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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, 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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February, Thursday 02, 2012

DOW – 11 = 12,705SPX + 1 = 1325NAS + 11 = 2859 10 YR YLD – .02 = 1.83%OIL – 1.25 = 96.36GOLD + 15.40 = 1759.40SILV +.65 = 34.46PLAT + 11.00 = 1635.00 Tomorrow is the big monthly jobs report. We all want to know the condition of the economy and jobs are the key to the other elements of a healthy economy such as: consumption, profits, credit, debt, deficit reduction, tax revenues, and the financial markets. The jobs report can move the markets and yet the jobs report tomorrow won’t really provide as much information as we want and need. The jobs report is based on a survey sample and there are errors in the sampling rate and the response rate. Then the report will be revised over the next two months. Then the report will be benchmarked against state reports. And we’re still dealing with guesstimates for job creation, and those guesses for job losses tended to lag as the economy turned down, and the best guess is that the guesstimates for job creation are lagging as the economy turns up. And then 8 months from now, we’ll get a number that shows how many “net” jobs were added to the economy, largely based on tax rolls. We know that jobs are being lost. We rarely hear that the economy is creating about 7 million jobs per quarter. The long-running decline in the proportion of Americans still tied to the labor force relative to the nation’s …

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February, Wednesday 1, 2012

DOW + 83 = 12,716SPX +11 = 1324NAS +34 = 284810 YR YLD +.05 = 1.85%OIL -1.31 = 97.17GOLD + 6.30 = 1744.00SILV +.58 = 33.81PLAT +31.00 = 1622.00 MF Global’s customers’ money didn’t just vaporize. Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing. Dealbook reports authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, but investigators remain uncertain about whether they can retrieve the money. Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees. As of late December, investigators had obtained more than 10,000 e-mails, interviewed more than 50 witnesses and subpoenaed about 20 people. Customers, including farmers, hedge funds and other small traders, have been very frustrated with the pace of the investigation and the dearth of updates about their missing money. Even regulators are growing anxious about how long the investigation is taking. In November, investigators said they began to worry that money …

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January, Tuesday 31, 2012

DOW – 20 = 12,632SPX – 0.6 = 1312 NAS + 1 = 281310 YR YLD  –  .04 = 1.80%OIL  –  .50 = 98.28GOLD + 6.40 = 1737.70SILV -.37 = 33.23PLAT – 23.00 = 1591.00 Greece has worked out a debt swap agreement with private bondholders where the creditors will take a loss of about 70%, but they won’t make an announcement until later in the week; there is still some unfinished business. The Greek technocrats must beat the local population into submission; the government will demand commitments on reforms, labor issues and the pension system. The Greek technocrats are very aware that further austerity measures would likely deepen the recession and impose additional hardships. And then there is the prospect of an election in April which could spell the end of the technocrats. And then there is the prospect of more protests in the streets, which tends to make governments nervous; just ask Hosni Mubarak.  Average, everyday Greeks on the street are more than miffed that the economists find it so easy to dispatch democracy to the dustbin when they are convinced they have the right technical answers. But other than that, the Greeks have apparently cobbled together a deal; it’s just not cobbled enough to show to anybody. Why? Well, one of the big stumbling blocks is that the European Central Bank holds Greek bonds, and while it might be fine for private bondholders to take a  70% haircut, the ECB is still hoping to make a profit. …

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January, Monday 30, 2012

DOW – 6 = 12653SPX – 3 = 1313NAS – 4 = 281110 YR YLD – .06 = 1.84%OIL – .61 = 98.94GOLD – 7.00 = 1731.30SILV – .49 = 33.60 PLAT – 10.00 = 1616.00 The stock market moved lower this morning; the justification was that Greece had not resolved its debt crisis. The 27 nations of the European Union held their 17th Summit in the past 2 years. The Greeks have been trying put together a deal with private bondholders to restructure about 200 billion euros of debt. But they couldn’t come up with completed deal. You’re shocked; I know; I’m shocked. And so the EU leaders can’t do anything until a deal gets done in Greece. To push things forwar, the Germans proposed a European Commissar take control of Greek public finances to ensure it meets its fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history. The German call won cautious backing from the Dutch and Swedish prime ministers. Apparently everyone forgot that the EU has already installed an unelected technocrat to run the country, Prime Minister Lucas Papademos. Then the Europeans talked about increasing the bailout funds to make at least a trillion dollar fire-ring around the economies of Portugal and Ireland and Greece, in hopes that the default problem doesn’t jump to Spain and Italy and get out of control.Treasury Secretary Tim Geithner went to the World Economic Forum …

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January, Thursday 26, 2012

DOW – 22 = 12,734 SPX – 7 =1318NAS – 13 = 280510 YR YLD -.08 = 1.93OIL +.48 = 99.88GOLD + 9.70 = 1721.50SILV +.20 = 33.57PLAT + 24.00 = 1614.00 Remember back before the holidays I told you the European Central Bank was following the Federal Reserve’s playbook?  The ECB was going to loan the Euro-banks plenty of capital, which would allow the big Euro-banks to report adequate capital ratios when they file their annual reports – which is a way of saying the banks get a big bailout, and then the banks could buy sovereign bonds. And the bottom line is they were not going to allow a deflationary collapse in Europe. And then yesterday, the Federal Reserve said they will keep interest rates at zero, and when you consider inflation, it really is less than zero, but the Fed said they aren’t thinking about inflation; they set a target for inflation and they’ll check back in a few years. The new Fed policy is negative real interest rates, but no new stimulus, no QE3 today.  JP Morgan Chase CEO Jamie Dimon says Europe is not a problem:”The direct impact of a Greek default is almost zero. There’s a teeny chance of a catastrophic outcome, which is why the muddle-through is the only good strategy. There is no other good strategy,” Dimon believes the ECB’s long term refinance operations took the liquidity problem off the table in Europe. Dimon did not address the difference between liquidity and …

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