"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Saturday, July 31, 2010

ZERO HEDGE POST: Ron Paul Goes After The SEC's FOIA Exclusivity, Introduces SEC Transparency Act

Another GREAT POST from Zero Hedge:

Just because being the most corrupt organization in the world was not enough, the SEC decided, courtesy of Donk (aka Frankendodd), that it is beyond accountability to anyone, even the constitution, after it was recently made public that the world's most incompetent and bribed regulators will continue watching kiddie porn, instead of regulatoring, only do so in complete opacity from now on, as in the future the SEC would be exempt from FOIA (freedom of information act) responses.

And with retail investors saying "no more" to trading stocks in a rigged casino that shares the same level of integrity as its regulator, and is programmed to generate profits for the house and the computers on 99.9% of trades (except of course for those newsletter and subscription peddlers who catch every single inflection point ever, and can predict what the market will do not only tomorrow but a week, a month and a year from now) the market will soon be a ghost town.

Recent attempts by Senator Kaufman to bring some honesty to stocks have so far been met with failure as the Sisyphean task is far too great for any one individual. Which is why we are glad to learn that Ron Paul has joined those few who still hold the long-forgotten dream that the market should be fair and impartial for all (and yes, that means eliminating discount window access for the chosen few Bank Holding Company hedge funds out there) and has introduced the SEC Transparency Act of 2010 (HR 5970), a bill designed to force greater transparency in the Securities and Exchange Commission.

Little by little, every single "intervention" by the world's two most corrupt politicians is being overturned: first the rating agency accountability provision which nearly destroyed the shadow market with a complete lockup of all new ABS issuance, and now the SEC's exclusion from that simple concept known as "checks and balances." Soon FinReg will finally be exposed for the fraud it has been since its inception - the much touted Obama financial regulatory reform is nothing but a scam designed to allow Wall Street to steel what middle class wealth remains faster, bolder and in ever greater amounts, as the point where the system breaks is now months away, and the Wall Street-DC joint venture is all too aware. As a result all must be done to allow theft to be bigger than ever, all the while the "regulator" is no longer held responsible for looking the other way.

From: Ron Paul
Congressman Ron Paul yesterday introduced the SEC Transparency Act of 2010 (HR 5970), a bill designed to force greater transparency in the Securities and Exchange Commission. The bill is designed to repeal the amendments made by section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the confidentiality of materials submitted to the Securities and Exchange Commission.

Recent news reports have publicized the little-noticed provision in the recently-passed financial reform package that the Securities and Exchange Commission has used to deny requests for information under the Freedom of Information Act. Paul’s bill would repeal the provision in the newly-passed legislation the SEC has used to deny FOIA requests.

“It is unfortunate, yet not unexpected, that legislation touted as fixing problems with the banking system actually makes them worse and provides more cover and power for organizations that failed us like the SEC and the Fed,” Paul said in introducing the bill. “I expect in the coming weeks and months that many more harmful provisions like this will come to light and it will take quite a bit of work to undo the damage from this massive and misguided legislation.”

What is unclear is whether the Ron Paul law prohibts SEC staffers to spend 40 hours per week to browse porn on the taxpayer's dime, while sending out their resumes to assorted HFT (high frequency trading) outfits, where they will participate in the same bid stuffing crime first hand, instead of just looking away from it when the latest bribery check clears.

On behalf of grandchildren everywhere, thank you ZERO HEDGE

Banner month for the FDIC: 22 bank closings and a $1.260 billion hit to the Deposit Insurance Fund (DIF) and Puff N Stuff Asset Valuations Continue

Sheila Bair's staff at the FDIC had a most productive July. Collectively she and her crack staff closed 22 banks with an estimated $1.260 billion hit to the Deposit Insurance Fund (DIF).

On Friday, the FDIC closed 5 banks with an estimated $334.7 million hit to the Deposit Insurance Fund. Year to date, the FDIC has closed 108 banks.

Recap of weekly bank closings for the month of July:
7/30/10 5 banks closed and DIF hit of $334.7 million
7/23/10 7 banks closed and DIF hit of $431 million
7/16/10 6 banks closed and a DIF hit of $334.8 million
7/9/10 4 banks closed and a DIF hit of $159.9 million
7/2/10 NO BANKS CLOSED (FDIC Holiday Weekend)

Courtesy of the Financial Accounting Standards Board (FASB) changes to "portfolio valuation", the banks continue their "Puff N Stuff" mark-to-model asset valuation (a.k.a. fraud).

Please allow grandpa to refresh your memory regarding the congressional "influence" on FASB:

June 26th, 2009 (Marketwatch): "I've testified maybe 20 times on the Hill and lawmakers and other policy makers here have a natural interest and responsibility to understand what we're doing," said FASB Chairman Robert Herz at the National Press Club in Washington. "I don't particularly welcome when people try to exert political pressure on us to get us to change accounting rules."

Key lawmakers, including a subcommittee chairman, Paul Kanjorski, D-Penn., said they would consider introducing legislation to make FASB make the changes if the agency didn't do it on its own. They demanded that FASB provide flexibility within three weeks.

March 30 (Bloomberg) -- Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent.

The changes proposed on March 16 to fair-value, also known as mark-to-market accounting, would allow companies to use “significant judgment” in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities. A final vote on the resolutions, which would apply to first-quarter financial statements, is scheduled for April 2.

The political action committees of banks including Citigroup, Bank of America, Bank of New York Mellon, Wells Fargo and banking trade groups contributed money to Kanjorski’s re- election campaign last year, according to the Federal Election Commission. Citigroup gave $6,500, Bank of America $7,000, Bank of New York $8,000 and Wells Fargo $13,000.

Puff N Stuff South Carolina Sytle
Woodlands Bank, Bluffton, South Carolina was closed by the FDIC on Friday and could be one the Poster Banks for mark-to-model. Woodlands Bank listed assets of $376.2 million and total deposits of $355.3 million. The FDIC estimates a hit to the DIF of $115 million. This would imply "REAL" assets of $240 million versus $376.2 million yielding a "Puff N Stuff" over statment of assest by 57%.

This is similar to one's child telling you they received an A- semester grade and during parent teacher conferences, the mark-to-market grade was a solid C+.

Thank you Paul Kanjorski for your stellar "integrity" role modeling on behalf of all children and grandchildren.

Thursday, July 29, 2010

SEC accuses Dallas investors of insider trading (AP)...a banner year for FRAUD and the SEC

DALLAS — Famed Dallas billionaire investors Sam and Charles Wyly made $550 million in undisclosed profits through 13 years of insider trading in the shares of companies on whose boards they served, according to a Securities and Exchange Commission lawsuit filed Thursday.

In a 78-page complaint filed in a Manhattan federal court in New York, the SEC said the Wylys held and traded tens of millions of securities in the companies and "defrauded the investing public" by misrepresenting the Wylys' ownership and trading of those shares.

"The apparatus of the fraud was an elaborate sham system of trusts and subsidiary companies located in the Isle of Man and the Cayman Islands ... created by and at the direction of the Wylys," the SEC complaint stated.

Using this offshore system, the Wylys were able to sell stock worth more than $750 million in four public companies where they served as corporate directors. They also committed an insider trading violation at one of the companies that resulted in an unlawful gain of over $31.7 million, according to the complaint.

The complaint lists the four companies as Michaels Stores Inc., Sterling Software Inc., Sterling Commerce Inc. and Scottish Annuity & Life Holdings Ltd., which is now known as Scottish Re Group Ltd.

"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws," Lorin L. Reisner, SEC deputy director of enforcement, said in a statement Thursday. "They used these structures to conceal hundreds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders."

Also named as defendants in the lawsuit are the Wylys' investment attorney, Michael C. French of Dallas, who was accused of covering the operation "with a false cloak of legality that was essential both to its concealment and its execution. Another defendant was the Wylys' stockbroker, Louis J. Schaufele III of Dallas, who was accused of using his position to conceal and misrepresent the Wylys' control over the securities and making insider trades himself.

The Wylys' defense attorney, William A. Brewer III of Dallas, called the charges "without merit" and said the Wylys "intend to vigorously defend themselves — and expect to be fully vindicated."

"At worst, the claims appear to represent an after-the-fact justification for a misguided six-year investigation," Brewer said in a statement issued by his law firm.

Attorneys for French and Schaufele had no comment Thursday.

In March, Forbes magazine estimated Sam Wyly's net worth at $1 billion. He has given generously to Republican causes and candidates, including the Swift Boat campaign that helped re-elect President George W. Bush in 2004 by tarring his Democratic opponent, Sen. John Kerry.

Grandpa: Welcome to the new era of the U.S. Equity Market. Fraud is rampant, Wall Street Banks stiff the entire globe, publically traded companies are sued for fraud and accounting irregularities by the SEC. RESULT: banks get bailed, turn record profits and share the welath in bonus issuance and the SEC collects fines while no one admits any wrongdoing.

The U.S. government manipulates data in each and every economic report and spends the next 3 months to 3 years making downward revisions, congress is a collection of 535 buffoons, publically traded companies "manage" their quarterly earnings and the banks play "extend and pretend" with their mortgage portfolios courtesy of FASB.

CNBC continues their cheerleader role on behalf of their Wall Street buddies while discussing the lack of confidence of the retail investor.

And to think we give our children and grandchildren a "time-out" for unacceptable behavior. That smell in the background is Rome burning....

Report: Unemployment High Because People Keep Blowing Their Job Interviews (The Onion)

Great article by the most enjoyable folks at The Onion. You might want to read it twice as the first run through sounds like it might actually be in place and printed in the Wall Street Journal...

Another applicant blows it by describing his short-term goals as "getting this job."

WASHINGTON—With unemployment at its highest level in decades, the U.S. Department of Labor issued a report Tuesday suggesting the crisis is primarily the result of millions of Americans just completely blowing their job interviews.

According to the findings, seven out of 10 Americans could have landed their dream job last month if they had known where they see themselves in five years, and the number of unemployed could be reduced from 14.6 million to 5 million if everyone simply greeted potential employers with firmer handshakes, maintained eye contact, and stopped fiddling with their hair and face so much.

"This economy will not recover until job candidates learn how to put their best foot forward," said Labor Secretary Hilda Solis, warning that even a small increase in stuttering among applicants who are asked to describe their weaknesses could cause the entire labor market to collapse. "If we're going to dig ourselves out of this mess, Americans need to stop wearing blue jeans to interviews, even if they're nice blue jeans, and even if that particular office happens to have a relaxed dress code."

"They also need to start bringing extra copies of their resumés, as it will show they are prepared and serious," Solis added. "And, by the way, how hard is it to send a hand-written thank-you note afterward? Anyone can dash off an e-mail."

A federal survey of employers found that nearly half of job-seeking Americans botched their interviews by responding no when asked, "So, do you have any questions for me?" Among candidates strongly qualified to perform the jobs they were applying for, 36 percent didn't bring a notepad or pen to the interview, and 16 percent were thrown off guard when the interviewer broached topics un≠related to work, such as the weather, sports, or personal hobbies.

Twelve percent, employers said, did this kind of nervous throat-clearing thing.

"If applicants would just say yes when asked if they played softball or liked golf, we could add 350,000 jobs to the private sector," Deputy Labor Secretary Seth Harris said. "The fact is, right now, today, approximately a third of the country's manufacturing positions are vacant. Auto plants across the country, especially in Detroit, are sitting there just waiting for people to come in and build cars."

"You may be a qualified candidate, but none of that matters if you walk into that interview lacking confidence," he added. "Don't act too confident, though. And don't joke around too much. And don't be overly friendly or ask too many questions. But be yourself."

The Labor Department confirmed their statistics don't take into account the estimated 20 million citizens who were unable to get interiews in the first place because of formatting errors in their resumés, or cover letters that slightly exceeded one page.

"At this point, hiring someone who doesn't use bulleted lists, strong action verbs, or boldfaced keywords is completely out of the question," said public relations executive Max Werner, who has been looking for office managers and a CFO since 2008. "And if you're going to end your cover letter with 'best wishes' instead of 'sincerely,' I don't care how experienced you are—you won't be working for me."

President Obama, who last week signed a law extending unemployment benefits, said the legislation would also address joblessness by creating a $1.2 billion program aimed at training Americans to use firm but approachable body language to make a great first impression.

"My administration remains fully committed to putting citizens back to work by making sure they show up at least 15 minutes early to their interview and never badmouth a previous boss," said Obama, flanked by unemployed Americans during an address from the White House Rose Garden. "Our new 'Nail the Interview, Score the Job' initiative will help regular Americans like Paul and Tracy here remember that they should prep ahead of time by learning a few things about the company they want to work for."

"And that little things," he continued, "like making sure your socks match, matter."

Welcome to Wall Street, Citigroup contributes $75 million to SEC as they did nothing wrong

Yes America, welcome to the new era of Corporate America and specifically the manner in which Wall Street operates. Another SEC suit settled for multi millions of dollars and yet no one admits to any wrongdoing. Citigroup simply writes out a check for $75 million and you can "bank" on the fact that business will continue as usual within the TARP bailed out Wall Street firm.

DO NOT TRY this at home as these are professionals. Stick it to the entire globe, get bailed out by the U.S. taxpayer and then simply write a check to the SEC. Also, DO NOT TRY this if you have a conscience as it will only work if you have no heart, sole, ethics and would sell your mother to get the deal done.

Citigroup to pay $75 million to settle SEC charges
it misled investors over subprime investments
(By Zachary Goldfarb-Washington Post)

Citigroup, one of the nation's largest banks, agreed Thursday to pay $75 million to settle a Securities and Exchange Commission complaint that it misled investors about $40 billion of its holdings in sub-prime mortgage investments that sent the bank to the edge of collapse.

After its $550 million settlement with Goldman Sachs, the SEC's resolution of the case with Citigroup represents a third major Wall Street institution this year agreeing to regulatory sanctions for behavior that was at the core of the financial crisis. Citigroup received one of the largest taxpayer bailouts.

Notably, the SEC complaint names two senior Citigroup executives -- former chief financial officer Gary L. Crittenden and former investor relations head Arthur Tildesley -- and alleges that they concealed important information from investors in regulatory disclosures in the second and third quarters of 2007. Crittenden agreed to pay $100,000 and Tildesley agreed to pay $80,000. Previous complaints against major financial firms have not charged high-level executives.

"Even as late as fall 2007, as the mortgage market was rapidly deteriorating, Citigroup boasted of superior risk management skills in reducing its subprime exposure to approximately $13 billion. In fact, billions more in ... subprime exposure sat on its books undisclosed to investors," said SEC Enforcement Director Robert Khuzami in a statement. "The rules of financial disclosure are simple -- if you choose to speak, speak in full and not in half-truths."

The SEC settlement marks the first time a major Wall Street bank has faced regulatory punishment for hiding from investors its exposure to the subprime mortgage market.

But the charges facing Citigroup are less serious than those Goldman faced. Goldman was accused of fraud, of deliberately misleading clients about a sub-prime mortgage investment the bank was trying to sell them. By contrast, the SEC is alleging that Citigroup was negligent in not providing important information about its sub-prime mortgage holding to investors, but did not deliberately intend to mislead its shareholders. Link to Washington Post

David Rosenberg...one of the few that that shoots straight!

David Rosenberg, one of the very few that shoot straight offers his opinions regardingtheeconomy and the U.S. equity market. Unlike the CNBC pundits paraded around day after day, David is not attempting to unload a stock position.

David Rosenberg believes the equity market is over bought, complacency reigns and the "bullish" atmosphere could get shattered pretty quickly. When asked about 80% of companies beating earnings estimate, David comments with a "so what" this happens almost every quarter. He also stressed to not mistake earnings for a strong economy.

Mr. Rosenberg is not a Cheetos eating, Red Bull drinking algorithmic gamer...

Another $1.525 BILLION is yanked from U.S. equity funds ($8.8 billion in July)

Washington, DC, July 28, 2010 - Total estimated inflows to long-term mutual funds were $6.91 billion for the week ended Wednesday, July 21, the Investment Company Institute reported today. Flow estimates are derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.

Equity funds had estimated outflows of $1.32 billion for the week, compared to estimated outflows of $3.19 billion in the previous week. Domestic equity funds had estimated outflows of $1.53 billion, while estimated inflows to foreign equity funds were $204 million.

Total Domestic Equity Flows/Week Ending
-$1.525 Billion 7/21/10
-$3.157 Billion 7/14/10
-$4.115 Billion 7/7/10 
-$227 Million 6/30/10
-$1.248 Billion 6/23/10
-$1.824 Billion 6/16/10
-$3.660 Billion 6/9/10
-$1.117 Billion 6/2/10
-$13.442 Billion 5/26/10
-$745 Million 5/19/10
-$7.018 Billion 5/12/10
-$2.437 Billion 5/5/10

Since May 5th, 2010, $40.515 BILLION has been withdrawn from Domestic Equity Funds. As of 7/21/10, $8.797 BILLION has been removed from domestic equity funds just in the month of July!

Wednesday, July 28, 2010

California: largest U.S. State Economy and 7th largest on planet declares State of Emergency

(Reuters) - California Governor Arnold Schwarzenegger declared a state of emergency over the state's finances on Wednesday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $19 billion shortfall.

The deficit is 22 percent of the $85 billion general fund budget the governor signed last July for the fiscal year that ended in June, highlighting how the steep drop in California's revenue due to recession, the housing slump, financial market turmoil and high unemployment have slashed its all-important personal income tax collection.

In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state's cash to pay its debt, and for essential services.

California's budget is five weeks overdue, joining New York among big states with spending plans yet to be approved, and Schwarzenegger and top lawmakers are at an impasse over how to balance the state's books.

Analysts say it could be several more weeks before the Republican governor and leaders of the Democrat-led legislature reach an agreement, a delay that threatens to lower the state's already weak credit rating, now hovering just a few notches above "junk" status.

"Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown," Schwarzenegger said in a statement.

"Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign," he wrote.

Schwarzenegger's declaration noted the state's government is projected to run out of cash no later than October should its budget stalemate persist, as expected. Link to Reuters Article

Grandpa: Don't fret, we still have Timmy "the weasel" Geithner on our side and robots running the equity market.

Our cash situation leaves me no choice but to once
once again furlough state workers

"I think the most likely thing is you'll see an economy that gradually
strengthens over the next year or two, you'll see job growth
start to come back, investments expanding ...
but we've got a long way to go still"....
...the teleprompter is a bit fuzzy..

Erin "the princess" Burnett and Jim "court jester" Cramer love Panera Bread

Erin Burnett, CNBC's princess cheerleader delivered her daily incessant "glass is half full" tribe yet again. Erin filled her glass today courtesy of Panera Bread announcing they plan to hire 25,000 employees. As is the case with most royalty, princess Erin does not leave the comfort of the kingdom frequently enough to get a real feel of conditions beyond the moat.

Erin's favorite court jester, Jim Cramer shared her giddiness about Panera Bread's hiring and earnings results. Jim "court jester" said he thinks that Panera Bread can be grouped together with Chipotle and Whole Foods because it offers fast food that is perceived to be good for you. "Panera is part of that rubric," Cramer said. People, will pay a premium for healthy foods.

WOW! Offering food that is "perceived to be good" for you becomes healthy because the court jester states so in a proclamation while in Erin's castle.

A plan to hire 25,000 and the princess believes all is well in the kingdom. Naturally, Erin did not ask if the 25,000 represented "net new" positions or if this included an attrition factor. Guess want princess, in the real world, 25,000 families will not experience a better, "castle-like" lifestyle working at Panera Bread. 40 million Americans receive food stamps, $300 is the national average for unemployment and guess what princess, Panera Bread wages are not "child-care" friendly. Of course you might break a nail conducting research so allow grandpa to assist in elevating your level of reality:

Subject to specific geographic regions, the average hourly range for part time non-management positions at Panera Bread is $8 to $10 per hour. The managers also pull up a bit short of a "castle-like" lifestyle as noted in a Career Builders Ad:

Job type: Full-Time
Pay: $28k - $40k/year
* MANAGERS * ASSOCIATE MANAGERS* RESTAURANT MANAGERS* Panera Bread is committed to creating an atmosphere to develop professionally within the company...

CNBC, "First in business worldwide"....PLEASE!
Maybe when CNBC boots the court jester and the princess grows up, maybe then...maybe, the hours of mindless dribble programming will graduate from junior high and your audience will actually learn something viable. Might I suggest some consideration of the next generation in your programming?

This is a 7 minute and 54 second clip however the first 2:43 is Panera.

8 Ways to Impress Me
Erin Burnett
Men's Health 2008

1. Pack Your Bags
Any guy who can plan a trip to an exotic locale, such as Mongolia, Mozambique, or Papua New Guinea, would impress me.

2. Buy Me a New Atlas and Globe
You could unlock my heart by allowing me to dream up my next trip. I love to travel, and hope to eventually set foot in 100 countries. I have many more to go.

3. Do Something Special for My Parents
Family is important to me, so round-trip business-class tickets to Australia and New Zealand for my parents would earn you big points in my book.

4. Relax Me
Yoga keeps me calm, so I'd be impressed if you thought to send a yoga instructor to my apartment for private sessions.

5. Help Me Work Out
Finding an exercise bike at my door would be great for rainy days when my Raleigh M80 mountain bike and I are stuck indoors.

6. Edify Me
Reading is a passion of mine, so a gathering with a couple of my favorite authors, especially Jared Diamond (Guns, Germs, and Steel) and Robin McKinley (The Blue Sword) would make for an exceptional evening.

7. Please My Palate
Hiring a personal chef to prepare meals for the few nights a week I am home would be unforgettable.

8. Send Me Packing
A man who recognizes the importance of my time with the girls is a keeper. A long weekend spa getaway for my sisters and me would be perfection.

Grandpa rests his case...once a princess...

Senate Banking Committee Approves All Three New Fed Governors (Zero Hedge) and more policy destruction to be shouldered by our grandkids

The Senate (Bought By) Banking Committee has spoken (the bribes finally cleared): say hello to your three brand new permadovish Keynesian kritters: Yellen, Raskin and Diamond.

All three now have direct access to the Goldman Sachs emergency red telephone, the suitcase carrying the printer launch codes, and a lifetime supply of How to Lie With Impunity and to "F" With The American People for Dummies.

All three will also be shortly sworn to defraud, steal and rob the US middle class blind until the failed economic experiment is over and done with.

Grandpa: does anyone in government care about what they continue to dump on our children and grandchildren!!!!!!!!!!!

U.S. local governments may cut almost 500,000 jobs

By William Selway
July 27 (Bloomberg) -- U.S. local governments may cut almost 500,000 jobs through next year to cope with sliding property taxes, a decline in state and federal aid and added need for social services, according to a report released today.

The report, a result of a survey by the National League of Cities, the U.S. Conference of Mayors and the National Association of Counties, showed local governments moved to cut the equivalent of 8.6 percent of their workforces from 2009 to 2011. That suggests 481,000 employees will lose their jobs, according to the report, which said the tally may yet rise.

“Local governments across the country are now facing the combined impact of decreased tax revenues, a falloff in state and federal aid and increased demand for social services,” said the study said which was released in Washington today.

While a separate report by the National Conference of State Legislatures today said U.S. state revenue is recovering from the drop in tax collections caused by the 2007 recession and the slow pace of job growth since, the greatest blow to local governments will be felt from now through 2012, the local groups said.

They called on Congress to pass a bill that would provide $75 billion in the next two years to local governments and community-based groups to stoke job growth and forestall deeper cuts.

Such a move may face political obstacles. Governors have appealed to Congress to extend additional aid to cover the cost of providing health care under Medicaid, the state-run program for the poor. The proposal stalled in the Senate, where the Republican minority has raised concern about the size of the federal deficit.

Property Taxes
The local groups said their budgets are likely to be hit by a drop in property taxes, which trail changes in home values because of the way assessments are calculated. Although prices peaked in 2006, property taxes paid to state and local governments kept rising until the first three months of this year, according to annual totals compiled by the U.S. Census Bureau.

“Over the next two years, local tax bases will likely suffer from depressed property values, hard-hit household incomes and declining consumer spending,” the report said.

The need for state and local governments to balance their budgets has weighed on the economy, damping the recovery. Spending fell at an annual pace of 3.8 percent during the first three months of this year, the steepest drop since the onset of the recession, according to U.S. Commerce Department. By June, local governments had cut their payrolls to 14.4 million from 14.58 million a year, according to the U.S. Labor Department data adjusted to take account of seasonal variations.

The fiscal strains have pushed some local governments into distress. In 2008, Vallejo, California filed for bankruptcy protection. Reading, Pennsylvania last year sought refuge under the state’s program for distressed municipalities. This month, a state appointed receiver took over in Central Falls, Rhode Island, a cash-strapped town of 19,000.

Clearly the fine folks in state and local government have not embraced Timmy "the weasel" Geithner's perspective on the U.S. economy.

US TREASURY Secretary Timothy Geithner said today he did not believe the country will double-dip back into recession before the economy improves.

Speaking on NBC’s Meet the Press, Mr Geithner said the most likely scenario would be a gradual recovery of the economy “over the next year or two."

"You see job growth start to come back again … investments expanding, manufacturing get a little stronger, exports better. Those are very encouraging signs," he said.

Tuesday, July 27, 2010

Obama administration plans a Kumbaya bonding experience with Fannie and Freddie

By Ian Katz
July 27 (Bloomberg) -- The Obama administration plans an Aug. 17 conference to discuss ways to fix the country’s “broken” housing-finance system and intends to submit a proposal by January to overhaul Fannie Mae and Freddie Mac.

“The future of our housing-finance system is critical not only to our economic recovery, but also to millions of American homeowners in every corner of our country,” Treasury Secretary Timothy F. Geithner said today in a statement released in Washington.

Falling home prices, together with easy availability of credit and government policies promoting homeownership, pushed Fannie Mae and Freddie Mac to the brink of collapse in 2008. The Treasury seized them in September of that year and has spent $145 billion so far to keep them solvent.

The administration wants a “comprehensive reform proposal that protects taxpayers, institutes tough oversight, restores the long-term health of our housing market, and strengthens our nation’s economic recovery,” he said.

In April, Treasury and the Department of Housing and Urban Development asked for public comment on how to fix the system.

In a separate statement, Jeffrey Goldstein, the Treasury’s undersecretary for domestic finance, said Fannie Mae and Freddie Mac have been “tightly supervised and regulated” since they went into government conservatorship two years ago. The two mortgage-finance companies have made “significant progress in improving the credit quality” of their new obligations, Goldstein said.
Private Sector
The review of the housing system will include Fannie Mae, Freddie Mac, the Federal Housing Administration, Ginnie Mae, the Federal Home Loan Banks and a “significant private sector role” in originating, funding and servicing mortgages, Goldstein said.

Fannie Mae and Freddie Mac guarantee more than $5 trillion in mortgages and hold $1.6 trillion in agency loans and other securities in their portfolios, Goldstein said. Created by the government to expand mortgage financing and encourage home ownership, the two companies will undergo “responsible reform” that will likely mean a different government role in housing, he said.

“For decades, Fannie Mae and Freddie Mac privatized their profits while ultimately putting taxpayers at risk for losses,” Goldstein said. “This type of ‘heads private shareholders win, tails taxpayers lose’ system of misaligned incentives makes no sense for the nation.”

‘Only Game’

Private capital hasn’t returned to the housing market, with Fannie Mae, Freddie Mac and other government entities guaranteeing more than 90 percent of new mortgages, Goldstein said. “They are practically the only game in town,” he said.

After reaching a record high of 69.2 percent in the second quarter of 2004, U.S. home ownership fell last quarter to 66.9 percent, the lowest level since 1999, according to Commerce Department figures released today.

U.S. Representative Michelle Bachmann, a Minnesota Republican and member of the House Financial Services Committee, said a “reasonable compromise” can be reached on housing finance.

“But we can’t have Uncle Sam be everyone’s mortgage banker,” she said in an interview today. “To nationalize housing would mean we’ll have a scarcity, ultimately, of housing, and it will guarantee that it’s far more expensive than it has to be.”

Home prices in 20 U.S. cities rose more than forecast in May from a year earlier as a government tax credit temporarily underpinned sales, a report showed earlier today. The S&P/Case- Shiller index of property values increased 4.6 percent from May 2009, the biggest year-over-year gain since August 2006, the group said today in New York.

Images courtesy of grandpa via the fine internet folks

GE to pay $23.5 million to settle with SEC...You should have listened to Santana and "Changed your evil ways"


General Electric Co. (GE) has agreed to pay $23.5 million to settle charges levied by the U.S. Securities and Exchange Commission, which alleged the conglomerate was involved in a $3.6 million kickback scheme with Iraqi government agencies.

The SEC said two GE subsidiaries and two other public companies that have since been bought by GE made illegal payments---which included cash, computer equipment, medical supplies and services--to the Iraqi Health Ministry and Iraqi Oil Ministry in order to obtain contracts to supply medical and water purification-equipment under the United Nations' Oil for Food program. The scheme ran from about 2000 to 2003.

GE agreed to pay the fees without admitting or denying the SEC's allegations. The company said in a statement the SEC identified 18 contracts under the program that weren't accounted for or controlled properly, 14 of which involving businesses that weren't owned by GE at the time.

The other four relate to GE Healthcare units in Europe, which GE said "declined to make cash payments to the Iraqi Ministry of Health, but they acquiesced when their agent offered instead to make in-kind payments of computer equipment, medical supplies and services to the Iraqi Health Ministry, and then failed to reflect the transactions accurately in their books and records." GE said those units' conduct "did not meet our standards."

The payment is comprised of a $1 million penalty and $22.5 million in profits plus interest the subsidiaries were estimated to have earned on the transactions, GE said.

A host of companies--including Agco Corp. (AGCO), Chevron Corp. (CVX), Ingersoll-Rand Co. (IR) and Textron Inc. (TXT)--have in recent years settled cases with the SEC related to the scandal-ridden program. The SEC said it has now taken 15 enforcement actions against companies involved in Oil for Food-related kickback schemes with Iraq, recovering more than $204 million.

"GE failed to maintain adequate internal controls to detect and prevent these illicit payments by its two subsidiaries to win Oil for Food contracts, and it failed to properly record the true nature of the payments in its accounting records," said Cheryl J. Scarboro, chief of the SEC's Foreign Corrupt Practices Act Unit.

Grandpa: who could forget GE's "Evil Ways" in 2009

Washington, D.C., Aug. 4, 2009 — The Securities and Exchange Commission today filed civil fraud and other charges against General Electric Company (GE), alleging that it misled investors by reporting materially false and misleading results in its financial statements.

Result: Without admitting or denying the SEC's allegations, GE agreed to the financial penalty ($50 million) and consented to the entry of an order permanently enjoining it from violating the antifraud, reporting, record-keeping and internal controls provisions of the federal securities laws.

SEC's GE theme Song:
You've got to change your evil ways, baby,
before I stop lovin' you.
You've got to change, baby,
and every word that I say is true.
You got me runnin' and hidin' all over town,
you got me sneakin' and a-peepin' and runnin' you down.
This can't go on, Lord knows you got to change, baby.

Consumer Confidence Index...the uncertainty index is higher, Hey Geithner, have you read the report?

The Conference Board Consumer Confidence Index® Declines Again
27 Jul. 2010

The Conference Board Consumer Confidence Index® which had declined sharply in June, retreated further in July. The Index now stands at 50.4 (1985=100), down from 54.3 in June. The Present Situation Index decreased to 26.1 from 26.8. The Expectations Index declined to 66.6 from 72.7 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for July’s preliminary results was July 21st.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Consumers’ assessment of current conditions was more downbeat in July. Those saying conditions are “bad” increased to 43.6 percent from 41.0 percent, however, those saying business conditions are “good” increased to 9.0 percent from 8.4 percent. Consumers’ appraisal of the job market was also more negative. Those claiming jobs are “hard to get” increased to 45.8 percent from 43.5 percent, while those saying jobs are “plentiful” remained unchanged at 4.3 percent.

Consumers’ short-term outlook also deteriorated further in July. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 15.9 percent from 17.1 percent, while those anticipating conditions will worsen rose to 15.7 percent from 13.9 percent.

Consumers were also more pessimistic about future job prospects. Those expecting more jobs in the months ahead decreased to 14.3 percent from 16.2 percent, while those anticipating fewer jobs increased to 21.1 percent from 20.1 percent. The proportion of consumers expecting an increase in their incomes declined to 10.0 percent from 10.6 percent.

Grandpa: given the fact that the U.S. Equity market remains disconnected from the consumer, this poor reading will likely provide the fuel necessary for the Dow Jone Industiral Average (DJIA) to launch 100+ points for the 4th consecutive day...producing a new world record for the DJIA! Yippee....publically traded companies fire hundreds of thousands of employees and report profits beating expectations. Yippee!! What a great environment for the Wall Street gamers.

Do not fret America as Timmy "the weasel" Geithner has your back: "Right now, the best thing the government can do ... is help create the conditions for the private sector to start to invest in hiring again," he said. "Now, we've seen six months of positive job growth by the private sector. That's pretty good," Geithner said. "Pretty good this early in a recession."

Equity market throws another victory party however poorly attended by the bulls

The U.S.equity market throws another victory party however it was anemically attended by the bulls. CNBC and their band of hallucinogenic mushroom eating pundits routinely ignore party attendance given the level trading volume. July 26, 2010 was another great day for the mushroom munchers as the S and P 500 closed above its 200 day moving average. This psychological (shroom influenced) level was exceeded on the 7th lowest trading volume since 4/1/2010.

There have been 80 trading days since 4/1/10 and 5 of the top 10 lowest trading volume days have occurred in July 2010. The top two lowest trading volume days also occured in July (July 12th and July 9th).

Since Ben Bernanke 's "unusually uncertain" comments on July 21st, the S and P 500 has launched 45.42 points (4.2%) in 3 trading days or 19.5 hours of trading. This 3 day launch of the S and P 500 occurred during the 7th, 14th and 17th lowest trading volume days since 4/1/10.

Imagine the equity market launch if Ben Bernanke was certain about his green shoots. Maybe if CNBC sent one of their coffee mugs filled with shrooms to Ben, he too would attend the party.

Tim Geithner in a not so riveting interview with ABC News on Elizabeth Warren

Timmy "the weasel" Geithner in a less than riveting interview with ABC news. Typical Geithner not answering the question and of course Jake "the flapper" Tapper displaying his prowess for asking those poignant questions and oblivious to the fact his question was not answered. Yes Amercia, quite the combo of a weasel politician and clown-like journalism. 

Monday, July 26, 2010

Harley-Davidson like so many corporations are making profits by firing workers

New York Times
Published: July 25, 2010

By most measures, Harley-Davidson has been having a rough ride.
Motorcycle sales are falling in 2010, as they have for each of the last three years. The company does not expect a turnaround anytime soon.
But despite that drought, Harley’s profits are rising — soaring, in fact. Last week, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.
This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.
Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.
As companies this month report earnings for the second quarter, news of healthy profits has helped the stock market — the Standard and Poor’s 500-stock index is up 7 percent for July — but the source of those gains raises deep questions about the sustainability of the growth, as well as the fate of more than 14 million unemployed workers hoping to rejoin the work force as the economy recovers.
“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”
And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.
In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.
“As long as corporations are reinvesting, the economy can grow,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “But if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”
“There’s no question that there is an income shift going on in the economy,” Mr. Harris added. “Companies are squeezing their labor costs to build profits.”
The trend is hardly limited to Harley. Giants like General Electric and JPMorgan Chase, as well as smaller companies like Hasbro, the toymaker, all improved their bottom lines despite slowing sales in the second quarter. Among the S and P 500 companies that have reported second-quarter results, more than one in 10 had higher profits on lower sales, nearly twice the number in a typical quarter before the recession, according to Thomson Reuters.  
Link to complete article

Maybe Erin Burnett of CNBC could read this while on the train. Her incessant glass is 1/2 full droning while millions of Americans have been fired is insulting. Guess what Erin, the glass needs to be filled with employed people in order to attain and maintain a viable growth curve. Drop your pom poms and take a more in-depth look at why U.S. Companies are beating profit estimates. This will prove challenging for you as "depth" and "CNBC" are incompatible.

Texas Manufacturing Sentiment sluggish at best...

Federal Reserve Bank of Dallas
Press Release 7//26/10

Texas Manufacturing Activity Remains Sluggish

Texas factory activity rebounded slightly in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key indicator of state manufacturing conditions, rose from –2 to 5, suggesting output expanded slightly in July after contracting in June.

Several indexes for factory activity continued to fall in July. The new orders and growth rate of orders indexes pushed deeper into negative territory, indicating a further contraction of demand. The index for capacity utilization dipped to –1, its first negative reading in nine months. The shipments index stabilized in July, rising from –9 to –1, with nearly equal shares of respondents noting an increase or decrease.

The general business activity index fell sharply to –21, its lowest level since July 2009. Thirty-one percent of firms reported a worsening of activity, up from 22 percent in June. The company outlook index also fell to a 12-month low, as only 13 percent of manufacturers said their outlook had improved over the previous month, compared with 24 percent who said it had worsened.

The employment index edged up and was positive for the fifth consecutive month, with 20 percent of firms reporting new hires. The wages and benefits index also rose, but overall wage pressures remained minimal, as 90 percent of respondents noted no change in compensation costs. The hours worked index dipped into negative territory, with 23 percent of manufacturers reporting a decrease in the average employee workweek.

The index for raw materials prices fell from 30 in June to 12 in July, suggesting the upward pressure on raw materials prices continued to moderate. Two-thirds of manufacturers reported no change in input costs, the highest share in six months. Downward pressure on finished goods prices intensified again in July, driving the index further into negative territory. The future raw materials prices index remained positive but slid to its lowest level in a year, while the future finished goods prices index fell to zero.

Optimism regarding firms’ six-month outlook continued to wane in July, although the indexes remained positive. The future production, capacity utilization and shipments indexes fell again this month, while the future indexes for new orders and growth rate of orders inched up but remained below the levels seen earlier this year. The future general business activity index decreased but remained in positive territory. The future company outlook index moved down from 22 to 16, with 32 percent of respondents expecting improved conditions six months from now.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected July 13–21, and 99 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share of firms reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.

Grandpa: It remains a great for bullish equity chasers as the Dow is up 70+ while the S and P 500 is up 10. Once again, poor manufacturing and new home sales data remain irrelevant as the great equity paper chase continues.

New Home Sales June 2010 330,000 and HUGE revisions to prior 3 months

New home sales reported by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development were 330,000 annualized units for the month of June 2010. The Red Bull drinking, manipulating gamers love the number as it beat the 310,000 concensus estimate. This figure is the worst on record (1963). May 2010 was revised from 300,000 annualized units to 267,000 which is a record. This is a 33,000 (11%) revision and the Census Bureau also revised the April and March 2010 figures.

Another Red Bull sir? June beats estimates by 20,000 and May revised lower by 32,000 units. Grandpa is old school however I believe 20,000 minus 32,000 does not generate anything positive.

330,000 annualized units...naturally a revision to follow in a month (maybe to 295k?)

300,000 annualized units initially reported 6/23/10
267,000 revised down 33,000 in 7/26/10 report

504,000 annualized units initially reported 5/26/10
446,000 revised down 58,000 in 6/23/10 report
422,000 revised down another 24,000 in 7/26/10 report

411,000 annualized units initially reported 4/23/10
439,000 revised up 28,000 in 5/26/10 report
384,000 revised down 55,000 in 7/26/10 report

Our Census Bureau is clearly mathematically challenged. Total downward revisions from the initial reports for March , April and May clock in at 142,000 annualized units. This equates to an average monthly downward revision of 47,333 annualized units.

Once again, the U.S. manipulated equity market continues its insane march to higher levels as the algorithmic gamers chase equities like a dog with its tail.

Sunday, July 25, 2010

Grandpa is not the only one commenting on the equity market trading volume

Grandpa is not the only one commenting on the equity market trading volume trading volume as noted in the following Marketwatch article By John Spence. Link to grandpa's trading volume post

S&P 500 ETF may be sending bearish signal
Trading volume, technicals set off jitters despite recent bounce

BOSTON (MarketWatch) -- Investors are hoping a summer rally will revive their battered stock portfolios, but the recent action in a key exchange-traded fund tracking the Standard and Poor's 500 Index suggests a troubling lack of buyer conviction and follow-through.

"From our lens, this is still a meat-grinder of a market," said David Rosenberg, chief economist and strategist at Gluskin Sheff, in a July 23 research note. He added that second-quarter earnings news has, on balance, been positive, "but not a slam dunk."

The bulls savored a victory late last week when upbeat earnings reports and European economic data sparked a surge Thursday of more than 2% in the SPDR S and P 500 ETF. The rally came one day after the market tanked as Federal Reserve Chairman Ben Bernanke warned the economic outlook was "unusually uncertain."

The gains held Friday as markets digested the release of the highly anticipated European bank stress tests. The S and P 500 has bounced solidly from the 2010 low it set on July 1, and is up around 7% so far this month. It remains to be seen whether the rebound is an inflection point or another head fake before moving lower.

Backward steps
Yet since Memorial Day, a disturbing trend for bulls has been that when trading volume picks up, it usually means selling and lower stock prices.

Between the sell-offs, the rallies have been characterized by fading volume as investors fret over European sovereign debt. Recent U.S. data on the economy and housing market have disappointed after the expiration of home-buyer tax credits, further weighing on sentiment and stoking fears of a double-dip recession

Since the beginning of June, the three highest-volume days in the SPDR S&P 500 ETF by share volume have resulted in declines. Two of those days resulted in losses of at least 3% -- on June 3 and 29. In July, the two most-active sessions also ended with stocks in the red. One was July 16, when the fund plunged nearly 3%.

The S and P 500 and ETFs that follow it have failed numerous attempts in the wake of the May 6 "flash crash" to break through their 50-day moving average, a closely watched technical indicator. Last week's rally did push the ETF above this average, and traders will be watching to see if it can hold.

In another potentially bearish signal, the 50-day moving average earlier this month dropped below the 200-day moving average. Chart followers call this event a "death cross," and the last one presaged the 2008 sell-off. Death crosses ring alarm bells with technical analysts, but their forecasting track record is mixed.

Meanwhile, falling Treasury yields and massive inflows to bond funds highlight investors' unease and desire for safety. For example, the $3.5 billion iShares Barclays 20+ Year Treasury Bond Fund has rallied more than 10% this year -- bond prices and yields move in opposite directions.

Treasury yields did rally Friday on relief the European bank stress tests didn't hold any negative surprises.

Still, the stock market appears to be pricing in a much stronger economic recovery than the fixed-income market, and analysts say both can't be right.

Cautious outlook
Standard & Poor's Global Investment Policy Committee in a July 21 outlook recommended underweighting equities and overweighting cash. "Heightened volatility, caused by plunging Treasury yields, global economic growth concerns, and sovereign debt worries, increase the range of investment outcomes, and therefore merit a more conservative investment stance," S and P said.

"The S and P 500 remains in an intermediate-term downtrend off the bull-market highs from April, with prices trapped between strong overhead on the upside and an apparent sturdy floor on the downside," the committee added. "Specifically, we see the S and P 500 trapped between the June highs up around 1,130 and the July lows down around 1,020."

Another potential red flag is how S and P 500 stocks have been moving as a herd either up or down. Earlier this month, the component stocks' correlation to the S and P 500 rose to the highest level since the October 1987 crash, The Wall Street Journal reported.

"There has been a lot of discussion over the past few weeks concerning the increased correlation between individual equities. Basically, on days when the market is up, it seems that all stocks go up, and on days when the market is down, everything is lower," Bespoke Investment Group said in a July 22 report.

One primary reason for the trend can be traced to the increased popularity of ETFs, such as the largest one tracking the S and P 500, Bespoke said. Individual stock correlation "bottomed in 1993, which was coincidentally the year that SPY began trading," it added, referring to the SPDR S and P 500 ETF's ticker symbol. "Since then, the increased correlation among stocks has increased in lockstep with moves in SPY's volume."

Bespoke concluded: "There has never been a period in the market's history where individual stocks traded in such lockstep with each other than they did in 2009. Now, even though we have since seen a decline in the relationship, current levels are now higher ... than they were in more than 98% of all other days since 1929. For better or worse, you can blame it on the SPY."

Saturday, July 24, 2010

Based on trading volumes the Bulls' parties offer tasteless hors d'oeuvres

The euphoric bull party of the U.S. equity party is poorly attended attended. The trend of high volume, well attended trading days during a declining market and poorly attended low volume days during the manipulated launch days continunes.

During the month of June, the Standard and Poor's 500 closed down 58.7 points on total monthly trading volume of 110.107 billion shares. 13 of the 22 June trading days were negative and generated 60% of the total trading volume during the month. The two largest down days occurred on June 4th (down 37.95) and June 29th (down 33.33). The average volume during these two largest down days was 6.159 billion shares. The two greatest up days occurred on June 10th (up 31.15) and June 2nd (up 27.67) on average volume of 5.086 billion shares.

The two largest down days generated 1.073 billion more guests per day than the two greatest up days. It appears the realistic and fundamentally focused bears truly know how to entertain. The "fundamentals don't matter", "I am entitled to a rally" and "CNBC affords me hope" bulls continue serving tasteless hors d'oeuvres.

For the week ending July 23rd, the Standard and Poor's 500 clocked in a net gain of 37.78 points with 33 of those points generated during the final 13 hours of trading. The market launched after Ben Bernanke's "unusually uncertain" phrase regarding his outlook on the U.S. economy. Month-to-date, the Standard and Poor's 500 index has launched 71.95 points during 16 trading days. The daily average trading volume month-to-date is 416 million shares less than June.

During the month of June, $8.076 billion was withdrawn from domestic equity funds (reporting period ending 6/2/10 through 6/30/10) or an average of $1.615 billion per reporting period.

The first two reporting periods in July note $7.272 billion has been withdrawn from domestic equity funds or an average of $3.636 billion per reporting period. Billions yanked from the U.S. equity market while the Standard and Poor's 500 Index romps 71.95 points.

Given the monster move in July, surely the bond market sold off causing interests rates to rise substantially...well not exactly...The 10 year treasury closed out the month of June at 2.95% and closed out July 23rd at 2.99%. The Standard and Poor's 500 launches 72 points (7%) in 16 trading days while the 10 year treasury moved a paultry 5 basis points (1%)!?

The 10 year treasury dropped 35 basis points (10.6%) during the month of June as the Standard and Poor's 500 index dropped 5.4% and a heavy trading volume month.

The market has clearly disconnected from any and all rational fundamentals while the bond market offers absolutely no endorsement of the bullish equity run. Time will tell who throws the ultimate party however during the interim, grandpa ordered tickets for the next bear bash!

A delicacy proudly served by the bulls....

FDIC closes 7 more banks (13 in the past two weeks) and 103 year to date

The FDIC was busy again Friday as they closed another 7 banks bringing the 2010 total closed banks to 103. For all of 2009, the FDIC closed 140 banks. With an average of 3.5 bank closings per week, the FDIC is well on their way to exceed last year's closings by 30%.

The FDIC estimates Friday's 7 closings will cost the Deposit Insurance Fund (DIF) of roughly $431 million.

Banks asset valuations continue to be significantly overstated and of course no one knows how overstaded they are until the FDIC shows up and pulls back the sheets. Home Valley Bank, Cave Junction, Oregon stated assets of $251.8 million and deposits of $229.6 million. The FDIC estimates the hit to the DIF of $37.1 million. This would imply an asset valuation closer to $192.5 million or roughly 24% less than the bank stated.

SouthwestUSA Bank, Las Vegas, Nevada was even more creative in their asset valuation. They listed $214.0 million in total assets and $186.7 million in total deposits and yet the FDIC estimates the DIF hit at $74.1 million which implies an asset valuation of $112.6 million. Clearly management held their meetings around the company bong given a 90% over statement of assets.

One wonders how many Wall Street banks also determine asset valuations while crunching numbers around their corporate bong!

C and C Bank Accounting Valuation Specialists

Friday, July 23, 2010

Obama administration takes a stab at meteorology and notes strong headwinds

(Reporting by Alister Bull; Editing by Andrew Hay)
Images courtesy of grandpa (feeling a bit sarcastic on a Friday afternoon...

(Reuters) - The Obama administration warned on Friday the U.S. economy had encountered "strong headwinds" and the country's fiscal challenge remained grim, but it lowered an estimate for the budget deficit this year.

Outlining the country's fiscal path over the next decade, the White House said the numbers were moving in the right direction but the deficit and debt were too high.

"The economy is still struggling; too many Americans are still out of work; and the nation's long-term fiscal trajectory is unsustainable," the White House said in the annual midsession review of President Barack Obama's budget.

Polls show Americans are anxious about the economy and could punish Obama's Democrats in November 2 midterm congressional elections for perceptions of big government spending and high unemployment after a severe U.S. recession.

Investors are also eyeing U.S. debt at a time when European governments are stressing fiscal consolidation. The White House said the country was on track to meet its June commitment to the Group of 20 in Toronto to halve the deficit by 2013.

The administration trimmed an expected funding gap in the current fiscal year by $84 billion to $1.47 trillion versus the estimate released in February. This gap was seen narrowing to $1.42 trillion in 2011.

Republicans jumped on the numbers as proof "Obamanomics" was not working.

"This report confirms that our national debt will double in five years and triple in 10 years. It confirms that our deficits are not sustainable," U.S. House of Representatives Republican Leader John Boehner said in a statement.

The review also tweaked White House assumptions about the economy, which have been criticized as overly optimistic in the past. The White House forecast growth at 3.2 percent this year, 3.6 percent in 2011 and 4.2 percent in 2012. Unemployment will only decline slowly, staying above 6 percent until 2015.

The forecasts were based on data available through May and finalized in early June.

"The most pressing danger we now face is unacceptably weak growth and persistent unemployment, rather than outright economic collapse, and that is a very substantial difference," White House budget director Peter Orszag told reporters.

Job creation is a vital goal for Obama, and will loom large in the November poll, but unemployment has lagged growth and remains at a lofty 9.5 percent.


"The U.S. economy still faces strong headwinds," the White House said, citing a weak housing market and doubts about the recovery in Europe, which could sap demand for exports.

"The European recovery is at risk because of increased uncertainty while government stimulus is withdrawn, and a further slowdown in Europe would pose problems for the rest of the world whose exports to Europe may be reduced," it said.

Britain and Germany have announced austerity plans to reassure investors, contrasting with the U.S. preference of phasing in budget controls going forward.

European Central Bank President Jean-Claude Trichet, in an article in the Financial Times on Friday, urged countries using the common euro currency to "implement a credible medium-term fiscal consolidation strategy."

In contrast, Federal Reserve Chairman Ben Bernanke argued this week the economy still needed fiscal support and it did not make sense to try to rein in this year's deficit.

But he stressed the country needs to curb the deficit over the next 2 to 3 years.

Obama signed a $862 billion emergency stimulus last year, which the White House says helped restore U.S. growth. But his subsequent efforts to increase aid to cash-strapped states and small businesses have been thwarted in Congress, mainly by Republicans in the Senate objecting to more deficit spending.

U.S. government debt held by the public is projected to rise above 70 percent of gross domestic product in 2012 and reach 77 percent by 2020.

Critics warn adding to the deficit could sap investor faith in the administration's commitment to phase in budget controls, risking a sovereign debt crisis here that unnerved European markets earlier this year.

Long-term U.S. interest rates have stayed low despite the grim U.S. budget outlook, supporting the recovery by holding down borrowing costs on things like mortgages and auto loans. But that could quickly change if bond investors took fright.

Obama vows to halve the deficit by 2013, a promise the larger Group of 20 rich and emerging nations also adopted at a meeting in Toronto last month, and the president has appointed a bipartisan commission to suggest how to tackle the fiscal challenge.

Obama's 18-strong panel is expected to recommend a mixture of spending cuts and tax increases when it reports findings by the end of December, well after the congressional vote.