STOCK MARKET WATCH, Tuesday 13 September

[ozymandius]

Tuesday September 13, 2005

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 3 YEARS, 130 DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 4 YEARS, 267 DAYS
WHERE'S OSAMA BIN-LADEN? 3 YEARS, 331 DAYS
DAYS SINCE ENRON COLLAPSE = 1388
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 2
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

AT THE CLOSING BELL ON September 12, 2005

Dow... 10,682.94 +4.38 (+0.04%)
Nasdaq... 2,182.83 +7.32 (+0.34%)
S&P 500... 1,240.56 -0.92 (-0.07%)
10-Yr Bond... 4.17% +0.05 (+1.12%)
Gold future... 453.70 +0.70 (+0.15%)

GOLD, EURO, YEN, Dollars and Loonie




PIEHOLE ALERT

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

For information on protests and other actions Citizens For Legitimate Government

[ozymandius]

1. WrapUp by Rob Kirby

THE MORE THINGS CHANGE, THE MORE THEY STAY THE SAME

I sat with my boss in a sweltering but fashionable downtown eatery in Toronto in mid August 1987 having lunch – with two chaps who were the book runners (traders) for the interest rate swap book of my number one client. This client just happened to be a major bullion bank and at the time the biggest derivatives dealer in the world. One of them was a Polish immigrant, a Ph.D. in mathematics who had been recruited from then DOW 30 constituent Honeywell. While he spoke in slightly broken English, this guy was not only a genius but an accomplished Olympian - as a sailor. These were indeed ‘heady times.’ The DOW had just broken the magical 2000 level and 5-year mortgage money was available at approximately 10% in Canada if you were on friendly terms with your local bank manager. In those days 10% money intuitively made most business deals work. Over a nice bottle of wine talk quickly turned to ‘the markets’ - interest rates in particular - and in a larger sense the general equity markets.

It was shortly after the banter turned to the equity markets that our Ph.D. friend, in his broken English informed us, “there are going to be days when the (stock) market (DOW) goes down 4 or 5 hundred points.” The other three of us sitting at the table stared at him gawking in disbelief – not sure whether we should laugh or take his words seriously. Given that the largest one day movement in the DOW Jones to that point in time was about 28 points we asked him what his reasoning was for such a bold prediction. His answer was , “the incorrect assumptions in portfolio insurance.”

We asked him pointedly just what it was that ‘was wrong’ with the assumptions in portfolio insurance? His reply, “Simple… portfolio insurance constitutes computer generated equity trades. The more the markets move in a given direction, the more the computers will exacerbate the move in the same direction-thus the market will drop 4 or 5 hundred points easily in one day.” That produced chuckles and a retort of, “By the same logic it seems the market might equally be susceptible to a 4 or 5 hundred point rise in one day?”

Things Never Crash “Up”

I’ll never forget his reply (interrupting and again in broken English), “Empirical observation I have made, things never seem to ‘crash’ up.” We asked him what made him so certain of his convictions regarding the equity markets. His reply, “I’ve modeled it all in my computer. It is certain to happen given the right conditions.” This guy had ‘modeled’ the equity market in a computer program he created in his spare time, for fun, and determined under which circumstances it would catastrophically ‘fail.’ He equated this exercise he had undertaken to a car company like FORD testing a new model in a wind tunnel for aerodynamics. This man was a truly brilliant independent thinker.

more...

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

[ozymandius]

2. Crude Oil Prices Fall for Third Day

SINGAPORE - Crude oil futures fell for a third day Tuesday on expectations that the recent spike in gasoline prices may undermine demand in the United States, the world's biggest energy consumer.

The downgrading of Ophelia, a storm off the coast of North Carolina, to tropical storm status from minimal hurricane, also eased concerns that it would interrupt recovery efforts along the U.S. Gulf of Mexico coast in the wake of Hurricane Katrina.

Mid-afternoon in Singapore, light, sweet crude of October delivery fell 1 cent to $63.33 a barrel in Asian electronic trading on the New York Mercantile Exchange. On Monday, the contract settled at $63.34, down 74 cents.

more

[teryang]

4. Ophelia hasn't been a threat to the gulf in days

They make this stuff up.

The energy crisis isn't over. Don't sell your oil and gas stocks.

[UpInArms]

31. Current Crude Oil Price: $63.65 bbl

10:06am 09/13/05 OCT CRUDE CLIMBS 31C TO $63.65/BRL IN EARLY NY TRADE

10:06am 09/13/05 OCT NATGAS FALLS 14.1C, OR 1.3%, TO $10.89/MLN BTUS

10:06am 09/13/05 OCT UNLEADED GAS UP 0.63C, OR 0.3%, AT $1.88/GAL

[ozymandius]

3. July and August reports due out today

8:30am
Core PPI
Briefing Forecast = 0.1%
Market Expects = 0.1%
Prior = 0.4%

PPI
Briefing Forecast = 0.7%
Market Expects = 0.7%
Prior = 1.0%

July Trade Balance
Briefing Forecast = -$58.1B
Market Expects = -$59.8B
Prior = -$58.8B

2:00 PM
Treasury Budget
Briefing Forecast = -$50.0B
Market Expects = -$47.8B
Prior = -$41.1B

[54anickel]

5. That Treasury budget might surprise - wonder if they'll have it come

in below expectations to soften the blow a bit that Katrina will have on the Sept numbers. I wouldn't put it past them.

Futures aren't looking too bright this AM.

[UpInArms]

47. U.S. Aug. budget deficit widens to $50 billion

(right on the "expected" number :eyes: )

http://www.marketwatch.com/news/newsfinder/pulseone.asp?guid={3F5C2CF3-30B0-4368-A779-0085D041462C}&siteid=mktw

WASHINGTON (MarketWatch) - The federal government ran a $50 billion deficit in August, as expected, the Treasury Department reported Tuesday. The government deficit totaled $41 billion in August 2004. Compared with August 2004, receipts increased $17.7 billion, or 12.9%, while outlays increased $26.5 billion, or 14.8%. With one month to go in the fiscal year, the cumulative deficit was $352.6 billion, down from $437.5 billion in the first 11 months of 2004. Thus far in fiscal 2005, receipts are up 13.7% compared with last year. Individual income tax receipts are up 15.3% and corporate income taxes are up 41.3%. Outlays have increased 7%.

2:00pm 09/13/05 U.S. 2005 FISCAL DEFICIT $352.6 BILLION YEAR-TO-DATE

2:00pm 09/13/05 U.S. AUG. OUTLAYS UP $26.5 BILLION OR 14.8%

2:00pm 09/13/05 U.S. AUG. RECEIPTS UP $17.7 BILLION OR 12.9%

2:00pm 09/13/05 U.S. AUG. BUDGET DEFICIT $50 BILLION AS EXPECTED

[UpInArms]

10. reports tumbling in:

U.S. July trade deficit narrows to $57.9 billion

http://www.marketwatch.com/news/newsfinder/pulseone.asp?siteid=mktw&guid=%7B094B672A-52C5-417E-8A62-3FB3B4FF4480%7D&

WASHINGTON (MarketWatch) -- The U.S. trade deficit narrowed by 2.6% in July to $57.9 billion, the Commerce Department said Tuesday. The trade deficit was below the consensus forecast of Wall Street economists of a deficit of $59.5 billion. The trade gap for June was revised higher to $59.5 billion, compared with the initial estimate of $58.8 billion. Exports rose while imports fell in July. The U.S. trade deficit with China widened to a record $17.7 billion in July compared with $14.9 billion in the same month last year. The U.S. imported a record amount of oil in July as the average price per barrel of crude oil reached an all-time high $49.03.

U.S. PPI rises 0.6% in Aug. on energy

http://www.marketwatch.com/news/newsfinder/pulseone.asp?siteid=mktw&guid=%7BD2AC9BAC-E8CF-4FEE-941C-20C72DB598AB%7D&

WASHINGTON (MarketWatch) - U.S. wholesale prices jumped 0.6% in August on the impact of higher energy prices, the Labor Department said Tuesday. Core prices, which strip out food and energy prices, were unchanged. The figures were slightly better than forecast on Wall Street, where economists were anticipating a 0.7% rise in the producer price index for finished goods and a 0.1% gain in the core rate. The 3.7% surge in energy prices in August pushed the year-over-year increase in the PPI to 5.1%, the worst wholesale inflation since a similar energy shock in December 1990. The core rate is up a more moderate 2.4% in the past 12 months, down from 2.8% last month.

8:30am 09/13/05 U.S. AUG. ENERGY PRICES UP 3.7%

8:30am 09/13/05 U.S. CRUDE PPI UP 2.3%

8:30am 09/13/05 U.S. CORE INTERMEDIATE PPI UP 3.2% Y-O-Y

8:30am 09/13/05 U.S. JULY TRADE GAP WITH CHINA RECORD $17.7 BLN

8:30am 09/13/05 U.S. AUG. INTERMEDIATE GOODS PPI UP 0.7%

8:30am 09/13/05 U.S. CORE PPI UP 2.4% Y-O-Y, DOWN FROM 2.8% IN JULY

8:30am 09/13/05 U.S. PPI UP 5.1% YEAR-OVER-YEAR, HIGHEST IN 15 YEARS

8:30am 09/13/05 U.S. AUG. CORE PPI FLAT VS. 0.1% GAIN EXPECTED

8:30am 09/13/05 U.S. AUG. PPI UP 0.6% VS. 0.7% EXPECTED

8:30am 09/13/05 U.S. JUNE TRADE GAP REV $59.5 BLN VS $58.8 PREV EST

8:30am 09/13/05 U.S. JULY TRADE GAP BELOW CONSENSUS OF $59.5 BLN

8:30am 09/13/05 U.S. JULY TRADE GAP NARROWS 2.6% TO $57.9 BLN

[UpInArms]

19. Laff-a-minute Spin: Producer prices up 0.6 pct pre-Katrina

http://today.reuters.com/investing/FinanceArticle.aspx?type=businessNews&storyID=2005-09-13T125241Z_01_MOR345591_RTRIDST_0_BUSINESS-ECONOMY-PRICES-1-DC.XML

WASHINGTON (Reuters) - U.S. producer prices shot up 0.6 percent last month as energy costs soared, but falling food prices helped keep underlying inflation steady, the Labor Department said on Tuesday in a report unaffected by Hurricane Katrina.

The producer price index, a gauge of prices received by farms, factories and refineries, showed inflation pressures were somewhat less than feared on Wall Street. Economists had forecast a 0.8 percent rise in overall producer prices, with prices outside of food and energy up 0.1 percent.

Energy prices climbed 3.7 percent in August, the department said, partly reflecting the impact of oil prices that had already reached record highs before the devastating storm slammed into the U.S. Gulf Coast. Oil prices shot higher still in the days after the storm, although they have since retreated to pre-Katrina levels.

The department noted that the data reflected prices in the middle of the month. Katrina did not hit the Gulf Coast until August 29.

Food prices dropped 0.3 percent in August for the second consecutive month, but economists warn they are likely to move higher in September as imports hit a bottleneck due to damage to the Port of New Orleans.

...more...

That's funny - my grocery bill has done nothing but increase :eyes:

[ozymandius]

22. Funny again.

Those once "too-volatile-too-be-figured-into-inflation" prices are included for some reason. Sugar coating maybe?

[AnneD]

34. Morning Marketeers,

:donut: And speaking of funnies, I was visited by the spirit of Karnack the Magnificent. He held and envelope to his forehead and said "Monica and Katrina" As I opened the envelope, I saw that it read....Give 2 examples of Presidential blow jobs...... Last time I have pizza and coke before I retire. Well Happy Hunting and watch out for the bears...

[54anickel]

40. (Meanwhile) China Exports Up 32% in August

http://www.nytimes.com/2005/09/13/business/13trade.html

BEIJING, Sept. 12 (Reuters) - China recorded its third-largest monthly trade surplus on record in August, a performance likely to sustain foreign pressure for a further rise in the value of the yuan.

The surplus was $10 billion, down from $10.4 billion in July, even though imports rose 23.4 percent from a year earlier.

Exports did even better, surging by 32.1 percent despite a 2 percent revaluation of the yuan on July 21, to a rate around 8.1 to the dollar, and the reimposition of quotas by the European Union and the United States on Chinese textile exports.

snip>

In the first eight months of 2005, China has posted trade surpluses each month, totaling $60.2 billion, compared with $32 billion in all of 2004. The United States, which is running trade deficits, had an imbalance in June of $58.8 billion.

more...

[54anickel]

6. Last Hurrah for Bonds (Roach)

http://www.morganstanley.com/GEFdata/digests/20050912-mon.html#anchor0

I am increasingly a limp-wristed bond bull. Since I threw in the towel on my long-standing bearishness on bonds at the end of May, yields on 10-year US Treasuries have fluctuated in a 3.88% to 4.42% range -- lower than most were looking for but falling short of the 3.5% target I had thought was achievable over the next year (see Rethinking Bonds, May 31, 2005). While I still think there is a trade or two that could push long rates lower over the next few months, I must confess that my newfound bullish conviction is starting to waver. The bond market’s bearish stars are now coming back into increasingly worrisome alignment.

The case for another downleg in long-term interest rates remains largely dependent on the possibility of a growth scare. If anything, the likelihood of disappointment on the growth front is higher than it was in late May. Back then, I was more worried about a China slowdown that could have serious pan-regional implications for the world’s largest and fastest-growing economic bloc. Today, downside growth risks are more an outgrowth of a full-blown energy shock -- consistent with recent changes we have made to our baseline energy price assumptions and the concomitant impacts those changes have had on our near-term global growth prognosis (see Petro-Cuts, September 5, 2005). Our new baseline view of the global economy now calls for industrial world GDP growth to test the 2.75% barrier during the 4Q05 to 1Q06 interval -- not much faster than the commonly accepted 2.5% global recession threshold. Post-Katrina impacts and the Fed’s September 20 policy reaction to the risks of those impacts are new and important wildcards for the near-term outcome. But to the extent our downwardly-revised baseline view of global growth plays out, downside growth risks should once again dominate the financial market debate -- underscoring the distinct possibility of another leg to the bond rally.

Any such downleg in long rates, however, could well turn out to be the last hurrah for bonds -- or at least for the US piece of the global bond market. That’s because the US saving outlook has just taken a worrisome turn for the worse. That wouldn’t be so bad if America started from a position of strength on the saving front. But, of course, that is not the case. America’s net national saving rate has averaged only 1.5% since early 2002 -- a record low and literally one-fifth the 40-year average of 7.5% recorded over the 1960 to 2000 time period. Moreover -- and here’s the kicker for the bond market -- in looking out over the next few years, the outlook is now deteriorating for all three major components of domestic US saving -- for consumers, the government sector, and Corporate America (see The Shoestring Economy, September 9, 2005). With the personal saving rate already in negative territory for the first time since the early 1930s, it could well move even lower as households opt to defend lifestyles in the face of an energy-shock-induced drain on discretionary income. At the same time, post-Katrina fiscal stimulus could lead to a significant widening of the Federal budget deficit -- pushing the government sector’s net saving position deeper into the red. Moreover, the business sector’s saving cushion seems likely to diminish in light of increased energy expenses, rising unit labor costs, and any end-market demand shortfalls stemming from the energy shock.

Deterioration in domestic saving is hardly an unusual development in the United States. The net national saving rate has, in fact, been on an irregular downtrend for about 30 years. Similarly, there has been a comparable widening in America’s current account deficit -- although this trend has only been in place for about 15 years. But like all secular developments, there are threshold effects that can make a real difference for financial markets. Key in that regard is the 5% current account deficit threshold -- a barrier that is widely thought to trigger a classic external adjustment. The United States first breached that threshold in early 2004. And, now, at 6.4% of GDP in 1Q05 -- and headed sharply higher in the months ahead -- the US external shortfall must be funded with about $3 billion of capital inflows each business day. So far, the availability of these inflows has not been a problem -- largely because of policy-related buying of dollar-denominated assets by Asian central banks. But there are no guarantees that an ever-profligate America can continue to count on the ever-increasing “kindness of strangers” to fund an ever-mounting saving shortfall. Moreover, with Japan and Germany on the cusp of sustainable recoveries, they could have less surplus saving -- making it even harder for America to fund its external deficit.

more...

[54anickel]

7. Fed Calls in Banks on Derivatives Paperwork Backlog

http://www.bloomberg.com/apps/news?pid=10000103&sid=azImI3pDkBOE&refer=us

Sept. 13 (Bloomberg) -- The Federal Reserve Bank of New York called in representatives from 14 of the world's largest banks because a failure to erase a backlog of paperwork in the $8.4 trillion market for credit derivatives concerns regulators.

The meeting, announced by the Fed on Aug. 24, will be at the central bank's New York office on Sept. 15. It will bring bank representatives and risk managers together with U.S. and European regulators to discuss ``market practices,'' New York Fed spokesman Peter Bakstansky said in an interview.

Banks and securities firms are struggling to keep up with administration as the credit derivatives market grows. They risk being overwhelmed by investors seeking settlement of contracts if there is a corporate default, an industry group led by E. Gerald Corrigan, managing director at Goldman Sachs Group Inc. and a former New York Fed president, said in a report in July.

``Banks have been too focused on their own profit interests and in grabbing a share of the rapidly expanding market and haven't focused on operational issues,'' said Alistair Milne, senior lecturer on credit risk and settlement systems at Cass Business School in London. ``Systems, controls and accounting haven't kept pace with the growth in the market.''

JPMorgan Chase & Co., Deutsche Bank AG, Goldman, Morgan Stanley and Merrill Lynch & Co. are the five most-cited trading partners in credit derivatives, according to Fitch Ratings.

more...

[UpInArms]

57. Regulators fret over backlogs in derivatives trade

http://today.reuters.com/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=uri:2005-09-13T193245Z_01_N13505614_RTRIDST_0_FINANCIAL-DERIVATIVES-REGULATORS.XML

NEW YORK, Sept 13 (Reuters) - U.S. and European regulators meeting with banks at the New York Federal Reserve on Thursday will be looking for signs the banks are cleaning up their act when it comes to credit derivatives.

Fifteen regulators and 14 banks are slated to meet on Thursday at the Fed's office in lower Manhattan to discuss credit derivatives, particularly with regard to back-office practices which regulators fear could leave markets vulnerable.

<snip>

The worry is that in the event of a crisis, participants in credit derivatives may find that they do not even know who their counterparties are, a scenario which could put further stress on a weakened financial system.

In May, Fed Chairman Alan Greenspan called back-office issues in credit derivatives a "significant problem."

The credit derivatives market, in which investors insure against borrowers defaulting on their debt, has grown more than eight-fold over the last three years to $8.42 trillion at the end of 2004, according to the International Swaps and Derivatives Association.

...more...

"In case of a crisis"???

[UpInArms]

8. daily dollar watch

Last trade 87.69 Change -0.02 (-0.02%)

Dollar Consolidates Ahead Of Further Gains

http://www.dailyfx.com/index.php?option=com_content&task=view&id=3422&Itemid=39

As with everything some things come to an end while other things continue to move in the original direction. After the broad dollar weakness attributed to high oil prices, hurricane Katrina and a general lack of liquidity, a large advance posted by the greenback is only a preview of thing to come as the overall trend has reversed its direction. A further advance by the US dollar will most likely see the majors retreat toward the 2003 lows over the course of six to nine month

<snip>

EUR/USD – Euro bulls fell back as earth parted under their feet after the greenback longs launched a broad based attack against the majors. As euro longs continue to give up ground to the advancing dollar bulls, a further collapse below the 1.2300 figure will most likely see the single currency breaking below the channel’s lower boundary and head straight for the 1.2249, a level marked by the 23.6 Fib of the 1.3477-1.1869 USD rally. As further advance by the greenback longs will most likely see the pair test the euro bids around 1.2126, a level protected by the August 19 daily low, with a further break in euro defenses seeing the dollar bulls crash their way toward the psychologically important 1.2000 figure. Indicators continue to favor euro with momentum indicator and MACD both above the zero line, while Stochastic and RSI both tread below overbought thus adding to possibility of a pullback.

<snip>

USD/JPY – Japanese Yen longs continued to retreat after giving up the psychologically important 110.00 figure to the greenback longs. As the price action continues to favor the dollar longs, a move toward the 110.98, a 50-day SMA will most likely see the greenback bulls bulldoze their way toward 111.48, a defensive position established by the Japanese yen longs with a help of the 23.6 Fib of the 104.18-113.74 USD rally. A sustained momentum of the greenback advance will most likely see the fall of 112.62, a yen defensive position established by the August 8 daily spike high and a gateway to the 2005 high at 113.68. A break above the 113.68 will most likely open the psychologically important 115.00 handle as a potential target as a break above that will most likely see a long term trend heading toward the 120.00 figure. Indicators support the yen longs with both momentum indicator and MACD below the zero line, while both oscillators remain neutral thus giving dollar bull’s additional room to maneuver.

...more...

Heavy Data Week Threatens Dollar Rally

http://www.dailyfx.com/index.php?option=com_content&task=view&id=3418&Itemid=39

US Dollar


On a day absent of any US economic releases, the dollar continued to gain strength. Before getting too excited though, tomorrow begins our extremely busy week of key US data. We are expecting the producer price index for the month of August as well as the trade balance for the month of July. One word will explain any surprises in the data - which is oil. The trade deficit is expected to increase as a result of rising oil prices and the end of the spring inventory correction. Although many of the releases this week has the potential of being market moving, the big uncertainly is in Thursday’s non-farm payrolls report. The estimates run the gamut of 312k to 800k. Citigroup is predicting that jobless claims will rise a whopping 800k for the week ending September 10th. They are the outlier by far, but Thomson Financial and UBS, the second and third runner-ups for the highest estimates are also predicting jobless claims to rise by 560k and 500k respectively. Given that the consensus estimate at this time is 350k, the market could perceive any number greater than 400k as extremely bearish for the US dollar. Even if the number is in line with estimates, the argument will be that jobless claims will only get progressively worse in the weeks to come because the victims of Katrina are still preoccupied with basic survival that they have yet to walk into the unemployment offices to file for benefits. Overall, it will be interesting to see if the dollar can continue to hold onto its gains this week in the face of such potentially negative developments.

...more...

[54anickel]

13. Blue in the face. . .

http://www.321gold.com/editorials/russell/russell091305.html

snip>

All right, then what makes the dollar worth anything at all? Confidence and custom. The world is accustomed to accepting dollars, and the world still has confidence in the United States. Furthermore, the central banks of the world are accustomed to accepting US dollars as the world's reserve currency -- although confidence in the United States is fraying a bit. My old friend, Doug Casey calls the dollar "the unbacked liability of a bankrupt nation." How can he say that?

Lets examine what's going on. The US is now the world's largest debtor. This nation is swimming in debt. The buying of US consumers comprises 70 percent of the Gross Domestic Product of the US, and the US consumer is now spending more than he's earning. The savings rate of the US consumer has now gone negative -- minus 0.60 percent.

But how about the government? Consider the national debt of the US, which is now pushing $8 trillion. The following are increases in the national debt that have been mandated by Congress. In 2002 the increase in the national debt was $450 billion. In 2003 the increase rose to $984 billion. In 2004 the increase was $800 billion. This year, in 2005, the House passed an increase of another $781 billion, although the Senate has not yet acted on this. In other words, in the last four years the increases have totaled $3 trillion, which amounts to an increase of 50 percent in the total national debt.

But the increases go on. The wars in Iraq and Afghanistan are costing roughly $5 billion a month. Now we have the New Orleans disaster. So far, President Bush has asked Congress for $10 billion and then another $52 billion, and the bills just keep coming in. Some estimates are that hurricane Katrina will cost $120 billion or more before it's all over, and this is probably conservative.

All the above, then, constitute the background for the dollar. Can the steady build up in debt inspire confidence in the dollar? I don't see how it can. My guess is that an increasing number of countries are going to "get around" receiving dollars by asking for payment in the form of a basket of currencies. This means that these nations are moving to disconnect themselves from the dollar. The dollar alone will not suffice for payment.

more...

[UpInArms]

21. a peek at the falling dollar

guess those revisions to the trade im-balance didn't fool too many people :eyes:

Last trade 87.59 Change -0.12 (-0.14%)

[54anickel]

9. Mideast firms putting oil money into emerging markets

http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge&storyID=2005-09-12T145656Z_01_EIC253748_RTRIDST_0_PICKS-OIL-INVESTMENT-DC.XML

LONDON (Reuters) - Armed with cash from $70 a barrel oil, Russian and Middle Eastern companies are on the prowl for acquisitions abroad and more and more of this money is being invested in companies in emerging markets.

While most of this money still flows into high-end real estate in Western capitals or into U.S. and European equity, oil-rich investors are increasingly focusing on cheaper assets in emerging economies.

snip>

Traditionally, billions of dollars of Middle East oil money were used to purchase dollar assets, mainly U.S. Treasuries.

But nowadays, analysts say, governments are not converting petrodollars into U.S. Treasuries straight away.

"To some extent money from the last oil boom was also being recycled via massive lending to Mexico, Brazil etc," Robertson said. "But this time it appears to be longer term FDI -- at least there are some examples that this seems to be happening."

more...

[54anickel]

11. Congress Unleashes Money With Hurricane Force

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_ferguson&sid=as5lX1i7KpZo

snip>

Yet the curses had scarcely subsided before the same congressmen began raining money on those same disaster-relief agencies in unprecedented and seemingly indiscriminate amounts.

The earlier criticism was closer to the mark. Long before Katrina exposed its shortcomings, FEMA was known for its inefficient methods. Last year, the inspector general of the Department of Homeland Security decided to look closely at the agency's response to Hurricane Frances in 2004.

Misspent in Miami

In Florida's Miami-Dade County, FEMA managed to unleash $31 million in disaster relief -- a majority of which, the inspector general concluded, was misspent.

The hurricane largely bypassed the county. Still, FEMA awarded rental assistance to people whose homes were not damaged, paid nearly twice the ``Blue Book'' value for vehicles whose losses could not be verified and bought funerals for people whose deaths were unrelated to the hurricane. The agency gave millions of dollars of household appliances to residents who hadn't requested them.

snip>

``That being said, the best way to provide relief is to make certain it's going to people who are suffering,'' Garrett said. ``And it's more difficult to do that when you just write FEMA a blank check. FEMA says they don't want us looking over their shoulder. But we're supposed to be looking over their shoulder. That's our job.''

snip>

``I'm not saying we don't have to spend this money,'' Republican Jeff Flake of Arizona told me. ``But not in increments of $50 billion at a time, knowing what we know of FEMA. Why not $10 billion a week for five weeks? That will force them to come back, regularly and routinely, and say, `This is what we're doing and what we're not doing.'''

more...

[UpInArms]

12. Oracle's Ellison in $100m charity payment to settle insider dealing claims

http://news.independent.co.uk/business/news/article312240.ece

Larry Ellison, the chief executive of Oracle, is set to pay $100m (£55m) to charity to settle insider trading charges that he sold almost $900m of stock ahead of a profit warning in 2001, which caused the share price to plummet.

The proposed settlement comes after four years of battling by a group of shareholders to bring the case against Mr Ellison, whose personal fortune is worth almost $14bn.

News of Mr Ellison's proposal came as Oracle agreed a near $6bn deal to buy a California-based software company, Siebel, the group's seventh acquisition this year.

Mr Ellison's undertaking to pay the money to charity is unusual. This type of case - known as a derivative lawsuit because it was brought by investors on behalf of the company - usually involve payments being made to the company.

According to a report in the US, Mr Ellison has reached a tentative agreement to give the money to a charity of his choosing, over five years. The money would be paid in the name of Oracle and it is unclear whether the payments would be tax deductible for Mr Ellison, the New York Times reported.

...more...

Unclear whether he would get a tax break on the "fine" for insider trading??? I wonder if Martha got such a deal. :sarcasm:

[UpInArms]

14. Asian Commentary: Greenspan, the Wizard of Bubbleland

http://www.atimes.com/atimes/Global_Economy/GI14Dj01.html

The Kansas City Federal Reserve Bank annual symposium at Jackson Hole, Wyoming, is a ritual in which central bankers from major economies all over the world, backed by their supporting cast of court jesters masquerading as monetary economists, privately rationalize their unmerited yet enormous power over the fate of the global economy by publicly confessing that while their collective knowledge is grossly inadequate for the daunting challenge of the task entrusted to them, their faith-based dogma nevertheless should remain above question. That dogma is based on a single-dimensional theology that sound money is the sine qua nonof economic well-being. It is a peculiar ideology given that central banking as an institution derives its raison d'etre from the rejection of a rigid gold standard in favor of monetary elasticity.

In plain language, central banking sees as its prime function the management of the money supply to fit the transactional needs of the economy, instead of fixing the amount of money in circulation by the amount of gold held by the money-issuing authority. Thus central bankers believe in sound money, but not too sound please, lest the economy should falter. Their mantra is borrowed from the Confessions of St Augustine: "God, give me chastity and continence - but not just now."

<snip>

Greenspan's formula of reducing market regulation by substituting it with post-crisis intervention is merely buying borrowed extensions of the boom with amplified severity of the inevitable bust down the road. The Fed is increasingly reduced by this formula to an irrelevant role of explaining an anarchic economy rather than directing it towards a rational paradigm. It has adopted the role of a cleanup crew of otherwise avoidable financial debris rather than that of a preventive guardian of public financial health. Greenspan's monetary approach has been "when in doubt, ease". This means injecting more money into the banking system whenever the US economy shows signs of faltering, even if caused by structural imbalances rather than monetary tightness. For almost two decades, Greenspan has justifiably been in near-constant doubt about structural balances in the economy, yet his response to mounting imbalances has invariably been the administration of off-the-shelf monetary laxative, leading to a serious case of lingering monetary diarrhea that manifests itself in runaway asset price inflation mistaken for growth.

(and I loved their illustration)



...more...

[54anickel]

15. “Lunch” Time (Gross)

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2005/IO+September+2005.htm

snip>

...But in determining whether or not the sun is rising or beginning to set on our economy and its markets, perhaps it is best to return to the maestro himself for a hint on the timing of this affair. "Any onset of increased investor caution," he wrote at Jackson Hole, "elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums." The secret for successful future strategies, therefore, may be to decipher what precipitates that increased investor caution and when.

To state that the level of prices themselves and therefore the skimpiness of risk premiums should at some level induce investor caution seems axiomatic. It seems most logical to an experienced old hand such as yours truly, and it is enough to induce caution, but it is not always a great timing tool. The NASDAQ was bubbly at 2, but it went to 5-thousand and it took the failing and in some cases fraudulent results of the dotcoms to caution investors that the end of the road was in sight. Perhaps an increase or two in the cost of money played a part as well and if so its parallel to today’s environment is compelling. With the Fed on the march from 1% to perhaps 4% Fed Funds, the price of borrowing to finance our asset-based economy has increased substantially. If Greenspan is targeting the housing bubble and I believe he is, then he holds investor caution in the palm of his hands, at least for six more months. Is 4% enough, especially with the yield curve flattening and bending down? An early answer is that today’s 3½% short-term rate already seems to be having an effect on housing; so 50 basis points more would be "cautionary" still. We have recent examples from Australian and UK housing markets as well where even smaller absolute increases of 150 basis points in short rates were enough to stop prices going up. Of course their mortgage markets are not rife with what I call "funny money" paper that has provided an additional boost in the U.S. Imagine lending money at 100%, 110%, 120% of estimated market value and on terms with borrower’s options to pay or not to pay. No caution there, that’s for sure. Still the Fed and other regulatory agencies have for the past few months been exerting increasing scrutiny on lending standards that when combined with higher short rates, may be just enough to "caution" prospective home buyers. The increase in home equity loans has been dropping rapidly as shown in Chart I, which may be a telltale sign of the froth coming off the top of this bier stein.

Additionally, because prospective homebuyers become increasingly optimistic, as employment and real wages turn higher, it stands to reason that they should become cautious if their income gains falter instead. The fact is that job growth is almost anemic in comparison to prior business cycles, as is wage growth for the important first-buyer segment of the population. Granted, this cycle’s employment and wage anemia hasn’t seemed to have had much of an effect up to now, but the housing market’s own momentum has been responsible for a goodly portion of job growth and income generation in the past few years. Take a gander at the remarkable Chart II displayed below. It shows that real estate, not manufacturing, has been the economic impetus in recent years in terms of net growth. Once price momentum slows or ceases for home prices, job growth will slow or disappear in the sector as well. How many more mortgage brokers or real estate agents do we really need or can we legitimately support? At least one more than our total of portfolio managers and investment bankers you might say, and to that I’d say "touché," but it only reinforces my point! Once the cautionary momentum begins, job and wage growth will not support a continuing housing boom, leading to further caution and an economic slowdown at the minimum.

If the home asset bubble stops expanding, deflates, or pops any time soon (and I suspect we are only a few short months from at least the first of these three) then the potential for Greenspan’s "debt liquidation" follow-on is something that investors must begin to prepare for. Debt liquidation, as opposed to loan growth, slows an economy or sinks it into recession, generating the higher risk premiums that the Chairman warns us lie ahead. What should an anticipatory bond manager do with the possibility of such circumstances drawing closer by the day? Cut the fat from his portfolio that’s what. Swallow the castor oil, go on a temporary fast and prepare for the system to eliminate its waste. (Sorry folks, but I had to tie it in somewhere.) That means a focus on high-quality investments with anticipation for an eventual Fed easing at some point in 2006. I believe that 4% will cap this Fed Chairman’s last bear market tightening and that his successor will quickly be confronted with the necessity to lower rates once again. A bullish orientation towards the front-end of the curve therefore should begin to dominate bond strategies, combined with an avoidance of anything that carries those low-risk premiums that Greenspan finally diagnosed. Those assets include real estate, equities, high yield, corporate, and some areas of emerging market debt. They also include, by the way, long-term Treasuries or any longer-dated government paper that has been lowered in yield in the past by Greenspan’s own "measured" transparency over the past 16 months. That is not to say that long government bonds won’t go up in price if the "system" suffers some elimination, slower growth, or to be frank, a recession in 2006. It’s just to acknowledge that the better duration-weighted paper lies at the front-end of the curve, especially now that it provides similar yields to longer maturities. Get ready for Greenspan’s "lunch" time and –

more...

[UpInArms]

16. Fraud 'R Us: Former Westar execs found guilty (DeLay's friends)

http://www.businessweek.com/ap/financialnews/D8CIUUF0B.htm?campaign_id=apn_home_down&chan=db

SEP. 12 5:12 P.M. ET A federal jury on Monday found two former Westar Energy Inc. executives guilty on charges that they looted the state's largest electric utility of millions of dollars.

Prosecutors claimed the two men, who were forced out of Westar in late 2002, engineered extravagant salaries and benefits for themselves at the expense of shareholders, hiding much of their actions from the company's board of directors and federal regulators.

Former Chief Executive David Wittig was found guilty of 39 counts of conspiracy, wire fraud, circumventing internal controls and money laundering while running the Topeka-based company.

Former Chief Strategy Officer Douglas Lake was found guilty of 30 counts of conspiracy, wire fraud, circumventing internal controls and money laundering. Lake was acquitted of seven counts of money laundering, one count of circumventing internal controls and one count of wire fraud.

...more...

CREW Demands DeLay Bribery Investigation

http://www.citizensforethics.org/activities/campaign.php?view=39

WASHINGTON, DC -- Citizens for Responsibility and Ethics in Washington (CREW) today sent a letter to all members of the House of Representatives requesting the House Ethics Committee open a formal investigation into serious allegations of criminal activity by Reps. Tom DeLay (R-TX), Billy Tauzin (R-LA) and Joe Barton (R-TX). The complaint stems from allegations that Delay, Tauzin and Barton may have extorted payments from Westar executives in return for favorable consideration of legislation to benefit the company.

The complaint alleges that DeLay, Tauzin and Barton violated federal bribery laws as well as a House Rule barring Members from receiving compensation or permitting others to be compensated in return for improperly influencing legislation.

<snip>

On May 17, 2002, Douglas Lawrence, Westar's Vice-President for Public Affairs, sent a memo to Westar executives outlining a plan for Westar and its executives to contribute approximately $31,500 in hard money and $25,000 in soft money to Members of Congress and their political action committees. The memo included a chart showing how much each executive needed to contribute and to which campaigns those contributions should be directed.

On May 20, 2002, another Westar executive, Douglas Lake, sent an e-mail to Doug Lawrence asking "who is Shimkus, who is Young. Delay is from TX what is our connection? . . . I am confused."

Lawrence e-mailed a reply to Lake, explaining that the donations were needed for Westar to "get a seat at the table," in effect clearing the way for the passage of an amendment to the energy bill that would have saved Westar billions of dollars.

...more...

[ozymandius]

20. Jeepers! DeLay's f*iends are lining up outside the Big House.

It seems that if DeLay wants to have any friends anymore, he may have no choice but to enroll in prison.

[54anickel]

17. The Train They Call the City of New Orleans (2 parts)

The Train They Call the City of New Orleans (part 1 of 2)
http://www.321gold.com/editorials/shedlock/shedlock091205.html

snip>

Does anyone want "benefits in time"? Should we all be praying for such benefits? Bernanke is, quite frankly, clueless. What that means is that unless someone even more clueless can be found, he will most likely become our next Fed chairman. Of course, there could be an accident and someone competent might actually be nominated, but I would not count on it.

Speaking of stupidity, let's take a look at our priorities: This is what Walter Maestri, emergency management chief for Jefferson Parish, La., had to say way back on June 8, 2004:

"It appears that the money has been moved in the president's budget to handle homeland security and the war in Iraq, and I suppose that's the price we pay. Nobody locally is happy that the levees can't be finished, and we are doing everything we can to make the case that this is a security issue for us."

Another commentator noted:

"The cost of the Iraq war forced the Bush administration to order the New Orleans District Office not to begin any new studies, and the 2005 budget no longer includes the needed money."

According to the above link, the U.S. Senate was seeking to restore some of the Southeast Louisiana Urban Flood Control Project (SELA) funding cuts for 2006.

Lovely. We have wasted $300 billion in Iraq, with no end in sight, with no benefit to anyone but Halliburton and other companies on no-bid government contracts (and the president had to lie to get Senate approval to do it), and in the meantime, we cut funds that might have saved the City of New Orleans from devastation.

more...



The Train They Call the City of New Orleans (part 2 of 2)
http://www.321gold.com/editorials/shedlock/shedlock091205a.html

snip>

In the meantime, 1 million people or so are displaced, without a home, without a job, without any money or clothes, and, in many cases, without any hope. In the face of that, homebuilder stocks staged a big rally today, as if any of those people will be buying a home anytime soon. Who cares? After all, lower interest rates might prolong the housing party for a few more months.

Unfortunately, for those displaced by Katrina, it is going to take months, if not much, much longer, for things to get back to normal. We've now got a million new homeless and currently jobless people from New Orleans. There are another million without power, bankrupt airlines unable to buy jet fuel, a lack of refining capacity, and looting by police in a major city.

We were headed for a recession anyway, but rest assured it will all be blamed on Katrina, rising oil prices, or both. Wall Street has its "out" now, and that is all that matters. Any excuse is good enough for Wall Street, but this upcoming lie is perfect simply because it will be so believable to so many. No one will blame the real cause: rampant credit growth and speculation, with falling loan standards on top of it, all supported by a bubble-blowing Fed.

It will be interesting to see exactly how the BEA handles the upcoming jobless numbers. The job losses should be staggering. That said, it gives "someone" a very, very easy out. All the government has to do is over-report the job losses to make the reports that follow look good. I expect huge "one-time" over-reporting of job losses, conveniently blamed on Katrina. Rest assured, anything that can be blamed on Katrina, will be...and then some.

No doubt there are those who think this is inflationary. Rest assured it is not. One million people suddenly put out of work with no income and destroyed houses is simply NOT inflationary. Rising gasoline prices without rising incomes is not inflationary, either, regardless of what anyone tells you. This is going to cut into consumer discretionary spending big time, and, unlike Sept. 11, there is NOT going to be a big housing boom to bail us out.

[ozymandius]

18. pre-open blather

9:02AM: S&P futures vs fair value: -3.0. Nasdaq futures vs fair value: -4.5. Still shaping up to be a lower open for the cash market as mixed corporate news takes some steam out the recent market rally, despite good news on the inflation front...

Meanwhile, Consumer Discretionary will be in focus today after Best Buy (BBY) missed analysts' Q2 expectations, merely reaffirming FY06 guidance, and Knight-Ridder (KRI) warned that Q3 earnings will miss forecasts. Analyst downgrades on EBAY and DJ, coupled with reports that Ford (F) has agreed to sell Hertz Corp. for about $15 bln, should also keep the sector in the spotlight

8:37AM: S&P futures vs fair value: -3.7. Nasdaq futures vs fair value: -5.5. Just hitting the wires is the Aug. PPI report... Total Aug. PPI rose 0.6%, below an expected 0.7% rise, while core PPI was unchanged, versus an expected 0.1% rise, suggesting inflation remains contained... The July trade deficit has checked in at at $57.9 bln (consensus $59.8 bln)...

The Treasury market has responded positively, sending the benchmark 10-year note up a bit (+05/32) to yield 4.15%... Futures trading, meanwhile, has ticked upward modestly but continues to suggest a lower open for stocks

[ozymandius]

23. update

9:15AM: S&P futures vs fair value: -3.2. Nasdaq futures vs fair value: -4.5. Futures indications trading near their best levels of the morning, perhaps finding some support from falling bond yields, but consolidation efforts continue to suggest stocks will open to the downside. Even though yields on the benchmark 10-yr note (+10/32) have fallen to 4.12% in early trade, buyers are finding few other reasons to extend stock market gains amid concerns about earnings warnings heading into the end of the quarter and perhaps a rebound in oil prices ahead of more inflation data (i.e. Thurs CPI report)

[UpInArms]

24. US chain store sales fall in the latest week-ICSC

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T114429Z_01_NAT001791_RTRIDST_0_ECONOMY-RETAIL-ICSC-URGENT.XML

NEW YORK, Sept 13 (Reuters) - U.S. chain store retail sales fell in the latest week, as higher energy prices forced consumers to cut back on nonessential purchases, a retail report said on Tuesday.

Sales fell 0.2 percent in the week ended Sept. 10, compared with a flat reading the previous week, the International Council of Shopping Centers and UBS said in a joint report.

Compared with the same week a year ago, sales softened to a 3.5 percent increase after rising 3.8 percent the preceding week.

"Despite the needs of the displaced residents that lived in the path of Hurricane Katrina, which helped to lift sales for basic foods and other supplies in Texas and across the South, higher energy prices are seemingly weighing on demand for nonessential goods by middle and lower income households," said Michael Niemira, ICSC's chief economist and director of research.

...more...

[54anickel]

36. Manpower survey forecasts weak U.S. holiday hiring

http://today.reuters.com/news/newsArticle.aspx?type=domesticNews&storyID=2005-09-13T045651Z_01_HO317839_RTRIDST_0_USREPORT-SERVICES-MANPOWER-SURVEY-DC.XML&archived=False

NEW YORK (Reuters) - U.S. employers are likely to increase hiring at a steady pace next quarter, but low optimism about hiring at retail and manufacturing companies could make for a bleak holiday season, according to the latest hiring outlook survey from Manpower Inc..
The survey of 16,000 employers conducted before Hurricane Katrina ravaged the U.S. Gulf Coast last month, forecast that 29 percent of companies expected to add to their payrolls during the fourth quarter. That was down slightly from 31 percent of employers who expected to hire last quarter, but on-par with about a third of companies that have expected to boost payrolls over the last seven quarters.

However, a slew of layoffs in the U.S. manufacturing sector and a soft outlook among retail consumers, showed signs that hiring may be put on the back burner for some industries.

In both the durable manufacturing and wholesale and retail sectors only 20 percent of companies expected to increase staff, down from 22 percent in the third quarter. In the manufacturing sector

"This is one of the most negative outlooks in the wholesale and retail sector since the first quarter of 2004. They're going to be very cautious," Manpower chief executive Jeff Joerres said.

more...

[ozymandius]

25. LaLa Land open for bidness.

9:30
Dow 10,663.52 -19.42 (-0.18%)
Nasdaq 2,177.95 -4.88 (-0.22%)
S&P 500 1,240.19 -0.37 (-0.03%)
10-Yr Bond 41.33 -0.36 (-0.86%)
NYSE Volume 15,007,000
Nasdaq Volume 36,038,000

[UpInArms]

28. 9:42 EST freefallin'

Dow 10,626.90 -56.04 (-0.52%)
Nasdaq 2,173.62 -9.21 (-0.42%)
S&P 500 1,235.63 -4.93 (-0.40%)
10-Yr Bond 4.138 -0.31 (-0.74%)

NYSE Volume 131,163,000
Nasdaq Volume 116,957,000

[UpInArms]

26. US Treasuries rise on tame PPI, trade gap narrows

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T130818Z_01_N13324243_RTRIDST_0_MARKETS-BONDS.XML

NEW YORK, Sept 13 (Reuters) - U.S. Treasury debt prices rose on Tuesday on tamer-than-expected core producer prices in August, suggesting increases in energy prices before Hurricane Katrina were not yet fueling inflation across the economy.

The U.S. government, in a report that covers a period preceding the hurricane, said the core PPI was unchanged in August, lower than the 0.1 percent increase economists had expected. The core PPI rose 0.4 percent in July. The core rate excludes volatile energy and food components.

The overall PPI, which includes energy costs, rose 0.6 percent in August. But that was below economists' expectations of a 0.8 percent increase and July's 1.0 percent increase.

"Inflation is very contained. It's not going anywhere. Because they will cook those reports. The Fed is little too worried about the wrong thing. I'm more worried about growth," said Robert Brusca, chief economist at Fact and Opinion Economics in New York.

...more...

[UpInArms]

27. Fund managers turn NEGATIVE on growth

the headline spin was: Fund managers turn wary on growth

http://www.marketwatch.com/news/story.asp?guid=%7B77033F8F%2D9C4C%2D4245%2DB774%2DFD9C615723CE%7D&siteid=mktw

LONDON (MarketWatch) -- Fund managers turned more cautious on global growth in September as they weighed the impact of Hurricane Katrina, a monthly Merrill Lynch survey shows.

The survey of 300 fund managers showed that respondents pulled back from a mildly positive view on global economic development in August of plus 14 to a reading of minus 26 in September.

"Hurricane Katrina with her impact on global energy prices was largely to blame," the survey said.

Forecasts for global earnings per share also slipped, to 4.5% growth in September from 5.9% growth in August, the survey showed.

...more...

Wary????? They turned around and RAN the other way!!!

[ozymandius]

29. non-existent bounce

10:07
Dow 10,633.66 -49.28 (-0.46%)
Nasdaq 2,173.14 -9.69 (-0.44%)
S&P 500 1,234.88 -5.68 (-0.46%)
10-Yr Bond 41.33 -0.36 (-0.86%)
NYSE Volume 306,829,000
Nasdaq Volume 276,146,000

10:00AM: The major indices continue to slip, driven downward by the Consumer Staples sector (-0.8%) that a host of relatively weak pockets is fueling... Proctor & Gamble's early 1.2% slide (55.72 -0.84) has pushed personal products down 0.4%, while Altria, off 0.4%, (MO 71.62 -0.21) notches tobacco down 0.9%. A dual decline in softdrink giants Coca-Cola (KO 43.65 -0.32) and Pepsi Co.(PEP 54.94 -0.49) leave their segment 1.1% underwater and standing as one of the worst-performing areas this morning, while Wal-Mart's (WMT 45.31 -0.58) weakness also contributes to the sector's current standing...NYSE Adv/Dec 765/1776, Nasdaq Adv/Dec 725/1716

[ozymandius]

30. Blather: cancer, sugar water merchants and Sprawl-Mart underperforming

not a good day for some big name stocks

[UpInArms]

32. China's forex regime poses fresh puzzle

http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge&storyID=2005-09-13T073948Z_01_HO327467_RTRIDST_0_PICKS-MARKETS-YUAN-TRADE-DC.XML

SINGAPORE (Reuters) - Taken literally, the rules of China's new currency regime could mean the country has more than the yuan to keep in line -- its central bank could be forced to try to corral the dollar, euro and yen.

The rules set limits for the Chinese currency against all of those units, which in theory translates to limits for the major currencies against each other. In other words, China could be forced to battle the nearly $2 trillion-a-day global forex market to keep dollar/euro from jumping around.

Or not, as the case may be.

Analysts say that this puzzling aspect of China's new currency regime should not be taken at face value.

Large-scale intervention to make it work is considered highly unlikely. Analysts say the more probable result is that, in the event of volatile markets, China could simply ignore some of its limits and focus on the dollar/yuan exchange rate.

...more...

[UpInArms]

33. DUH! Firm sees link between poor governance, accounting woes

http://www.marketwatch.com/news/story.asp?guid=%7BF072CFF3%2DED63%2D490F%2DAD9E%2D34BB7C5CDF5E%7D

NEW YORK (MarketWatch) -- A new examination of companies viewed as corporate governance laggards shows that governance may indeed matter when it comes to corporate performance and behavior.

New data by GovernanceMetrics International shows that companies the firm relegated to the bottom of the governance barrel over time were more likely than well-governed companies to restate earnings or to otherwise be caught in regulators' cross-hairs over accounting.

"There does appear a strong correlation between governance and performance," said Gavin Anderson, President and CEO of the New York firm. Investors who scale back poorly governed companies in their stock portfolios are "in all probability going to do better."

GMI's research is the latest to yield a link between governance and performance. Even before the financial scandals that rocked the market starting with the fall of Enron Corp., academics and institutional investors scrambled to establish such a connection. More recently, proxy advisors and governance rating firms like GMI have joined in the effort.

<snip>

But some of the private studies - though perhaps lacking the apparent rigor of scholarly research - taken at face value have provided startlingly strong evidence that a connection indeed exists.

...more...

Ya think??!!?? And logic has died an ignominious death :eyes:

[AnneD]

35. SO

they get degree's for stating the obvious. I've said Bush was a spoiled party brat boy since '78 and his friends were crooks since '82. I think I've earned a PhD degree in Political Science and History Magna Cum Laude. Maybe I could exchange it for Brownie's Medal of Freedom that Bush will surely give him before he leaves office..

[54anickel]

37. Mortgage mysteries abound

http://www.dallasnews.com/sharedcontent/dws/bus/columnists/all/stories/DN-dimartino_12bus.ART.State.Edition2.9463468.html

snip>

Several months after the end of every quarter, the MBA releases its latest statistics on home defaults and foreclosures.

In a word, every last report in recent memory has been downright encouraging. Therein lies the confusion.

snip>

Mortgage addiction

As long as banks keep on loosening their standards, it's conceivable that households' habits will worsen, not improve.

Why would banks do this?

Because their livelihoods depend on the addicts remaining addicted. A record 61 percent of bank credit is mortgage-related.

I guess the MBA data had better remain encouraging. If defaults even start to tick up, the banking system would be "crippled," Mr. Kasriel writes.

And just in case you can't picture "crippled," Mr. Kasriel suggests you look at 1990s Japan. The crippled banking system there killed the economy.

more single sentence paragraphs....

[54anickel]

38. FREDDIE TO RECOVER FUNDS

http://www.nypost.com/business/53230.htm

September 13, 2005 -- Freddie Mac, the U.S. mortgage finance company seeking to recover from $5 billion in accounting errors, agreed to help its federal regulator recoup compensation from former Chairman and Chief Executive Leland Brendsel.

Freddie Mac will consider Brendsel terminated "for cause," according to a consent order between the government-chartered company and the Office of Federal Housing Enterprise Oversight released yesterday.

The agreement caps a settlement reached in December 2003, under which the company paid a $125 million fine for making bookkeeping errors to reduce earnings volatility.

short blurb..

[ozymandius]

39. Today's SMW brought to you by: the color "RED"

11:03
Dow 10,616.38 -66.56 (-0.62%)
Nasdaq 2,169.75 -13.08 (-0.60%)
S&P 500 1,232.87 -7.69 (-0.62%)
10-Yr Bond 41.14 -0.55 (-1.32%)
NYSE Volume 616,095,000
Nasdaq Volume 530,307,000

10:30AM: The stock market holds steady, with each of the major indices in the red... Technology (+0.1%), however, has recently turned positive, leaving the nine other sectors trending below the flat line. Home entertainment software continues to shine today, up 2.2% on the back of Electronic Arts' (ERTS 60.68 +1.59) 5.3% surge yesterday. Chip stocks have found additional support following an analyst upgrade on Applied Materials (AMAT 18.06 +0.28) while a 1.9% surge in shares of Qualcomm (QCOM 43.34 +0.79), which was added to CSFB's focus list today, has also provided a lift... SOX +0.2, NYSE Adv/Dec 861/1986, Nasdaq Adv/Dec 776/1874

[54anickel]

41. Is the US Economy Shock-Resistant?

http://www.merkfund.com/merk-perspective/insights/2005-09-12.html

How well equipped is the U.S. economy to weather shocks, such as the catastrophic hurricane Katrina? How does the economic stimulus of rebuilding the area weigh against the effects the high cost of energy has on the consumer? Why is the dollar down and gold up since the catastrophe hit? In our view, we need to look for the answers by looking at the big picture.

For starters, we should wind back to the days before Katrina devastated Louisiana. Before significant parts of US energy supply, as well as an important transit route (the Mississippi) for food and raw materials were taken offline. Before the hurricane, commodity prices ranging from oil and gas, from steel to copper, from coffee to grain were near or at historic highs. These high prices are a reflection of elevated global demand; part of this high demand is due to a US economy that has enjoyed and continues to enjoy accommodating monetary and fiscal policies (low interest rates and low taxes); Asia’s drive to sell cheap consumer goods to the US and Asia’s growing internal consumption have also contributed to high commodity prices.

To understand how shock-resistant the US economy is, let us look at its most important and vulnerable part. A key driver behind economic growth in recent years has been consumer spending which comprises about 70% of Gross Domestic Product (GDP). Declining interest rates and lower taxes have contributed to consumer spending growing faster than overall GDP for more than a decade. When the technology bubble burst in 2000, consumer spending never declined. At the same time, the savings rate has been declining in the US. While Chinese consumers save more than 30% of their income, the US savings rate recently turned negative to an unsustainable -0.6% for the first time since records began in 1959. Negative savings rates are possible if consumers spend by selling assets, dipping into savings or borrowing against future income. The savings rate is also lowered by homeowners that refinance and take more money out of their home; in recent years, many consumers have treated their homes like ATMs (cash machines). The rise in housing prices has far exceeded the rise in income leading us to believe that current housing prices are not sustainable, and that we are in a housing bubble induced by an extended period of very low interest rates. Talking to real estate agents around the country in some of the hottest areas, we believe we have passed the peak in the housing market. In summary, the US consumer is the key to understanding what will happen to the US economy. Not only does the US consumer have record amounts of debt, but the drivers that have allowed this debt to accumulate have shifted into reverse: interest rates are rising and housing prices are at risk of declining.

Another important factor influencing consumer spending is real income. If incomes were to rise, then the effects of higher interest rates could be mitigated. We have long argued that real incomes have a very difficult time rising in an environment where US corporations are squeezed by both high commodity prices on the production side and low consumer prices because of a flood of cheap imports from Asia. In such an environment, US corporations attempt to keep up their profit margins by accelerating their outsourcing. In a best-case scenario, we believe income growth will lag GDP growth.

Taken together, US consumer spending is most vulnerable; the question in our view is when, not whether consumer spending will falter. Unlike the government, consumers cannot print money to pay off their debt. As housing prices decline and incomes don’t rise, consumers will have to spend less and liquidate other assets (such as their stock portfolio) to serve their debt.

more...

[ozymandius]

46. This hammers some very important points.

(1) We as a nation cannot spend our way to prosperity.
(2) Wealth generation cannot be endlessly derived only from investing. A vital domestic labor force is required.
(3) Debt is a burden, not a service.

[UpInArms]

42. 1:24 EST still wearing that "red" badge

Dow 10,623.54 -59.40 (-0.56%)
Nasdaq 2,174.63 -8.20 (-0.38%)
S&P 500 1,233.87 -6.69 (-0.54%)
10-Yr Bond 4.136 -0.33 (-0.79%)

NYSE Volume 1,143,873,000
Nasdaq Volume 944,308,000

1:00PM: Although the Financial sector has spent the session in the red, chalking a 0.6% loss and standing as the fifth-worst performer today, its brokerage group has emerged as a section of relative strength. The AMEX Brokerage Index (XBD 177.57 +0.69) is currently up 0.39%, a gain for which Charles Schwab's (SCH 14.53 +0.55) 3.9% surge is largely attributable after it was upgraded to Outperform from Market Perform at Friedman Billings. Shares of SCH have hit a new 52-week high, as have shares of competitor Ameritrade (AMTD 21.76 +0.42)...

As far as the S&P, brokers are the best of the worst groups today, posting a 0.1% decline, but remain one of the Financial sector's strongest links year-to-date...NYSE Adv/Dec 963/2202, Nasdaq Adv/Dec 894/2003

12:30PM: The major averages continue to linger near their worst levels of the day... Despite the Dow's languish, a few positive components sit within it. Boeing (BA 65.38 +0.24) has reversed course today, attracting modest buying interest while United Technologies (UTX 51.54 +0.20) also sports a slight gain. Both companies have received a boost after Wachovia initiated coverage of their respective stocks with Outperform ratings...

Separately, General Motors (GM 32.75 +0.04) represents the third positive player in the blue chip average, rising after Delphi (DPH 4.40 +0.19) announced that, to avoid bankruptcy, it must reach an agreement with the auto giant...

[UpInArms]

43. Fitch may cut ratings on five insurers

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T171027Z_01_WEN8980_RTRIDST_0_FINANCIAL-INSURERS-FITCH-URGENT.XML

NEW YORK, Sept 13 (Reuters) - Fitch Ratings on Tuesday said it may cut its ratings on five property and casualty insurers because of large potential losses from Hurricane Katrina.

The affected companies are Allstate Corp. (ALL.N: Quote, Profile, Research), Horace Mann Educators Corp. (HMN.N: Quote, Profile, Research). Montpelier Re Holdings Ltd. (MRH.N: Quote, Profile, Research), PXRE Group Ltd. (PXT.N: Quote, Profile, Research) and State Farm Mutual Automobile Insurance Co.

Fitch said the ratings warning was based on its view that considerable uncertainty remains about ultimate losses and that the affected companies' exposures may represent a material percentage of their equity base.

[UpInArms]

44. S&P says may cut Hertz to junk on sale from Ford

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T141805Z_01_WNA8038_RTRIDST_0_AUTOS-HERTZ-S-P-URGENT.XML

NEW YORK, Sept 13 (Reuters) - Standard & Poor's on Tuesday said it may cut Hertz Corp.'s (HRZ.N: Quote, Profile, Research) debt ratings to junk status, citing how parent company Ford Motor Co. (F.N: Quote, Profile, Research) plans to sell the unit.

S&P said it may cut Hertz's "BBB-minus" corporate credit rating, which is at the bottom of investment-grade status.

Downgrades usually raise a company's borrowing costs, particularly cuts to junk.

Moody's may cut Hertz's debt ratings to junk.

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-12T213729Z_01_WNA7999_RTRIDST_0_AUTOS-HERTZ-MOODYS-URGENT.XML

NEW YORK, Sept 12 (Reuters) - Moody's Investors Service on Monday said it may cut Hertz Corp.'s debt ratings to junk, citing Ford Motor Co.'s (F.N: Quote, Profile, Research) agreement to sell its shares to a group of private equity firms.

The group acquiring Hertz will likely fund a significant portion of the purchase with debt and proceeds from asset sales, Moody's said in a release.

Moody's said it may cut Hertz long-term debt rating of "Baa3," which is one notch above junk and its short-term rating of "Prime-3." Ratings downgrades can increase a company's borrowing costs.

Ford to Sell The Hertz Corporation to Private Equity Group (The Carlyle Group) in $15 Billion Transaction

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-12-2005/0004105567&EDATE=

DEARBORN, Mich., Sept. 12 /PRNewswire-FirstCall/ -- Ford Motor Company
(NYSE: F) announced today the execution of a definitive agreement with an
investor group of leading private equity firms, under which Ford will sell all
of the shares of common stock of its wholly owned subsidiary, The Hertz
Corporation, in a transaction valued at approximately $15 billion including
debt. The acquiring investor group is composed of Clayton Dubilier & Rice,
The Carlyle Group and Merrill Lynch Global Private Equity.

Under the terms of the agreement, Ford will receive $5.6 billion for the
equity of Hertz.

"This transaction reinforces our commitment to strengthening our balance
sheet and investing in our core automotive business," said Executive Vice
President and Chief Financial Officer Don Leclair. "Hertz is a world class
company with an experienced management team. We look forward to working with
the new owners and intend to maintain our strong commercial relationship with
Hertz."

In connection with the transaction, Hertz plans to commence a cash tender
offer for up to $2.3 billion of certain of its outstanding debt securities;
certain other Hertz debt will be refinanced.

The purchase of Hertz is subject to customary conditions, including
applicable regulatory approvals, and is anticipated to be completed by year
end.

...more...

[ozymandius]

45. numbers and blather

1:49
Dow 10,625.14 -57.80 (-0.54%)
Nasdaq 2,176.68 -6.15 (-0.28%)
S&P 500 1,234.21 -6.35 (-0.51%)
10-Yr Bond 41.33 -0.36 (-0.86%)
NYSE Volume 1,219,972,000
Nasdaq Volume 1,017,717,000

1:30PM: The equity market continues to trade sideways, showing little response to oil prices which have, over the past half hour, slipped below $63.00/bbl... Despite re-extended price declines across the energy complex and wide spread consolidation throughout today's session, the Energy sector is holding its own, posting the smallest among weak sectors...

Refiners, the biggest gaining group in the S&P year-to-date (+86.4%), have surfaced as the sector's sole spot of strength, lifted by a CSFB upgrade on Valero (VLO 111.52 +0.67). Additionally, Exxon Mobil (XOM) has pared some of its early loss while buying interest in Halliburton (HAL) has lent some further support to the sector... Separately, the Aug. Treasury Budget (consensus -$49.9 bln) will be released at the top of the hour...NYSE Adv/Dec 1008/2182, Nasdaq Adv/Dec 950/1955

[UpInArms]

48. 2:13 EST market bounces on growing deficit

Dow 10,649.03 -33.91 (-0.32%)
Nasdaq 2,180.36 -2.47 (-0.11%)
S&P 500 1,236.30 -4.26 (-0.34%)
10-Yr Bond 4.136 -0.33 (-0.79%)

NYSE Volume 1,320,899,000
Nasdaq Volume 1,113,620,000

2:00PM: Despite the negative standings of the Tech sector's top five components - Microsoft (MSFT), Intel (INTC), Cisco (CSCO), IBM (IBM), and Verizon (VC) - the sector has again emerged from the red to sit solo above the flat line. Solid gains in Dell (DELL), Qualcomm (QCOM), Oracle (ORCL) and Yahoo (YHOO) have underscored the sector's modest rise and helped the Nasdaq touch its best levels of the session...NYSE Adv/Dec 1058/2155, Nasdaq Adv/Dec 1007/1925

[specimenfred1984]

49. 2:06 thru Now, PPT Move

Huge buy volume in the Dec. Mini S&P pit starting at 2:06.

What a sorry ass "free market" society we've become.

[ozymandius]

50. So to support the markets, the government is kiting checks again? n/t

[Roland99]

56. What's going to happen when this shell game falls on its face?

[UpInArms]

58. I think, the latest Katrina lesson, was our answer -

you're on your own - just hope you're not attempting to live in a "low lying area" and need any help to survive.

[Roland99]

60. I'm thinking more along the lines of worldwide recession.

In the wake of a huge Wall St. scandal wherein our gov't has been artificially shoring it up.

[UpInArms]

51. Consumer Sentiment Nosedives

http://today.reuters.com/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=uri:2005-09-13T182551Z_01_N13464025_RTRIDST_0_MARKETS-BONDS-UPDATE-2.XML

excerpt:

The Investor's Business Daily/Technometrica consumer optimism index fell to a record low of 41.2 from 50.9 in August as gasoline prices climbed following Hurricane Katrina and Americans faced disturbing images from the storm's aftermath.

The reading was the lowest in the survey's history, which dates back to early 2001, and its biggest one-month decline.

Consumers' views of their personal finances and of government policies both declined.

"The former is of greater interest as it may reflect consumers' negative reaction to the sharp increase in gasoline prices and could bode ill for consumption going forward. If this is the case, it will raise a flag of concern at the Fed," said Drew Matus, U.S. senior financial markets economist at Lehman Brothers.

Some analysts trimmed their forecasts for Friday's University of Michigan sentiment survey, last estimated at a median of 85.0 against 89.1 in August.

Analysts often note the disconnect between consumers' reported mood and their spending habits, but the sentiment plunge was enough to push down equities and spur some flight to safety buying in bonds.

...more...

[UpInArms]

52. Mesaba says Northwest (Airlines) missed $18.7 mln payment

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T183717Z_01_N13583440_RTRIDST_0_AIRLINES-NORTHWEST-MESABA-URGENT.XML

WASHINGTON, Sept 13 (Reuters) - Mesaba Aviation Inc., a regional feeder carrier for Northwest Airlines Corp. (NWAC.O: Quote, Profile, Research), said on Tuesday that it had delivered a notice of default to Northwest after the airline failed to make an $18.7 million payment due on Monday.

Mesaba, a unit of MAIR Holdings Inc. (MAIR.O: Quote, Profile, Research), said it had told Northwest -- whose shares plunged on Tuesday on a report that it had decided to file for Chapter 11 bankruptcy protection -- it could "exercise available remedies" against Northwest if the payment was not made by Sept. 20.

...very short blurb...

[UpInArms]

53. 3:11 EST recover fails - deeper into the red it goes

Dow 10,619.01 -63.93 (-0.60%)
Nasdaq 2,175.58 -7.25 (-0.33%)
S&P 500 1,234.12 -6.44 (-0.52%)
10-Yr Bond 4.137 -0.32 (-0.77%)

NYSE Volume 1,580,446,000
Nasdaq Volume 1,394,890,000

3:00PM: The market staged a recovery effort over the past half an hour that was essentially short lived, but which has left the averages treading near their best levels of the day... With respect to sector performances, Technology (+0.5%) remains the front-runner, but a lack of assistance from the remaining nine sectors has made for a halted overall market advance and the Nasdaq's unsustained positive stance. On a year-to-date basis, the Tech sector has risen 0.4%, the fifth best gainer behind Energy (+35.5%), Utilities (+18.8%), Healthcare (+6.6%), and Consumer Staples (+1.6%)...NYSE Adv/Dec 1206/2030, Nasdaq Adv/Dec 1162/1823

2:25PM: The indices gain traction and pare much of the session's loss as they head north... To that end, the tech-heavy Composite has inched over the unchanged mark on account of Tech's afternoon leadership. The sector's 0.6% gain has been paced by software (+0.8%) and semiconductors (+0.7%), but networking and diskdrives area also offering support. Alongside Tech's rise is the outperformance of the Philadelphia Semiconductor Index (SOX), ahead 0.8% on the day and extending its 11.0% year-to-date gain... SOX 0.84, NYSE Adv/Dec 1034/2186, Nasdaq Adv/Dec 1021/1916

[UpInArms]

54. S&P cuts Archer Daniels Midland's debt ratings

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-13T191300Z_01_WNA8072_RTRIDST_0_FOOD-ADM-S-P-URGENT.XML

NEW YORK, Sept 13 (Reuters) - Standard & Poor's on Tuesday cut Archer Daniels Midland Co.'s (ADM.N: Quote, Profile, Research) debt ratings, citing the agribusiness' weaker-than-expected credit improvements.

S&P said ADM's credit protection had improved but not enough to sustain an "A-plus" debt rating. The rating agency cut ADM's corporate credit and senior unsecured debt ratings one notch to "A," the sixth-highest investment grade rating, from "A-plus."

Ratings downgrades can increase a company's borrowing costs. S&P said the outlook is stable.

[UpInArms]

55. EWWW! Avoid US Stocks Recession tipping over 50/50 Investing Very "Risky"

http://www.bloomberg.com/apps/news?pid=10000087&refer=top_world_news&sid=aG8yF7DS_nps

excerpt:

Investors also became more pessimistic this month about prospects for economic and profit growth worldwide after the hurricane, according to a Merrill Lynch & Co. survey. Fund managers said they expect to avoid U.S. stocks in the next 12 months, while favoring shares in Japan because Asia's biggest economy has the best outlook for earnings, it showed.

``We see the probability of a recession tipping over the 50-50 point right now,'' said Barry James, chief equity strategist at James Investment Research Inc., which manages $950 million in Dayton, Ohio. The environment for stocks is ``very, very risky today.''

Gasoline for October delivery rose 0.6 percent to $1.884 a gallon in New York amid speculation U.S. fuel supplies will decline because of damage caused to refineries in the wake of the hurricane. Crude oil prices were little changed.

...more...

[54anickel]

61. OMG, he used the "R" word!!!

Sheesh, we were heading that way before the damned hurricane. It's just going to become a lot more obvious.

Notice there haven't been too many pundits pushing the broken window fallacy anymore. :eyes: Maybe they'll start up again after the brainless wonder speaks to us all on TV Thursday night.

[UpInArms]

59. 3:46 EST below 10,600

Dow 10,598.89 -84.05 (-0.79%)
Nasdaq 2,173.73 -9.10 (-0.42%)
S&P 500 1,231.89 -8.67 (-0.70%)
10-Yr Bond 4.134 -0.35 (-0.84%)

NYSE Volume 1,788,376,000
Nasdaq Volume 1,579,655,000

[54anickel]

62. Oil: Geologists vs. Economists

http://www.prudentbear.com/internationalperspective.asp

"What we all do next will determine how well we meet the energy needs of the entire world in this century and beyond. Demand is soaring like never before. As populations grow and economies take off, millions in the developing world are enjoying the benefits of a lifestyle that requires increasing amounts of energy. In fact, some say that in 20 years the world will consume 40% more oil than it does today. At the same time, many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically and even politically. When growing demand meets tighter supplies, the result is more competition for the same resources.


"We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions: How do we meet the energy needs of the developing world and those of industrialized nations? What role will renewables and alternative energies play? What is the best way to protect our environment? How do we accelerate our conservation efforts?"
– Advertisement for the Chevron Corporation

As the extraordinary Chevron ad at the top of these pages implicitly concedes, oil is literally the lifeblood of the global economy. All one has to do is gaze outside one’s window on any given day to understand the central role of oil and natural gas in the modern world. The roads are choked with traffic, including enormous trucks transporting goods. Electricity, widely generated from oil and gas, provides light and power, heating and cooling throughout the World, as well as playing a central part in most manufacturing processes. Petrochemicals and plastics are everywhere. The production of food itself is highly energy intensive, oil and gas being required to fuel the tractor, power the irrigation pumps, and transport the produce to market. The populous cities in particular became dependent on distant agricultural trade.


Hence, questions of how much oil we have left have more than passing academic interest. Despite the sharp rise of crude to $70 a barrel last week, and the fact that this is the one commodity which has become an issue of national security, there is still surprisingly little uniformity of views in regard to its long term price prospects or, indeed, the energy complex in general. Broadly speaking, the camps divide into two: on the one side are those who subscribe to the so-called “Peak Oil” hypothesis, which holds that the supply of oil is finite, and that we are in the midst of draining the more than trillion barrels of proven reserves said to be left in the ground. The most prominent spokesmen for this viewpoint are Matthew Simmons and Kenneth Deffeye, both of whom have forecast that global crude oil production is on the verge of a precipitous decline.

By contrast, groups such as Daniel Yergin’s Cambridge Energy Associates (CERA) adhere to a more optimistic view regarding future oil supplies. CERA recently released studies projecting an 18m barrel per day increase in capacity from 2004-2010. The Cambridge view was also echoed in a recent US Department of Energy forecast, which held out the prospect of a 50 per cent increase in world oil production by 2030, largely supported by the major oil companies and others. CERA has made the point that each time forecasts of oil running out have hit the headlines of the major newspapers, these have invariably proved premature. Daniel Yergin himself has made the case that new technologies have consistently facilitated the exploration and exploitation of new sources of oil as prices have gone higher.



In simple terms, “It’s the geologists on one side and the economists on the other,” noted Seth Kleinman of PFC Energy, quoted in a recent article in the New York Times (“On Topic of Oil Supply, Opinions Aren’t Scarce”, Joseph Nocera, NY Times, 10/09/05). There is much to be said for characterizing the debate in these terms. Economists invariably think in terms of supply and demand, arguing that whenever tight supplies have pushed up prices sufficiently, rising prices have both tempered demand and spurred innovation in areas. And they note that “peak oil” exponents have cried wolf many times before.

more...

[UpInArms]

64. I wonder if that increase in capacity from 2004-2010

took into consideration the "reserves" that were inflated (at the very least by Shell)?

http://www.commondreams.org/headlines04/0419-08.htm

Shell Report Exposes Lies on Oil Reserves

Published on Monday, April 19, 2004 by the Associated Press

LONDON - A top executive of Royal Dutch/Shell Group of Cos. wrote in an e-mail that he was "sick and tired about lying" about the company's inflated oil and gas reserves estimates, an investigation commissioned by Shell reported Monday.

The investigation, whose findings Shell accepted in full, found that some bosses knew for almost two years the company had publicly overstated the size of its reserves. The shaken oil giant also announced that its chief financial officer had stepped down, the latest in a string of high-level casualties since Shell's announcement in January that its confirmed oil and gas holdings were much smaller than it had claimed.

The company said Monday that it had now downgraded a total of 4.35 billion barrels, or about 22 percent of its reserves, from "proven" to less certain categories. That is 200 million barrels more than its previous estimate.

Shell said in January that it was downgrading 3.9 billion barrels, or about 20 percent of its total holdings. A March announcement brought the total downgraded to 4.15 billion barrels.

The disclosures caused a shareholders' uproar and led to a string of resignations. Reserves are an oil company's most valuable asset, and any reclassification into less certain categories is a major concern for investors.

...more...

[amandabeech]

67. I follow energy, including oil and gas, closely and have for the past

three or four years. I am a member of the Yahoo group "EnergyResources." Mike Lynch, an economist cited in this article, posts there regularly. He has never been able to counter the geologists--he seems to talk right past them. Before Katrina, he saw $40 oil in December.

I'd have more respect for Yergin if he would set out in detail where he expects all this new oil to be found, and what his estimates are for proven reserves (e.g., 90% probability) and probable reserves (50%) in the major fields and what his estimates are for depletion in each of these fields.

Another key point that the article neglects to mention is that in addition to financial cost, taking products like Canadian tar sands, Venezuelan bitumen and U.S. "shale oil" requires a tremendous amount of energy. You don't just pump this stuff out of the ground. Generally, you mine it and process huge amounts of other stuff to get the oil-like stuff out.

It is also extremely thick stuff, somewhere between asphalt and soft coal, and in the case of "shale oil," only a precursor to oil. Turning this stuff into gasoline requires a tremendous refining effort generally involving cracking the molecules and inserting more hydrogen. Even then, you may get a much lower percentage of products used in transportation (gasoline, diesel, kerosene, aviation fuel) out of this.

All this means that there is less net energy and less useful product from the alternatives, at least with the technology that we have now.

Personally, I think that Peak Oil will happen relatively soon, but not as soon as many of the Peak OIlers.

Also, there have been reports that the USGS and Energy Department merely predict that we will have as much as they think we will want in the outlying years. Frankly, I don't pay too much attention to them.

[ozymandius]

63. Dow closes below 10,600

Dow 10,597.44 -85.50 (-0.80%)
Nasdaq 2,171.75 -11.08 (-0.51%)
S&P 500 1,231.20 -9.36 (-0.75%)
10-Yr Bond 41.34 -0.35 (-0.84%)
NYSE Volume 2,005,706,000
Nasdaq Volume 1,724,547,000

blather still to come

[UpInArms]

66. blather

Close: The equity market's major averages finished the session at freshly carved lows of the day, having slumped back from a short-lived post-lunch advance that ultimately could not counter the broad-based consolidation efforts that defined the day and eclipsed a dual dose of encouraging economic data... The morning's wires offered two better-than-expected reports that the stock market overlooked, but upon which the Treasury market staged a rally...

Total Aug. PPI (+0.6%) was up less than economists' expected 0.7% rise, and, more significantly, the core rate was flat. While the closely-watched inflation gauge sent the benchmark 10-year note (+10/32) to its 4.13% closing yield, the fact that the PPI data did not factor in potential Katrina-related inflationary pressures, coupled with apprehension ahead of Thursday's CPI read and the looming Sept. 20 FOMC meeting, helped cultivate the session's uneasy sentiment and further stimulated profit-taking efforts...

Alongside the PPI report came an unexpected decline in the U.S. trade deficit figure (-$57.9 bln vs. -$59.8 bln consensus) that underpinned the bond market's positive tone and bolstered the buck, but that similarly flew under the equity market's radar...

With the exception of Technology, the market at large spent Tuesday below the flat line. The respective 2.7%, 3.0% and 2.5% gains that the Dow, S&P and Nasdaq chalked over the last two weeks perhaps provided the best reason for consolidation and were largely responsible for today's underwater session. The Technology sector's several pockets of relative strength boosted the Nasdaq briefly out of the red, but the lack of participation across any of the nine remaining sectors left the Tech-induced rise limited and, essentially, unsustainable. With respect to the strong spots, networking got a lift after Nokia (NOK 16.66 +0.59), Texas Instruments' (TXN 33.40 +0.29) largest wireless customer, raised Q3 sales and profit forecasts. Aside from a 2.4% surge in TXN shares, chip stocks found additional support following an analyst upgrade on Applied Materials (AMAT 18.02 +0.24) while Qualcomm (QCOM 43.21 +0.66) jumped after CSFB added it to its focus list. Strong follow-through buying interest in Electronic Arts (ERTS 61.91 +2.82) wielded a 5% rise in home entertainment software, which spent the day as the S&P's brightest industry group...

It was the Consumer Discretionary sector that spearheaded the day's decline, dragged downward on several counts. Best Buy (BBY 45.17 -5.19), one of the session's few earnings reporters, missed analysts' Q2 expectations by a penny and disappointed investors with reaffirmed FY06 guidance that was below Wall Street estimates. The computer and electronics index, as a result, plummeted, and pressured the sector as a whole. Retail sold off 1.3% alongside extended consolidation in the homebuilding and home furnishing segments, to name a few. The Health Care sector was also weak, further bogging down the overall market. Most notably, pharmaceuticals declined 0.9%, driven by an FDA non-approval that catalyzed Pfizer's (PFE) slide, while HMO's - the sector's best year-to-date performer - was the sector's worst performing group today, losing 2.2% after Aetna (AET) reiterated disappointing Q3 and FY05 EPS forecasts... Despite the bond market's rally, even rate-sensitive sectors like Financial (-0.6%) and Utilities (-0.7%) failed to find support in the face of pervasive profit-taking...

A re-extended decline in crude prices, which fell 0.4% to $63.12/bbl sparked further Energy consolidation, but, at the same time, did little to aid the Consumer Discretionary sector... DJTA -1.55, DJUA -0.82, DOT -0.16, Nasdaq 100 -0.30, Russell 2000 -1.10, SOX +0.23, S&P Midcap 400 -0.72, XOI -0.71, NYSE Adv/Dec 1014/2281, Nasdaq Adv/Dec 996/2036

[54anickel]

65. Oil-for-food: Far from a failure

http://www.iht.com/articles/2005/09/12/news/edsevan.php

After nearly a year and a half and more than $35 million spent, the Independent Inquiry Committee Into the United Nations Oil-for-Food Program (IIC), led by the former Federal Reserve chairman Paul Volcker, has faulted the management of the program, which I ran for six years. It is easy to apply formal management and audit criteria after the fact to a massive multibillion-dollar humanitarian program, but as the recent crisis in New Orleans shows, what is critical when people are dying is to bring food and medicine to affected populations as quickly as possible. This we accomplished. There are many thousands of people alive today because of the oil-for-food plan.

There is a misconception, reinforced by the familiar echo chamber of the Murdoch press, The Wall Street Journal, the UN bashers in the U.S. Congress, and neocon think tanks, that the program was a failure of epic proportions, riddled with corruption and pliant to Saddam Hussein's every manipulation. The reality is that the oil-for-food program was highly successful in its fundamental mission of addressing the acute humanitarian crisis caused by sanctions imposed on Iraq, in channeling all but a very small percentage of Iraqi oil revenues into food, medicine, and other approved humanitarian supplies, and in helping to maintain international support for sanctions, which in turn prevented Iraq from developing weapons of mass destruction during the course of the program.

Volcker's 'public' and other political constituencies are nevertheless demanding heads on a platter, and the latest IIC report, sadly, appears to capitulate to that pressure by unfairly targeting the Secretariat, including the Office of the Iraq Program (OIP) and me, for problems that were essentially inherent in the design of the program and in the inevitable reality of politics among member states.

The program was created by a series of Security Council resolutions that carefully defined - and limited - the role of the Secretariat. In particular, the Office of the Iraq Program did not have responsibility for monitoring, policing or investigating sanctions violations. That role was specifically reserved to the Security Council; its so-called 661 Committee, which monitored the overall sanctions regime and oil-for-food; and member states. The IIC knows or should know this. Yet the IIC insists repeatedly on blaming the OIP for functions, such as investigating sanctions violations, that lay beyond its mandate.

The IIC also faults the secretary general, the deputy secretary general and me for failing to provide information regarding Iraqi demands for illicit kickbacks and surcharges to the Security Council through formal rather than informal channels. But in setting forth its charges, the IIC seems to confuse the decision not to convey information through official channels with a decision not to convey the information at all. On no occasion did OIP or I personally withhold material information from the Security Council members, the secretary general and his deputy. OIP informed the 661 Committee not only on surcharges but also on at least 70 occasions of contracts reflecting suspicious pricing (and hence possible kickbacks), yet the committee declined in every instance to act. Similarly, I informed the U.S. government, effectively the policeman for sanctions violations in the Gulf, of maritime smuggling on a massive scale that was occurring, to no avail.

It is now known that the United States and other member states purposefully allowed this smuggling to occur, in addition to the massive daily shipment of oil by land routes, putting billions of dollars directly into Saddam's pockets in violation of sanctions in order to support Iraq's trading partners, Turkey and Jordan, which are also U.S. allies. It smacks of hypocrisy to criticize OIP for a political compromise made to help the economies of American allies.

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