February, Friday 17, 2012

DOW +46 = 12950SPX + 3 = 1361NAS – 8 = 295110 YR YLD +.02 = 2.01%OIL +1.75 = 104.06GOLD – 5.00 = 1724.80SILV -.24 = 33.38PLAT + 11.00 = 1638.00 The stock market is looking great. The S&P 500 hit a nine-month high. The Dow is back at levels from the beginning of 2008, (record high was 1517 for SPX) (14,198 for Dow). At least it’s looking decent. The market was cruising along with triple digit gains, but couldn’t hold into the close. Confidence is one thing, but going long heading into a holiday weekend.., well, let’s not get carried away. Optimism was high that there would be some sort of  deal worked out to rescue Greece by burying the country under unsustainable debt.  Euro-zone finance ministers will be meeting over the weekend to hammer out details. The big challenge is to cut Greece’s debt down to 120% over the next 8 years; to do this, the Greeks will have an orderly default of debt, paying off bonds at about 30 cents on the dollar for private sector investors and about a 50% haircut for the central bankers that hold Greek bonds. And nobody is quite sure if the private sector investors are going to accept the haircut. In return for the discounts, the Greeks would accept, maybe, harsh austerity measures that will contract the economy. And they keep saying they will have a deal, probably by Monday. And all I can think of is that Homer is now …

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February, Thursday 16, 2012

DOW + 123 = 12,904SPX + 14 = 1358NAS + 44 = 295910 YR YLD +.06 = 1.99%OIL +.55 = 102.35GOLD +.70 = 1729.80SILV +.02 = 33.62PLAT – 10.00 = 1629.00 The number of people seeking unemployment benefits fell to the lowest point in almost four years last week, the latest signal that the job market is steadily improving. Weekly applications for unemployment benefits dropped 13,000 to a seasonally adjusted 348,000. It was the fourth drop in five weeks and the fewest number of claims since March 2008. The US economy is showing signs of strength. New construction of houses rose 1.5% in January. Part of the increase can be attributed to unseasonably warm weather, however part of it is that the economy is showing signs of strength. The Philly Fed Index of manufacturing hit a  four month high in February. US manufacturers just had their best month of growth in five years. As manufacturing has increased it has rippled through the economy, increasing demand in other industries, such as shipping and transportation. Part of the increase may be attributed to pent-up demand; individuals and businesses postponed purchases over the past three years. Now companies are investing in machinery and computers. Individuals are once again starting to make purchases of certain discretionary items, and even cars. Two years after emerging from bankruptcy GM unveiled record profits of $7.6 billion for 2011. It’s been a great year for GM. Although its European business is still in reverse and it is unlikely …

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February, Wednesday 15, 2012

DOW – 97 = 12,780SPX – 7 = 1343NAS – 16 = 291510 YR YLD +.01 = 1.93OIL + 1.15 = 101.89GOLD + 7.00 = 1729.10SILV -.08 = 33.60PLAT + 7.00 = 1637.00 The Greek debt crisis has not been resolved. Euro-zone finance officials have been meeting in Brussels and trying to figure out some deal that would avoid a disorderly default on Greek bonds, and at the same time they are trying to impose ever-harsher austerity measures on the Greek people, and the Greeks are finally growing a little backbone and telling their northern neighbors to ease up. And there is an election in Greece scheduled for April, and the Euro-zone finance officials would like to postpone everything until after the election because the mobs, err, the democratic process might yield unexpected results. A new report released today shows the economy of the Euro-zone shrank by 0.3% in the fourth quarter of 2011. France eked out a smidgen of growth. The German economy contracted slightly. The Greek economy remains in shambles despite imposed austerity; five years of recession and the economy still contracting at a 7% annualized rate. The European economic plan isn’t working. One thing the Euro-debt crisis has done is remind us that bonds are not risk free. Granted, Greek and Italian bonds are in a different league than US Treasuries, but there is still a decent chance the United States could lose its Triple-A credit rating. Meanwhile, the big multi-national blue chip stocks have been solid …

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February, Tuesday 14, 2012

02142012 DOW + 4 = 12,878SPX – 1 = 1350NAS +0.44 = 293110 YR YLD -.07 = 1.92%OIL +.29 = 101.20GOLD – .80 = 1722.10SILV – .14 = 33.68PLAT – 26.00 = 1635.00 Over the weekend, the unelected technocrat Greek Prime Minister warned that if the terms of the second Greek bailout were not approved, there would be a “disorderly bankruptcy that would create conditions of economic chaos and social explosion. The savings of the citizens would be at risk. The state would be unable to pay salaries, pensions, and cover basic functions, such as hospitals and schools, and … the country – public and private sector alike – would lose all access to borrowing and liquidity would shrink. The living standards of Greeks would collapse. The country would drift into a long spiral of recession, instability, unemployment and prolonged misery. These developments would lead, sooner or later, to exit from the euro.” And so the Greek parliament voted to accept a plan to impose austerity on the already austere Greek economy in exchange for a 130-billion euro bailout needed to pay 14-billion in bonds that are set to be redeemed in March.  If there is a default on the bonds, it would likely start a process of national bankruptcy which in the first order would mean state pensions, wages, contracts and medical bills not being paid. From there, the insolvency would multiply outwards into the already deeply impaired private sector, where many businesses would find it impossible to stay …

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February, Monday 13, 2012

DOW +72 = 12,874SPX + 9 = 1351NAS +27 = 293110 YR YLD +.02 = 1.99%OIL +2.33 = 101.00GOLD -.20 = 1722.90SILV +.13 = 33.82PLAT – 1.00 = 1655.00 Last week we heard about the $25 billion dollar mortgage fraud settlement. President Obama has vowed to follow it up with an expanded inquiry that is supposed to produce broader accountability and a far larger payout. At best, this round of relief will reach about two million former and current homeowners. Under the agreement, banks will grant some $10 billion worth of principal reduction, $3 billion in refi’s and $7 billion in other mortgage relief, like forbearance for unemployed borrowers, covering roughly one million borrowers in total. Another $1.5 billion will be cash payments of about $2,000 to some 750,000 borrowers who were treated unfairly in foreclosures from 2008 through 2011. And $3.5 billion will go to state and federal governments for what has been described as resources for legal aid and other counseling for borrowers facing foreclosure. Such aid is vitally important, but it appears that the earmarked money also could be used to plug state budget holes, rather than empower homeowners in their fights against the banks.  The banks did not get the blanket release they originally sought from legal liability for all manner of mortgage misconduct. But the settlement still shields them from state and federal civil lawsuits for most foreclosure abuses, including the wrongful denial of loan mods, excessive late fees that enriched the banks but could …

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February, Friday 10, 2012

DOW – 89 = 12, 801SPX – 9 = 1342NAS – 23 = 190310 YR YLD -.08 = 1.97%OIL  –  .79 = 99.05GOLD – 7.00 = 1723.10SILV –  .31 = 33.69PLAT – 4.00 =1662.00 We’ve been talking about the debt situation in Europe because it seems important, and Greece is the linchpin whose failure could send the wheel flying off the axle. Wednesday we told you Greece would have a deal on restructuring part of its debt; that deal was announced yesterday. Thursday we told you there would be social unrest in Greece. The strikes started today. The Greeks have already been hit with 25% wage cuts; now they’re being told they must accept additional 30% wage cuts in order to pay off bondholders who recognized weakness and forced them to roll over their debt at record high rates. The wage cuts are being pushed as a way to forestall bankruptcy, but they will still be deep in debt; even with the wage cuts they will still face debt of 120% of GDP in 2020, and that is the best case scenario; it is based on assumptions of some sort of growth. So the Greek people are being asked to sacrifice their own retirement and their childrens’ futures rather than telling the Banksters to take a hike. So far, the Greeks have been volunteering for massive cuts to their retirement programs, their pensions, their healthcare, government services, and wages; they have been docile as their taxes have increased by 30%; …

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February, Thursday 09, 2012

DOW + 6 = 12,890SPX + 1 = 1351 NAS + 11 = 292710 YR YLD +.07 = 2.07%OIL +1.09 = 99.80GOLD -2.90 = 1730.10SILV -.04 = 34.00PLAT – 5.00 = 1661.00 Greece is a done deal. The Big Bank settlement for abusive mortgage practice is a done deal. We’ll start with the Greek deal and then we’ll look at the mortgage settlement and if you’ll ever see a penny of the $25 billion dollar deal. Finance ministers from across Europe flew to Brussels to put their seal of approval on an orderly default of Greek debt. Private sector investors will swap their old Greek bonds for new Greek bonds, and they will give up 70 percent of the value, and Athens will reduce its overall debt of 350 billion euros, down to 250 billion euros. To deal with the remaining pile of debt, the technocrats are requiring deep austerity measures. Greece’s two major labor unions have already called for a 48 hour strike on Friday and Saturday. It is widely expected there will be social unrest. There were quite a few special interests represented at the negotiating table; that’s probably why it took so long. In the era of debt securitization, creditors have become far more numerous, and include hedge funds and other investors over whom regulators and governments have little sway. “Innovation” in financial markets has made it possible for securities owners to be insured, meaning that they have a seat at the table, but no “skin in …

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February, Wednesday 08, 2012

DOW + 5 = 12, 883SPX + 2 = 1349NAS + 11 = 291510 YR YLD +.01 = 1.98%OIL +.63 = 99.04GOLD – 12.90 = 1733.00SILV – .21 = 34.04PLAT + 14.00 = 1668.00 Once again we had a quiet day on Wall Street, and the justification du jour was everyone was waiting on Greece. Which is kind of silly. Greece is finalizing details of a debt reduction deal, an orderly default on Greek bonds. They will swap the old bonds for new bonds at about 30 cents on the dollar. Quite a few private sector investors will take a hit, but very few if any are taking the full hit. These bonds have been trading lower over a period of time. Officials in Brussels announced a meeting of Euro-zone finance ministers tomorrow. They wouldn’t announce the meeting if they didn’t have a deal; at least, that is the thinking. Once the deal is finalized, there is still a vote in Parliament on Sunday, and that means the politicians will have to sell the deal to the people. It won’t be an easy sale. In exchange for an orderly debt default, the government gets bailout money, but they will force the people to cut public sector jobs, there will be a 22% drop in the minimum wage; pensions and benefits will also be cut; big chunks of the economy will be privatized. One politician described it this way: “Tough demands are like tight shoes, sooner or later, you want to …

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February, Tuesday 07, 2012

DOW + 33 = 12, 878SPX + 2 = 1347NAS + 2 = 290410 YR YLD +.06 = 1.96%OIL + 1.74 = 98.65GOLD + 25.00 = 1744.90SILV +.47 = 34.15 PLAT + 36.00 = 1647.00 I talked with a friend this weekend about the unbelievably better than expected jobs report on Friday. My friend was a bit surprised that I viewed the report favorably. I tried to explain that the report was deeply flawed, seriously imperfect, and likely not accurate, however it is probably still the best report to track the jobs picture, even with strange seasonal adjustments. The debate continued that the jobs report was certainly nothing more than a big BLS snow job, and if I bothered to look at the tax rolls, I would see that tax revenue declined while jobs were supposedly increasing. Of course, that’s what happens when you cut the payroll tax rates. Then I heard the argument that if we really counted the way we used to count in 1994 the unemployment rate would be 22.5%, and I was politely told about shadowstats. Well, I’ve met John Williams and I’ve cited John Williams, and if we compare today’s  unemployment rate to 1993, then he has a good point, but if we compare the unemployment rate from a year ago or 3 years ago then the jobs picture is improving; apples to apples and oranges to oranges. Then my friend asked if the economy was recovering. I think we’re still in a small “d” …

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February, Monday 06, 2012

DOW – 17 = 12,845SPX -0.5 = 1344NAS – 3 = 290110 YR YLD -.05 =1.90%OIL – .93 = 96.91GOLD – 6.00 = 1720.90SILV +.01 = 33.78PLAT -10.00 = 1629.00 Today was supposed to be a deadline for Greece to accept its punishment and fall into line. The Greeks were expected to strike a deal for an orderly debt default, which would secure a $170 billion dollar bailout for the Greeks, and avoid a disorderly meltdown of Credit Default Swaps, which could in turn cause a meltdown of the European shadow banking system, which could in turn cause a meltdown of the Euro-banks, which in turn could cause a meltdown of several Euro countries, and then ultimately the rest of Euro-land, and then the USSA, and then life as we know it would cease – or something like that. The office of Prime Minister Lucas Papademos, a former central banker who heads an unelected government of politicians and technocrats, said that a meeting of leaders from the conservative, socialist and far-right parties due on Monday had been postponed to Tuesday. German Chancellor Angela Merkel was saying all sorts of jibberish about how important it is for Greece to do the deal, and she gave every indication her patience is wearing thin. Merekel claims she wants “Greece to stay in the Euro,” and she says, “Something needs to happen quickly, and then she hammered the point that “A lot is at stake for the entire euro-zone.” And the Greeks seem to …

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