Posted By thestatedtruth.com on September 10, 2009

Harvard Investments Lose 27.3%

By Gillian Wee

Sept. 10 (Bloomberg) — Harvard University, the wealthiest U.S. school, said its investments fell 27.3 percent in the past year, a $10.1 billion loss that was smaller than President Drew Faust’s forecast in December before markets started to recover.

The endowment declined to $26 billion from $36.9 billion in the year ended June 30, including the inflow of gifts from donors and $1.7 billion in distributions to the university, according to a report today by Harvard Management Co., which oversees the fund. Gains in non-U.S. fixed-income and emerging- markets securities helped trim a loss that Faust had said could reach about 30 percent.

Jane Mendillo, Harvard Management’s chief executive officer, is seeking to rebuild assets and protect the Cambridge, Massachusetts, university against future financial shocks. She raised cash holdings, cut $3 billion in commitments to private- equity and real estate funds, and began shifting assets from outside firms to Harvard Management, according to the report.

“We expect a prolonged period of instability and slower growth in some markets,” Mendillo said in the report. “We can do and are doing more to manage the risks we face, given the lessons of the past year.”

Harvard fired workers, sold $2.5 billion in bonds and delayed construction projects after the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 crippled financial markets and left the 373-year-old university short of cash. The Faculty of Arts and Sciences, which relied on the endowment for about 60 percent of its income, will cut about $220 million, or 19 percent, from its $1.15 billion budget in the next two years.

‘Oversized Commitments’

It was the first loss in seven years and the biggest in four decades for the endowment, whose earnings helped pay for new professors, expanded financial aid and campus construction. Harvard lost more money in one year than all but the six biggest U.S. universities had in their funds as of June 30, 2008.

Harvard entered the worst financial crisis since the Great Depression with “recent oversized commitments to illiquid asset classes,” and didn’t have enough cash to meet “our obligations along with the needs of the university,” Mendillo, who took over as CEO in July 2008, said in the six-page report.

The Standard & Poor’s 500 Index plunged 54 percent from the start of 2008 to the nadir on March 9, affecting endowments nationwide. The S&P has since gained more than 50 percent.

Endowments probably recorded their biggest losses in 35 years in the 12 months ended June 30, according to research firm Commonfund Institute in Wilton, Connecticut.

Yale, Brown

Yale University in New Haven, Connecticut, the second- wealthiest U.S. school, said today its endowment dropped an estimated 30 percent to about $16 billion. Yale President Richard Levin said in a July interview that investment declines cut the fund by 25 percent and the school spent 5 percent.

Brown University in Providence, Rhode Island, said yesterday that its fund declined 27 percent, including a 23 percent drop in investments.

Mendillo, 50, inherited responsibility for the endowment from Mohamed El-Erian, who returned to Pacific Investment Management Co. after less than two years at Harvard Management. She has raised cash by offloading some private-equity stakes, redeeming from hedge funds and selling stocks.

The endowment is targeting cash levels this year equivalent to 2 percent of the portfolio, according to the report. In previous years the endowment was fully invested and borrowed to amplify gains. Allocations to other assets remain little changed.

Harvard’s public equities and real assets including natural resources beat benchmarks, declining 28 percent and 38 percent, respectively. The international fixed-income and internal emerging-markets teams outperformed indexes by 9 percentage points and 3.7 percent points. Other asset classes trailed benchmarks, including private equity, down 32 percent and absolute-return strategies, off 19 percent.

More Liquidity

The endowment lowered its commitments to private equity and real estate to $8 billion from $11 billion, as some firms reduced the size of their funds or made capital calls, and Harvard shed some of its pledges through secondary sales. Mendillo is reviewing private-equity and hedge-fund stakes.

“With perfect hindsight we and most other investors would have started this year in a more liquid position and with less exposure to some of the alternative asset categories that were hardest hit,” Mendillo said. She said it would be a mistake to “categorically avoid” hard-to-sell assets like natural resources and private equity.

“But the balance of liquid and illiquid investments within the portfolio needs to remain in the forefront of our portfolio strategy,” she wrote.

Return to Harvard

Mendillo was a fund manager at Harvard for 15 years before leaving in 2002 to build Wellesley College’s investment office. She returned as head of Harvard Management when El-Erian resigned in September 2007 to become CEO of Pimco, a bond manager based in Newport Beach, California. El-Erian in February 2006 had succeeded Jack Meyer, the endowment chief of 15 years, whose compensation was criticized by Harvard alumni.

Harvard’s internal management team, which is responsible for about one-third of the portfolio, is “extraordinarily cost effective — with total expenses equal to a fraction of the costs of employing outside managers for similar asset pools with similar results,” Mendillo said in the report.

Mendillo is considering more collaboration between teams and planning more hires. She added hedge-fund executives Emil Dabora from Caxton Associates LLC and Michele Toscani, a managing director for Fortress Investment Group LLC in Tokyo, to expand her internal investment team, while Mark McKenna, also from Caxton, will start this month in equity arbitrage.

“It is important to be realistic about near-term returns and about our expectations for several years to come,” Mendillo said in the report. “The impact of the events of 2008-2009 will not be reversed overnight. For Harvard, as for almost every major investor, regaining the market value lost as a result of the recent global economic crisis will take time.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=azaVNoupoSkA

Category: Commentary, Finance, Wall Street | 10 Comments »
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Posted By thestatedtruth.com on September 9, 2009

Category: Charts and Graphs, Economy, Finance, National News, Wall Street | 105 Comments »
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Posted By thestatedtruth.com on September 5, 2009

States, counties, and cities are having to make deep cuts, in both jobs and programs. Today’s Wall Street Journal talks about the cuts in state after state. States cannot print money like the US can, so at some point they have to either raise taxes or cut spending to balance their budgets. Raising taxes just makes it less profitable for businesses to remain in your state. There is a very high correlation with high state taxes and unemployment.

The following chart shows how rapidly income taxes are falling. Sales tax receipts are down. At some point voters are going to demand that their federal government show some of the same restraint that households, cities, and counties are being forced into. My bet is that next year raises for government workers, even those in unions, will come under attack. They won’t be cut, but watch as political backlash builds.

Category: Charts and Graphs, Commentary, Economy, Finance, National News, Wall Street | 57 Comments »
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Posted By thestatedtruth.com on September 5, 2009

Interesting statistic. Want to know where wages are rising? Think federal government workers. The gap between civilian and government workers was less than $13,000 nine years ago, but now is almost $30,000. Inflation has been 24%, but government wages are up 55%. According to a recent release from Rasmussen Reports, a government job remains “the top employment choice in today’s economic environment.” (chart from Clusterstock)

Category: Charts and Graphs, Commentary, Economy, Finance, National News, Wall Street | 5 Comments »
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Posted By thestatedtruth.com on September 4, 2009

A History Lesson On Railroads And Other Things……….    

Does the statement, ‘We’ve always done it like that’ ring any bells?

The US standard railroad gauge (distance between the rails) is 4 feet, 8.5 inches. That’s an exceedingly odd number.

Why was that gauge used? Because that’s the way they built them in England, and English expatriates built the US railroads.

Why did the English build them like that? Because the first rail lines were built by the same people who built the pre-railroad tramways, and that’s the gauge they used.

Why did ‘they’ use that gauge then? Because the people who built the tramways used the same jigs and tools that they used for building wagons, which used that wheel spacing.

Why did the wagons have that particular odd wheel spacing?

Well, if they tried to use any other spacing, the wagon wheels would
break on some of the old, long distance roads in England, because that’s the spacing of the wheel ruts.

So who built those old rutted roads? Imperial Rome built the first long distance roads in Europe (and England) for their legions. The roads have been used ever since. And the ruts in the roads? Roman war chariots formed the initial ruts, which everyone else had to match for fear of destroying their wagon wheels. Since the chariots were made for Imperial Rome, they were all alike in the matter of wheel spacing. Therefore the United States standard railroad gauge of 4 feet, 8.5 inches is derived from the original specifications for an Imperial Roman war chariot.  Bureaucracies live forever.

So the next time you are handed a Specification/Procedure/Process and wonder ‘What horse’s ass came up with it?’ you may be exactly right. Imperial Roman army chariots were made just wide enough to accommodate the back ends of the rear ends of two war horses… or two horses’ asses.

Now, the twist to the story:
When you see a Space Shuttle sitting on its launch pad, there are two big booster rockets attached to the sides of the main fuel tank. These are solid rocket boosters, or SRBs. The SRBs are made by Thiokol at their factory at Utah . The engineers who designed the SRBs would have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site.

The railroad line from the factory happens to run through a tunnel in the mountains. And the SRBs had to fit through that tunnel. The tunnel is slightly wider than the railroad track, and the railroad track, as you now know, is about as wide as two horses’ behinds.

So, a major Space Shuttle design feature of what is arguably the world’s most advanced transportation system was determined over two thousand years ago by the width of a horse’s ass.

And you thought being a horse’s ass wasn’t important?

Ancient horse’s asses control almost everything….
and CURRENT Horses Asses are controlling everything else!! You need look no further than Washington to confirm this.

From The Turner Radio Network

Category: Commentary, Tid Bits | 33 Comments »
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Posted By thestatedtruth.com on September 3, 2009

More Pain Felt by ‘Prime’Borrowers

Category: Commentary, Economy, Finance, National News, Real Estate, Wall Street | 3 Comments »
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Posted By thestatedtruth.com on September 3, 2009

Natural Gas Tumbles to Lowest Since March 2002 on Supply Gain

By Reg Curren

Sept. 3 (Bloomberg) — Natural gas futures extended a decline in New York, falling to the lowest level since March 2002, after a government report showed stockpiles expanded more than average to a record for this time of year.

Supplies rose 65 billion cubic feet in the week ended Aug. 28 to 3.323 trillion cubic feet, the Energy Department said. Inventories are the highest for that week since the department began publishing data in 1993. Stockpiles typically gained 64 billion cubic feet for the period in the past five years.

“We’re well supplied and there’s so little demand,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “Some people are starting to question the economic recovery and that adds more pressure to gas.”

Natural gas for October delivery fell 16.4 cents, or 6 percent, to $2.551 per million British thermal units at 12:14 p.m. on the New York Mercantile Exchange. Gas was trading at $2.63 per million Btu before the report was released at 10:30 a.m. in Washington. Gas has declined 55 percent this year. Futures touched $2.50, the lowest since March 6, 2002.

Overall U.S. gas consumption may contract by 2.6 percent as the recession that began in December 2007 cuts demand, the Energy Department said in its monthly Short-Term Energy Outlook on Aug. 11.

Gas use at factories is forecast to tumble 8.6 percent this year because of the recession, the department said.

“People are beating up on natural gas because they can,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Supplies are high and there’s another injection coming for inventories, so they’re really pressuring the market to the downside.”

Weather Effect

Summer heat, which can increase demand for electricity from gas-fired power plants for air conditioning, is dissipating and there are no immediate threats from storms to output in the Gulf of Mexico, and that is weighing on futures, Flynn said.

Natural gas prices will probably tumble further in the coming weeks, sliding down to a range of $2 to $2.30 by early November, Charles Maxwell, senior energy analyst at brokerage Weeden & Co. in Greenwich, Connecticut, said in a note to clients late yesterday.

“There is not enough winter storage space left in the system to handle every producer’s surplus volumes in this year of record supplies and depressed demand,” he said.

A combination of the economic slowdown, a prior period of higher prices that pushed some industrial consumers of gas out of the U.S., new domestic supplies and increased capacity to import liquefied natural gas from overseas has created a “perfect wave of excess natural gas supplies in the U.S.,” Maxwell said.

Price Forecast

Weeden forecasted earlier this year that New York futures would average $3.50 in the third quarter and $4 in the fourth.

Supplies were 18 percent above the five-year average last week, compared with 3.7 percent a year earlier, according to Energy Department data.

“We’re getting to the point where people are starting to worry about where they’re going to put gas and what that entails for the market,” said Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky. “If they have to take gas to market, instead of putting it in storage, the front end of the curve will continue to get whacked.”

Contango

Natural gas for delivery in January was trading at $4.892 per million Btu, a premium of about $2.34 to October futures. When prices for future delivery are higher than near-month contracts it’s a situation known as contango, which typically encourages companies to put supplies in storage now for use later in the year.

An increase of inventories to the end of October that matches the average increase of the past five years will put supplies in storage near 3.9 trillion cubic feet, Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston, said yesterday.

Peak natural gas storage capacity rose 100 billion cubic feet to an estimated 3.889 trillion cubic feet as of April as operators expanded to meet rising production, according to an Energy Department report on Aug. 31.

The previous high for storage is 3.545 trillion cubic feet, reached on Nov. 2, 2007, according to the department.

“The physical aspect of the commodity is becoming a problem, unless some demand comes on quickly or we get some weather that changes things,” said Florer. “As long as those things remain constant, like they have for months now, then I don’t think the bulls have much to hang their hats on any time soon.”

Futures declined along with the United States Natural Gas Fund LP.

The fund, the world’s largest exchange-traded fund in gas, fell 28.1 cents, or 2.9 percent, to $9.169 a share at 12:13 p.m. The fund owns futures contracts and swaps and tries to track price changes in the fuel. The ETF’s units have declined 60 percent this year.

“A lot of people are worried about their funds” so they’re dumping them, said Rose of Angus Jackson.    More……………

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDyIAp9XoiX8

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Posted By thestatedtruth.com on September 2, 2009

BP Makes ‘Giant’ Oil Discovery in Gulf of Mexico

By Eduard Gismatullin

Sept. 2 (Bloomberg) — BP Plc, Europe’s second-largest oil company, reported a “giant” discovery at the Tiber Prospect in the Gulf of Mexico that may contain more than 3 billion barrels, after drilling the world’s deepest exploration well.

The well is located about 250 miles (400 kilometers) southeast of Houston, the London-based company said today in a statement. It was drilled to approximately 35,055 feet (10,685 meters), greater than the height of Mount Everest.

The latest discovery will help BP, already the biggest producer in the Gulf of Mexico, boost output in the region by 50 percent to 600,000 barrels of oil equivalent a day after 2020. It’s equal to about a year’s output from Saudi Arabia, the biggest exporter in the Organization of Petroleum Exporting Countries, as well as coming close to matching the U.K.’s entire proven reserves.

“It will take a while to develop, the second half of next decade, but it’s very important,” Jonathan Rigby, an analyst at UBS AG in London, said in a telephone interview.

BP climbed 22.15 pence, or 4.3 percent, to 541.65 pence in London, the highest close since January.

BP, led by Chief Executive Officer Tony Hayward, is developing nine projects in the Gulf of Mexico and overtook Royal Dutch Shell Plc in terms of output in the region after ramping up the Thunder Horse platform to more than 300,000 barrels of oil equivalent a day.

Thunder Horse

Hayward, who took over as CEO from John Browne in May 2007, is boosting production growth after delays at projects including Thunder Horse led to an operational gap with rivals. BP has a history of pushing back the frontiers of exploration in North America, and pioneered enhanced oil recovery techniques in Alaska.

Oil companies have been increasingly turning to more technically challenging fields as oil-rich nations limit access. Tiber will help allay concerns over BP’s growth prospects given its reluctance to invest heavily in unconventional projects, such as oil sands in Canada, to replenish reserves as maturing fields age.

“What today’s announcement proves is that BP is a very, very successful explorer,” Irene Himona, an oil and gas analyst at Exane BNP Paribas, said by telephone. “They’ve opened up the whole area for discoveries.”

Other major finds by the oil industry in recent years include the Tupi field in Brazil’s pre-salt region, the largest oil discovery in the Americas since Mexico’s Cantarell in 1976. Tupi may hold as many as 8 billion barrels of oil.

Production Boost

BP could potentially raise production by between 1 and 2 percent a year from 2013 to 2020, according to Andy Inglis, BP’s chief executive for exploration and production.

“Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery,” Inglis said in today’s statement.

The new discovery “will be bigger” than Kaskida, which is estimated to hold 3 billion barrels, BP spokesman Robert Wine said. “This is a whole new geological play we’ve got here.”

The British producer last month bought additional acreage in the Lower Tertiary, or so-called Paleogene, region of the Gulf of Mexico. The 24 million-to 65 million-year-old formation, where both Exxon Mobil Corp. and Chevron Corp. are drilling wells, was previously thought to be unreachable. Tiber is the deepest exploration well ever drilled by the oil and gas industry, BP said.

Second Well

BP said it’s the largest net leaseholder in the Lower Tertiary area. “I believe there are other structures to investigate,” Wine said. The company plans to drill a second well at Tiber next year, he added.

BP is operator of the Tiber project with a stake of 62 percent, while Petroleo Brasileiro SA, Brazil’s state-controlled oil company, holds 20 percent and ConocoPhillips 18 percent.

“The announcement of Tiber confirms the very positive prospectivity of the Lower Tertiary geological play in the locale,” Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, said. The news is “positive, and potential for more upside still” possible.    More……………    www.bloomberg.com

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Posted By thestatedtruth.com on September 1, 2009

  Sheila Bair  was very candid about commercial defaults being more of a driver of lots of bank failures this Fall. This is precisely the type of issue we’ve been concerned of. The references some are making about the ‘stress tests’ being feather tests of banks, is something we’ve argued all along; based on ridiculous underlying assumptions. As to the economy and market, it simply means a dampening of growth prospects; such that valuations are a directly-tied inhibitor of equity price gains, even if we stay stable.   

 From www.ingerletter.com

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Posted By thestatedtruth.com on September 1, 2009

China Warns Banks on OTC Hedge Defaults -Report

BEIJING, Aug 29 (Reuters) – Chinese state-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, a leading financial magazine said.

China’s SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), had told the financial institutions that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying.

It did not name the banks or the firms in question, but said Keith Noyes, an official with the International Swaps and Derivatives Association, had confirmed he was aware of the letter to the banks. He declined to comment further to Caijing.

It also cited a SASAC official as saying that almost every SOE involved in foreign exchange or trade had some exposure to derivatives such as crude oil, non-ferrous metals, agricultural commodities, iron ore and coal, although only 31 SOEs were licensed to do so.

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Posted By thestatedtruth.com on September 1, 2009

Housing Won’t Lead U.S. Out of Recession, Gross Says

By Susanne Walker

Sept. 1 (Bloomberg) — Housing won’t lead the U.S. out of its recession, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote in his September investment outlook.

There has been a significant break in the traditional economic growth pattern “because of delevering, deglobalization and reregulation,” Gross wrote in the outlook posted on Newport Beach, California-based Pimco’s Web site.

“Subsidized and tax-deductible mortgage interest rates as well as a ‘see no evil, speak no evil’ regulatory response to government agencies FNMA and FHLMC promoted a long-term housing boom and now a significant housing bust,” wrote Gross, Pimco’s co-chief investment officer. “Housing cannot lead us out of this big-R recession no matter what the recent Case-Shiller home price numbers suggest.” FNMA is mortgage company Fannie Mae, and FHLMC is the Federal Home Loan Mortgage Corp.

The S&P/Case-Shiller home-price index fell 15.4 percent in June from a year earlier, a report showed Aug. 25, less than the 16.4 percent decline forecast in a Bloomberg News survey, leading to speculation that housing declines bottomed.

Home ownership is declining, and the “new normal” in ownership is 65 percent of American households, down from 69 percent, Gross wrote.

‘Irreversibly Changed’

“The financialization of assets via the shadow banking system led to an American era of consumerism because debt was available, interest rates were low, and the livin’ became easy,” Gross wrote. “Now things have perhaps irreversibly changed,” with savings headed up and growth rates in consumer spending moving down.

Officials at Pimco have forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower growth.

“If you are a child of the bull market, it’s time to grow up and become a chastened adult; it’s time to recognize that things have changed and that they will continue to change” for the next 10 to 20 years, Gross wrote.

Global policy rates will stay low for extended periods, and Asia and Asian-connected economies such as Australia and Brazil will dominate global growth, he wrote. The dollar is “vulnerable on a long-term basis,” he added.  More……

http://www.bloomberg.com/apps/news?pid=20601110&sid=arMoynrLZVUs

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Posted By thestatedtruth.com on August 31, 2009

By: Rick Ackerman

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Posted By thestatedtruth.com on August 31, 2009

“Friday’s edition of The Wall Street Journal picks up on the theme of the long road of pain ahead for bank shareholders in the US,” colleague Dan Amoss tells us. “In ‘Banks on Sick List Top 400,’ the WSJ details several ugly highlights from the latest FDIC Quarterly Banking Profile, published last Thursday.

“Here are a few:

“1. The FDIC’s Deposit Insurance Fund is now promising to insure $6.2 trillion in deposits with just $10.4 billion in reserves. Expect to see another “special assessment” cutting a few billion dollars out of bank earnings later this year.

“2. Credit card losses are at a record: 9.95%

“3. 416 banks, or 5% of the nation’s banks, are on the ‘problem’ list.

“4. FDIC-insured banks are sitting on $332 billion in loans more than 90 days past due, up from $290 billion in the first quarter.

“5. Nonperforming loans now make up 2.77% of the entire banking industry’s assets. This is up from 1.4% in June 2008 and 0.47% in June 2006. As these loans get ‘worked out’ in today’s credit environment, the market will start to realize how severe net charge-offs will be.

“In this new report, the FDIC published updated figures for the combined noncurrent loans and loan loss allowance at all FDIC-insured institutions. The new figures – the moves from December 2008 to June 2009 – are highlighted in the dotted lines at the far right of the chart above:

Category: Charts and Graphs, Commentary, Economy, Finance, Wall Street | 403 Comments »
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Posted By thestatedtruth.com on August 30, 2009

 “These capitalists generally act harmoniously and in concert, to fleece the people”

               Abraham Lincoln

                          Old Abe must have been talking about our banks…………

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Posted By thestatedtruth.com on August 30, 2009

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Posted By thestatedtruth.com on August 30, 2009

PARIS — Swine flu spreads four times faster than other viruses and 40 percent of the fatalities are young adults in good health, the world’s top health official warned in an interview appearing Saturday.

“This virus travels at an unbelievable, almost unheard of speed,” World Health Organisation Director General Margaret Chan told France’s Le Monde daily in an interview.

“In six weeks it travels the same distance that other viruses take six months to cover,” Chan said.

“Sixty percent of the deaths cover those who have underlying health problems,” Chan said. “This means that 40 percent of the fatalities concern young adults — in good health — who die of a viral fever in five to seven days.

“This is the most worrying fact,” she said, adding that “up to 30 percent of people in densely populated countries risked getting infected.”

Chan’s warning came a day after the WHO said the virus had overtaken others to become the most prevalent flu strain.

“Evidence from multiple outbreak sites demonstrates that the A(H1N1) pandemic virus has rapidly established itself and is now the dominant influenza strain in most parts of the world,” the UN agency said in a statement.

“The pandemic will persist in the coming months as the virus continues to move through susceptible populations,” it added.

Chan underlined that emergency and healthcare services in several countries had come under strain and stressed that resources allocated for cancer patients and those suffering from heart disease should not be diverted.

“One must not rob Peter to pay Paul,” she said. “All governments must prepare for the worst.”

She said the most important thing in the battle against the virus was “political leadership.”

More than 2,180 people around the world have died from the virus since it emerged in April, according to the latest WHO figures.

Chan also said that it could be months before sufficient vaccine is available to combat the pandemic.

She put world production capacity at 900 million doses a year, for a global population of 6.8 billion people.

Even if this was an unprecedented effort, and authorities were speeding up procedures for getting vaccines to the market, there should be no question of compromises on their safety and effectiveness, Chan said.

Britain and France received their first batches of swine flu vaccine this week. Australia on Friday said a massive swine flu vaccination programme would start in October and Turkey hopes the first supplies of the vaccine will come by that time.

While 90 percent of severe and fatal cases occur in people aged above 65 in seasonal flu, most of those who die from swine flu are under the age of 50.

A “very severe form of disease” affecting the lungs and causing severe respiratory failure among young and healthy people was being reported, WHO said Friday, adding that highly specialised care was required.

Large numbers of such patients could therefore “overwhelm” intensive care units and disrupt the provision of care for other diseases, it warned.

In the southern hemisphere where the flu-prone winter season is tailing off, the WHO said cities in several countries had reported that nearly 15 percent of hospitalised cases required intensive care.

Copyright © 2009 AFP. All rights reserved.   For more on this article, please click the link below………………

http://www.google.com/hostednews/afp/article/ALeqM5hYCBp4bPYUGtZwMUlvNaMJxSlOng

Category: Commentary, Economy, Healthcare and Science, Wall Street | 3,814 Comments »
Tags: business, Commentary, deficits, deflation, epidemic, Finance, flu, gold, health, inflation, pure didinfectant, silver, swine flu, taxes, unemployment, WHO

Posted By thestatedtruth.com on August 29, 2009

Category: Charts and Graphs, Economy, Finance, Wall Street | 16 Comments »
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Posted By thestatedtruth.com on August 29, 2009

Category: Charts and Graphs, Economy, Finance, National News, Wall Street | 67 Comments »
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Posted By thestatedtruth.com on August 29, 2009

Chart from www.ingerletter.com

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Posted By thestatedtruth.com on August 28, 2009

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Posted By thestatedtruth.com on August 27, 2009

Fed Urges Secrecy on Banks in Bailout

 

 

* Fed urges judge not to enforce order pending appeal

* Banks say disclosure could cause loss of confidence

By Jonathan Stempel

NEW YORK, Aug 27 (Reuters) – The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy.

The central bank filed its request on Wednesday, two days after Chief Judge Loretta Preska of the U.S. District Court in Manhattan ruled in favor of Bloomberg News, which had sought information under the federal Freedom of Information Act.

Preska said the Fed failed to show that revealing the names would stigmatize the banks and result in “imminent competitive harm.” The Fed asked the judge not to require disclosure while it readies an appeal.

“Immediate release of these documents will cause irreparable harm to these institutions and to the board’s ability to effectively manage the current, and any future, financial crisis,” the central bank argued.

It added that the public interest favors a delay, citing a potential for “significant harms that could befall not only private companies, but the economy as a whole” if the information were disclosed.

Underlying this case and a similar one involving News Corp’s (NWSA.O: Quote, Profile, Research, Stock Buzz) Fox News Network LLC is a question of how much the public has a right to know about how the government is bailing out a financial system in a crisis.

The Clearing House Association LLC, which represents banks, in a separate filing supported the Fed’s call for a delay. It said speculation that banks’ liquidity is drying up could cause runs on deposits, and trading partners to demand collateral.

“Survival can depend on the ephemeral nature of public confidence,” Clearing House general counsel Norman Nelson wrote. “Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow.”

The Clearing House said its members include ABN Amro Holding NV, Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Bank of New York Mellon Corp (BK.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research, Stock Buzz), HSBC Holdings Plc (HSBA.L: Quote, Profile, Research, Stock Buzz), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), U.S. Bancorp (USB.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz).

The case arose when two Bloomberg reporters submitted FOIA requests about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan.     More…………

http://www.reuters.com/articlePrint?articleId=INN2732083820090827

Category: Commentary, Economy, Finance, National News, Wall Street | 1 Comment »
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Posted By thestatedtruth.com on August 26, 2009

According to the US Department of Energy, liquid fuel demand in the developed nations peaked in August 2005 at 41.89 million barrels per day. Since then, it has plunged by 3.6 million barrels per day to 38.27 million barrels per day. However, you may want to note that despite these tough economic conditions, consumption has been extremely resilient in the emerging world. For instance, demand in the developing countries peaked in October 2008 at 46.33 million barrels per day and it is down by only 0.36 million barrels per day! I am amazed that the worst global recession in decades has barely managed to shrink energy demand in the developing world. Whilst this is wonderful news for the energy investor, it is a terrible sign for society.

At present, our world is using up roughly 84 million barrels of liquid fuels per day and for the moment at least, there is sufficient supply to meet demand (Figure 1). However, when economic activity picks up, it won’t take much for demand to zip right past supply. Remember, it is much easier to increase usage, but it takes a long time to ramp up production. So, unless this is a permanent global recession (which I doubt), it is inevitable that the price of oil will go up significantly over the medium to long-term.

Figure 1: Supply and demand – balanced for now

 

On the supply side of the equation, let me be clear. If I was asked to pick the biggest threat to a sustainable economic recovery, Peak Oil would top that list. Remember, Peak Oil doesn’t mean that we are running out of oil reserves, crude will be around for decades. However, ‘Peak Oil’ does imply that we are dangerously close to peak global oil production. ‘Peak Oil’ also means that rather than experiencing a burst in oil supplies as many expect, from here onwards, we will witness sharp declines in global flow rates. In a nutshell, the era of cheap energy is over and the price of crude oil will rocket higher over the coming decade.

Now, many skeptics will argue that if Peak Oil was real, the price of oil wouldn’t have dropped to roughly US$30 per barrel in last autumn’s stunning crash. Valid point; but let us not forget that the spectacular plunge occurred at a time when global economic activity virtually came to a standstill. Let us also keep in mind that last autumn’s crash in asset prices was caused by a total freeze in credit and the associated asset liquidation. Whilst I agree that the final action in crude oil’s parabolic blow-off last July smacked of speculation, I can assure you that speculation alone couldn’t have created a multi-year boom whereby the price of crude oil went up by almost 1500%! As you can see from Figure 1 above, supply clearly fell short of demand between 2005 and 2008, and this is why we had a magnificent bull-market in crude oil.

Make no mistake, global demand for liquid fuels will rise again – and if my homework is correct, supply won’t be able to keep up. If you ignore the noise and review hard data, you will observe that the vast majority of the world’s most prolific oil provinces are now past peak production and in a state of permanent depletion. According to the BP Statistical Review of World Energy, out of the 54 oil producing nations and regions in the world, only 14 are still increasing production. Alarmingly, 30 oil producing nations and regions are definitely past their peak output and the remaining 10 appear to have modestly declining production rates. Put another way, when weighted by production, Peak Oil is already a grim reality in 61% of the oil producing world!

Still not convinced about Peak Oil? Then review Figure 2, which charts the expected combined flow rates for crude oil, lease condensates and Canadian Oil Sands. As you can see from the grey shaded area, production is about to decline by roughly 5 million barrels per day by 2012.

Figure 2: Has crude oil production peaked?

Ironically, Figure 2 also plots the optimistic (almost laughable) forecast made by the International Energy Agency (IEA) in its “World Energy Outlook 2008”. Interestingly, in last year’s “World Energy Outlook”, the IEA stated that in order to fulfill its optimistic projections, the world had to install 64 million barrels per day of new supply by 2030 or the equivalent of six times the Saudi Arabian output! Furthermore, the IEA declared that the energy industry had to invest hundreds of billions of dollars every year to achieve this favorable outcome.

Now, I can understand that the IEA is a government-funded agency so it has to paint a rosy picture, but it is ominous that the energy watchdog failed to mention where this surplus oil would come from!

Well, I guess you get the idea. Global crude oil production has probably peaked, new discoveries have dried up and there is a shortage of capital for investment purposes. Apart from these factors, if you believe the energy optimists, all is well in the energy industry and the price of oil is about to drop to zero!

After years of extensive research, I have no doubt in my mind that unless global demand stays weak forever, we will see supply shortages in the not too distant future. And before that occurs, the price of crude oil will stage an explosive rally. Accordingly, I suggest that all my readers allocate a large proportion of their investment portfolio to upstream energy companies and to businesses in the energy services sector.

Finally, in the energy complex, the price of natural gas is still scraping along its recent crash low and this is a fantastic long-term investment opportunity. As we approach winter in the Northern Hemisphere and heating demand picks up, we are likely to see a big rally in the price of natural gas. So, investors may want to allocate capital to this unbelievably inexpensive commodity.

Regards,

Puru Saxena
for The Daily Reckoning

Category: Charts and Graphs, Commentary, Commodities, Economy, National News, Oil and Nat Gas, Wall Street, World News | 11,183 Comments »
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Posted By thestatedtruth.com on August 24, 2009

From www.ingerletter.com

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Posted By thestatedtruth.com on August 24, 2009

From   www.ingerletter.com

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Posted By thestatedtruth.com on August 24, 2009

How to Kill Germs, and Consumer Resistance

Consumers can be skeptical of new disinfectants, so Michael Krall is eager to demonstrate his faith in his company’s ingredient, silver dihydrogen citrate, that is contained in a new consumer product called PureGreen 24.

Sandy Huffaker for The New York Times

Dr. Elewski, a professor of dermatology at the School of Medicine at the University of Alabama, Birmingham, once tested bedroom carpets in hotels as she scouted for foot fungi (the micro-organisms that can flake off our skin and reside among carpet fibers). She found so many different microbes that she stopped categorizing hotels as being three or four stars. Instead, she now gives them three or four spores.

So, when hoteling, I wear socks religiously as my little piece of body armor. And how about you — where do you locate your inner Howard Hughes? Do you carry hand sanitizer around like a talisman? Wear gloves on buses or subways? Press elevator buttons with your knuckles? Eschew bowls of candy next to restaurant cash registers? Roll up your pants two hem lengths before entering a public lavatory or use paper towels to open the door on the way out?

In a world where the norovirus travels by cruise ship and the swine flu can hop a plane, we have become a country with germ compulsions, a nation of microbephobes. Still, bacteria have learned to outsmart antibiotics, and Pure Bioscience, a company based in El Cajon, Calif., says it is counterattacking with an even smarter biocide.

The company developed a molecule called silver dihydrogen citrate, or S.D.C., that it bills as an all-purpose germ killer. Hungry germs are attracted to the citrate part of the molecule, which they recognize as a food source. Then microscopic particles of ionized silver, an antimicrobial agent, emerge and destroy the germ cells.

Tradition is found here: silver has been used since the days of the ancient Greeks to purify water containers. And silver dihydrogen citrate turns out to be a pretty effective killer of certain viruses, bacteria and fungi.

In the United States, the Environmental Protection Agency has registered it as a disinfectant — a substance that wipes out the entire population of a given micro-organism — for hard surfaces like countertops. The molecule, used in a consumer product called PureGreen 24, can kill off salmonella and listeria in 30 seconds, according to the product label; it needs 10 minutes to eliminate athlete’s foot, the rhinovirus and the Hong Kong flu. In Europe, meanwhile, where regulators have approved silver dihydrogen citrate as an antimicrobial agent for personal care products, Beiersdorf has introduced antiperspirants and deodorants called Nivea for Men Silver Protect.

But even as swine flu looms large this fall, people are skeptical about a new antimicrobial substance that can eliminate both methicillin-resistant Staphylococcus aureus, or MRSA, and the bacteria behind body odor.

“It’s not such a miracle,” says Michael Krall, the chief executive of Pure Bioscience. “It does one thing really good: It kills bugs. But when you introduce a new technology, you are going up against some very large resistance.”

Indeed, it turns out that humans have something in common with bacteria that have learned how to resist antibiotics. As much as we want to control germs, we have learned to resist the idea of a more powerful disinfectant. What if it kills off so many microbes that we lose our natural ability to fight germs? What if some bacteria begin to resist the allure of citrate? What if the pico-sized — that is, smaller than a nanometer — silver ions have downstream effects? What if we fear a smarter germ killer as much as, or more than, we fear the germ itself?

Mr. Krall has two answers to all of this: science and live demonstrations.

Nationally known laboratories have run batteries of tests on silver dihydrogen citrate, which Pure Bioscience has posted on its Web site. Skeptics can read the results for themselves. For those who like more tangible evidence, Mr. Krall is wont to open wide and spray the stuff in his mouth to demonstrate his belief in its safety.

SOME cruise lines are testing the disinfectant offshore against the norovirus, Mr. Krall says. Some jails and schools have started using it to keep flu and infections at bay. And, last month, Pure Bioscience formed a partnership with a new pharmaceutical company created by doctors at the Cleveland Clinic. The nascent company hopes to use the antimicrobial agent to develop over-the-counter and prescription drugs to combat the microorganisms that cause acne, toenail fungus and athlete’s foot.

It will take a few years, however, for the company to go through the clinical trial process and submit the results for product approval by the Food and Drug Administration. Until then, when I travel, I am keeping my socks on.

Category: Commentary, Healthcare and Science, National News | 51 Comments »
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Posted By thestatedtruth.com on August 21, 2009

White House Sees $9 Trillion in Deficits Over Decade

By Brian Faler

Aug. 21 (Bloomberg) — The U.S. government’s long-term budget outlook is darker than expected, with projected deficits over the next 10 years totaling $2 trillion more than had been forecast, according to an Obama administration official.

A White House budget review set for release Aug. 25 will show cumulative deficits over the next decade amounting to $9 trillion, up from $7.1 trillion that the administration predicted in May, the official said on condition of anonymity because the figures haven’t been made public.

The administration revised the estimate after taking into account more up-to-date information about how the economy performed late last year, which affected its assumptions about the future, the official said.

The nonpartisan Congressional Budget Office has estimated deficits between 2010 and 2019 will total $9.14 trillion.

The deficit, the difference between government spending and revenue, is financed by borrowing from investors in the U.S. and other countries. The borrowed money is tacked onto the national debt.

This year’s shortfall will total $1.58 trillion, about $262 billion less than previously estimated, the administration said earlier this week. The lower deficit projection for the fiscal year ending Sept. 30 is largely attributable to the administration dropping contingency plans to provide hundreds of billions in additional aid to the financial industry, the official said.

The administration’s mid-session review next week will update its economic and budget forecasts, with revised estimates of GDP growth, unemployment and next year’s projected deficit. The official declined to discuss other details in the report. The CBO is slated to issue its own revised budget outlook the same day.  More….

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaNkaSFbrjmA

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Posted By thestatedtruth.com on August 21, 2009

Meredith Whitney Predicts More Than 300 Bank Failures

By Lynn Thomasson and Margaret Brennan

Aug. 21 (Bloomberg) — Meredith Whitney, the analyst who predicted that Citigroup Inc. would cut its dividend last year, said the number of U.S. bank failures will quadruple as lenders struggle with bad loans.

“There will be over 300 bank closures,” Whitney said in an interview with Bloomberg Television from Jackson Hole, Wyoming. “The small-business owner on Main Street continues to see liquidity come away.”

Unemployment has risen to the highest since the early 1980s and Americans are falling behind on mortgage payments at a record pace, forcing regulators to seize 77 lenders in 2009, the most in 17 years. Colonial BancGroup Inc. was closed by the Federal Deposit Insurance Corp. and taken over by BB&T Corp. on Aug. 14 in the biggest failure since Washington Mutual Inc. collapsed in 2008.

The FDIC plans to ease rules to allow private-equity investors to acquire insolvent banks, the New York Times reported today, citing unidentified people briefed on the situation. The move would help reduce the number of failed banks the FDIC needs to support as their number increases, the newspaper said.

Whitney said that even though the panic of the financial crisis has passed, investors have been “overzealous” in estimating bank profits for the next few years. Analysts polled by Bloomberg project earnings for the industry will surge more than ninefold this year and 57 percent in 2010 as lenders recover from the worst crisis since the Great Depression.

“Many banks may be OK for while, but the real driver for the economy, which is consumer spending, I don’t expect that to come back anytime soon,” she said.

Financial companies in the Standard & Poor’s 500 Index have collectively rallied 135 percent in the past five months after falling to the lowest level since 1992.   More………http://www.bloomberg.com/apps/news?pid=20601087&sid=a.xOfdFgBdiA

Category: Commentary, Economy, Finance, National News, Real Estate, Wall Street | 24 Comments »
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Posted By thestatedtruth.com on August 20, 2009

Category: Charts and Graphs, Wall Street | 870 Comments »
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Posted By thestatedtruth.com on August 20, 2009

Category: Charts and Graphs, Economy, National News, Wall Street | 42 Comments »
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Posted By thestatedtruth.com on August 20, 2009

Mortgage defaults rise to record 13%

 

In the second quarter, the number of homeowners behind on payments or in foreclosure rose along with the jobless rate, with California among states leading the way.

 

Category: Commentary, Economy, National News, Real Estate | 41 Comments »
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Posted By thestatedtruth.com on August 20, 2009

‘Cash for Clunkers’ Program to Close on Aug. 24, U.S. Says

By Angela Greiling Keane

Aug. 20 (Bloomberg) — The U.S. “cash for clunkers’’ vehicle trade-in program will close on Aug. 24, Transportation Secretary Ray LaHood said.

LaHood commented in an e-mailed press release today.     More…….

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ2___hEnt6E

Category: Commentary, Economy, National News, Wall Street | 59 Comments »
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Posted By thestatedtruth.com on August 20, 2009

Pension Plans’ Private-Equity Cash Depleted as Profits Shrink

By Jason Kelly and Jonathan Keehner

Aug. 20 (Bloomberg) — U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.

The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund — among the few pension managers to disclose details of their investments — had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years.

The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.

While some investors say they’re confident the private- equity industry’s traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms’ books and prevented them from cashing out in public share sales.

‘Can’t Eat IRRs’

Now pension managers on both ends of the spectrum are looking skeptically at the so-called internal rate of return buyout firms calculate to gauge their results.

“I work for over 400,000 employees, and they can’t eat IRRs,” said Gary Bruebaker, the chief investment officer of the Washington State Investment Board. “At the end of the day, I care about how much do I give you, and how much money do I get back.”

Private-equity firms pool money from so-called limited partners — pension funds, endowments, wealthy families and sovereign wealth funds — and use that cash, along with money borrowed from banks, for corporate takeovers. The buyout managers aim to boost profits through cost cuts, acquisitions or added lines of business, then reap a return for themselves and their investors in a public stock offering or a sale to another buyer.

The buyout firms also levy fees, typically 2 percent of the assets they oversee annually and 20 percent of profits from successful investments. That’s helped make the titans of the industry into billionaires.

Avago IPO

Stephen Schwarzman, the 62-year-old co-founder and chairman of Blackstone Group LP, the biggest private-equity firm, ranked 261st on the 2009 Forbes list of the world’s richest people, with an estimated net worth of $2.5 billion. KKR & Co. LP co- founder Henry Kravis, 65, topped that with $3 billion, while Carlyle Group co-founder David Rubenstein, 60, weighed in at $1.4 billion.

Buyout managers, and some pension funds, downplay their cash returns so far this decade and counsel patience, saying that investments often look worse in the years immediately after they’re made. Blackstone’s Schwarzman told backers on an Aug. 6 conference call he expected his New York-based firm to take some of its companies public in 2010. KKR, also in New York, sold shares in Avago Technologies Ltd. through an IPO earlier this month, raising $648 million.

Harvard’s Sales

Pension funds also say that over time, private-equity returns compare favorably to the Standard & Poor’s 500 Index, which declined 28 percent from the beginning of 2000 through the end of last year. Bruebaker says his Washington fund had an 8.2 percent average annual gain from its buyout investments in the past 10 years, compared with a 3.9 percent drop in the S&P.

While investors can sell publicly traded stocks as needed, buyout funds keep money tied up for years, said Steven Kaplan, a professor at the University of Chicago’s Booth School of Business.

“With private equity, you’re taking on a liquidity risk, which people did miscalculate,” said Kaplan, who has studied takeover returns.

University endowments and philanthropic foundations hurt by the worst economic crisis since the Great Depression have struggled to sell their stakes in private-equity funds to raise cash. Investors including Harvard University, in Cambridge, Massachusetts, planned to raise more than $100 billion through so-called secondary sales of limited partnership interests, some at discounts of at least 50 percent, people familiar with the effort said last year.

‘Money in the Ground’

Rubenstein, of Washington-based Carlyle, acknowledges that the buyout industry faces tough questions.

“People have a lot of money in the ground and today it’s probably not worth what they had intended, but a turn-around in valuations is now beginning,” Rubenstein said in an interview. “You’ll probably see general partners and limited partners focused more on multiples of equity rather than just IRRs.”      More……From www.Bloomberg.com

Category: Commentary, Economy, Finance, National News, Real Estate, Research, Wall Street | 571 Comments »
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Posted By thestatedtruth.com on August 19, 2009

Category: Charts and Graphs, Economy, National News | 49 Comments »
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Posted By thestatedtruth.com on August 19, 2009

Hyperinflation Won’t Be Like Germany’s

By: Rick Ackerman

Category: Commentary, Commodities, Economy, National News, Pictures, Wall Street | 1,207 Comments »
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Posted By thestatedtruth.com on August 19, 2009

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Posted By thestatedtruth.com on August 19, 2009

Buffett Says Federal Debt Poses Risks to Economy

By Shamim Adam

Aug. 19 (Bloomberg) — The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said.

The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”

The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.

“Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said.

Record Deficit

The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July. The excess of expenditure over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history, the Treasury said Aug. 12.

Officials must still do “whatever it takes” to get the U.S. economy back on its growth momentum, Buffett wrote.

“Once recovery is gained, however, Congress must end the rise in the debt-to-GDP ratio and keep our growth in obligations in line with our growth in resources,” Buffett said. “With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.”

Dollar Index

Pacific Investment Management Co., which runs the world’s biggest bond fund, said in an Emerging Markets Watch report that the dollar will weaken as the swelling U.S. deficit erodes its status as a reserve currency. The Dollar Index, which tracks the greenback against a basket of currencies, has fallen 12 percent from this year’s high in March.

“Unchecked greenback emissions will certainly cause the purchasing power of currency to melt,” Buffett said. “The dollar’s destiny lies with Congress.”

Buffett is the chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc. Buffett built Berkshire into a $155 billion enterprise over four decades with dozens of acquisitions, buying companies that sell ice cream, lease private jets and operate power plants.

Berkshire has been buying securities issued by governments outside the U.S. The company held about $11.1 billion in foreign government bonds in its insurance units as of June 30, compared with $9.6 billion three months earlier, Berkshire said in a regulatory filing on Aug. 7.

The value of holdings in U.S. Treasuries and so-called government sponsored enterprises slipped 5.3 percent in the three months ended June 30 to about $2.5 billion.    More………….

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay3ayJvt3t3s

Category: Commentary, Finance, National News, Wall Street | 14 Comments »
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Posted By thestatedtruth.com on August 18, 2009

 Cumberland Advisors  
614 Landis Avenue Vineland NJ 08360-8007
1-800-257-7013  http://www.cumber.com

 

September!!!!  Also, Closing the Lehman Gap

August 18, 2009

 

From the Wall Street Journal of August 11:  

“For investors, the period between Labor Day and Halloween is proving an annual fright show. And no one knows why.  It was, of course, in September last year that Lehman collapsed and everything fell apart. But then it was also September-October 2002 that the last bear market plunged to its lows.  The 1998 financial crisis? It began late August, and rolled on for two months.  The famous crash of 1987 came in October. But most people have forgotten that the market actually started sliding downhill in late August.  That’s almost exactly what happened in 1929 too. The big crash came in October, but the market peaked just after Labor Day. Prices began falling through September, and then tumbled further still.  The worst month of the Depression?  September, 1931, when the Dow fell about 30 percent.  It was also in September, 2000, that the bear market really got going.  The 9/11 crisis, of course, came in September. That was hardly caused by investors. But what is forgotten is that the stock market was already looking wobbly. In the two weeks before the terrorist attacks, the Standard & Poor’s 500-stock index fell 7 percent.  The great panic of 1907? October. The great crash of 1873?  September.  Yikes.” 

When Bianco Research excerpted this piece in their weekly news clips they added the calculations of total return for each month since 1926.  For the S&P 500 index, the only month with a negative total return from 1926 through 2008 is September.  OK, this is history, but has anyone explained why it happens?  There are many theories but no hard facts to point to.

Meanwhile, the US stock market recovery stalled at S&P 500 index level 1000 and seemed to reverse itself with a VIX-spiked vengeance in mid-August from the 2009 ascendant move of five months.  The 1000 level is about a 35% retracement of the fall from the October 2007 peak to the March 2009 low.  Market technicians would like to see the market break decisively above this level in order to run bullish in a more robust way.

The 1000 level is also the bottom of the five-week waterfall when the market tumbled over 200 S&P 500 index points last year.  This period is called the “Lehman gap” and is measured by about 1000 on the downside and about 1200 on the top.  It represents a time when stocks fell on a worldwide, highly correlated basis following the Lehman Brothers failure. 

A number of market strategists expect the US stock market to eventually try to close the Lehman gap.  We are among them.  Our target for this closure is next spring.  Others, like Ed Yardeni, argue that it will happen quickly as earnings outcomes for the 4th quarter of this year are discounted this coming October.  Others point to the large amount of uninvested cash as the source of fuel for the additional stock market rally to come.  Yet others look to all the “golden crosses” in various indices as a reason for optimism. 

A golden cross is when a 50-day moving average of a price breaks up through a declining 200-day moving average.  Strategas Research noted that June was the 15th time since 1929 that we have seen the golden cross.  Only twice out of the previous fourteen times did this indicator fail to reach a new high twelve months after its occurrence.  The failing years were 1941 (down 13.8%) and 1857 (down 6.1%).

Even counting the two down periods, a year after a golden cross found the market up 18.8% on average.  That rise would take the S&P 500 Index to the top of the Lehman gap.  The largest post-golden cross upward twelve months followed Sept, 19, 1932; the market rose 50.8% in the subsequent year.  The most recent golden cross was on June 28, 1988; it was followed by a 19.6% twelve-month rise.

Golden crosses get a lot of respect among the technician crowd for good reason.

We are not technicians at Cumberland; however, we do look at their work.  We do that because it is important to see what others are using to guide their decisions.  And we do find some value in the technical work of research firms like Ned Davis or Strategas. 

We find that technical work cannot predict the future. Technical methods do help keep you in a trend longer than you would otherwise do.  This is important, since stocks are mean reverting but rarely stop or stay at the mean.  They tend to overshoot in both directions.

We raised a little cash in US stock account is mid-August.  So far that has served our clients well.  We have buy targets for a number of ETFs.  They are sitting on the trading desk awaiting an entry point.  But for now, we will give September a little more respect than we give Rodney Dangerfield.

We wish to add this postscript.  With all the Healthcare debate cacophony, has anyone noticed that there is a fully functioning federal healthcare system with a nationwide electronic records system and millions of users?  It competes in the present environment.  It maybe analyzed for systems use and it may be both praised and criticized for its good and bad points.  It is funded by the federal government.  I haven’t heard a single Congressman use it either as a positive argument or a negative one.  I wonder it holds the key to a compromise and that it has in place a national infrastructure so that a new wheel doesn’t have to be discovered.   It is called the Veterans’ Administration; the hospitals and clinics are ubiquitous in the United States.

David R. Kotok, Chairman and Chief Investment Officer, email: david.kotok@cumber.com

*********

Copyright 2009, Cumberland Advisors. All rights reserved.

Category: Commentary, Economy, Finance, National News, Wall Street | 67 Comments »
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Posted By thestatedtruth.com on August 18, 2009

CalPERS Admits California “Pension Costs Unsustainable” – So What To Do About It?

In an unusual display of honesty CalPERS Actuary Says “Pension Costs Unsustainable”

The CalPERS chief actuary says pension costs are “unsustainable,” and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

“I don’t want to sugarcoat anything,” Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

Dwight Stenbakken of the League of California Cities told the seminar that pension benefits are “just unsustainable” in their current form and difficult to defend politically.

“I think it’s incumbent upon labor and management to get together and solve this problem before it gets on the ballot,” he said.

“I actually think it is sustainable,” said Terry Brennand of the Service Employees International Union. He said the basic problem is investment losses, not high benefit levels.

“What is sustainable?” said Lou Paulson of the California Professional Firefighters. He said proposals to extend the retirement age for firefighters from 50 to 55 would result in more injuries with advancing age, driving up workers’ compensation costs.

Sustainability In Eyes Of Beholder

The California Firefighters Association and the Service Employees International Union think the plan is sustainable. I think it is too, if they are willing to put 25% of their pretax pay in every year at retire at 60 after 25 years of service.

Otherwise, they are speaking as extremely biased beneficiaries of massive public handouts, not as impartial unbiased observers.

8% annual returns are not sustainable, at least not with long-term yields at 3.5%. Indeed chasing performance is one of the reasons CalPERS suffered the losses it did. CalPERS is attempting to get 8% returns in a 4% return world.

Perhaps the crisis is just too noticeable to deny any longer, but it’s refreshing to see a bit of reality from CalPERS even as the unions are in a massive state of denial.

Politically Unfeasible Solutions

The article notes that four years ago Gov. Arnold Schwarzenegger backed an initiative proposed by former Assemblyman Keith Richman, R-Northridge, that would have switched all new state and local government hires to a 401(k)-style plan. However, Richman has since called a switch to a 401(k)-style plan “politically” unfeasible.

Dropping defined benefit plans may be “politically unfeasible”, but they are “Actuarially Mandatory”. If unions had any brains (and typically they don’t), they would hop on the 401K bandwagon for new employees, hoping to save what they have for current members.

Instead, they risk municipal bankruptcies such as happened Vallejo, California, where some bankruptcy judge ultimately decides who gets what.

Note that the system is so broken that it is highly probable that a massive reduction in pension benefits is necessary even IF the unions would agree to the 401K solution.

http://globaleconomicanalysis.blogspot.com/2009/08/calpers-admits-california-pension-costs.html

Category: Commentary, Economy, Finance, National News, Wall Street | 15 Comments »
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Posted By thestatedtruth.com on August 17, 2009

Fed Says Banks Tightened Lending in Second Quarter 

By Craig Torres

Aug. 17 (Bloomberg) — U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed today.

Most banks cited reduced risk tolerance and “a more uncertain economic outlook” as the main reasons for restricting credit to businesses, with 35.2 percent saying they “tightened somewhat,” the Fed said in its quarterly Senior Loan Officer survey.

The report suggests that lenders and borrowers were wary of taking on more risk until the U.S. economy showed clearer signs of growth. Since the survey, economists have raised their outlook for the economy as data suggested home sales and manufacturing were stabilizing, and the Fed said last week that the economy is “leveling out.”

“The report tells us that credit is not becoming more readily available, but also that the credit freeze is at least moving in the direction of a thaw,” said Carl Riccadonna, senior economist at Deutsche Bank Securities Inc.

The survey of 55 U.S. banks and 23 U.S. branches of foreign banks found that demand for loans continued to weaken “across all major categories” except prime residential mortgages, the central bank said. Two banks, or 3.7 percent, reported eased lending standards to large businesses in the survey, held from July 14 and July 28.

Taking Less Risk

Thirty-seven of 38 banks said a less favorable or more uncertain economic outlook was the reason for tighter credit standards on commercial and industrial loans over the previous three months, while 29 of 37 banks cited reduced risk tolerance as a reason for keeping strict standards on industrial loans.

None of the 51 respondent banks eased standards on prime mortgages in the latest survey, while 39 said demand for mortgages was about the same, moderately stronger or substantially stronger.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” said Joel Conn, president of Lakeshore Capital LLC in Birmingham, Alabama. “That has caused them to recalibrate what their requirements for future lending are going to look like.”

Loan originations by the top 22 banks receiving capital injections from the U.S. government rose 12.7 percent in June to $312.1 billion from a month earlier, the Treasury Department said in a separate report today.

Getting Aid

In its monthly report on the banks getting aid from the Troubled Asset Relief Program, the Treasury said total loan balances averaged $4.30 trillion in June, down 1.1 percent from the previous month. Bank of America Corp. in Charlotte, North Carolina, and Citigroup Inc. in New York are among the banks still receiving aid.

Total home mortgages were nearly unchanged in the first quarter compared with the final quarter of 2008 at $10.4 trillion, according to the Fed’s second-quarter Flow of Funds report. Consumer credit decreased at an annual rate of 5.25 percent in the second quarter, the Fed said Aug. 7 in a separate release.

“After holding nearly flat in the April survey, the net percentage of domestic banks that tightened standards on prime residential real estate loans fell to roughly 20 percent,” the loan officer survey said. “The net fraction of respondents that tightened standards on nontraditional residential mortgages fell to roughly 45 percent, from 65 percent in April.”

The Fed today extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real-estate industry from rising defaults and falling prices.

Newly Issued

The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31.

With regard to commercial real estate loans, “nearly all banks indicated that current standards were tighter than their longer-term average levels,” today’s Fed report said. “Around 40 percent expected standards to return to longer-term average levels by the second half of 2010 or in 2011 for both investment-grade and non-investment-grade lending.”

Forecasters surveyed by Bloomberg News expect the economy to expand at a 2.2 percent annual pace in the third quarter, according to the median estimate of 55 economists.

Concerns that the expansion may be slower than forecast weighed on stock prices. A 4.2 percent decline in the Standard & Poor’s Financials Index helped lead the S&P 500 to a 2.4 percent decline in New York trading today.   More…………..

http://www.bloomberg.com/apps/news?pid=20601087&sid=aA_yjiBTcYVo

Category: Commentary, Economy, Finance, National News, Wall Street | 12 Comments »
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Posted By thestatedtruth.com on August 16, 2009

Op-Ed Contributor      New York Times

Why We Need Health Care Reform

By BARACK OBAMA

Published: August 15, 2009

I hear more and more stories like these every single day, and it is why we are acting so urgently to pass health-insurance reform this year. I don’t have to explain to the nearly 46 million Americans who don’t have health insurance how important this is. But it’s just as important for Americans who do have health insurance.

There are four main ways the reform we’re proposing will provide more stability and security to every American.

First, if you don’t have health insurance, you will have a choice of high-quality, affordable coverage for yourself and your family — coverage that will stay with you whether you move, change your job or lose your job.

Second, reform will finally bring skyrocketing health care costs under control, which will mean real savings for families, businesses and our government. We’ll cut hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid and in unwarranted subsidies to insurance companies that do nothing to improve care and everything to improve their profits.

Third, by making Medicare more efficient, we’ll be able to ensure that more tax dollars go directly to caring for seniors instead of enriching insurance companies. This will not only help provide today’s seniors with the benefits they’ve been promised; it will also ensure the long-term health of Medicare for tomorrow’s seniors. And our reforms will also reduce the amount our seniors pay for their prescription drugs.

Lastly, reform will provide every American with some basic consumer protections that will finally hold insurance companies accountable. A 2007 national survey actually shows that insurance companies discriminated against more than 12 million Americans in the previous three years because they had a pre-existing illness or condition. The companies either refused to cover the person, refused to cover a specific illness or condition or charged a higher premium.

We will put an end to these practices. Our reform will prohibit insurance companies from denying coverage because of your medical history. Nor will they be allowed to drop your coverage if you get sick. They will not be able to water down your coverage when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or in a lifetime. And we will place a limit on how much you can be charged for out-of-pocket expenses. No one in America should go broke because they get sick.

Most important, we will require insurance companies to cover routine checkups, preventive care and screening tests like mammograms and colonoscopies. There’s no reason that we shouldn’t be catching diseases like breast cancer and prostate cancer on the front end. It makes sense, it saves lives and it can also save money.

This is what reform is about. If you don’t have health insurance, you will finally have quality, affordable options once we pass reform. If you have health insurance, we will make sure that no insurance company or government bureaucrat gets between you and the care you need. If you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan. You will not be waiting in any lines. This is not about putting the government in charge of your health insurance. I don’t believe anyone should be in charge of your health care decisions but you and your doctor — not government bureaucrats, not insurance companies.

The long and vigorous debate about health care that’s been taking place over the past few months is a good thing. It’s what America’s all about.     More………….

www.nytimes.com

Category: Commentary, Healthcare and Science, National News | 711 Comments »
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