STOCK MARKET WATCH, Monday February 2

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday February 2, 2009

Bush Administration Officials Under Indictment = 0
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 1

AT THE CLOSING BELL ON January 30, 2009

Dow... 8,000.86 -148.15 (-1.85%)
Nasdaq... 1,476.42 -31.42 (-2.08%)
S&P 500... 825.88 -19.26 (-2.28%)
Gold future... 928.40 +21.90 (+2.36%)
30-Year Bond 3.60% +0.04 (+1.24%)
10-Yr Bond... 2.84% +0.03 (+1.03%)

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

Market Conditions During Trading Hours

GOLD,EURO, YEN, Loonie and Silver

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Read more: du

[ozymandius]

1. Market WrapUp

Bench Strength
BY BRIAN PRETTI

I have the feeling that critical to our investment decision making in 2009 will be successfully dealing with and navigating the “tension” between technical and fundamental analysis. We know the economic news of the moment is pretty much horrible. Hard to imagine how it can get much worse, right? Stick around. In like manner, there’s a fair contingent of the investment community and headline mouthpiece commentators simply itching to call a bottom in equities. We all “know” that in prior cycles, equities have bottomed before the economy has bottomed. In classic experience past, this has indeed been the rhythm of prior bear market and recession occurrence combo experiences. The standout anomaly is the 2001 recession, whereby equities did not bottom until late 2002/early 03, well after the official recession conclusion.

.....

Personally, I have absolutely no idea what lies ahead. I have a lot of guesses and a number of game plans, but absolute certainty about what’s to come? Please. As I have written about for years now, I feel we’re in the process of reconciling the credit cycle of a generation. We’ve been here before and seen this very phenomenon in other economies. I am working under the current assumption that the US and probably the global economy is “resetting,” if you will, to a new level of normal. If we make the case that the credit cycle of the prior three decades clearly and positively influenced corporate earnings, GDP and asset values, then we need to ask ourselves just what the US economy, corporate earnings and asset values will look like in the absence of maniacal credit creation. Should the US economy really have become a $14.5 trillion economy? How much of this number was the result of prior credit cycle influence? And as that influence fades for now, where is US GDP headed? These questions necessarily also apply to corporate earnings and asset values of all kinds.

What’s an individual investor to do, right? The pro’s that can hang out in front of quote machines all day and actively trade in and out can control risk quite easily (which is the whole point of investment management anyway). But what about those who do not have this luxury of monitoring the markets constantly while they are open? Do they stick with equities? Do they press their bets if the markets start to lift off? Do they trust their assets to a mainstream investment community who largely rode the markets all the way down last year? What about investors who are decidedly long term in nature?

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

[Kolesar]

42. I will start to buy equities (dollar cost averaging) when the S&P500 climbs & CFNAI ...

... and/or other indicies that track real economic activity. That's my take on Pretti's advice.

edit: Fidelity Contrafund mutual fund is reopened for new "buyers". I wish I had never followed the 1990s fad and left Contra for the S&P500 Index. I will probably buy into that and let their management match wits with the day traders.

[ozymandius]

2. Today's Reports

08:30 Personal Income Dec
Briefing.com -0.4%
Consensus -0.4%
Prior -0.2%

08:30 Personal Spending Dec
Briefing.com -0.8%
Consensus -0.9%
Prior -0.6%

10:00 Construction Spending Dec
Briefing.com -1.0%
Consensus -0.9%
Prior -0.6%

10:00 ISM Index Jan
Briefing.com 32.0
Consensus 32.0
Prior 32.4

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

[UpInArms]

30. U.S. Dec. nominal consumer spending falls 1.0%

04. U.S. Dec. real consumer spending falls 0.5%
8:30 AM ET, Feb 02, 2009

05. U.S. Dec. real disposable incomes rise 0.3%
8:30 AM ET, Feb 02, 2009

06. U.S. Dec. core consumer inflation flat
8:30 AM ET, Feb 02, 2009

07. U.S. Dec. nominal incomes fall 0.2%
8:30 AM ET, Feb 02, 2009

08. U.S. Dec. nominal consumer spending falls 1.0%
8:30 AM ET, Feb 02, 2009

09. U.S. Dec. personal savings rate rises to 3.6%
8:30 AM ET, Feb 02, 2009

[UpInArms]

31. Bankers' Bonuses on the Taxpayer Dime show up -

05. U.S. Dec. real disposable incomes rise 0.3%
8:30 AM ET, Feb 02, 2009

[UpInArms]

32. Consumer spending drops 6th time in 7 months

http://www.marketwatch.com/news/story/Real-consumer-spending-drops-6th/story.aspx?guid=%7B6E658EEB%2DCA2A%2D44AD%2D9F61%2D7BC4C26D5DE9%7D&dist=hplatest

WASHINGTON (MarketWatch) - U.S. real consumer spending fell in December for the sixth time in seven months as consumers saved what they gained from falling energy prices, the Commerce Department reported Monday.

Nominal spending fell 1% in December, the sixth straight decline. After adjusting for a 0.5% decline in prices, real consumer spending fell 0.5% in December, after a 0.3% increase in November, the government said. It was the sixth decline in real spending in the past seven months.

Nominal incomes fell 0.2% in December. After adjusting for inflation and after paying taxes, real disposable incomes rose 0.3%.

With spending falling faster than incomes, the personal savings rate rose to 3.6% in December, the highest since May when savings were boosted by tax-rebate checks.

The Commerce Department report fills in monthly details provided on a quarterly basis in the gross domestic product report released last Friday, which showed the economy contracted at a 3.8% annual rate in the quarter, the worst since the early 1980s.

...more...

[UpInArms]

35. Mattel Q4 profit disappoints as sales languish

http://www.reuters.com/article/ousiv/idUSTRE51124120090202

NEW YORK (Reuters) - Mattel Inc (MAT.N), the world's top toy company, posted a fourth-quarter profit that fell far below expectations, crushed by a disappointing holiday season and a stronger dollar.

Mattel said on Monday net profit fell to $176.4 million or 49 cents a share, from $328.5 million, or 89 cents a share, a year earlier.

Analysts, on average, were expecting the owner of Barbie and Hot Wheels to post a profit of 71 cents a share, according to Reuters Estimates.

Sales fell 11 percent to $1.94 billion as the company recession-hit consumers bought fewer toys in the weeks leading up to the holiday season. Mattel said its sales suffered a 5-percentage-point setback due to the stronger dollar.

While domestic gross sales fell 6 percent, international sales were down 20 percent, Mattel said.

Barbie, its flagship product that celebrates 50 years in 2009, faced a 21 percent decline in sales.

The toy maker announced in November that it would shed about 1,000 jobs, saying at that time that it was facing one of the most challenging periods in the past century.

...more...

guess those jobs are in China as this creepy corporation makes me kinda throw up in my mouth a little bit

[ozymandius]

45. One of my students proclaimed that she used to rip the heads off

her sister's Barbie dolls, stick them in bags of water and chuck them in the freezer. I offered my compliments to that dear old-fashioned girl. :sarcasm:

Full disclosure: I used to shave the heads of my sister's Barbie dolls. One can never get a clean shave, though. The hair follicles are clustered together in clumps and very stout. The best I could do is make the dolls look as though they had hair implants.

Creepy toys.

[AnneD]

52. We put our Barbies....

into GI Joe grenade launchers and would shoot them across the yard. When they took the launchers away-we used sling shots. We weren't abusive to them-we just wanted more action. Our dolls of choice were always baby dolls-we never were rough with them. The Barbies were made out of tough plastic-our Barbies were wild women.

[Demeter]

61. I Never Cared Much for Dolls--I Liked My Baby Brother A Lot More

[UpInArms]

50. Dec construction spending falls 1.4% - US Jan ISM @ 35.6%

20. U.S. Dec. construction spending falls 1.4% as expected
10:01 AM ET, Feb 02, 2009

21. U.S. Jan. ISM jobs 29.9%, unchanged vs Dec.
10:01 AM ET, Feb 02, 2009

22. U.S. Jan. ISM manufacturing index above 32.8% consensus
10:00 AM ET, Feb 02, 2009

23. U.S. Jan. ISM manufacturing index 35.6% vs 32.9% in Dec.
10:00 AM ET, Feb 02, 2009

[Festivito]

3. Debt: 01/29/2009 10,626,297,420,130.85 (UP 8,436,156,947.55) (1st 14B up.)

(A first somewhat significant rise in the public debt under Obama. 14B$. Hidden somewhat by a 5B$ drop in the SS debt. Seems appropriate to me. Good morning to all.)

= Held by the Public + Intragovernmental(FICA)
= 6,309,860,670,347.08 + 4,316,436,749,783.77
UP 14,335,901,611.96 + DOWN 5,899,744,664.41

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.81, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 305,702,486 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $34,760.26.
A family of three owes $104,280.78. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 31 days.
The average for the last 22 reports is 3,281,068,859.04.
The average for the last 30 days would be 2,406,117,163.29.
The average for the last 31 days would be 2,328,500,480.61.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 7 reports in 9 days of Obama's part of FY2009 averaging -0.69B$ per report, -0.41B$/day so far.
There were 82 reports in 121 days of FY2009 averaging 7.34B$ per report, 4.97B$/day.

PROJECTION:
There are 1,452 days remaining in this Obama 1st term.
By that time the debt could be between 12.6 and 17.8T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/29/2009 10,626,297,420,130.85 BHO (UP -579,628,782.23 so far since Obama took office.)
(                 NOTE: That is up a negative amount. That's actually DOWN.)
Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 601,572,523,218.40 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
01/08/2009 -027,599,431,464.26 -
01/09/2009 -000,568,123,287.98 ---
01/12/2009 -001,098,982,842.59 -- Mon
01/13/2009 -000,038,769,243.84 ----
01/14/2009 -000,515,208,818.51 ---
01/15/2009 +020,470,437,698.93 ------------**********
01/16/2009 -000,579,761,204.80 ---
01/20/2009 -001,254,116,733.01 -- Tue
01/21/2009 -000,225,946,840.81 ---
01/22/2009 -010,383,446,466.83 -
01/23/2009 -000,119,553,441.75 ---
01/26/2009 -001,004,948,620.76 -- Mon
01/27/2009 +000,188,054,837.85 ------------********
01/28/2009 -000,240,130,414.24 ---
01/29/2009 +014,335,901,611.96 ------------**********

-8,634,025,230.64 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $961,665,616,871.78 in last 133 days.
That's 962B$ in 133 days.
More than any year ever, except last year, and it's 95% of that highest year ever only in 133 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 133 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3714329&mesg_id=3714544

[Festivito]

65. Debt: 01/30/2009 10,632,005,246,736.97 (UP 5,707,826,606.12) (up 7B$.)

(Half of yesterday's rise of debt, not huge.)

= Held by the Public + Intragovernmental(FICA)
= 6,317,224,182,633.94 + 4,314,781,064,103.03
UP 7,363,512,286.86 + DOWN 1,655,685,680.74

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.81, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 305,708,658 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $34,778.23.
A family of three owes $104,334.68. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 31 days.
The average for the last 22 reports is 3,590,481,002.06.
The average for the last 30 days would be 2,633,019,401.51.
The average for the last 31 days would be 2,548,083,291.78.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 8 reports in 10 days of Obama's part of FY2009 averaging -0.71B$ per report, -0.40B$/day so far.
There were 83 reports in 122 days of FY2009 averaging 7.32B$ per report, 4.98B$/day.

PROJECTION:
There are 1,451 days remaining in this Obama 1st term.
By that time the debt could be between 12.6 and 17.9T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/30/2009 10,632,005,246,736.97 BHO (UP 5,128,197,823.89 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 607,280,349,824.50 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
01/09/2009 -000,568,123,287.98 ---
01/12/2009 -001,098,982,842.59 -- Mon
01/13/2009 -000,038,769,243.84 ----
01/14/2009 -000,515,208,818.51 ---
01/15/2009 +020,470,437,698.93 ------------**********
01/16/2009 -000,579,761,204.80 ---
01/20/2009 -001,254,116,733.01 -- Tue
01/21/2009 -000,225,946,840.81 ---
01/22/2009 -010,383,446,466.83 -
01/23/2009 -000,119,553,441.75 ---
01/26/2009 -001,004,948,620.76 -- Mon
01/27/2009 +000,188,054,837.85 ------------********
01/28/2009 -000,240,130,414.24 ---
01/29/2009 +014,335,901,611.96 ------------**********
01/30/2009 +007,363,512,286.86 ------------*********

26,328,918,520.48 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $967,373,443,477.90 in last 134 days.
That's 967B$ in 134 days.
More than any year ever, except last year, and it's 95% of that highest year ever only in 134 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 134 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3718769&mesg_id=3718774

[ozymandius]

4. Oil hovers near $42 as US crude workers may strike

SINGAPORE – Oil prices hovered under $42 a barrel Monday in Asia as investors weighed the threat of an oil worker strike in the U.S. against the prospect of more bad economic news this week.

Light, sweet crude for March delivery rose 5 cents to $41.73 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose 24 cents to settle at $41.68.

Negotiations over wage increases continued over the weekend, with some 24,000 refinery workers agreeing to postpone a strike for at least a day. The United Steelworkers agreed to a rolling 24-hour extension of talks.

Workers plan to show up for scheduled shifts Monday, though a strike would affect 60 refineries. The U.S.'s biggest refiner, Valero Energy Corp., said it would shut down some facilities if workers walk out, as did European oil company BP PLC.

....

In other Nymex trading, gasoline futures rose 0.71 cent to $1.24 a gallon. Heating oil gained 0.67 cent to $1.44 a gallon while natural gas for March delivery fell 1.5 cents to $4.56 per 1,000 cubic feet.

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

[UpInArms]

25. March crude down $1.21, or 3%, to $40.45 a barrel on Globex

07. March crude down $1.21, or 3%, to $40.45 a barrel on Globex
7:56 AM ET, Feb 02, 2009

[ozymandius]

5. World markets fall on bleak earnings

BANGKOK – Most Asian markets sank Monday as investors digested a slew of awful earnings reports from the region's corporate heavyweights and inauspicious signs from Wall Street, where stock averages clocked their worst January ever. European bourses opened sharply lower.

Hong Kong's Hang Seng slid 3.1 percent to 12,861.49, Japan's Nikkei 225 stock average dropped 120.07, or 1.5 percent, to 7,873.98 and South Korea's Kospi was off 1.3 percent at 1,146.95. Australia's main index fell 1.2 percent and markets in Singapore, Thailand and India fell 2 percent or more.

Mainland China's market, reopening after the weeklong Lunar New Years holiday, rose amid a report the government is considering new steps to boost growth. The Shanghai Composite index gained 1.1 percent to 2,011.68.

Sentiment was shaky after big name Japanese companies like Honda, NEC and Hitachi announced dire results on Friday and data showed the U.S. economy shrank at a 3.8 percent pace in fourth quarter.

http://news.yahoo.com/s/ap/20090202/ap_on_bi_ge/world_markets_3

[ozymandius]

6. Asia stocks slide on darkening corporate outlooks

HONG KONG (Reuters) – Asian stocks fell on Monday, with forecasts of corporate earnings slashed as the global economy rapidly deteriorates, steering investors toward the yen and U.S. dollar, which hit a two-month high against the euro.

Major European stocks were expected to open as much as 1.2 percent lower, according to financial bookmakers, with the focus on expectations for poor corporate results.

From the auto industry to technology firms, companies are lowering their outlooks because of the worsening environment for business and consumer spending.

....

Dismal U.S. economic reports as well as uncertainty about a massive fiscal stimulus package in Washington helped spark the worst Wall Street January performance ever. U.S. Treasury bonds meanwhile have provided little solace since dealers have been lately more concerned about the government's growing borrowing needs to finance multiple rescue plans.

http://news.yahoo.com/s/nm/20090202/bs_nm/us_markets_global_1

[ozymandius]

7. Hitachi shares plunge 17 percent on record loss warning

TOKYO (Reuters) – Shares in Japan's Hitachi Ltd dived 17 percent to a near 29-year low on Monday after its warning of a record $7.8 billion annual loss due to weak sales, a firmer yen and costs of restructuring its sprawling operations.

Hitachi lost $1.9 billion in market value as investors damped its shares after Friday's warning of what would be the biggest ever full-year loss at a Japanese manufacturer and would wipe out a third of its shareholders' equity.

Hammered by the global recession, a growing number of electronics makers including Sony Corp and Toshiba Corp have issued loss warnings.

Hitachi's automotive components business has been battered by slumping car sales worldwide, while steep price falls, fierce competition and anemic demand are hurting its flat-screen TV operations, prompting it to announce a $2.2 billion cost-cutting plan on Friday.

http://news.yahoo.com/s/nm/20090202/bs_nm/us_hitachi

[ozymandius]

8. Oil industry profits plunge; no regrets at Exxon

HOUSTON – The extraordinary profits for Exxon Mobil may be over for now, but opportunities abound even in a year that's expected to be miserable for the entire oil and gas industry.

The world's largest publicly traded oil company on Friday reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company, even as its fourth-quarter earnings fell 33 percent from a year ago.

....

Triple-digit price swings for a barrel of crude have scattered oil majors along divergent paths as each adjusts to seismic changes in the market.

ConocoPhillips, for example, is cutting jobs and spending after posting a massive fourth-quarter loss. Royal Dutch Shell had a big loss too, but it hopes to ride out the downturn with flat spending and few, if any, layoffs.

http://news.yahoo.com/s/ap/20090131/ap_on_bi_ge/earns_oil

[ozymandius]

9. P&G cuts outlook, says sales slowing

CINCINNATI – Even Procter & Gamble Co., the world's largest consumer products maker, is getting dragged down by the spreading recession that has households around the globe looking for ways to tighten their budgets.

P&G reported Friday that its second-quarter profit jumped 53 percent, but that was boosted by the sale of its Folgers coffee business last year. The current outlook isn't so robust, and P&G stock tumbled 6 percent Friday to close at a 52-week low.

The company dropped its earning projections for the full year, and expects total sales to fall in the current quarter and possibly for the year. Chairman and CEO A.G. Lafley had warned in December that P&G, long considered a safe harbor in economic tempests, is recession-resistant — but not recession-proof.

....

U.S. households have been trimming spending and some are turning to cheaper store and generic brands. P&G officials said some women are cutting down on beauty spending, fine fragrances are down, and that households are emptying their pantries and drawers of products like its Duracell batteries before buying any more while retailers are tightening inventories.

http://news.yahoo.com/s/ap/20090130/ap_on_bi_ge/earns_procter___gamble

[ozymandius]

10. Republicans vow trouble for Obama stimulus plan

WASHINGTON (AFP) – President Barack Obama's gargantuan attempt to revive the recession-hit US economy risks running into a wall of opposition in the Senate this week, top Republicans warned Sunday.

With the Senate poised to take up the 819-billion-dollar stimulus package Monday, Republican leaders said they would stall the bill without a fundamental rethink of its mix of spending and tax cuts.

"In the Senate, it routinely takes 60 votes to do almost everything. It doesn't necessarily mean you're trying to slow a bill down," Senate Minority Leader Mitch McConnell said on CBS program "Face the Nation."

....

A key Republican demand is to refocus the stimulus package away from a spending spree on infrastructure and social safety nets, and toward attacking the root cause of the financial crisis: the US property market slump.

http://news.yahoo.com/s/afp/20090201/bs_afp/uspoliticsfinancecongress

---

What geniuses! These Republicans want to re-inflate the real estate bubble. Then everything will be just fine. Bankrupt of ideas does not even begin to describe the utter stupidity of this party.

[snot]

29. actually, if they really did that --

"A key Republican demand is to refocus the stimulus package . . . toward attacking the root cause of the financial crisis: the US property market slump.

The Republicans will introduce a plan to enable homeowners to refinance their mortgages at a low interest rate of about four percent, Senator John Ensign said on CNN."

-- it would make a lot more sense as a stop-gap than what they've done so far. Wouldin't the derivatives problem go away, if we solved the bad-mortgage-loan problem?

Somehow I doubt that's what they'd really do, given the chance.

[Dr.Phool]

40. The interest rates aren't the problem. It's the prices.

Prices skyrocketed because of low interest rates. There's no way in hell that a house should appreciate 50-60% in 3 or 4 years. I don't care what the interest rate is, no sanely operated bank is going to loan you more than the house is worth anymore.

Start off with more jobs at higher wages, and the rest will take care of itself.

[Tansy_Gold]

41. "Start off with jobs"

Amen.

[MUAD_DIB]

39. But the financial crisis has already spread out from the instability

of the real estate mess. Wouldn't throwing monies there be ineffectual?

Maybe if they (GOP) had thought of regulation of the housing markets, let's say in 2001, then maybe we could have avoided this catastrophe?

Better yet, maybe if they had all swallowed a bottle of pills in 1994 then they would have saved the US 15 years of humiliation.

[AnneD]

53. One of my few comebacks....

yesterday they were talking about that amd one guy said "Democrats! We don't have that kink of money!!" to which I replied "Well we didn't have it last month but that didn't stop the Republicans from giving it to their banker friends." You could tell by the clubhouse rx's which side people were on.

[ozymandius]

11. Veneroso: Japan on the Edge of the Abyss

from Naked Capitalism

last Thursday, which showed a fall of 9.6%.

I have to confess that I have fallen into "Japan bad news" syndrome, in that I expect bad news out of Japan and therefore did not focus enough on the details. And while I do not aspire to covering every financial news story (that's what the MSM is for), the latest figures paint a grim picture, even by our new, desensitized standards.

It wasn't simply that December was truly awful, but it came on top of a nearly-as-bad November. From Bloomberg:

Japanese manufacturers cut production an unprecedented 9.6 percent last month, deepening a recession that’s expected to be the worst in the postwar era.

The drop eclipsed the previous record of 8.5 percent decline set in November, the Trade Ministry said today in Tokyo. Economists predicted a month-on-month decrease of 8.9 percent.

....

A hedge fund correspondent sent Frank Veneroso"s ;latest piece, "The Yen: Will The Traders Push The Land Of The Rising Sun Off The Face Of The Earth?" which gives a sense of how bad things could get. Some excerpts:

1)The Japanese industrial production data and METI forecast was bad beyond all imagining. Industrial production might fall by 1/3 in the 12 months ending in January. It could fall in a mere four months between November and February by more than half the U.S. Great Depression decline which took almost four years.

2) Nothing like this has ever happened to a major industrial nation to my knowledge – not even during the 1929 – 1933 Great Contraction.

3) The trade weighted yen is by far the strongest currency in the world. Japan is losing competitiveness fast. Given the lags in trade matters will get worse.

4) The insane trader community continues to push the yen up as a safe haven. It is all so detached from reality I suppose they could take it higher.

Yves here. I only get the privilege of reading Veneroso now and again, but I cannot recall him taking a tone remotely like what follows:

Every week it gets worse and worse and worse. Today it was Japan....

THERE HAS NEVER BEEN DATA THIS BAD FOR ANY MAJOR ECONOMY – EVEN IN THE GREAT DEPRESSION. December industrial production came in down 9.6%, worse than the METI forecast. It is now down almost 21% year over year. METI forecasts a further 4.7% decline in February. The inventory to production ratio soared again. Maybe METI will be correct.

If it is, Japan industrial production will have fallen 28% (non annualized) in four months. It will have fallen by a third in about a year. Nothing in the history of major nations compares. A 28% decline in four months would be more than half of the entire decline in U.S. industrial production over the 3 years and nine months of the U.S. Great Depression.

It would be a greater decline in four months than in any 12 month period in the Great Depression in the U.S. We are literally looking at the unimaginable. (I am attaching the U.S. industrial production index from the Great Depression for comparison).

IT’S A DEPRESSION IN JAPAN – ALREADY – PURE AND SIMPLE.

It's a little early in the week for apocalyptic forecasts. One can only hope Veneroso is wrong, but it seems likely that the (considerable) damage of an overly high yen is already done.

---

much more at link...

[Demeter]

14. Lo How The Might Have Fallen

Hey, Japan! Move over, willya? There's got to be room for two at the bottom....

[ozymandius]

12. Bailouts for Bunglers (something we can shake our fists about)

Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government — but the president says some very harsh things about you before forking over the cash.

Am I being unfair? I hope so. But right now that’s what seems to be happening.

Just to be clear, I’m not talking about the Obama administration’s plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do. I’m talking, instead, about the administration’s plans for a banking system rescue — plans that are shaping up as a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.

....

So banks need more capital. In normal times, banks raise capital by selling stock to private investors, who receive a share in the bank’s ownership in return. You might think, then, that if banks currently can’t or won’t raise enough capital from private investors, the government should do what a private investor would: provide capital in return for partial ownership.

....

There’s more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

http://www.nytimes.com/2009/02/02/opinion/02krugman.html?_r=1&partner=rssnyt&emc=rss

---

As I've said before - and will say again right here - the banking sector ceased to be a "free market system" years ago. We owe ourselves the dignity of admitting that bare-knuckled fact.

[Demeter]

17. More from Krugman

But bank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.

My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.

If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair — but prices would, The Financial Times reports, probably be based on “valuation models” rather than market prices, suggesting that the government would be making a big gift here, too.

And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.

Will there at least be limits on executive compensation, to prevent more of the rip-offs that have enraged the public? President Obama denounced Wall Street bonuses in his latest weekly address — but according to The Washington Post, “the administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid” because “harsh limits could discourage some firms from asking for aid.” This suggests that Mr. Obama’s tough talk is just for show.

Meanwhile, Wall Street’s culture of excess seems to have been barely dented by the crisis. “Say I’m a banker and I created $30 million. I should get a part of that,” one banker told The New York Times. And if you’re a banker and you destroyed $30 billion? Uncle Sam to the rescue!

There’s more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

[snot]

37. Deserves its own GD post.

[ozymandius]

13. Railroad Traffic Plunges

From Mike Shedlock...

The American association of Railroads says it was a Down Week for Freight Traffic on U.S. Railroads.

WASHINGTON, January 29, 2009 — Freight traffic on U.S. railroads continued to trend downward during the third week of 2009, the Association of American Railroads (AAR) reported today. Carload freight totaled 267,634 cars, down 14.6 percent from the comparison week in 2008, with loadings down 9.2 percent in the West and 22.1 percent in the East. Intermodal volume of 195,182 trailers or containers was off 7.1 percent from last year, with container volume falling 2.3 percent and trailer volume dipping 23.9 percent. Total volume was estimated at 28.4 billion ton-miles, off 13.4 percent from 2008.

Combined North American rail volume for the three weeks of 2009 on 14 reporting U.S., Canadian and Mexican railroads totaled 1,015,857 carloads, down 17.3 percent from last year, and 738,351 trailers and containers, down 12.3 percent from last year.

Railroads reporting to AAR account for 89 percent of U.S. carload freight and 98 percent of rail intermodal volume. When the U.S. operations of Canadian railroads are included, the figures increase to 96 percent and 100 percent. The Canadian railroads reporting to the AAR account for 91 percent of Canadian rail traffic. Railroads provide more than 40 percent of U.S. intercity freight transportation, more than any other mode, and rail traffic figures are regarded as an important economic indicator.

Motor vehicle traffic was down a whopping 65.4%.

more at the link...

[Demeter]

15. Oh, Ozy! You Are So Full of Cheerful Good News!

I will look in my email for something remotely humorous, to lighten the tone of this Groundhog Edition of SMW. Otherwise, we'll have readers slitting their wrists.

Personally, I'd be happy if our President would stop making futile gestures to the GOP, as a start. Then doing the same for the Big Failed Banks would double the relief.

[Dr.Phool]

27. Wretched Rodent predicts Ruin!

Phil said you're in for 6 more weeks of dismal weather. I hope it at least warms up some.

A friend of mine comes down from Cleveland to spend the winter in St. Pete. This year he came a month later than usual. He called me yesterday morning when he got into town. He drove down I-77, to I-26, I-95, I-10, and I-75. He said there was virtually no traffic all the way down. And he drove during the daylight hours, and spent the night in Savannah.

I've driven that route several times, and it's usually packed with truck traffic. He said not this time.

[Tansy_Gold]

38. Local traffic in Apache Junction, AZ, is still horrendous

this winter, with the usual influx of "snowbirds" who aren't familiar with some of our traffic patterns. But reports are that they are spending far less money.

Also, an informal survey by yours truly has determined that there are more than the usual number of Canadians. We normally have our fair share of visitors from north of the border, but those Saskatchewan, Alberta and "Beautiful British Columbia" license plates seem to be more numerous than in prior years.

Also, in the FWIW Dept, an acquaintance recently bought a house here for $128K that had been on the market for almost two years. The original asking price was $245K. This was to settle an estate, not a foreclosure or short sale or anything.



Tansy Gold

[Ghost Dog]

43. Hence Re. "Motor vehicle traffic was down a whopping 65.4%" above,

I take it this refers to freight traffic carried by truck? Where is this figure sourced (Mish gives no link)?

This seems to reflect the "Shipping News" just about everywhere.

Ed. See also #22: "International Air Transport Association said traffic volumes had fallen by 22.6 per cent year-on-year in December."

[Demeter]

47. Well, Today Is Just as Beautiful As Yesterday

Meaning it's above freezing, the snow is swiftly retreating, and I'm not wearing my entire wardrobe every time I go outdoors.

This winter was a Finland winter. It's nice to be back to a Michigan winter. I hope the groundhog chokes.

[ozymandius]

33. It's so hard to be a little ray of sunshine these days.

I thought more than twice about posting Exxon Mobil's good news. I refrained, however, out of fear of being pelted with rotten fruits and vegetables. :hide:

[Demeter]

16. As unemployment rises, Uncle Sam has jobs

http://news.yahoo.com/s/ap/20090202/ap_on_go_ot/feds_padding_payrolls_2

By DEB RIECHMANN, Associated Press




While the nation's 11 million unemployed and the millions more who fear losing their jobs may feel Washington should streamline too, economists say a strong federal work force is key to economic recovery. Were President Barack Obama to put any of the nearly 2 million federal civil servants out in the street in the middle of the worst economic downturn since the Great Depression, the consequences could be dire.

"Federal belt-tightening would worsen the problem right now," said Kevin Hassett, director of economic policy studies at the American Enterprise Institute, a conservative think tank. "Most economists agree that the federal government is a built-in stabilizer," said Hassett, a former adviser to GOP presidential campaigns.

Obama's proposed $800-plus billion economic aid plan, which includes heavy spending on public works, is expected to increase the ranks of government workers, although mostly at the state and local level.

........

Simply letting federal workers go is "penny-wise and pound foolish," said Max Stier, president of the Partnership for Public Service, a nonprofit group that works to revitalize the government and its work force. "We had a situation where we had a single person monitoring toys coming in from abroad. The result: You get lead-tainted toys coming in to the country," Stier said. "We need people looking out for the public good."

Paul Light, professor of public service at New York University, also thinks more, not fewer, federal workers are needed on the front lines. He said other steps could be taken to trim costs. The Obama administration has suggested reducing the number of managers at the middle levels, he said.

"That would be a good thing," Light said. "What he hasn't suggested is that we reduce political appointees at the senior level. I just think you could do some things to say to the public, 'Look, the federal government is going to make its share of sacrifice and it's more than just having energy-efficient buildings.'"

The government's civilian, nonmilitary work force peaked in the late 1960s at about 2.3 million. It was 2 million or more through the mid-1990s, when the government cut more than 400,000 jobs — many through military base closings. Since 2001, civilian employment in the executive branch, excluding postal employees, has edged upward from 1.7 million to about 2 million, largely because of new homeland security jobs.

More federal job openings are on the horizon.

A report released in January by Christina Romer, head of the White House Council of Economic Advisers, and Jared Bernstein, an economic policy adviser to Vice President Joe Biden, predicted that more than 90 percent of the 3 million to 4 million jobs that Obama proposes to save or create would be in the private sector.

But the report also estimated that 244,000 government jobs — some at the federal level, but more at the state and local level — would be created or saved.

That was based on a $600 billion stimulus package; the one being debated in Congress is more than $800 billion.

Moreover, many baby boomers who are getting government paychecks are at retirement age. The Office of Personnel Management estimates that 58 percent of supervisory and 42 percent of nonsupervisory workers who were on the federal payroll as of October 2004 will be eligible to retire by the end of next year. The financial meltdown, however, has prompted some to delay retirement.

[Demeter]

18. Dilbert on Modern Business Practices online

[Demeter]

19. Stock plan for Lehman creditors

http://www.ft.com/cms/s/0/93a88ce0-f095-11dd-972c-0000779fd2ac.html

By Julie MacIntosh, Francesco Guerrera and Nicole Bullock in New York

Published: February 1 2009 23:33 | Last updated: February 1 2009 23:33

Creditors of Lehman Brothers would receive stock rather than cash under a plan that could separate its illiquid assets into two companies, which would force them to wait for repayment but potentially boost their returns.

The plan would allow Lehman to cordon off difficult-to-sell assets and wait for the markets to improve, preventing a fire sale of its holdings, said Bryan Marsal, co-head of Alvarez and Marsal, which is managing Lehman’s liquidation. It is now in its preliminary stages but, if it is adopted, the two standalone companies could be publicly listed within two years.

One of the companies would include Lehman’s real estate holdings, now valued at $43bn, which could prove difficult to sell at a time when the commercial real estate market is only just starting to suffer from corporate lay-offs and liquidations.

The bank’s other illiquid assets, including private equity investments and proprietary investments such as its stake in SkyPower, a Canadian renewable energy company, would be gathered into the second company.

Lehman had $12.3bn in principal investments as of September 30, plus additional commitments that it had not yet funded.

Lehman, which filed for the largest bankruptcy in history in September, would distribute stock in those companies into a trust that would benefit its creditors. That stock would eventually be converted to cash as assets are sold.

Lehman is considering the future of the industrial bank it operates in Utah and Lehman Brothers Bank, its thrift. It may try to convince US regulators that the two banks are financially viable and, therefore, eligible to sell loss-making assets into the $700bn troubled asset relief programme.

Lehman approached the US Treasury late last year to request inclusion in the Tarp but was denied, said Mr Marsal. The bank plans to reapply for Tarp assistance.

Lehman’s advisers have hired more than 200 former Lehman employees to help sell its securities and other liquid assets, which range from derivatives to corporate jets. Dick Fuld, the company’s former chief executive, is working on a month-to-month basis to help lobby counterparties for better recovery terms.

Lehman’s US operations managed $26bn of the total $47bn in global derivatives receivables Lehman was owed when it filed for bankruptcy. Alvarez and Marsal has collected on $2.5bn of that exposure.

[Demeter]

20. UBS bankers face 80% bonus cut

http://www.ft.com/cms/s/0/f17f8954-ee42-11dd-b791-0000779fd2ac.html

By Haig Simonian in Zurich, Adrian Cox in London and Peter Thal Larsen in Davos

Published: January 29 2009 20:37 | Last updated: January 29 2009 20:37

UBS bankers were reeling on Thursday after the Swiss government said the bank would have to slash bonuses by more than 80 per cent after taking state assistance.

One banker said employees were “shocked” at the news that the compensation pool would probably be less than SFr2bn (€1.34bn) – a fraction of the award for 2007.

“No one in a rational world is saying we should be getting a bonus. But this is a realisation that we would have been better off working somewhere else,” he said.

The UBS cuts are the latest evidence of the extent of bonus cuts at investment banks.

Wall Street firms slashed payments for 2008 by 44 per cent, the second straight decline after two record years, according to New York state estimates. Bank of America is planning to defer bonus payments to some investment banking staff this year.

The heaviest UBS cuts will come from senior staff packages, which also have a higher proportion of non-cash bonus rewards. Employees will find out in early February what their pay is to be.

UBS’s approach to bonuses has been influenced by the Swiss government and a backlash to the rescue of the group. UBS had the highest losses from the credit crisis of any European bank.

Under the terms of last October’s bail-out, the Swiss government injected SFr6bn into UBS by subscribing to mandatory convertible notes, equivalent to more than 9 per cent of the bank’s shares.

The Swiss central bank created a special multibillion-franc vehicle to take on the bulk of UBS’s toxic assets. In return, UBS agreed to the Swiss bank regulator having a say in compensation.

[fedsron2us]

56. Welcome to the real world

Little bird has told me that UBS offices in the City of London had numerous OMG and 'we are so screwed' meetings last week.

The investigation by the US authorities into UBS role in tax evasion is threatening the firm with annihilation.

http://www.bloomberg.com/apps/news?pid=20601087&sid=arH70q8zTzp4&refer=home

I suspect that the US government has finally decided to crack down on some of the fun and games indulged in by big corporations through off shore tax havens. What better way to get the message out than to go after the biggest of them all, Switzerland.

[Demeter]

21. Kuwaiti bank reimburses Madoff losses

http://www.ft.com/cms/s/0/81db6136-ee4c-11dd-b791-0000779fd2ac.html

By Brooke Masters and Henny Sender

Published: January 29 2009 23:31 | Last updated: January 29 2009 23:31

The National Bank of Kuwait has fully reimbursed all its clients who lost money in the alleged $50bn Ponzi scheme run by New York broker Bernard Madoff, banking sources said.

NBK paid about $50m to some 20 individuals who invested in Madoff feeder funds through its Swiss bank in December, one NBK executive said. The clients received the principal they initially put into the funds and the gains, said by authorities to be fictitious, that they thought they had made.

A bank spokesman declined to comment. People close to NBK, one of the Arab world’s largest financial institutions, saw the measure as a way to strengthen its relationships with its clients. The NBK move puts pressure on other banks and fund managers whose clients lost money in Mr Madoff’s alleged fraud. “Other banks should similarly acknowledge responsibility for investing their clients’ monies in Madoff’s fraudulent enterprise, and with the threat of reputational losses and litigation, we would not be surprised to see other banks doing right by their clients,” said Mark Gross, of the US-based Pomerantz law firm, which represents European and US clients who lost money to Mr Madoff’s operation.

NBK had the advantage of having relatively small losses to cover, compared to the $7.5bn and $3.2bn lost by the clients of US money managers Fairfield Greenwich and Tremont Group respectively. Santander, the Spanish bank that stands third on the list of reported Madoff losses with about $3.2bn, has offered to cover part of the losses of its private clients who sent money to Mr Madoff’s operation through Santander’s Optimal hedge fund arm. But Santander’s offer covers only the principal invested and is in the form of preference shares, which some investors have argued are worth only 20 per cent of the face value of their original investment. Institutional investors are not included in the offer.

People at several other banks with Madoff exposure took pains to distinguish themselves from NBK and Santander, where the investors who have been offered reimbursement were individuals with wealth management or private banking accounts. UBS and HSBC each served as custodians for Madoff-feeder funds, and the UniCredit Madoff customers were institutional investors who invested through the Italian bank’s Irish unit.

[Demeter]

23. Wells Fargo hurt by Madoff fallout

http://www.ft.com/cms/s/0/37eae736-ed39-11dd-88f3-0000779fd2ac.html

By Francesco Guerrera in New York

Published: January 28 2009 14:11 | Last updated: January 28 2009 18:48

Wells Fargo emerged as a surprise victim of the Bernard Madoff scandal on Wednesday, revealing a $294m loss caused by clients who defaulted on loans from the San Francisco-based bank after losing money in the alleged fraud.

The Madoff-related charge was revealed as Wells reported a $2.5bn loss in the last three months of 2008 – its first quarter in the red since 2001.

The charge at Wells, a bank that prides itself on its prudent lending policies, suggests that the effects of the alleged fraud by Mr Madoff may have touched a wider-than-expected range of customers and financial institutions.

People close to Wells stressed it had no direct exposure to Bernard Madoff Securities, the New York brokerage firm whose “Ponzi scheme” allegedly lost $50bn for clients ranging from fund managers to charities.

However, they said that several clients of its wealth management business, which caters to high net-worth individuals, had lost significant sums in the scandal and had been forced to default on some loans from the bank.

[Demeter]

26. Santander makes offer to Madoff victims

http://www.ft.com/cms/s/0/d9864cde-ec9e-11dd-a534-0000779fd2ac.html

By Joanna Chung in New York and Victor Mallet in Madrid

Published: January 27 2009 18:54 | Last updated: January 27 2009 23:16

Santander, the Spanish bank whose clients lost €2.33bn in the alleged fraud by the US broker Bernard Madoff, on Tuesday night became the first institution to offer to repay the victims in an attempt to stave off lawsuits and preserve its reputation.

Santander said it would pay back 100 per cent of the investments made in the Optimal Strategic US Equity fund, which was wholly invested with Mr Madoff, to individual private banking clients but not to institutional investors. In exchange, clients would have to agree not to sue.

The repayment of the private bank client investments of €1.38bn would be in the form of Santander preference shares, paying an annual 2 per cent, which could be bought back by the bank after 10 years.

The difference between the amount of the offer and the €2.33bn total client losses initially announced by Santander includes investments by institutional clients for which no offer is being made and the nominal returns from Mr Madoff that apparently never existed.

José Antonio Alvarez, Santander finance director, told the Financial Times that the bank, the largest in the eurozone, was making the offer “to preserve the value of the franchise”. He said: “We have significant business with those private clients and we are trying to preserve this business.”

The current cost to Santander of paying back its clients would be about €500m, which would be provisioned in the 2008 results to be announced next week, the bank said.

Optimal Investment Services, Santander’s Geneva-based fund of hedge funds management company, meanwhile, announced on Tuesday night that it would wind up seven of its 12 funds through “orderly redemption and termination” following a sharp rise in withdrawal requests.

Santander gave no official explanation for its exclusion of institutional investors from the offer. But bank officials drew a distinction between private clients advised by Santander and institutions that could perform their own due diligence and that invested in Optimal’s US equity fund precisely because it was a route into Mr Madoff’s business. “They are grown-ups,” said one. “They knew it was Madoff.”

Santander is the bank whose clients were worst hit by the Madoff scandal, and its customers in Spain, Latin America and elsewhere are furious about the loss of their investments. In Spain, some have threatened to withdraw their custom from the bank.

[Demeter]

22. Airlines report ‘shocking’ plunge in traffic

http://www.ft.com/cms/s/0/320fdb52-edeb-11dd-b791-0000779fd2ac.html


By Kevin Done, Aerospace Correspondent

Published: January 29 2009 10:20 | Last updated: January 29 2009 10:20

The airline industry reported on Thursday an “unprecedented and shocking” plunge in global air cargo traffic.

Air freight accounts for 35 per cent of the value of goods traded internationally and the International Air Transport Association said traffic volumes had fallen by 22.6 per cent year-on-year in December.

Giovanni Bisignani, Iata director general, said, “there is no clearer description of the slowdown in world trade. Even in September 2001 (after the 9/11 terrorist attacks in the US), when much of the global fleet was grounded, the decline was only 13.9 per cent.”

International passenger traffic fell in December by 4.6 per cent. Iata said the drop was less dramatic than in cargo, as volumes had been supported by year-end leisure travel that had been booked in advance.

Airlines are still struggling to reduce capacity to match falling demand, however, and are flying with more empty seats. Capacity was reduced by 1.5 per cent year-on-year in December, resulting in airlines filling only 73.8 per cent of available seats, down from 76.2 per cent a year ago.

[UpInArms]

24. dollar watch

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

Last trade 86.399 Change +0.565 (+0.73%)

Dollar King of No Yield

http://www.bktraderfx.com/site/uncategorized/fx-weekly-0109-020609-dollar-king-of-no-yield

As 2009 begins to unfold the biggest story in the FX market is the inexorable movement of all G-7 interest rates to zero percent. ZIRP, as a monetary policy is no longer the sole province of BOJ. US rates are now 0.25%. UK rates are 1.5% and moving towards 1% by next week. Canadian rates are 1.5% and will no doubt drop to 1% by the next meeting of BOC. And just last week ECB President Trichet telegraphed to the market that he intends to take rates European rates below the vaunted 2% line at the meeting in March.

Even high yielders like the kiwi dropped rates by much larger than expected 150bp last week taking the RBNZ yield to a paltry 3.5%. This week the RBA is expected to follow suit taking rates to 3.25% for the Aussie. Everywhere you look in the currency market yield is disappearing faster than an ice cube at the Australian Open where temperatures yesterday hit 109F (43C).

As all industrialized economies continue to battle the growing global economic crisis by further easing their monetary policies what becomes the dominant value to drives trade? Survival. In world where consumer demand has fallen off a cliff, investors aren’t seeking a return ON capital, but simply just a return OF capital. Sovereign debt risk becomes the primary concern of currency valuation.

Ironically enough, US with its massive twin deficits and its FIRE (Finance, Insurance, Real Estate) based economy burned to the ground has become the repository of safe haven investment flows. The strength in the dollar is not a reflection of optimism in the US economy, but rather a vote of total no-confidence in Euro-zone system. With European union beginning to fragment under the pressure of escalating economic problems. traders are flocking to dollars as the only alternative left.

If the market truly loses faith in the euro experiment the pair could slice through the 1.2500 handle and even approach 1.2000 as panic liquidation will begin to set it. We haven’t reached that point yet, but next week could prove to be pivotal in determining just how fragile the support for the single European currency has become.

...more...

Weak Dollars, Weak Presidents

http://spectator.org/archives/2009/01/27/weak-dollars-weak-presidents

Our friend Steve Forbes has said that if you’re ever stuck in the middle seat on an airplane and want to clear some elbow space, start talking about monetary policy and your seatmates will start fleeing for the exits. But the subject was unavoidable this past election season, and it is precisely because President Bush had taken his eye off the importance of defending the greenback from its precipitous fall (perhaps he too thought the issue a yawner) that Republicans ended up in a world of trouble. Bush has followed a Ronald Reagan tax cutting strategy but a Jimmy Carter monetary policy. John McCain's loss to Barack Obama in November confirms that the collapse of the dollar in recent years is a big explanation for the second straight voter repudiation of Republican economic policies.

It turns out that the direction of the dollar has a lot to do with who wins elections, and history proves it. Since 1960, when the dollar has remained strong the incumbent party has fared very well on Election Day. When the dollar falls in value over a president’s term, the voters usually throw the bums out. Why? A weak dollar is often the trip wire for other negative economic effects that hit Americans right smack in the pocket book: higher inflation at the grocery store and gas pump, stagnant or declining wages, and less international investment here, meaning fewer jobs.

When John F. Kennedy ran against Richard Nixon in 1960, he declared, “we can do bettah,” and as the pro-growth candidate called for a faster economic growth rate (5 percent) and a stronger dollar. Kennedy’s declaration on monetary policy was bullish and unequivocal: “This nation will maintain the dollar as good as gold at $35 an ounce, the foundation stone of the free world's trade and payments system.''

The economy performed well while JFK was still alive, and boomed even more once Lyndon Johnson passed Kennedy's tax cuts posthumously, which helped lay the groundwork for LBJ’s landslide victories in 1964. But as the ’60s wore on, investors increasingly questioned America’s commitment to maintaining the dollar’s relationship with gold. In private markets gold started to trade far above the Bretton Woods $35/ounce fix, which translated into inflation. By the end of 1968, consumer price inflation had risen to 4.7 percent. One unsung reason for the implosion of his presidency beyond the growing unpopularity of the Vietnam War was that Americans were experiencing the cruel economic retardant of creeping inflation.

Under Nixon the economy performed well and inflation was still relatively tame through his first term, so he won a huge re-election. But Nixon severed the dollar’s peg to gold in 1971, and by mid-1973, a new and ferocious inflationary phase had been unleashed.

With the dollar now lacking credibility, commodities, including gold, boomed. From 1972 to ’73 oil prices rose 300 percent, meat prices were rising at a 75 percent annual rate, and the price of a bushel of wheat rose 240 percent. After the second dollar devaluation in February 1973, Treasury Secretary George Shultz said, “There is no doubt that we have achieved a major improvement in the competitive position of American workers and American business.” Arthur Burns assured the Federal Open Market Committee that the inflationary impact of the dollar’s devaluation “would be quite small.” They sounded much like Messrs. Paulson and Bernanke today.

...more...

[Demeter]

28. Valero shuts refinery as slowdown bites

http://www.ft.com/cms/s/0/9d781cc8-ec93-11dd-a534-0000779fd2ac.html

By Sheila McNulty in Houston

Published: January 27 2009 17:31 | Last updated: January 27 2009 22:57

Valero Energy said it would close an entire US refinery this quarter as it slashes petrol production and sharply reduces capital spending to manage the economic slowdown.

The biggest US refiner has 15 refineries across the country. It said that in addition to shutting its large Texas City refinery, it would close the fluid catalytic cracking unit, which primarily produces petrol, at its Corpus Christi East Plant.

Valero has cut the average useage rate at such petrol-producing units to 70-75 per cent capacity, down from the near full capacity at which the whole US system was running just a few years ago.

“The sluggish economy is clearly a headwind against demand growth for refined products,’’ said Bill Klesse, Valero’s chairman and chief executive.

Valero also cut its estimate for 2009 capital spending to $2.7bn from its previous estimate of $3.5bn. Analysts had been expecting more than $4bn in capital spending for 2009. The company said that the cut in planned expenditure would have an impact on discretionary projects at many of its refineries.

Valero reported a fourth quarter net loss of $3.3bn, or $6.36 per share, on a goodwill impairment loss of $4.1bn.

In the same quarter a year earlier, Valero had reported net income of $567m, or $1.02 per share. Excluding the impairment charge, related to various acquired assets, Valero reported fourth quarter 2008 net income of $732m, or $1.41 per share.

Analysts expect Valero, with its diverse assets, to fare better than most US refiners in what is likely to be another difficult year. Last year, the sector suffered from a sharp drop in demand for petrol, as US consumers responded to the rise in petrol to more than $4 a gallon.

The drop in demand meant refiners could not raise prices any further to pass along the continued rise in their crude oil feedstocks, which rose to just under $150 a barrel.

[UpInArms]

34. From the "Ya Think?" Dept: Bank rescues risk skewing competition

http://www.reuters.com/article/newsOne/idUSTRE5111V620090202?sp=true

DAVOS, Switzerland (Reuters) - State intervention to rescue banks and prevent a collapse of the financial system was essential but may inadvertently skew competition between lenders, senior executives say.

Governments across the world have rushed to inject much-needed capital into faltering banks to avoid a complete financial meltdown following the collapse of U.S. investment bank Lehman Brothers in September.

But the nationalization and part-nationalization of several banks in major countries has had consequences for banks that did not initially need state aid, who are now facing market pressure from state-backed competitors.

"It may be inadvertent, but there is no way that government involvement doesn't temporarily alter the competitive balance in the various industries that they get involved in," NYSE Euronext

Chief Executive Duncan Niederaurer said at the annual meeting of the World Economic Forum.

"Once you support and guarantee bank A in one country, it is sort of incumbent on you to support and guarantee bank B and C."

"If not you could inadvertently create the sense that the bank you went to rescue is just a safer place than the ones you did not rescue, even though the other banks didn't need the money."

Top executives say that what was started as a welcome response to a market shock could risk creating an uneven playing field in the long run.

"In the short term it is an absolute necessity to save some banks, to support them," said Georges Pauget, Chief Executive of France's largest retail bank Credit Agricole.

"But in the long term, we will have to be very careful about the consequences of such intervention."

...more...

[DemReadingDU]

36. Economy poll

Hey, I started a simple poll about the economy yesterday, Here's the link if you care to take it
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x55454


Also, don't forget to check out Demeter's weekend thread. Lots of good articles there, I'm still catching up!
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x421204

[Demeter]

48. Decades?

It doesn't have to take decades to rebuild the US economy---but it will take some serious prosecuting, jailing, asset-stripping, and taxing. It will also take some serious regulation within the government and by the government.

The odds of that happening? I couldn't guess, just hope.

[DemReadingDU]

51. From what I've been reading

Recovery is going to be different, not necessarily bad, but not back to where most people were overspending, overconsuming. I'm not exactly sure what our economy is going to look like in 5 years, 10 years, or 2 decades.

Part of this recovery process needs the prosecuting and jailing of the corrupted banksters and their cronies in the government. No one is above the law. The Rule of Law and justice must prevail.

The 'rule of law', in its most basic form, is the principle that no one is above the law.
the "rule of law" or Rechtsstaat is considered a prerequisite for democracy
http://en.wikipedia.org/wiki/Rule_of_law

[snot]

63. I love it:

"Now, I expect the IMF to go to Obama and tell him how to fix the economy," said .

[DoBotherMe]

44. kick n/t

[Tansy_Gold]

46. me, too n/t

[Demeter]

49. If All These Banks in Other Countries Can Make their Madoff Victims Whole (or in part)

do we have any US victims that were sent to Madoff by US banks?

[ozymandius]

54. Yes we do.

Sorry- I cannot bring them to mind right now. Stories circulated here in the past few weeks have indicated as such.

[Tansy_Gold]

55. GOP senators draft stimulus alternative

http://edition.cnn.com/2009/POLITICS/02/02/stimulus/index.html

(This has its own LBN thread but I wanted to put it here, too, because I want my comments in the SMW thread)

(CNN) -- A group of Republican senators drafted an alternative stimulus measure that narrows government spending to infrastructure programs and helping unemployed Americans, addresses the housing crisis and relies mostly on tax cuts.

***

The proposal includes $430 billion in tax cuts, $114 billion for infrastructure projects, $138 billion for extending unemployment insurance, food stamps and other provisions to help those in need and $31 billion to address the housing crisis.

***

Republicans have blasted numerous measures in the package, such as funding for veterans in the Philippines, sod on the National Mall and honey bee insurance.

***



My comments:
Funding for veterans in the Philippines may be a laudable issue, and given the reliance of our agriculture on honey bees and the current honey bee crisis, so is "insurance" for honey bees. But those issues DO NOT belong in an economic stimulus bill. If Dems put them in there, they need to get them out. Sod on the National Mall?? ARE YOU FUCKING KIDDING ME?????

Extending unemployment insurance is nice for those people who are eligible, but many people have gone beyond their benefit period and many more were never eligible. Extending unemployment insurance does NOT create jobs.

Tax cuts? On low- and middle-income tax payers? Great idea! BUT IN THE MEANTIME WE ABSOLUTELY MUST RAISE taxes on the upper 10%. If the people in DC, both D and R, really want to "stimulate" the economy, they have to create jobs. That means:

1. Raise taxes on the rich. Raise taxes on unearned income such as capital gains, inheritances, interest and dividends and rental property income. Allow for low- to middle-income exemptions but make the rich pay. Tax high incomes at appropriate levels. And for those who are whining because -- ultimately -- they hope someday to BE rich and live tax free, GET OVER IT, MORANS. IT AIN'T GONNA HAPPEN.

2. Go after the corporations that ship jobs overseas. THEY ARE NOT AMERICAN ANY LONGER. They are supra-national global parasites sucking the lifeblood of ALL workers everywhere.

3. Quit worrying about "trade wars." We've been on the losing end of one for years.

4. Put LOTS of money into energy independence. The one commodity the U.S. lacks to be virtually self sufficient is oil, but that doesn't mean we have to remain in bondage to those who have petroleum reserves.

5. Spend a few million $$ educating the American people as to how "an economy" really works. It's quite obvious they don't know.


Tansy Gold, who does

[tclambert]

57. Sod on the national mall might employ some landscapers

(somebody make sure they're not illegals, m'K?), otherwise I agree. #5, though, will receive a lot of resistance from Republicans because they do NOT want people to know how an economy really works. They want to keep pretending their past policies make sense, and don't cause massive recessions. "Give taxpayer's money to corporations and they'll create jobs?" Hmm. Have the recipients of TARP funds been hiring? Oh, gosh, no, they've been laying off.

[ozymandius]

58. I'm tired. Time to call it an evening.

Dow 7,936.75 Down 64.11 (0.80%)
Nasdaq 1,494.43 Up 18.01 (1.22%)
S&P 500 825.44 Down 0.44 (0.05%)
10-Yr Bond 2.719% Down 0.125
NYSE Volume 5,769,881,000
Nasdaq Volume 2,034,455,375

4:25 pm : Market-moving news was lacking this session. In turn, stocks traded with little direction and finished with mixed results.

All three major indices fell to losses in excess of 1% in the early going. Only the Nasdaq was able to finish with a gain, thanks to help from large-cap tech stocks. Microsoft (MSFT 17.83, +0.73) was a primary leader in its space. It staged its largest single-session advance in more than one week, enabling it to reclaim losses in the prior two sessions.

Large-cap industrial stocks sent the the Dow to new lows for 2009. The Dow is up 6.5% from its bear market low, though. General Electric (GE 11.62, -0.51) was a primary laggard in the Dow and the industrial sector (-2.5%), which was the worst performing sector in the S&P 500. Shares of GE actually registered a 13-year low amid ongoing concerns regarding the health of the company's capital arm. GE remains one of the only companies to boast a AAA credit rating, though.

Financial stocks, which have led the market in recent weeks, managed to finish a volatile session with a 0.2% gain. Financials were down as much as 3.5%.

Investors continue awaiting further details regarding a government-led plan to help restore the nation's financial system. Though there is doubt that any such plan will spur an immediate recovery, investors are anxious to make progress. According to The Wall Street Journal, Treasury Secretary Geithner indicated he will lay out plans for the financial crisis in his speech next week.

With the health of the financial system and the broader economy still uncertain, companies continue to issue warnings and make cuts where necessary. Macy's (M 8.59, -0.36) projects lower earnings for fiscal 2009 and is cutting dividend to $0.05 per share from $0.1325 per share. Macy's also plans to eliminate some 7,000 jobs. Shares of M dragged retailers 0.3% lower this session.

Earnings news was light this morning. Humana (HUM 40.13, +2.20) was one of the few widely-held companies to report; it announced lower fourth quarter earnings, strong revenue growth, and reaffirmed its full-year outlook. Humana's report was largely in-line with expectations.

There was some economic data released this morning, but it came with little surprise. Hard pressed by ongoing headwinds, personal spending in December was down 1%, while personal income decreased 0.2%. The personal spending data was largely reflected already in last week's advance fourth quarter GDP report.

Meanwhile, January ISM Manufacturing came in a better-than-expected 35.6. The consensus called for a reading of just 32.5. Still, the data reflect continued contraction in manufacturing.

Construction spending in December fell 1.4%, which is a bit steeper than the 1.2% decline that was widely expected. The drop in December indicates an accelerated decline from the 1.2% decline registered in the prior month. DJ30 -64.11 NASDAQ +18.01 SP500 -0.45 NASDAQ Dec/Adv/Vol 1248/1451/2.02 bln NYSE Dec/Adv/Vol 1656/1378/1.33 bln

[Tansy_Gold]

59. I'm tired, too.

I'm tired of the overwhelming mountain of stupidity that seems to have dumped itself on Barack Obama.

And as a result, I'm beginning to think a colossal crash of the markets, a true disaster of epic proportions is the only thing that can save us. I truly believe now that Obama and Geithner and Summers and Rubin and all the rest will just keep postponing the inevitable. They've got it in their heads that they CAN work miracles. All the snide remarks about Obama as the "savior" have a substantial ring of truth to them.

It takes a certain amount of ego and hubris to run for the presidency. That goes without saying. But good goddess, what happened to the man's intelligence? Can he not see that unless the economy is made sustainable, unless there are real jobs created -- not make-work giveaways -- the whole thing will just collapse anyway?

Just like Condi Rice and the we never imagined the planes would fly into buildings, does Obama really believe that putting people to work fixing bridges and renovating schools is going to restore jobs? No, it's going to take MAJOR shifts in policy. It's going to take a major standing up to the corporations who care nothing about individual national economies and only about the profits to their stockholders.

Obama, more than any previous president, ought to have some inkling of what happens when an economy -- in this case, a global one -- is built on slavery. There is no room for a middle class in that kind of economy.

I know I'm either shrieking in the wilderness or preachin' to the choir, but it just makes me so damned angry to see so much stupidity concentrated in one place.


Tansy Gold

[ozymandius]

60. Many were wary of the Milton Friedman disciples in the Obama camp.

Those fears were not misplaced. The toolbox contains one tool: a hammer. Now everything looks like a nail. I know this is a vast generalization of Obama policies. However - the same tactics used before are being used again - but with feeling (and a modicum of oversight).

Tired. Tired. Tired.

[Demeter]

62. The Goal of Infrastructure (Not permanent ) Jobs Is to Start Money Moving About

The velocity of money--how quickly it changes hands--has dropped tremendously. It just doesn't get into the empty hands, some of it piles up in the rich man's bank accounts, and a lot of it simply evaporated when the frauds and casinos had their roofs blown off.

If this temporary work starts the money moving into the empty hands, those hands will spend freely and prime the pump for more "permanent" work. Not there is any such thing, anymore, unless you are the nephew of the CEO at a utility.

The temp jobs can also help new workers get their work habits started, their resumes won't be blank, and they won't be on welfare. It is by design a temporary program.

But unless the banks are nationalized and rationalized, they will always be the brick wall in the economy.

And unless taxes start getting collected from people who have money to spare, we aren't going to have even a temporary program to prime the pumps.

[Tansy_Gold]

64. I understand that. But if there are no PERMANENT jobs to

replace all those that have been lost (shipped to cheaper labor markets) the money will stop circulating. It will be once more concentrated in the hands of the rich.

Once people get money in their hands, they will spend it. They will buy things. They will buy food (some of it produced in the U.S.). They will buy clothes (few produced in the U.S. and many of those marked "made in USA" actually made in Mariannas' sweatshops employing Chinese slave laborers). They will buy cars (some made in the U.S. but some made by "foreign" companies operating in the U.S.). They will buy toys and microwaves and televisions and cell phones and computers and video games and hammers and sunglasses and pens and pencils and crayons and jewelry and furniture and books and magazines and toilets and toilet bowl cleaner and toilet paper.

If the money they spend on these items stops circulating in the American economy, then the American economy dies. The corporate economy may thrive, enriching the stockholders (wherever they may reside or stash their cash), but the American economy as it functions for American workers, American consumers, American students, American families, will disappear.

Is there something wrong with wanting to protect our economy? Our jobs? Our chidren's future? That's what "protectionism" is all about. It's not isolationism and it's not nationalism. IF the nations with whom we trade uphold the same social principles we do (or at least we give some kind of lip service to them) such as safe working conditions, fair pay, reasonable working hours, etc., then they will be able to compete with us and we with them on a level playing field. But as I have stated before, we are already engaged in a trade war, one in which the corporations have pitted the American workers agaist their counterparts in China and Mexico and Vietnam and everywhere else. We are all like chess pieces, with no power of our own to make the moves in the game. We are all losers.

Infrastructure investment is needed. There's no question about that. But unless the economic policies are changed, we'll end up a very poor nation with great roads. When the Chinese billionaires come buying up all our real estate for invetment, for summer homes, for whatever, then maybe we will think about what we shoulda done. . . . . .


Tansy Gold, who shoulda been doin' her paying work all afternoon and didn't

[Mind_your_head]

66. Did you see this?

IBM Offers To Move Laid Off Workers To India

Source: Information Week

Big Blue wants to help redundant U.S. employees relocate to developing markets, according to an internal document.

February 2, 2009 12:36 PM


The climate is warm, there's no shortage of exotic food, and the cost of living is rock bottom. That's IBM (NYSE: IBM)'s pitch to the laid-off American workers it's offering to place in India. The catch: Wages in the country are pennies-on-the-dollar compared to U.S. salaries.

Under a program called Project Match, IBM will help workers laid off from domestic sites obtain travel and visa assistance for countries in which Big Blue has openings. Mostly that's developing markets like India, China, and Brazil.

"IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand," IBM says in an internal notice on the initiative. "Should you accept a position in one of these countries, IBM offers financial assistance to offset moving costs, provides immigration support, such as visa assistance, and other support to help ease the transition of an international move."

The document states that the program is limited to "satisfactory performers who have been notified of separation from IBM U.S. or Canada and are willing to work on local terms and conditions." The latter indicates that workers will be paid according to prevailing norms in the countries to which they relocate. In many cases, that could be substantially less than what they earned in North America.

IBM has laid off more than 4,000 workers in the United States since the beginning of January, according to an employee group. The company has confirmed layoffs but won't comment on specific numbers.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3720170

------------------

The "agenda" is waaaaaaaay bigger and different than what folks like you and I are currently imaging. I don't like this road that we are all being taken down....not one bit! But we ARE being taken down this 'bad road'.....

[Tansy_Gold]

67. yes, I saw it. And no, it's not "bigger and different" from what I've been

imagining.


Unlike the inimitable Dr. Rice, I can imagine almost anything. And the total destruction of the working/middle class is OF COURSE their ultimate agenda. and not just in one country.



Remember "Today Germany, tomorrow the world!"? This is just a slight variation on that theme. Same fascism, different fuhrer. And no, I'm not comparing Obama to Hitler. I made no secret that I considered booooosh a political descendant of Hitler, but not Obama. I don't know who's out there waiting in the wings or who is the ultimate puppetmaster, but their plans are indeed global. Make no mistake about that.



TG