 billion jump in reserves in January to $1.5898 trillion. Whatever the reason, the pace of accumulation in the first two months dwarfs last year's average monthly increase of $38.5 billion.

The reserves have ballooned because the People's Bank of China, in order to hold down the yuan, buys most of the dollars that flow into China.

The central bank then has to sterilise the impact on the money supply by mopping up the domestic currency it creates in the process. The jump in reserves will make this job harder.

Capital inflows

Tao Wang, Bank of America's economist in Beijing, said there was more than $100 billion of unexplained capital flows into China in the second half of last year. These may even have accelerated in recent months, Wang said in a report.

"Whether these inflows are 'hot money' or not, they validate the concerns on speculative inflows and the reluctance to increase interest rates aggressively," she said.

/.. http://www.gulfnews.com/business/money/10199560.html

[Demeter]

46. "Hot" as In Illegal?

[Ghost Dog]

49. To some degree, no doubt. But "hot" as in gambling, I guess

is the more general meaning: easy come, easy go; fast in, fast out.

In other words: probably destabilizing & highly unreliable.

[UpInArms]

34. dollar watch

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

Last trade 72.810 Change -0.358 (-0.49%)

Dollar Up Modestly - Is This The Week of the Rebound?

http://www.dailyfx.com/story/bio2/Dollar_Up_Modestly___Is_1206350624064.html

Another very quiet night in the currency market as Easter holidays continue in Europe leaving both UK and EZ calendars essentially empty. The dollar however, received a modest boost against the Swiss franc on announcement that UBS is gearing for a major rights offering, only several months after securing a massive capital injection from Sovereign Wealth funds. After so much focus on the problems in US capital markets in the past several weeks, the currency traders may be turning its attention to Europe as they take a more skeptical view of the European financial sector.

The UBS announcement along with the news that CSFB will register its first quarterly loss in 5 years, dented the franc’s reputation as a safe haven currency and the decline in the Swissie dragged EURUSD along with it below 1.5400 figure. Overall however, as we noted last week, “The market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop.”

With US financial markets pacified for the time being, the currency market will cast its eye on European data, the most important of which will be the IFO survey on Thursday. Any serious weakness in the report is likely to push the EURUSD lower on concerns that the ECB may have to finally relent and consider a rate cut in H1 of this year.

The US calendar today carries only Existing Homes Sales data. The markets expect yet another decline to 4.85MM units from 4.89MM the month prior. However, the greenback may benefit from low expectations, and is unlikely to react negatively to the data unless the number shows massive deterioration in demand.

With markets at full force tomorrow, the true tone of trade should become more evident by then. With EURUSD having run out of stream at 1.5900 early last week, near term momentum has shifted to dollar bulls. They will however, need further negative surprises out of the Eurozone in order push the pair to 1.5000 level of support. Otherwise, assuming there are no additional exogenous shocks, the currency market may simply meander aimlessly for the rest of the week in very narrow trading range.

...more...

Has Dollar Turned The Corner?

http://www.dailyfx.com/story/topheadline/Has_Dollar_Turned_The_Corner__1206336806165.html

After relentless selling for the past month which culminated in a spike top of 1.5900 at the start of trade this week, the EURUSD dollar finally turned the corner dropping below 1.5500 by Good Friday. As we wrote in our daily, “The market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop. The collapse of Bear Stearns has left the market wary, but with no additional news of serious trouble in the US financial system, dollar shorts have run out of fresh reasons to sell the greenback. Meanwhile evidence of a potential slowdown in EZ economy is starting to mount, raising concerns that ECB may have to shift its hawkish posture relatively soon”.

Next week the calendar hardly looks friendly to the dollar as nearly every event from Existing Home Sales to U of M Confidence survey are expected to print lower that the prior month. However, after so much bad news, the greenback may benefit from diminishing expectations staging a rally simply if the data does not show any further deterioration. In any case the market appears to be trading less on economic news and more on risk version concerns. If currency traders see some stabilization in US financial sector some flows may return to the buck, on pure short covering dynamics alone. Therefore, while the rally in the dollar may continue, for the time being it is still nothing more than a correction in ongoing bear market. -BS



...more...

[Ghost Dog]

50. Euro= USD 1.543, CHF 1.566 JPY 154.3 and GBP 0.778 at this time

[TalkingDog]

37. Media Alert. I may be talking to a CNN reporter soon

Regarding the economy, the arts and non-profits.

Any thing I should slip in subliminal-like?



Today could still be a good showing on the "Street" but I think at least on or two of those dominoes is coming out of it's binge induced hangover to see that it's not quite steady on it's feet.


I'll check in with you guys later.
Have fun at it.

[MilesColtrane]

47. Slip in a "DU".

It could be in the form of a question. "I just don't see inflation subsiding any time soon. DU?"

[Ghost Dog]

51. "fantastic falsification of financial (un)reality"?

as well as all sorts of intellectual untruthiness... :-)

[Robbien]

40. US regulator: Your bank deposits are safe

Sheila Bair \ Chairman of the Federal Deposit Insurance Corporation

and other wisdom from this adviser:

Banks: They're not perfect but they are heavily regulated.

http://money.cnn.com/2008/03/21/magazines/fortune/Benner_Bair.fortune/index.htm?section=money_latest

[Demeter]

48. NOW I'm Worried

Whenever anybody makes such a claim, check your wallet to see if it's stilll there.

[MilesColtrane]

52. Wonder what the FSLIC chair was saying in the 80's?

After seeing a graph last week that compared the amount of bank's reserves versus borrowed Fed money, I also wonder if many banks have already failed.

They just remain open, like a chickens walking around after having their heads lopped off.

I know that the delayed closure of insolvent S&Ls greatly compounded the FSLIC's losses.

This chart shows how losses in insolvent S&Ls grew during the eighties as the closure of insolvent S&Ls was delayed. Mid-1983 would have been the optimum time to close hopelessly insolvent S&Ls. Instead, Congress chose to put off the eventual day of reckoning, which only compounded the problem.

[UpInArms]

56. here's a pretty fair chronology of the S&L crisis

http://www.fdic.gov/bank/historical/s&l/index.html

March, 1983--Edwin Gray becomes Chairman of the Federal Home Loan Bank Board. Beginning in 1984 and continuing throughout his tenure, regulatory and supervisory measures passed by the Bank Board begin the reversing of deregulation.

November, 1983--Bank Board raises net worth requirement for newly chartered S&Ls to 7%.

March, 1984--Failure of Empire Savings of Mesquite, TX. "Land flips" and other criminal activities are a pattern at Empire. This failure would eventually cost the taxpayers approximately $300 million.

April, 1984--Bank Board moves jointly with the FDIC to attempt to eliminate deposit insurance for brokered deposits. Federal court rejects this attempt in mid-1984 as overstepping statutory limits.

July, 1984--Bank Board requires S&L management to adopt policies and procedures for managing interest rate risk.

January, 1985--Bank Board limits the amount of brokered deposits to 5% of deposits at FSLIC insured institutions failing to meet their net worth requirements. Bank Board also limits direct investment (equity securities, real estate, service corporations, and operating subsidiaries) to the greater of 10% of assets or twice the S&L's net worth, provided the institution meets regulatory net worth.

March, 1985--Ohio bank holiday. Anticipated failure of Home State Savings Bank of Cincinnati, OH and possible depletion of Ohio state deposit insurance fund cause Governor Celeste to close Ohio S&Ls. Eventually, those that can qualify for federal deposit insurance are allowed to reopen.

May, 1985--S&L failures in Maryland eventually cause loss to state deposit insurance fund and Maryland taxpayers of $185 million. Ohio and Maryland S&L failures helped kill state deposit insurance funds.

July, 1985--Chairman Gray begins transfer of federal examiners to the twelve regional Federal Home Loan Banks so that they are no longer overseen by OMB and their salaries are paid directly by the Bank Board system.

August, 1985--Only $4.6 billion in FSLIC insurance fund. Chairman Gray tries to gain support for recapitalizing FSLIC on Capitol Hill. In 1986, GAO estimates the loss to the insurance fund to be around $20 billion.

December, 1985--Bank Board allows S&L examiners to "classify" questionable loans and other assets for the purpose of requiring loan loss reserves.

1986-1989 Compounding of losses as insolvent institutions are allowed to remain open and grow, allowing ever increasing losses to accumulate.

August, 1986--Bank Board raises net worth standard gradually to 6% with up to 2% points offset for reduced interest rate-risk.

1987--Losses at Texas S&Ls comprise more than one-half of all S&L losses nationwide, and of the 20 largest losses, 14 are in Texas. Texas economy in major recession: crude oil prices fall by nearly 50%, office vacancy is over 30%, and real estate prices collapse.

January, 1987--GAO declares FSLIC fund insolvent by at least $3.8 billion. Recapitalization has stalled on Capitol Hill until now by claims of powerful S&L lobbyists that Bank Board regulations are too harsh and arbitrary.

February, 1987--Bank Board requires prior supervisory approval for S&Ls making direct investment in excess of 2.5 times their tangible capital.

April, 1987--Edwin Gray ends his term as chairman of Federal Home Loan Bank Board in June. Before his departure, he is summoned to the office of Sen. Dennis DeConcini. DeConcini, with four other Senators (John McCain, Alan Cranston, John Glenn, and Donald Riegle) question Gray about the appropriateness of Bank Board investigations into Charles Keating's Lincoln Savings and Loan. All five senators, who have received campaign contributions from Keating, would become known as the "Keating Five". The subsequent Lincoln failure is estimated to have cost the taxpayers over $2 billion.

[MilesColtrane]

59. Yow, what a fetid, stinky mess!

[Zynx]

60. Deposits are safe. The government still has the room to do a significant bail out of the banks if

need be. Also, foreigners would come in to prop up our banks in a massive crisis since a systemic failure of banks is hardly in their interest.

[Robbien]

53. Desperate for cash, many in U.S. taking high-interest 'payday' loans

As hundreds of thousands of American homeowners fall behind on their mortgage payments, more people are turning to short-term loans with extreme interest rates, just to get by.

While hard figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called "payday loans" is growing as the U.S. housing crisis deepens.

. . .
A payday loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the center.

The center also estimates that payday lenders issued more than $28 billion in loans in 2005, the latest available figures.

The loans on offer have an annual percentage rate of as much as 391 percent, excluding fees and penalties. All you need for a loan like this is proof of regular income - even government benefits suffice.

On top of the exorbitant cost, payday loans have an even darker side, Sacher said: "We also have to contend with the fact that payday lenders are very aggressive when it comes to getting paid."

, , ,

But while the state of Ohio has not done well in recent years, payday lenders have proliferated.

Bill Faith, executive director of COHHIO, an umbrella group representing about 600 nonprofit agencies in Ohio, said the state is home to an estimated 1,650 payday lenders. That is more than the number of McDonald's, Burger Kings and Wendy's fast food franchises in the state.

http://www.iht.com/articles/2008/03/24/business/loan.php

[MilesColtrane]

58. Good thing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005...

...was passed with the wisdom and foresight of Congress before this foreclosure crisis.

Once these families of leeches default on their 800% loans they took out in an attempt to make a mortgage payment, they won't be able to run and hide after having suckled at the benevolent teats of our fine corporations.

[UpInArms]

55. Fannie Mae delinquencies jump, portfolio up 1 pct

http://www.reuters.com/article/bondsNews/idUSN2431554020080324

NEW YORK, March 24 (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research), the largest provider of funding for U.S. home mortgages, on Monday said its portfolio edged higher in February while delinquencies jumped in the prior month to more than a decade high.

The government-chartered company said its mortgage investments increased $594 million to $721.6 billion in February, representing a 1 percent annualized growth rate.

Delinquencies on Fannie Mae's single-family home financing business rose in January to 1.06 percent, the highest since at least 1997.

...more...

[UpInArms]

57. 9:51 EST the markets experience "liquid insanity"

Dow 12,462.43 101.11 (0.84%)
Nasdaq 2,286.18 28.07 (1.24%)
S&P 500 1,341.21 11.70 (0.88%)
10-Yr Bond 3.462% 0.134

NYSE Volume 369,795,906.25
Nasdaq Volume 153,671,687.5

09:15 am : S&P futures vs fair value: +5.4. Nasdaq futures vs fair value: +3.8.

08:55 am : S&P futures vs fair value: +6.1. Nasdaq futures vs fair value: +3.2. S&P futures climb to their best levels of the session on news that the Federal Housing Finance Board raised the Federal home loan bank limit. Federal home loan banks are now able to buy in excess of $100 billion in agency mortgage backed securities. Meanwhile, commodities are seeing selling interest with oil down 0.9% to $100.89 per barrel and gold down 0.5% to $915.40 per ounce. This follows last week's steep declines, with gold shedding 8.0%, its largest weekly loss since 1983. As a whole, the CRB Commodity Index fell 8.3%, which marks its largest weekly decline in its 52 year history.

08:32 am : S&P futures vs fair value: +3.7. Nasdaq futures vs fair value: -0.8. It is shaping up to be a lackluster start to the trading session, as S&P 500 futures suggest a slightly higher open. In earnings news, Walgreen (WAG) reported second quarter earnings of $0.69 per share, topping the consensus estimate by $0.02.

[Roland99]

65. 10:33am - JPMorgan sweetens Bear Stearns offer. Markets erupt in joy.

Dow 12,552.06 +190.74
Nasdaq 2,314.17 +56.06
S&P 500 1,351.08 +21.57
10 YR 3.49% 0.16
Oil $101.05 $-0.79
Gold $918.00 $-2.00

[spotbird]

66. Clinton proposes Greenspan lead foreclosure group

Source: Reuters

By Jeff Mason

WHITE PLAINS, New York (Reuters) - Former Federal Reserve Chairman Alan Greenspan and other economic experts should determine whether the U.S. government needs to buy up homes to stem the country's housing crisis, Democratic presidential candidate Hillary Clinton will propose on Monday.

Clinton, a presidential candidate and senator from New York, said the Federal Housing Administration should "stand ready" to buy, restructure and resell failed mortgages to strengthen the ailing U.S. economy.

"Just as it has in the past, this kind of temporary measure by the government could give our economy the boost it needs and families the help they need," Clinton will say, according to excerpts of remarks prepared for a speech in Philadelphia.

Read more: http://www.reuters.com/article/politicsNews/idUSN243066...

Found in LBN here:



http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3240340

[formercia]

67. Why not, he helped create the monster

Alan 'Doktor Frankenstein' Greenspan.

[Tansy_Gold]

69. This is INSANITY

Okay, the classic definition of insanity is doing the same thing over and over and expecting different results. Is there a corollary definition that says putting the person who made the mess in charge of cleaning it up is also insanity??


Tansy Gold, so angry she mis-typed "insanity" four times before she got it right.

[spotbird]

92. Clinton is the candidate of change,

it's sort of a Bushian meaning of change, like peace is war, ownership through bankruptcy, etc..

[fedsron2us]

73. Attacking symptoms not causes

This is an insolvency crisis caused by the fact US citizens simply do not earn enough to live adequately without borrowing. Propping up the housing bubble actually hurts the ordinary citizn because it stops prices deflating to a value that ordinary people can afford. Under the wrappers it would be just another bailout for Wall Street using taxpayers money.

[Delphinus]

86. Tell that to my bosses, please.

One in particular seems to think I make too much as it is - living on less that $17,000 per year.

Yes, I'm grateful for this job - and I know I'm living on more than what a lot of people do. But, for them to think that $17k is too much stinks.

[TalkingDog]

91. I know a bike messenger in NJ who makes over twice that.

Granted...it's Brooklyn, expensive rent and a dangerous job, but I live in Podunk NC and make a little less than that working part-time for a non-profit and for myself....

A friend and I were discussing "advantages" at lunch today. He was born into a white middle class family that owns a 3rd generation small business, he never wanted for much of anything. He has trouble understanding why some people can't seem to ...whatever: get a job, get ahead, and I've been trying to pound it into his head:

Them that's born with boots find it easy to tell them with bare feet to tug up on their bootstraps.

[Ghost Dog]

83. Clinton rolls out new economic crisis plan

WASHINGTON (AFP) - Democrat Hillary Clinton Monday pitched a mortgage rescue plan aimed at halting a slide towards recession, as she launched a new bid to prune Barack Obama's lead in their White House race.

Eyeing her blue-collar base feeling the pinch in Pennsylvania, which hosts the next crucial nominating contest on April 22, Clinton spoke in-depth on everyday economic woes in a speech in Philadelphia.

In the city where Obama made a soaring speech on race last week, Clinton's address appeared to be an attempt to argue that only she felt the acute economic anxiety stalking Americans and is best prepared to fight the crisis.

She called on President George W. Bush to appoint former Federal Reserve chiefs Alan Greenspan and Paul Volcker, and ex-Treasury secretary Robert Rubin, to a bipartisan panel to report on the depth of the crisis within three weeks.

"Over the past week, we've seen unprecedented action to maintain confidence in our credit markets and head off a crisis for Wall Street banks," Clinton said.

"It's now time for equally aggressive action to help families avoid foreclosure and keep communities across this country from spiraling into recession."

...

Clinton's economic plan calls for new action to help homeowners restructure mortgages, removes legal curbs for lenders keen to relax loan terms and calls for a 30 billion dollar stimulus package to help states fight foreclosures.

She accused Bush of presiding over a "brain-dead energy policy," eroding confidence in the dollar and pushing gasoline prices so high "you feel like it costs more to commute to work than you make when you get there."

...

"There are some good ideas in there (but) most of them are repackaged ideas," said Obama campaign manager David Plouffe in a conference call, accusing Clinton of taking huge campaign contributions from lobbyists who work for financial interests she is now promising to tackle.

The Obama camp also said their candidate had proposed a high-level summit a year ago to discuss the looming foreclosure crisis.

Clinton had previously proposed a 90-day moratorium on foreclosures, and a five-year freeze on interest rates in troublesome subprime mortgages.

Obama has called for a crackdown on unscrupulous lenders, a fund to help homeowners restructure mortgages and bigger new tax credits.

/... http://news.yahoo.com/s/afp/20080324/ts_alt_afp/usvote

[Zynx]

70. I really hope those who went short financials on the Bear Stearns news last week are

destroyed now. It's stupid to bet against the government in situations like this. There is no single industry the government is more willing and able to bail out than financial services due to its critical role in the economy. People should remember that when they go short hoping to ride these things to zero. If you went short at their peaks, that was smart because it was clear that the investment banking boom would not last. However, going short at this point is just this side of insane.

[specimenfred1984]

80. Wierd

Longs and shorts get destroyed everyday, it's call "speculation". I hope corrupt banks get destroyed as they are criminals, anti-Americans and disaster capitalists. Then, the new banks need regulated as does all trading of all stocks.

Cheering for the bailout of corrupt banks using our gov't money reeks of neo-conservatism.

[antigop]

71. Phil Gramm is McCain's chief economic adviser? Yes, according to Krugman...

http://www.nytimes.com/2008/03/24/opinion/24krugman.html?_r=1&oref=slogin

Not if Mr. McCain makes it to the White House. His chief economic adviser is former Senator Phil Gramm, a fervent advocate of financial deregulation. In fact, I’d argue that aside from Alan Greenspan, nobody did as much as Mr. Gramm to make this crisis possible.

Both Democrats, by contrast, are running more or less populist campaigns. But at least so far, neither Democrat has made a clear commitment to financial reform.

Is that simply an omission? Or is it an ominous omen? Recent history offers reason to worry.

In retrospect, it’s clear that the Clinton administration went along too easily with moves to deregulate the financial industry. And it’s hard to avoid the suspicion that big contributions from Wall Street helped grease the rails.

Sorry if this is not news to you.. it was to me. I didn't know about Gramm's advisory role here.

[antigop]

74. Ex-Countrywide exec in new mortgage venture

http://money.cnn.com/2008/03/24/news/companies/bc.apfn.blackrock.jointv.ap/index.htm?postversion=2008032409

Investment management firms BlackRock Inc. (BLK) and Highfields Capital Management said Monday they are sponsoring a new company that will acquire and restructure distressed mortgages.

The new company, Private National Mortgage Acceptance Co. will be run by Stanford Kurland. Kurland served as president and chief operating officer of Countrywide Financial Corp., the nation's largest mortgage lender, until 2006.

Private National Mortgage, also known as PennyMac, will invest in and service resident mortgages on behalf of private investors. PennyMac will aim to avoid home foreclosures and instead restructure loans so borrowers can maintain payments.

[formercia]

77. I would call it something else:

Squeeze as much blood out of the Turnip as you can.corp.

[MilesColtrane]

78. Wow.

Makes money by helping create a shitstorm, then makes money helping to clean up the same shitstorm.

Livin' the American dream....

[antigop]

79. He's an "entrepreneur". n/t

[formercia]

81. Big bonus and stock options too.

They might even be so cynical as to make it a non-profit corporation.

[specimenfred1984]

84. The "Fascist Float" for hours

Prop up the markets with BS propaganda and watch 'em aimlessly float as all buyers and sellers all just wait for the corruption to be addressed years from now.

Hey maybe the FED will throw another $200 billion of our money at corrupt banks!

[antigop]

85. Thought you might want to read this older article....

Look at the names and players, bank loans, derivatives..a lot of this sounds familiar,doesn't it?

http://query.nytimes.com/gst/fullpage.html?res=9407E5D91139F93AA1575AC0A96E958260&sec=&spon=&pagewanted=all

The rescuing institutions have agreed to commit their capital for as long as three years, according to people involved. Their objectives are to reduce the size of Long-Term Capital's enormous portfolio of securities, derivatives and forward contracts -- positions that at the end of August totaled $1.25 trillion.
....
Committee members have expressed concerns about how Long-Term Capital used a seemingly limitless flow of bank loans to build up a securities portfolio that by the end of August totaled about 50 times its paid-in capital base. Government regulators and members of Congress have also said that they plan to investigate how a single speculative fund catering to rich investors could threaten the stability of the financial system, requiring a bailout on such a scale.

Players: Greenspan and Rubin.

Did we learn anything from LTC?

[Demeter]

87. Which Question Selects Our Musical Theme for the Day:

Blowin' in the Wind by Bob Dylan


How many roads must a man walk down
Before you call him a man?
Yes, 'n' how many seas must a white dove sail
Before she sleeps in the sand?
Yes, 'n' how many times must the cannon balls fly
Before they're forever banned?
The answer, my friend, is blowin' in the wind,
The answer is blowin' in the wind.

How many times must a man look up
Before he can see the sky?
Yes, 'n' how many ears must one man have
Before he can hear people cry?
Yes, 'n' how many deaths will it take till he knows
That too many people have died?
The answer, my friend, is blowin' in the wind,
The answer is blowin' in the wind.

How many years can a mountain exist
Before it's washed to the sea?
Yes, 'n' how many years can some people exist
Before they're allowed to be free?
Yes, 'n' how many times can a man turn his head,
Pretending he just doesn't see?
The answer, my friend, is blowin' in the wind,
The answer is blowin' in the wind.


http://www.bobdylan.com/songs/blowin.html

[Hugin]

90. Capital choice, Demeter.

:thumbsup:

[Demeter]

97. Thank You, Master Prag!

I am only a grasshopper....

[Demeter]

88. Taming the Beast By PAUL KRUGMAN

http://www.nytimes.com/2008/03/24/opinion/24krugman.html?_r=2&hp&oref=slogin&oref=slogin


--------------------------------------------------------------------------------
key issue: the need to reform our out-of-control financial system.



America came out of the Great Depression with a pretty effective financial safety net, based on a fundamental quid pro quo: the government stood ready to rescue banks if they got in trouble, but only on the condition that those banks accept regulation of the risks they were allowed to take.

Over time, however, many of the roles traditionally filled by regulated banks were taken over by unregulated institutions — the “shadow banking system,” which relied on complex financial arrangements to bypass those safety regulations.

Now, the shadow banking system is facing the 21st-century equivalent of the wave of bank runs that swept America in the early 1930s. And the government is rushing in to help, with hundreds of billions from the Federal Reserve, and hundreds of billions more from government-sponsored institutions like Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Given the risks to the economy if the financial system melts down, this rescue mission is justified. But you don’t have to be an economic radical, or even a vocal reformer like Representative Barney Frank, the chairman of the House Financial Services Committee, to see that what’s happening now is the quid without the quo.

Last week Robert Rubin, the former Treasury secretary, declared that Mr. Frank is right about the need for expanded regulation. Mr. Rubin put it clearly: If Wall Street companies can count on being rescued like banks, then they need to be regulated like banks.

[ScreamingMeemie]

89. For your Counting the Days...

Day 27 of the UAW---American Axle Strike. No end in sight. Blue collar employees being royally screwed while execs collect profit sharing.

[Roland99]

93. At the close... Methadone Monday

Dow 12,548.64 +187.32
Nasdaq 2,326.75 +68.64
S&P 500 1,349.88 +20.37
10 YR 3.52% 0.19
Oil $100.86 $-0.98
Gold $918.70 $-1.30

[fascisthunter]

94. Everything is Ok Afterall....

I hear the debt's getting larger, but hey, DOW and the investors are doing fine, just as long as we the tax payers bail them all out.

[CatholicEdHead]

95. It will not last long

The fundamentals still do not look very good at all. We are still down around 15% for the year on the major indexes.

[UpInArms]

98. idiotic blather - says it was all about home sales - but was it about Bear Stearns (earlier highs)

On Monday, the major indices kicked off the week on a high note with the S&P 500 advancing 1.5% and the Nasdaq posting a 3.0% gain. Lifting stocks was a better than expected housing report, a move to increase liquidity in mortgage backed securities (MBS), and an increased offer for Bear Stearns (BSC 11.25, +5.29).

The stock market saw the bulk of this session’s gains after the February existing home sales report showed that sales rose 2.9% to a seasonally adjusted annualized rate of 5.03 million. Economists expected sales to fall to 4.85 million from the prior reading of 4.89 million.

Although existing home sales remain weak, the report provided some hope as it marked the first monthly rise in one year. In addition, inventories fell to 9.6 months, which is the lowest level since August. Median home prices are down 8% compared to last year, and are down 15% from the peak in July 2006.

The report gave the market a broad-based lift, with notable strength seen in the homebuilding (+6.5%) and real estate management & development (+13.5%) groups.

On a related note, the Federal Housing Finance Board authorized Federal Home Loan Banks to increase their purchases of agency mortgage backed securities. The expanded authority--which could provide more than $100 billion in additional liquidity to mortgage-backed securities--is limited to Freddie Mac (FRE 30.61, -1.97) and Fannie Mae (FNM 31.16, -3.14) securities

Shortly after the opening bell JPMorgan Chase (JPM 46.55, +0.58) confirmed reports that it is going to increase its offer for the Bear Stearns. Last week, in order to avoid bankruptcy, Bear’s board accepted a $2 per share offer from JPMorgan. The extremely low offer sparked outrage from Bear’s shareholders, which still have to approve the takeover. This spurred JPMorgan’s action this morning to revise its offer. Each share of Bear would now receive 0.21753 shares of JPMorgan, which equates to roughly $10.

Financials gained as much as 3.4% on the news, but slipped in late afternoon trading to finish with a modest 0.7% gain.

Nine of the ten sectors closed the day with a gain. Materials posted the largest advance of 3.2% after agriculture company Monsanto (MON 104.26, +7.13) was upgraded to Buy from Neutral at UBS.

Consumer discretionary (+3.1%) also posted a hefty gain, partially due to better than expected earnings reports from Walgreen (WAG 38.61, +1.83) and Tiffany & Co (TIF 42.76, +4.16).

The Nasdaq outperformed thanks to leadership from some recently beaten large-cap tech names. Apple (AAPL 139.53, +6.26), Research In Motion (RIMM 11.83, +6.89) and Google (GOOG 460.56, 27.01) gave the composite a nice boost.

Defensive investments underperformed. Treasuries took a beating, with the 10-year note giving up 55 ticks. Meanwhile, utilities (-0.3%) was the sole sector in the red, and healthcare (+0.6%) underperformed on a relative basis.DJ30 +187.32 NASDAQ +68.64 NQ100 3.6% R2K +2.9% SP400 +2.3% SP500 +20.37 NASDAQ Dec/Adv/Vol 773/2163/2.31 bln NYSE Dec/Adv/Vol 612/2576/1.57 bln

3:30 pm : The major indices are trading with healthy gains but are sliding off their best levels. Meanwhile, Treasuries are getting clipped. The 10-year note is down 57 ticks, sending its yield up to 3.54%.

The financial sector (+0.9%) continues to give up its gains. The thrifts & mortgages (-3.0%) group has retreated into the red, and is the worst performing group within the S&P 500. The selling interest may simply be profit taken after the group surged 56% from its low last Monday to its high earlier today.

XM Satellite (XMSR 13.66, +1.72) and Sirius (SIRI 3.08, +0.18) have received Dept. of Justice anti-trust approval. The companies still need FCC approval.

DJ30 +193.18 NASDAQ +66.57 SP500 +21.51 NASDAQ Dec/Adv/Vol 779/2143/1.88 bln NYSE Dec/Adv/Vol 627/2543/1.25 bln

3:00 pm : The stock market dips off its best level, although it continues to post a large gain. The energy sector (+1.4%) has retreated well of its session highs as crude (-1.7% to $100.12) approaches the $100 mark.

Small cap stocks are outperforming this session. The Russell 2000 Index is up 3.1%. Mid cap names are also performing well, with the S&P 400 up 2.6%.DJ30 +203.93 NASDAQ +66.65 SP500 +22.05 NASDAQ Dec/Adv/Vol 751/2171/1.59 bln NYSE Dec/Adv/Vol 574/2592/1.09 bln

2:30 pm : The major indices are trading slightly below their best levels of the session. The financial sector (+2.1%) has dipped off its best level, but its slip is being offset by strength in the materials(+3.8%), tech (+3.0%), and consumer discretionary (+3.1%) sectors.

Lehman Brothers (LEH 47.40, -1.25) is one of the relatively few financial stocks trending lower. Oppenheimer analyst Meredith Whitney downgraded the company to Perform from Outperform based on valuation. Whitney's calls usually garner attention. In November she correctly predicted that Citigroup (C 23.86, +1.36) would have to cut its dividend.DJ30 +236.60 NASDAQ +76.32 SP500 +27.01 NASDAQ Dec/Adv/Vol 2202/2196/1.46 bln NYSE Dec/Adv/Vol 520/2636/996 mln

2:05 pm : The bullish bias remains intact with advancers outpacing decliners by 16-to-3 on the NYSE and by 3-to-1 on the Nasdaq. The stock market is now up 8.0% from its 52-week low that was reached last Monday. Conversely, the stock market remains down 13.9% from its all-time high that was reached last October.DJ30 +234.71 NASDAQ +75.93 SP500 +26.85 NASDAQ Dec/Adv/Vol 686/2210/1.35 bln NYSE Dec/Adv/Vol 497/2639/911 mln

1:30 pm : Stocks continue to trade with hefty gains, with only the utilities sector (-0.5%) posting a loss. Seven of the ten sectors are up more than 2%.

Of the Dow's 30 components, 27 are trending higher. Caterpillar (CAT 76.23, +2.41) and American Express (AXP 47.97, +1.99) are providing leadership. Defensive stocks Johnson & Johnson (JNJ 64.73, -0.65) and Coca-Cola (KO 60.91, -0.13) are the main laggards.DJ30 243.76 NASDAQ +75.71 SP500 +27.98 NASDAQ Dec/Adv/Vol 672/2197/1.23 bln NYSE Dec/Adv/Vol 480/2644/830 mln

1:00 pm : The stock market climbs to fresh session highs. Buying interest has been broad-based, although there is notable strength in the tech sector (+3.1%).

Retailers (+4.0%) are outperforming this session, led by gains in Home Depot (HD 29.48, +1.42) and Lowe's (LOW 24.31, +1.08). The S&P 500 Retailing Index is now in positive territory for the year, up a modest 0.4%, after advancing 11.5% in the last five sessions.DJ30 +243.98 NASDAQ +74.87 SP500 +28.31 NASDAQ Dec/Adv/Vol 644/2204/1.13 bln NYSE Dec/Adv/Vol 464/2637/763 mln

12:30 pm : The major indices are trading near or at their best levels of the session with the Nasdaq handily outpeforming the Dow and S&P 500. Within the Nasdaq 100, 92% of stocks are trending higher. Apple (AAPL 140.66, +7.39), Google (GOOG 460.21, +26.66) and Research In Motion (RIMM 111.24, +6.30) are providing leadership.

After posting a loss in the early going, the CRB Commodity Index is posting a decent 0.7% gain. Wheat is up 5.6%, natural gas has gained 2.8% and silver has advanced 1.7%. Not every commodity is higher, as crude is down 0.6% to $101.84 per barrel.DJ30 +231.93 NASDAQ +71.05 SP500 +26.69 NASDAQ Dec/Adv/Vol 657/2164/1.02 bln NYSE Dec/Adv/Vol 488/2609/699 mln

12:05 pm : The major indices are trading with strong gains at midday, lifted by an increased offer for a major Wall Street firm, and better than expected housing data.

Topping headlines this morning was reports that JPMorgan Chase (JPM 47.14, +1.17) was going to raise its offer for collapsed investment bank Bear Stearns (BSC 13.17, +7.21) after facing outrage from Bear’s shareholders over its previous $2 per share offer.

Shortly after the opening bell, JPMorgan and Bear confirmed that the offer has been revised so that each share of Bear would now receive 0.21753 shares of JPMorgan, which equates to roughly $10 per share. Both companies’ boards approved the revised offer, although shareholders still have to agree on the new deal.

Bear Stearns has soared 121% on word of the new offer, however, even the revised offer remains well below Bear’s 52-week high of $159.36.

Also helping matters is news that the Federal Housing Finance Board authorized the Federal Home Loan Banks to increase their purchases of agency mortgage backed securities. The expanded authority--which could provide more than $100 billion in additional liquidity to mortgage-backed securities--is limited to Freddie Mac (FRE 32.50, -0.08) and Fannie Mae (FNM 33.26, -1.04) securities.

As a result, the financial sector (+2.4%) is providing leadership this session. The sector is now up 21% from its 52-week low that was reached on Monday.

The market responded positively to this session’s sole economic release. February existing home sales rose 2.9% to a seasonal adjusted annualized rate of 5.03 million. The prior reading stood at 4.89 million, and economists expected a decline to 4.85 million.

The 2.9% rise in existing home sales marked the first monthly gain in a year. Inventories are still high at 9.6 months, but are at the lowest level since August--meaning there is fewer houses for sale. Median home prices are down 8% in the last twelve months and down 15% since the peak in July 2006.

The real estate management & development (+18.2%) and homebuilding (+10.5%) groups are posting the largest gains this session. Their strength, along with better than expected earnings reports from Walgreen (WAG 38.73, +1.95) and Tiffany & Co (TIF 43.57, +4.97) is helping to lift the consumer discretionary sector (+3.0%)

Materials (+4.3%) is the best performing sector as agriculture chemical company Monsanto (MON 105.33, +8.20) soars after being upgraded to Buy from Neutral at UBS.

Defensive oriented investments are out of favor this session. The only sector in the red is utilities (-1.0%), and Treasuries are getting clobbered, with the ten year down 43/32 ticks.
DJ30 +212.23 NASDAQ +62.25 R2K +2.9% SP400 +2.6% SP500 +23.50 NASDAQ Dec/Adv/Vol 645/2155/908 mln NYSE Dec/Adv/Vol 491/2585/625 mln

11:35 am : The major indices are trading near their best levels. The defensive oriented utilities sector is down 0.8%, and is the only sector in negative territory. Defensive areas consumer staples (+0.8%) and healthcare (+0.4%) are also underperforming on a relative basis. Meanwhile, treasuries are getting clipped, with the 10-year down 55/32 ticks, sending its yield up to 3.50%.

The Nasdaq Composite is outperforming thanks to strength in large cap tech names. Apple (AAPL 138.98, +5.71) is showing notable strength on little news. The name has been beaten down lately, as it is down 31.9% from its 52-week high.DJ30 +219.23 NASDAQ +60.43 NQ100 +2.9%% SP500 +24.65 NASDAQ Dec/Adv/Vol 663/2111/785 mln NYSE Dec/Adv/Vol 506/2526/542 mln

11:00 am : The major indices climb to new highs. Fitch Ratings announced it is maintaining its Financial Strength and debt ratings on MBIA (MBI 14.28, +1.51) and it subsidiaries for the foreseeable future. The financial sector is up 2.8% this session.

The materials sector is providing leadership, as its gains a strong 3.8%. Agricultural chemical company Monsanto (MON 105.10, +7.97) is posting its largest daily percent gain in more than seven years after being upgraded to Buy from Neutral at UBS. On a related note, agriculture product company Potash (POT 152.41, +8.15) got a nice boost after it was upgraded to a Top Pick from Outperform at RBC. Since the company is based in Canada it does not directly effect the S&P 500, however related companies such as Mosaic (MOS 97.61, +5.60) are rising in conjunction with Potash.

As a result, the fertilizer & agriculture chemicals group is posting a nice 7.8% gain. Despite this session's gains, the group is still down 9.6% this month, underperforming the broader market's 1.8% gain. However, the group is up 90% versus one year ago, compared with the market's 5.6% decline.DJ30 +214.27 NASDAQ +55.50 SP500 +23.18 NASDAQ Dec/Adv/Vol 649/2076/639 mln NYSE Dec/Adv/Vol 490/2506/447 mln

10:30 am : The major indices extend their gains, and are all trading up more than 1.5%. The Nasdaq leads the way with a 2.2% advance.

The real estate management & development (+14.5%) and homebuilding (+8.1%) groups saw nice boosts following the better than expected February housing data. The 2.9% rise in existing home sales marked the first monthly gain in a year. Inventories are still high at 9.6 months, but are at the lowest level since August--meaning there is fewer houses for sale. Median home prices are down 8% in the last twelve months and down 15% since the peak in July 2006.

Bear Stearns (BSC 11.93, +5.97) is up a whopping 100%. Interestingly, Bear Stearns is trading at $11.97 per share, which is well above JP Morgan's (JPM 47.17, +1.20) new $10 offering price that was announced earlier this morning. Similarly, shares of Bear traded well above the original $2 per share offer, as its previous close was $5.96 per share. Of note, JP Morgan's revised offer is still drastically lower than Bear's 52-week high, when its shares hit $159.36.DJ30 +187.57 NASDAQ +51.60 SP500 +20.33 NASDAQ Dec/Adv/Vol 626/2028/485 mln NYSE Dec/Adv/Vol 475/2487/345 mln

10:05 am : The major indices extend their gains and then climb higher on a better than expected economic release

Just hitting the wires, February existing home sales rose 2.9% to an seasonal adjusted annualized rate of 5.03 million. The prior reading stood at 4.89 million. Economists expected sales to fall to 4.85 million, which would have marked the lowest level of sales since they were first tracked in 1999.

Shortly after the opening bell, shares of Bear Stearns (BSC 9.83, +3.87) were halted. Confirming reports earlier this morning, Bear and JPMorgan Chase (JPM 46.59, +0.62) announced they have amended their merger agreement to reflect a value of $10 per share of Bear common stock. JPMorgan's previous offer for the collapsed investment bank was $2 per share. Shares of Bear Stearns have resumed trading.DJ30 +161.43 NASDAQ +38.00 SP500 +18.75 NASDAQ Dec/Adv/Vol 801/1696/207 mln NYSE Dec/Adv/Vol 608/2203/148 mln

09:40 am : The major indices open on a high note. Lending support is a New York Times report that JPMorgan Chase (JPM) may raise its offer for Bear Stearns (BSC) to $10 per share, from its original offer of roughly $2.

Also giving the market a boost is news that the Federal Housing Finance Board authorized the Federal Home Loan Banks to increase their purchases of agency mortgage backed securities. The expanded authority--which could provide more than $100 billion in additional liquidity to mortgage-backed securities--is limited to Freddie Mac (FRE) and Fannie Mae (FNM) securities.DJ30 +84.92 NASDAQ +21.20 SP500 +9.32

09:15 am : S&P futures vs fair value: +5.4. Nasdaq futures vs fair value: +3.8.

08:55 am : S&P futures vs fair value: +6.1. Nasdaq futures vs fair value: +3.2. S&P futures climb to their best levels of the session on news that the Federal Housing Finance Board raised the Federal home loan bank limit. Federal home loan banks are now able to buy in excess of $100 billion in agency mortgage backed securities. Meanwhile, commodities are seeing selling interest with oil down 0.9% to $100.89 per barrel and gold down 0.5% to $915.40 per ounce. This follows last week's steep declines, with gold shedding 8.0%, its largest weekly loss since 1983. As a whole, the CRB Commodity Index fell 8.3%, which marks its largest weekly decline in its 52 year history.

08:32 am : S&P futures vs fair value: +3.7. Nasdaq futures vs fair value: -0.8. It is shaping up to be a lackluster start to the trading session, as S&P 500 futures suggest a slightly higher open. In earnings news, Walgreen (WAG) reported second quarter earnings of $0.69 per share, topping the consensus estimate by $0.02.