On the daily chart, notice the following:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below all the SMAs
-- Today's price action stopped the bleeding, but didn't do much beyond that.
Tuesday, September 30, 2008
Today's Markets
On the daily chart, notice the following:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below all the SMAs
-- Today's price action stopped the bleeding, but didn't do much beyond that.
This Is a Really Stupid Idea
From Bloomberg:
That's right -- let's start making shit up. Whenever we don't like what the market says, we just make up new rules until the market is more to our liking.
The U.S. Securities and Exchange Commission and the Financial Accounting Standards Board may issue additional guidance on fair-value accounting rules, people familiar with the matter said.
The SEC may say companies can rely more on assumptions such as expected cash flows in assessing how much assets are worth, said the people, who declined to be identified because the plans haven't been completed. The guidance pertains to a requirement that banks review their assets each quarter and write them down if values have declined.
That's right -- let's start making shit up. Whenever we don't like what the market says, we just make up new rules until the market is more to our liking.
We're Nowhere Near A Bottom in Housing
From Bloomberg
Note the year over year rate accelerated. While I don't expect that situation to continue, it's obvious the rate of decline is not letting up.
Over the last few months there were some commentators who noted the rate of decline in individual cities was increasing. Therefore, there were signs of a bottoming. Folks -- my hope is that at the end of this year we'll have some visibility regarding when there might be a bottom. Maybe.
House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month's credit crisis.
The S&P/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
Note the year over year rate accelerated. While I don't expect that situation to continue, it's obvious the rate of decline is not letting up.
Over the last few months there were some commentators who noted the rate of decline in individual cities was increasing. Therefore, there were signs of a bottoming. Folks -- my hope is that at the end of this year we'll have some visibility regarding when there might be a bottom. Maybe.
Hedge Funds -- The Next Problem?
From CNBC:
Hedge Funds utilize a securities law that basically states a money manager does not have to register with the SEC if he only sells to "accredited investors." The standard definition for this is a person with $1 million in net worth or $200,000+ year in income for two years in a row (it might be $250,00). By only selling to these people, hedge fund managers don't have to make reports to the SEC. That means we have no idea how much money is actually invested in these vehicles or what investments they own.
There are several other important points. Most hedge funds have a policy that states a person can't simply withdraw money, but can only do so after a specified period of time like 1 year. In addition, some hedge funds only allow people to withdraw at the beginning of the quarter or month etc... That means a hedge fund could experience a flood of redemptions within a short period of time.
Here's the nightmare scenario. Fund A has a poor quarter. A bunch of people redeem shares. This forces Fund A to liquidate a large position in security X, causing security X to drop in price. This leads to Fund B taking a hit and the cycle repeats itself over and over again, essentially showballing downhill.
First, the money rushed into hedge funds. Now, some fear, it could rush out.
Even as Washington reached a tentative agreement on Sunday over what may become the largest financial bailout in American history, new worries were building inside the nearly $2 trillion world of hedge funds. After years of explosive growth, losses are mounting — and so are concerns that some investors will head for the exits.
No one expects a wholesale flight from hedge funds. But even a modest outflow could reverberate through the financial markets. To pay back investors, some funds may be forced to dump investments at a time when the markets are already shaky.
The big worry is that a spate of hurried sales could unleash a vicious circle within the hedge fund industry, with the sales leading to more losses, and those losses leading to more withdrawals, and so on. A big test will come on Tuesday, when many funds are scheduled to accept withdrawal requests for the end of the year.
“Everybody’s watching for redemptions,” said James McKee, director of hedge fund research at Callan Associates, a consulting firm in San Francisco. “And there could be a cascading effect, where redemptions cause other redemptions.”
Hedge Funds utilize a securities law that basically states a money manager does not have to register with the SEC if he only sells to "accredited investors." The standard definition for this is a person with $1 million in net worth or $200,000+ year in income for two years in a row (it might be $250,00). By only selling to these people, hedge fund managers don't have to make reports to the SEC. That means we have no idea how much money is actually invested in these vehicles or what investments they own.
There are several other important points. Most hedge funds have a policy that states a person can't simply withdraw money, but can only do so after a specified period of time like 1 year. In addition, some hedge funds only allow people to withdraw at the beginning of the quarter or month etc... That means a hedge fund could experience a flood of redemptions within a short period of time.
Here's the nightmare scenario. Fund A has a poor quarter. A bunch of people redeem shares. This forces Fund A to liquidate a large position in security X, causing security X to drop in price. This leads to Fund B taking a hit and the cycle repeats itself over and over again, essentially showballing downhill.
Yesterday's Markets
OK -- we're back. I hope everyone had a decent night sleep (if that was possible given the circumstances).
Let's look at the charts.
Click on them to get a bigger picture:
Notice the following:
-- The markets opened lower. This was not because of the bail-out package but because there were several other bank problems in Europe. However, the markets moved sideways until the vote. Then the markets essentially went cliff diving.
-- Notice how the markets dove 4 points on the news that the measure failed. That should tell you a great deal about what the markets want right now.
On the three month chart, notice the following:
-- First, ignore the double printing of yesterday's bar. I have no idea why that happens.
-- The shorter SMAs are below the longer SMAs
-- All the SMAs are headed lower
-- Prices are below all the SMAs in a big way.
This is a bearish chart -- big time.
On the 7-year chart, notice we've moved through the 50% retracement level and are moving to the 61.8% level. Simply using Fib ratios we're looking at roughly the 110 area as out next level of support.
On the multi-year QQQQ chart, notice the index has broken through all important multi-year areas of support. However -- this weeks bar is only from 1-day. That bar could change by Friday, which could somehow keep this latest weekly bar above the long-term support line. However, this chart indicates that NASDAQ is about to break down as well.
On the IWMS, notice we've approached 65 several times this year but have been rebuffed. Now we're approaching that level again and we have a damn good reason to break through it. We haven't -- yet. But we could.
Bottom line: all three averages are looking to break multi-year support.
Let's look at the charts.
Click on them to get a bigger picture:
Notice the following:
-- The markets opened lower. This was not because of the bail-out package but because there were several other bank problems in Europe. However, the markets moved sideways until the vote. Then the markets essentially went cliff diving.
-- Notice how the markets dove 4 points on the news that the measure failed. That should tell you a great deal about what the markets want right now.
On the three month chart, notice the following:
-- First, ignore the double printing of yesterday's bar. I have no idea why that happens.
-- The shorter SMAs are below the longer SMAs
-- All the SMAs are headed lower
-- Prices are below all the SMAs in a big way.
This is a bearish chart -- big time.
On the 7-year chart, notice we've moved through the 50% retracement level and are moving to the 61.8% level. Simply using Fib ratios we're looking at roughly the 110 area as out next level of support.
On the multi-year QQQQ chart, notice the index has broken through all important multi-year areas of support. However -- this weeks bar is only from 1-day. That bar could change by Friday, which could somehow keep this latest weekly bar above the long-term support line. However, this chart indicates that NASDAQ is about to break down as well.
On the IWMS, notice we've approached 65 several times this year but have been rebuffed. Now we're approaching that level again and we have a damn good reason to break through it. We haven't -- yet. But we could.
Bottom line: all three averages are looking to break multi-year support.
Monday, September 29, 2008
BackTomorrow
OK -- take a deep breath for a moment. I know it's probably hard right now. But this is not the time to do any analysis. It is the time to walk away until tomorrow morning.
I will have a complete market analysis up by 8AM CST -- that's a half hour before the market opens. I will try to have it up sooner but that might be difficult. There is a lot of information to sort through right now.
I will have a complete market analysis up by 8AM CST -- that's a half hour before the market opens. I will try to have it up sooner but that might be difficult. There is a lot of information to sort through right now.
Liquidity Is Still A Huge Issue
From Marketwatch:
Think about this. The Federal Reserve is doubling their injections into the financial system because of the current situation. And the central issue is lack of trust. Everyone is concerned that the company they lend money to won't be around in a week or even tomorrow. As a result, no one is lending any money -- even really short-term money. That tells us there is pure fear in the market right now. Until that fear subsides we've got problems. Big problems.
The Fed said it was boosting the size of its dollar swap arrangements to $620 billion from $290 billion previously. The agreement, with nine central banks, allows authorities to provide short-term dollar loans to commercial banks in an effort to ease short-term funding woes that have resulted from reluctance by commercial banks to lend short-term funds to each other through the interbank market.
.....
"Market participants are reluctant to engage in transactions with each other because of heightened counterparty risk and fear that they could be the next in line to experience a 'bank run' and therefore need all the liquidity they can get themselves," wrote economists at Danske Bank in Copenhagen.
Such fears left Bradford & Bingley and Fortis struggling for funding. Their subsequent collapse then contributed to further tensions in the money market.
Amid the money-market tensions, central banks have been "forced to get more and more active in providing liquidity to the market because the market isn't doing it internally," said Don Smith, an economist at brokerage firm ICAP.
Think about this. The Federal Reserve is doubling their injections into the financial system because of the current situation. And the central issue is lack of trust. Everyone is concerned that the company they lend money to won't be around in a week or even tomorrow. As a result, no one is lending any money -- even really short-term money. That tells us there is pure fear in the market right now. Until that fear subsides we've got problems. Big problems.
Citigroup Buys Wachovia
From Marketwatch:
Let's back up for a moment and look at the above information in a bit more detail.
1.) 13.46% of Wachovia's loans were bad. That should tell you how bad things are out there. This is also why I am deeply concerned about this "mark to market" study they want to include in the bail-out bill. If we start using a mark to fantasy asset valuation model we're in deep trouble.
However, consider the depth of the problem. Over 10% of the loans were in poor shape. That's a ton of loans.
The reason?
Gee - y'think? Someone had absolutely no idea about the problems coming down the pike when they made that purchase. That shows a completely stupid management that deserves to fail in my book.
2.) The FDIC and Federal Reserve are busy bees aren't they? They're playing deal maker for anyone, trying to avoid a ton of problems for the US taxpayer if at all possible. My guess is the bank insurance program is under serious strain right now and the FDIC and Treasury are trying to avoid another set of problems. Here's the reason I think that:
Citi is first in line to absorb losses. Federal authorities start to absorb losses after the $42 billion is absorbed.
And here's another set of problems for Citi:
Who is going to provide money to Citi? Who in their right mind thinks any financial company is worth the paper they are printed on right now?
Bottom line: the Feds are trying to patch up one hole, while creating another down the line.
Citi will acquire "the bulk of Wachovia's assets and liabilities," the FDIC statement said. Under the agreement, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, while the FDIC will take losses beyond that.
.....
The Wachovia deal was facilitated by the FDIC with the blessing of the Federal Reserve and the Treasury Dept.
Let's back up for a moment and look at the above information in a bit more detail.
1.) 13.46% of Wachovia's loans were bad. That should tell you how bad things are out there. This is also why I am deeply concerned about this "mark to market" study they want to include in the bail-out bill. If we start using a mark to fantasy asset valuation model we're in deep trouble.
However, consider the depth of the problem. Over 10% of the loans were in poor shape. That's a ton of loans.
The reason?
Wachovia reported $9.7 billion of losses in the first half of 2008. The slide toward collapse began when the bank paid more than $24 billion in October 2006 for Golden West Financial Corp., the California lender that specialized in option-ARM home mortgages. The bank holds about $122 billion of the adjustable- rate home loans. Kennedy Thompson, the chief executive officer at the time, later admitted that the purchase at the height of the real estate boom was ill-timed.
Wachovia is the largest holder of option ARMs, ahead of Washington Mutual, the Seattle-based lender that collapsed last week. The loans are prone to default because they allow borrowers to skip some interest payments and add them to the principal. The terms backfired when housing markets weakened, leaving borrowers with loans bigger than the value of their home. Prices in California during August fell 41 percent from year-earlier levels.
Gee - y'think? Someone had absolutely no idea about the problems coming down the pike when they made that purchase. That shows a completely stupid management that deserves to fail in my book.
2.) The FDIC and Federal Reserve are busy bees aren't they? They're playing deal maker for anyone, trying to avoid a ton of problems for the US taxpayer if at all possible. My guess is the bank insurance program is under serious strain right now and the FDIC and Treasury are trying to avoid another set of problems. Here's the reason I think that:
Citigroup will absorb as much as $42 billion of losses on Wachovia's $312 billion pool of loans, the FDIC said in the statement. The regulator will take on losses beyond that amount in exchange for $12 billion in preferred stock and warrants.
Citi is first in line to absorb losses. Federal authorities start to absorb losses after the $42 billion is absorbed.
And here's another set of problems for Citi:
``Of course they are going to raise capital,'' Oppenheimer & Co. analyst Meredith Whitney said in an interview on CNBC. ``I don't know how they absorb $42 billion on the income basis they have,'' Whitney said.
Who is going to provide money to Citi? Who in their right mind thinks any financial company is worth the paper they are printed on right now?
Bottom line: the Feds are trying to patch up one hole, while creating another down the line.
Why the Mark To Market Issue is So Important
Consider the following from a Reuter's story on Wachovia:
One of the biggest issues facing anybody with an interest in the financial sector is this: what is the actual value of the company? Mark to market forces a company to acknowledge reality by providing market determined prices for its assets. The idea that the SEC needs to study mark to market is ludicrous. What is essentially being asked is "how much can we lie to shareholders about the value of our assets?"
Investor concern about Wachovia intensified on Friday after JPMorgan said it would take a $31 billion write-down on loans it acquired when it took over Washington Mutual Inc's banking unit on Thursday.
One of the biggest issues facing anybody with an interest in the financial sector is this: what is the actual value of the company? Mark to market forces a company to acknowledge reality by providing market determined prices for its assets. The idea that the SEC needs to study mark to market is ludicrous. What is essentially being asked is "how much can we lie to shareholders about the value of our assets?"
The Treasury Plan
From the WSJ:
Although I don't like the spending this is a lot more palatable. It gives the Treasury enough money to probably make a dent in the current situation while allowing Congress to use the "power of the purse" to control the situation.
DANGER WILL ROBINSON....DANGER WILL ROBINSON.....
This is where we had problems before and still have them. Many of the details, including pricing and purchase procedures, will be worked out between those managers and Treasury. That phrase should scare the hell out of anyone reading it -- and rightfully so. It's a terrifying phrase.
This isn't too hard people. If you're going to do this you should set a few basic guidelines. One -- those who made really stupid decisions in buying this paper without analyzing it should not be able to dump it at an above market rate. Letting them do so subsidizing that mistake on the backs of taxpayers.
I have no problem with hiring asset managers. I've worked with these type of people before and they're very capable. But with the amount of money involved -- and with tax dollars on the table -- more details need to be included here.
This should be regulated by Boards of Directors. But that isn't going to happen anytime soon. So this is a good start. Paying people for failure encourages bad management decisions. Someone has to tell that to companies in the market place.
No problems here. The bottom line is we're engaging in a partial nationalization scheme here. Might as well go full boat and actually own part of these companies.
Not good. There are a lot of inside players here who have an interest in not performing decent oversight. I would prefer to see some outside parties from industry players who aren't participating in the program (which might be hard to find). In lieu of that, perhaps econ and finance professors who know high-finance. This looks like letting the fox guard the hen house.
Good idea, but we need more meat on the bones. My guess is there isn't any meat because doing so would make this a non-starter legislatively.
There is way too much soft language in this section to make it meaningful. The Treasury will "use its position to encourage...." Simply put this is feel-ggod language that has no bite. It's a dead issue.
This should have been done when times were good. This will help should there be another crisis in 10 or more years. For now, this is a good start.
Excuse me? How in the hell did this get in there? This looks to me like the beginning of serious trouble. First, the SEC is a neutered animal right now. It has done nothing during the current crisis to warrant any confidence in any of its abilities. Secondly, I can tell you exactly what that report will say. "Mark to market caused the problem. Let's use a new "mark to fantasy" method of accounting that will make the books look really good." That's where this one is leading folks.
The bill authorizes $700 billion for the fund in installments. Treasury will first get $250 billion, with an additional $100 billion immediately accessible. Congress would have the option of blocking the final installment of $350 billion by issuing a joint resolution within 15 days of any requests.
Although I don't like the spending this is a lot more palatable. It gives the Treasury enough money to probably make a dent in the current situation while allowing Congress to use the "power of the purse" to control the situation.
Treasury plans to hire asset managers to determine how to buy bad loans and other ailing assets from financial institutions. Many of the details, including pricing and purchase procedures, will be worked out between those managers and Treasury. The legislation requires Treasury to set guidelines within 45 days for pricing methods and setting the value of troubled assets, as well as mechanisms for purchasing assets, procedures for selecting asset managers and criteria for identifying troubled assets to buy.
The legislation requires Treasury to purchase assets at the lowest price, and allows the government to buy through auction or direct from institutions.
Treasury expects to start buying the simplest assets first -- mortgage-backed securities, for example -- followed by more complex securities. Treasury likely will publish a list of the assets it is seeking to purchase. Banks and other institutions are expected to submit bids in a competition to sell bad loans and securities.
DANGER WILL ROBINSON....DANGER WILL ROBINSON.....
This is where we had problems before and still have them. Many of the details, including pricing and purchase procedures, will be worked out between those managers and Treasury. That phrase should scare the hell out of anyone reading it -- and rightfully so. It's a terrifying phrase.
This isn't too hard people. If you're going to do this you should set a few basic guidelines. One -- those who made really stupid decisions in buying this paper without analyzing it should not be able to dump it at an above market rate. Letting them do so subsidizing that mistake on the backs of taxpayers.
I have no problem with hiring asset managers. I've worked with these type of people before and they're very capable. But with the amount of money involved -- and with tax dollars on the table -- more details need to be included here.
The legislation places restrictions on executive compensation for certain companies that sell assets to Treasury. If Treasury buys assets from a company directly -- something it would do if a firm were failing -- then no "golden parachute" exit payments could be made during the period when Treasury has an ownership stake in the firm. Companies that sell assets to Treasury through an auction process will be subject to some limits. Firms that sell more than $300 million of assets to Treasury won't be allowed to make any new golden-parachute payments to top executives. A tax-deduction limit on compensation above $500,000 also will apply.
This should be regulated by Boards of Directors. But that isn't going to happen anytime soon. So this is a good start. Paying people for failure encourages bad management decisions. Someone has to tell that to companies in the market place.
The legislation requires Treasury to receive warrants in companies that participate in the program. If a company sells its assets through an auction, Treasury will get a nominal amount of nonvoting warrants. If Treasury buys assets directly, it could get a majority equity stake.
No problems here. The bottom line is we're engaging in a partial nationalization scheme here. Might as well go full boat and actually own part of these companies.
The Troubled Asset Relief Fund will be overseen by a bipartisan congressional commission that will receive reports from Treasury every 30 days. The program will also be overseen by a board comprising the heads of Treasury, the Federal Reserve, the Securities and Exchange Commission, the Housing and Urban Development Department and the Federal Housing Finance Agency.
The office of accountability will have an inspector-general office within Treasury.
Treasury will have to submit a written report to Congress no later than April 30 on the overall financial regulatory system and "its effectiveness at overseeing the participants in the financial markets, including the over-the-counter swaps market and government-sponsored enterprises" and recommend improvements.
Not good. There are a lot of inside players here who have an interest in not performing decent oversight. I would prefer to see some outside parties from industry players who aren't participating in the program (which might be hard to find). In lieu of that, perhaps econ and finance professors who know high-finance. This looks like letting the fox guard the hen house.
If after five years the government has a net loss, the president will be required to submit a legislative proposal to seek reimbursement from the financial institutions that participated.
Good idea, but we need more meat on the bones. My guess is there isn't any meat because doing so would make this a non-starter legislatively.
Treasury will buy mortgage-backed securities, mortgages and other assets secured by residential real estate. The legislation requires Treasury to use its position as the investor in those loans and securities to "encourage the servicers of the underlying mortgages" to help minimize foreclosures.
It also calls for Treasury to "identify opportunities" to acquire "classes of troubled assets" that will improve the ability of Treasury to help modify and restructure loans. The idea is that Treasury would be more patient with homeowners who have fallen behind on their payments than commercial lenders.
There is way too much soft language in this section to make it meaningful. The Treasury will "use its position to encourage...." Simply put this is feel-ggod language that has no bite. It's a dead issue.
The bill would require Treasury to establish, alongside the asset-purchase plan, a program to insure mortgage-backed securities. Financial institutions that want to participate would essentially pay the government a fee and, in return, the government would insure their assets against any future losses.
This should have been done when times were good. This will help should there be another crisis in 10 or more years. For now, this is a good start.
The legislation would require the Securities and Exchange Commission to study so-called mark-to-market accounting standards, which require that firms reflect the market value of assets on their books. Such accounting has culminated in many financial institutions writing down big losses as the value of certain assets has fallen in price. The SEC would have to study the accounting rule's effect on balance sheets and report to Congress within 90 days of its findings.
Excuse me? How in the hell did this get in there? This looks to me like the beginning of serious trouble. First, the SEC is a neutered animal right now. It has done nothing during the current crisis to warrant any confidence in any of its abilities. Secondly, I can tell you exactly what that report will say. "Mark to market caused the problem. Let's use a new "mark to fantasy" method of accounting that will make the books look really good." That's where this one is leading folks.
Friday, September 26, 2008
Weekend Wiemar and Beagle
Actually, this week it's all Beagle. And an amazing Beagle to boot. Just watch this escape artist in action.
I'll be back on Monday. I'll be on KTLK tomorrow morning at 9:00 CST (I think).
I'll be back on Monday. I'll be on KTLK tomorrow morning at 9:00 CST (I think).
A Closer Look At the Financial Sector
Considering the financial sector has been he focus of a great deal of talk lately, let's see how this sector is performing from a technical perspective.
On the yearly chart, notice the following:
-- Prices are still in the downtrend that started about a year ago. While prices spiked to the 200 day SMA on talk of the bail-out, they quickly retreated to below the downward sloping trend line again. In fact, prices opened above the line and then closed below the line.
-- Since roughly mid-July, prices have moved in a tighter pattern, moving primarily sideways. Prices moved between essentially 20 and 23. While we saw moves below that level last week, we can attribute that to extreme market responses to the AIG/Fannie and Freddie situation etc...
The yearly chart highlights the need to understand technical developments in a fundamental light. While reading charts is incredibly important to understanding the market, this chart especially would be a bit hard to understand without an understanding of the fundamental backdrop.
On the three month chart, notice the following:
The 10, 20 and 50 day SMA are in an extremely tight range, highlighting the fact that traders are equally split between bullish and bearish sentiment. The big uncertainty is the bail-out package. Until that situation changes I wouldn't expect the sector's outlook to change.
On the yearly chart, notice the following:
-- Prices are still in the downtrend that started about a year ago. While prices spiked to the 200 day SMA on talk of the bail-out, they quickly retreated to below the downward sloping trend line again. In fact, prices opened above the line and then closed below the line.
-- Since roughly mid-July, prices have moved in a tighter pattern, moving primarily sideways. Prices moved between essentially 20 and 23. While we saw moves below that level last week, we can attribute that to extreme market responses to the AIG/Fannie and Freddie situation etc...
The yearly chart highlights the need to understand technical developments in a fundamental light. While reading charts is incredibly important to understanding the market, this chart especially would be a bit hard to understand without an understanding of the fundamental backdrop.
On the three month chart, notice the following:
The 10, 20 and 50 day SMA are in an extremely tight range, highlighting the fact that traders are equally split between bullish and bearish sentiment. The big uncertainty is the bail-out package. Until that situation changes I wouldn't expect the sector's outlook to change.
US dollar advances further to 4-day high versus Israeli shekel, Friday, September 26, 2008 1:33:16 PM
Extending early European session`s uptrend, the US currency advanced to a 4-day high of 3.4438 against its Israeli counterpart at about 6:15 am ET. Thereafter, the pair ticked down slightly and as of now is worth 3.4242. The dollar-shekel pair closed yesterday`s deals at 3.4100.
Aussie recoups losses against most majors, Friday, September 26, 2008 12:37:35 PM
The Australian dollar strengthened against most of its major counterparts from previous session`s downtrend in New York morning deals on Friday.
After touching a 1-week low of 0.8243 against the US dollar and 0.8545 versus the Canadian dollar at about 3:55 am ET, the Aussie gained ground in New York morning session on Friday. As of now, the Australian currency is trading at 0.8317 against the greenback and 0.8608 versus the loonie.
The U.S. Commerce Department revealed that Gross Domestic Product grew at a rate of 2.8 percent in the April-to-June period. This was slower than the 3.3 percent pace that was reported last month.
The statistics also showed that personal spending advanced at a 1.2 percent rate during the quarter, revised down from the 1.7 percent that was previously estimated.
The Aussie ticked up to 1.7539 against the euro and 88.45 versus the yen by about 10:00 am ET from last session`s weekly lows of 1.7686 and 86.89, respectively. At present, the Aussie is worth 1.7577 against the euro and 88.26 versus the yen.
After touching a 1-week low of 0.8243 against the US dollar and 0.8545 versus the Canadian dollar at about 3:55 am ET, the Aussie gained ground in New York morning session on Friday. As of now, the Australian currency is trading at 0.8317 against the greenback and 0.8608 versus the loonie.
The U.S. Commerce Department revealed that Gross Domestic Product grew at a rate of 2.8 percent in the April-to-June period. This was slower than the 3.3 percent pace that was reported last month.
The statistics also showed that personal spending advanced at a 1.2 percent rate during the quarter, revised down from the 1.7 percent that was previously estimated.
The Aussie ticked up to 1.7539 against the euro and 88.45 versus the yen by about 10:00 am ET from last session`s weekly lows of 1.7686 and 86.89, respectively. At present, the Aussie is worth 1.7577 against the euro and 88.26 versus the yen.
Canadian Dollar Shows Mild Strength Versus Majors, Friday, September 26, 2008 12:53:59 PM
The loonie showed mild strength against its major counterparts on Friday in New York, most notably reaching a fresh weekly high against the euro.
Crude oil dropped on Friday as the ongoing problems in the U.S. financial sector could continue to cause traders to feel energy demand could be dragged lower. Light sweet crude for November delivery moved to $105.67, down $2.35 on the session. Prices hit as low as $104.25 in overnight deals.
The Canadian dollar experienced choppy trading with the U.S. dollar on Friday. The pair bounced between 1.0372 and 1.0314 throughout the day, staying just below Thursday`s multi-month high.
Investors weighed a slew of reports showing U.S. gross domestic product and personal consumption fell unexpectedly in the second quarter, while a University of Michigan survey showed consumer confidence dropped more than expected in September.
The loonie climbed to a fresh weekly high versus the euro on Friday. The Canadian dollar advanced to 1.5071 just after 6:00 am ET, up from an early morning low of 1.5164. Traders pondered a report showing French gross domestic product contracted at an expected rate in the second quarter.
Crude oil dropped on Friday as the ongoing problems in the U.S. financial sector could continue to cause traders to feel energy demand could be dragged lower. Light sweet crude for November delivery moved to $105.67, down $2.35 on the session. Prices hit as low as $104.25 in overnight deals.
The Canadian dollar experienced choppy trading with the U.S. dollar on Friday. The pair bounced between 1.0372 and 1.0314 throughout the day, staying just below Thursday`s multi-month high.
Investors weighed a slew of reports showing U.S. gross domestic product and personal consumption fell unexpectedly in the second quarter, while a University of Michigan survey showed consumer confidence dropped more than expected in September.
The loonie climbed to a fresh weekly high versus the euro on Friday. The Canadian dollar advanced to 1.5071 just after 6:00 am ET, up from an early morning low of 1.5164. Traders pondered a report showing French gross domestic product contracted at an expected rate in the second quarter.
Swiss Franc Lacks Direction With Majors, Friday, September 26, 2008 1:10:25 PM
The Swiss franc posted lackluster performances against its major counterparts on Friday in New York. Traders weighed a report showing the Swiss leading indicator fell less than expected in September.
Indicting continued easing in Swiss economic growth, the KOF leading indicator in September declined further to 0.62 points from a revised 0.73 points in August, the KOF Economic Institute said. The August reading was upwardly revised from 0.68. Economists were looking for a reading of 0.54 for September.
According to the institute, Switzerland`s annual gross domestic product growth will slow in the months ahead. Among the three modules of the KOF indicator, the Core GDP module continued its downward trend. Meanwhile, the construction and banking modules showed a stabilizing effect.
The Swiss franc lacked direction with the dollar on Friday. The pair bounced between 1.0911 and 1.0828 throughout the day, staying below Monday`s multi-week high.
Investors pondered a slew of reports showing U.S. gross domestic product and personal consumption fell unexpectedly in the second quarter, while a University of Michigan survey showed consumer confidence dropped more than expected in September.
Versus the euro, the franc pulled back from a weekly high on Friday. After advancing to 1.5860 by 7:30 am ET, the euro fell back to 1.5909 in the afternoon. Traders digested a report showing French gross domestic product contracted at an expected rate in the second quarter.
Against the pound on Friday, the franc moved with uncertainty. The two currencies moved between 1.9941 and 2.0024, staying above last week`s monthly low.
The Bank of England said it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries. Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today. The Bank of England`s overnight dollar repo operations will be US$10 billion on Friday.
Indicting continued easing in Swiss economic growth, the KOF leading indicator in September declined further to 0.62 points from a revised 0.73 points in August, the KOF Economic Institute said. The August reading was upwardly revised from 0.68. Economists were looking for a reading of 0.54 for September.
According to the institute, Switzerland`s annual gross domestic product growth will slow in the months ahead. Among the three modules of the KOF indicator, the Core GDP module continued its downward trend. Meanwhile, the construction and banking modules showed a stabilizing effect.
The Swiss franc lacked direction with the dollar on Friday. The pair bounced between 1.0911 and 1.0828 throughout the day, staying below Monday`s multi-week high.
Investors pondered a slew of reports showing U.S. gross domestic product and personal consumption fell unexpectedly in the second quarter, while a University of Michigan survey showed consumer confidence dropped more than expected in September.
Versus the euro, the franc pulled back from a weekly high on Friday. After advancing to 1.5860 by 7:30 am ET, the euro fell back to 1.5909 in the afternoon. Traders digested a report showing French gross domestic product contracted at an expected rate in the second quarter.
Against the pound on Friday, the franc moved with uncertainty. The two currencies moved between 1.9941 and 2.0024, staying above last week`s monthly low.
The Bank of England said it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries. Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today. The Bank of England`s overnight dollar repo operations will be US$10 billion on Friday.
Japanese yen pares gains against most majors, Friday, September 26, 2008 12:12:14 PM
The Japanese currency pared early gains against most of its major counterparts during New York mid-day trading on Friday.
The Ministry of Internal Affairs and Communications said that core inflation in Japan increased 2.4 percent on year in August, in line with analyst expectations. It also held steady from the July figure, equaling an 11-year high.
Overall nationwide CPI was up an annual 2.1 percent, matching forecasts after a 2.3 percent gain on year in the previous month. Overall inflation gained 0.3 percent on month.
After hitting an 8-day high of 105.05 by about 8:35 am ET, the yen reversed its direction against the US dollar in New York mid-day deals today. Currently, the pair is worth 106.08.
The U.S. Commerce Department revealed that Gross Domestic Product grew at a rate of 2.8 percent in the April-to-June period. This was slower than the 3.3 percent pace that was reported last month.
The Japanese currency trended down against the euro and the British pound in New York morning deals from previous session`s uptrend. As of now, the yen is trading at 154.77 against the euro and 195.14 versus the pound, compared to early 1-week highs of 153.50 and 193.22, respectively.
Against the Swiss franc, the yen weakened to 97.76 by about 10:00 am ET from last session`s 4-day high of 96.63 today. Presently, the franc-yen pair is trading near 97.40.
The Ministry of Internal Affairs and Communications said that core inflation in Japan increased 2.4 percent on year in August, in line with analyst expectations. It also held steady from the July figure, equaling an 11-year high.
Overall nationwide CPI was up an annual 2.1 percent, matching forecasts after a 2.3 percent gain on year in the previous month. Overall inflation gained 0.3 percent on month.
After hitting an 8-day high of 105.05 by about 8:35 am ET, the yen reversed its direction against the US dollar in New York mid-day deals today. Currently, the pair is worth 106.08.
The U.S. Commerce Department revealed that Gross Domestic Product grew at a rate of 2.8 percent in the April-to-June period. This was slower than the 3.3 percent pace that was reported last month.
The Japanese currency trended down against the euro and the British pound in New York morning deals from previous session`s uptrend. As of now, the yen is trading at 154.77 against the euro and 195.14 versus the pound, compared to early 1-week highs of 153.50 and 193.22, respectively.
Against the Swiss franc, the yen weakened to 97.76 by about 10:00 am ET from last session`s 4-day high of 96.63 today. Presently, the franc-yen pair is trading near 97.40.
Hong Kong Dollar Recovers Asian session Losses against US Dollar, Friday, September 26, 2008 7:37:49 AM
The Hong Kong dollar recovered Friday`s Asian session losses against the US dollar during early European deals. The local dollar thus climbed from a 1-week low of 7.7840 to 7.7697 against the greenback by about 4:00 am ET. The pair that closed Thursday`s deals at 7.7785 is now worth 7.7743.
Global Central Banks Brace For Liquidity Crunch, Friday, September 26, 2008 11:10:04 AM
Friday, the Federal Reserve and leading European central banks announced coordinated measures to address funding pressures. Central banks in Asia Pacific also took measures to boost liquidity.
The Fed along with the European Central Bank, the Bank of England and the Swiss National Bank provided U.S. dollar liquidity with a one-weak maturity. Reiterating that they will continue to work together, the central banks said they are ready to take additional measures as needed to deal with the ongoing pressures in the funding markets.
The latest liquidity boost from global central banks came following a breakdown of talks over a US$700 billion rescue plan for the US financial system. Sentiment in financial markets also took a hit on the news of collapse of U.S. bank Washington Mutual. Late Thursday, JPMorgan Chase & Co. said that it has agreed to acquire all deposits and assets of Washington Mutual for about $1.9 billion, after the struggling company was seized by regulators in what is considered as the largest bank failure in U.S. history.
In a statement, the Fed said the Federal Open Market Committee authorized a $10 billion increase in its temporary swap facility with the ECB and a $3 billion increase in its facility with the SNB. These expanded facilities will support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the SNB.
Together, these changes represent a $13 billion addition to the $277 billion previously authorized swap deals with other central banks. Previously, the Fed had authorized swap lines with the Bank of Japan ($60 billion), the Bank of England ($40 billion), the Reserve Bank of Australia ($10 billion), the Bank of Canada ($10 billion), the Bank of Sweden ($10 billion), the National Bank of Denmark ($5 billion), and the Bank of Norway ($5 billion). The Fed said these arrangements have been authorized through January 30, 2009.
The actions were in response to the crisis at U.S. financial firms, which took excessive bets on mortgage-backed investments resulting in the write off of billions of dollars of assets. The troubled U. S. investment bank Lehman Brothers went bankrupt, while Merrill Lynch got sold to the Bank of America in a quickly-negotiated $50-billion transaction. Meanwhile, the U.S. government stepped in to save insurer AIG from sinking. The Fed extended an $85 billion loan, essentially nationalizing the firm. Further, investment banks Goldman Sachs and Morgan Stanley converted themselves into regulated commercial banks.
In the latest move, the ECB decided to provide US dollar one-week funding over the quarter end to European banks, applying a variable rate tender procedure and with an intended volume of US$35 billion. The bank received bids worth US$82.495 billion from 52 banks. The bank offered the funds at a marginal rate of 4.5%. In its overnight operations, the ECB lent US$30 billion, reduced from an initial US$40 billion, against a bid amount of US$41.38 billion from 33 bidders at a marginal rate of 2.25%.
The SNB allotted US$4.9 billion at a marginal interest rate of 1% in its one-week repo operation, which had twelve banks participating. In its overnight operation, the central bank allotted US$7 billion against a bid amount of US$8.3 billion from 13 banks at a marginal rate of 1.82%.
The Bank of England said in a statement that it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries. Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today.
The UK central bank`s overnight dollar repo operation was US$10 billion on Friday, reduced from US$40 billion earlier, against a bid amount of US$12.36 billion. The cover ratio was 1.24 and weighted average accepted rate of 2.208%. In the one-week operation, the bank received US$31.65 billion worth bids and the cover ratio was 1.06%. The weighted average accepted rate was 2.991%.
The BoE added that Bank`s long-term repo operations against extended collateral, including mortgage securities, will for a period be held weekly and enlarged. The first such operation will be held on September 29. It will be an auction for GBP40 billion, for maturity to January 15, 2009.
Meanwhile, the Danish central bank extended the banks and mortgage credit institutes lending facilities given the tight liquidity conditions. The Danmarks Nationalbank said it will introduce a facility offering banks and institutes credit on the basis of their excess capital adequacy and will increases the number of assets accepted as collateral. These measures will come into effect on September 26. The central bank received bids worth US$16.8 billion against an offered amount of US$5 billion in its US dollar auction.
Markets in Asia Pacific also received funds on Friday. Data from the Reserve Bank of Australia offered A$816 million today in repo. Further, the Australian central bank reportedly said it offered US$10 billion in its first US dollar repurchase operation. Further, the Australian government announced that it will invest A$4 billion in two tranches in the domestic residential mortgage-backed securities to boost home lending.
Elsewhere in the region, the Bank of Japan injected 1.5 trillion yen or US$14billion into its money markets.
The South Korean Finance Ministry announced that it would supply at least US$10 billion into the swap market in the coming weeks in order to provide more liquidity. Choi Jong-ku, head of the ministry`s international financial bureau said the central bank would continue to supply dollars whenever necessary.
The Fed along with the European Central Bank, the Bank of England and the Swiss National Bank provided U.S. dollar liquidity with a one-weak maturity. Reiterating that they will continue to work together, the central banks said they are ready to take additional measures as needed to deal with the ongoing pressures in the funding markets.
The latest liquidity boost from global central banks came following a breakdown of talks over a US$700 billion rescue plan for the US financial system. Sentiment in financial markets also took a hit on the news of collapse of U.S. bank Washington Mutual. Late Thursday, JPMorgan Chase & Co. said that it has agreed to acquire all deposits and assets of Washington Mutual for about $1.9 billion, after the struggling company was seized by regulators in what is considered as the largest bank failure in U.S. history.
In a statement, the Fed said the Federal Open Market Committee authorized a $10 billion increase in its temporary swap facility with the ECB and a $3 billion increase in its facility with the SNB. These expanded facilities will support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the SNB.
Together, these changes represent a $13 billion addition to the $277 billion previously authorized swap deals with other central banks. Previously, the Fed had authorized swap lines with the Bank of Japan ($60 billion), the Bank of England ($40 billion), the Reserve Bank of Australia ($10 billion), the Bank of Canada ($10 billion), the Bank of Sweden ($10 billion), the National Bank of Denmark ($5 billion), and the Bank of Norway ($5 billion). The Fed said these arrangements have been authorized through January 30, 2009.
The actions were in response to the crisis at U.S. financial firms, which took excessive bets on mortgage-backed investments resulting in the write off of billions of dollars of assets. The troubled U. S. investment bank Lehman Brothers went bankrupt, while Merrill Lynch got sold to the Bank of America in a quickly-negotiated $50-billion transaction. Meanwhile, the U.S. government stepped in to save insurer AIG from sinking. The Fed extended an $85 billion loan, essentially nationalizing the firm. Further, investment banks Goldman Sachs and Morgan Stanley converted themselves into regulated commercial banks.
In the latest move, the ECB decided to provide US dollar one-week funding over the quarter end to European banks, applying a variable rate tender procedure and with an intended volume of US$35 billion. The bank received bids worth US$82.495 billion from 52 banks. The bank offered the funds at a marginal rate of 4.5%. In its overnight operations, the ECB lent US$30 billion, reduced from an initial US$40 billion, against a bid amount of US$41.38 billion from 33 bidders at a marginal rate of 2.25%.
The SNB allotted US$4.9 billion at a marginal interest rate of 1% in its one-week repo operation, which had twelve banks participating. In its overnight operation, the central bank allotted US$7 billion against a bid amount of US$8.3 billion from 13 banks at a marginal rate of 1.82%.
The Bank of England said in a statement that it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries. Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today.
The UK central bank`s overnight dollar repo operation was US$10 billion on Friday, reduced from US$40 billion earlier, against a bid amount of US$12.36 billion. The cover ratio was 1.24 and weighted average accepted rate of 2.208%. In the one-week operation, the bank received US$31.65 billion worth bids and the cover ratio was 1.06%. The weighted average accepted rate was 2.991%.
The BoE added that Bank`s long-term repo operations against extended collateral, including mortgage securities, will for a period be held weekly and enlarged. The first such operation will be held on September 29. It will be an auction for GBP40 billion, for maturity to January 15, 2009.
Meanwhile, the Danish central bank extended the banks and mortgage credit institutes lending facilities given the tight liquidity conditions. The Danmarks Nationalbank said it will introduce a facility offering banks and institutes credit on the basis of their excess capital adequacy and will increases the number of assets accepted as collateral. These measures will come into effect on September 26. The central bank received bids worth US$16.8 billion against an offered amount of US$5 billion in its US dollar auction.
Markets in Asia Pacific also received funds on Friday. Data from the Reserve Bank of Australia offered A$816 million today in repo. Further, the Australian central bank reportedly said it offered US$10 billion in its first US dollar repurchase operation. Further, the Australian government announced that it will invest A$4 billion in two tranches in the domestic residential mortgage-backed securities to boost home lending.
Elsewhere in the region, the Bank of Japan injected 1.5 trillion yen or US$14billion into its money markets.
The South Korean Finance Ministry announced that it would supply at least US$10 billion into the swap market in the coming weeks in order to provide more liquidity. Choi Jong-ku, head of the ministry`s international financial bureau said the central bank would continue to supply dollars whenever necessary.
European currency falls to 1-week low against Japanese yen, Friday, September 26, 2008 6:09:45 AM
Extending Asian session downtrend, the European currency declined to 1-week low against the Japanese yen and a 3-day low versus the Swiss franc during early European deals on Friday. The euro also remained down against the currencies of US and UK.
In economic news, Germany`s import price inflation remained stable in August at its highest level in nearly eight years on higher energy prices.
The Federal Statistical Office said today that the import price index rose 9.3% year-on-year in August, marking the same pace as in July, while quicker than the 8.9% increase in June. Meanwhile, economists had forecast the rate to ease to 9.1%. The August rate was the highest since November 2000. In the same period last year, prices were down 0.6%.
The French economy contracted 0.3% quarter-on-quarter in the second quarter, confirmed the initial estimate, a final report from the statistical office INSEE revealed today. The economy had expanded 0.4% in the first quarter.
The Federal Reserve, the Bank of England, the European Central Bank, or ECB and the Swiss National Bank or SNB revealed today that they are introducing operations to provide U.S. dollar liquidity with a one-week maturity using their reciprocal currency arrangements or swap lines.
The Federal Open Market Committee authorized a $10 billion increase in its temporary swap facility with the ECB and a $3 billion increase in its facility with the SNB. According to the Fed, these expanded facilities will now support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the SNB.
Against the US dollar, the European currency showed weakness during early deals on Friday. At 3:55 am ET, the euro-dollar pair touched a low of 1.4568, compared to 1.4610 hit late New York Thursday. The pair is now worth 1.4578.
The European currency that closed Thursday`s North American session at 0.7954 against the British pound edged down to 0.7940 at 5:05 am ET Friday.
The Bank of England said today that it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries.
Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today. The Bank of England`s overnight dollar repo operations will be US$10 billion on Friday.
Against the Swiss franc, the single currency edged lower during Friday`s early deals. At 3:30 am ET the euro-franc pair slipped to a 3-day low of 1.5880, compared to 1.5937 hit late New York Thursday. The pair is currently quoted at 1.5891.
The Swiss leading indicator in September declined further to 0.62 points from a revised 0.73 points in August, the KOF Economic Institute said today. August`s reading was upwardly revised from 0.68. Economists were looking for a reading of 0.54 for September.
The euro that closed Thursday`s New York deals at 155.70 against the Japanese yen declined to a 1-week low of 153.50 at 3:55 am ET Friday. The euro-yen pair is currently trading at 153.86.
Core inflation in Japan rose 2.4 percent on year in August, in line with analyst expectations, the Ministry of Internal Affairs and Communications said today. It also held steady from the July figure, equaling an 11-year high. Overall nationwide CPI was up an annual 2.1 percent, matching forecasts after a 2.3 percent gain on year in the previous month. Overall inflation gained o.3 percent on month.
Across the Atlantic, the US final second quarter GDP, personal consumption expenditure and the University of Michigan`s confidence survey are scheduled for release later in the New York session.
In economic news, Germany`s import price inflation remained stable in August at its highest level in nearly eight years on higher energy prices.
The Federal Statistical Office said today that the import price index rose 9.3% year-on-year in August, marking the same pace as in July, while quicker than the 8.9% increase in June. Meanwhile, economists had forecast the rate to ease to 9.1%. The August rate was the highest since November 2000. In the same period last year, prices were down 0.6%.
The French economy contracted 0.3% quarter-on-quarter in the second quarter, confirmed the initial estimate, a final report from the statistical office INSEE revealed today. The economy had expanded 0.4% in the first quarter.
The Federal Reserve, the Bank of England, the European Central Bank, or ECB and the Swiss National Bank or SNB revealed today that they are introducing operations to provide U.S. dollar liquidity with a one-week maturity using their reciprocal currency arrangements or swap lines.
The Federal Open Market Committee authorized a $10 billion increase in its temporary swap facility with the ECB and a $3 billion increase in its facility with the SNB. According to the Fed, these expanded facilities will now support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the SNB.
Against the US dollar, the European currency showed weakness during early deals on Friday. At 3:55 am ET, the euro-dollar pair touched a low of 1.4568, compared to 1.4610 hit late New York Thursday. The pair is now worth 1.4578.
The European currency that closed Thursday`s North American session at 0.7954 against the British pound edged down to 0.7940 at 5:05 am ET Friday.
The Bank of England said today that it will increase the term of its existing operations to lend US dollar funds against collateral eligible in short-term repos and US Treasuries.
Alongside an operation to lend funds overnight, the central bank will lend US$30 billion of funds for one week today. The Bank of England`s overnight dollar repo operations will be US$10 billion on Friday.
Against the Swiss franc, the single currency edged lower during Friday`s early deals. At 3:30 am ET the euro-franc pair slipped to a 3-day low of 1.5880, compared to 1.5937 hit late New York Thursday. The pair is currently quoted at 1.5891.
The Swiss leading indicator in September declined further to 0.62 points from a revised 0.73 points in August, the KOF Economic Institute said today. August`s reading was upwardly revised from 0.68. Economists were looking for a reading of 0.54 for September.
The euro that closed Thursday`s New York deals at 155.70 against the Japanese yen declined to a 1-week low of 153.50 at 3:55 am ET Friday. The euro-yen pair is currently trading at 153.86.
Core inflation in Japan rose 2.4 percent on year in August, in line with analyst expectations, the Ministry of Internal Affairs and Communications said today. It also held steady from the July figure, equaling an 11-year high. Overall nationwide CPI was up an annual 2.1 percent, matching forecasts after a 2.3 percent gain on year in the previous month. Overall inflation gained o.3 percent on month.
Across the Atlantic, the US final second quarter GDP, personal consumption expenditure and the University of Michigan`s confidence survey are scheduled for release later in the New York session.
Russian ruble slips to 2-day low against US dollar, Friday, September 26, 2008 6:37:48 AM
Against the US dollar, the Russian ruble edged down to a 2-day low of 25.0850 at about 6:25 am ET Friday. If the Russian currency weakens further, it may likely target the 25.3 level. The dollar-ruble pair closed Thursday`s North American session at 25.0275.
Employment Picture is Deteriorating Badly
Click on the images below for a larger image
Consider the following charts from the St. Louis Federal Reserve:
The bottom line is it is getting harder to find work. This indicates the labor market is deteriorating. Also consider this chart from Calculated Risk:
Consider the following charts from the St. Louis Federal Reserve:
The bottom line is it is getting harder to find work. This indicates the labor market is deteriorating. Also consider this chart from Calculated Risk:
Friday Forex Round-Up
On the weekly chart, notice the following:
-- The dollar has broken out of a multi-year downtrend.
-- The 10 and 20 week SMA are both moving higher
-- Prices have technical support at the 10 and 20 week SMA
-- Prices also have technical support at the long-term downward sloping trend line that prices broke through a few weeks ago.
On the daily chart notice the following:
-- Prices have fallen through the two month rally that started in mid-July
-- Prices are using the 50 day SMA as technical support
-- The 10 day SMA has moved through the 20 day SMA
-- The 20 day SMA is turning lower
This is a borderline chart. While the shorter SMAs are indicating a downward trend, the 50 day SMA is moving higher. This means the long term trend (which is higher) is intact.
Thursday, September 25, 2008
Dollar weakens versus major Latin American currencies, Thursday, September 25, 2008 4:49:55 PM
The US currency weakened against its major Latin American counterparts during New York trading on Thursday after some significant economic reports were released during morning session turned out to be disappointing.
According to a report released today by the US Department of Commerce that new home sales fell 11.5% to a seasonally adjusted annual rate of 460,000 units in August from the upwardly revised July rate of 520,000. The Commerce Department also said that durable goods orders fell 4.5% in August following a downwardly revised 0.8% increase in July.
The Department of Labor released that jobless claims unexpectedly jumped to 493,000 from the previous week`s revised figure of 461,000.
The US dollar dropped against the Brazilian real during New York trading on Thursday. The greenback fell to a 2-day low of 1.8145 versus the real by about 3:25 pm ET from today`s high of 1.8655. The pair that closed yesterday`s deals at 1.8645 is now worth 1.8210.
The Brazilian Census Bureau (IBGE) reported Thursday that unemployment declined to 7.6 percent in August, compared to 8.1 percent in July.
After hitting a 1-week high of 10.8615 by about 8:00 am ET, the US currency lost ground against its Mexican counterpart in New York afternoon deals on Thursday. At about 3:25 pm ET, the pair slipped to 10.6975, compared to Wednesday`s closing value of 10.8500.Currently, the greenback is trading at 10.72 versus the Mexican peso.
During New York trading on Thursday, the US dollar weakened against the Chilean peso. The pair dropped to 537.05 by about 1:15 pm ET from early high of 541.50. Presently, the pair is trading at 537.28 from yesterday`s New York session close of 541.38. The pair had hit a multi-day high of 545.15 yesterday.
The dollar, which closed yesterday`s New York session at 2158.00 against the Colombian peso, dropped to 2077.50 in New York afternoon session today.
According to a report released today by the US Department of Commerce that new home sales fell 11.5% to a seasonally adjusted annual rate of 460,000 units in August from the upwardly revised July rate of 520,000. The Commerce Department also said that durable goods orders fell 4.5% in August following a downwardly revised 0.8% increase in July.
The Department of Labor released that jobless claims unexpectedly jumped to 493,000 from the previous week`s revised figure of 461,000.
The US dollar dropped against the Brazilian real during New York trading on Thursday. The greenback fell to a 2-day low of 1.8145 versus the real by about 3:25 pm ET from today`s high of 1.8655. The pair that closed yesterday`s deals at 1.8645 is now worth 1.8210.
The Brazilian Census Bureau (IBGE) reported Thursday that unemployment declined to 7.6 percent in August, compared to 8.1 percent in July.
After hitting a 1-week high of 10.8615 by about 8:00 am ET, the US currency lost ground against its Mexican counterpart in New York afternoon deals on Thursday. At about 3:25 pm ET, the pair slipped to 10.6975, compared to Wednesday`s closing value of 10.8500.Currently, the greenback is trading at 10.72 versus the Mexican peso.
During New York trading on Thursday, the US dollar weakened against the Chilean peso. The pair dropped to 537.05 by about 1:15 pm ET from early high of 541.50. Presently, the pair is trading at 537.28 from yesterday`s New York session close of 541.38. The pair had hit a multi-day high of 545.15 yesterday.
The dollar, which closed yesterday`s New York session at 2158.00 against the Colombian peso, dropped to 2077.50 in New York afternoon session today.
Dollar weakens versus Chilean peso, Thursday, September 25, 2008 3:37:41 PM
During New York trading on Thursday, the US dollar weakened against the Chilean peso. The pair dropped to 537.05 by about 1:15 pm ET from early high of 541.50. Presently, the pair is trading at 537.28 from yesterday`s New York session close of 541.38. The pair had hit a multi-day high of 545.15 yesterday.
US dollar pares recent gains against most majors, Thursday, September 25, 2008 4:12:35 PM
The US currency pared recent gains against most of its major counterparts during New York afternoon deals on Thursday. As of now, the greenback is trading near 1.4627 against the euro, 1.0898 versus the Swiss franc, 106.39 versus the Japanese yen, 1.8393 against the British pound and 0.8363 versus the Aussie.
US dollar eases from 1-week high against Mexican peso, Thursday, September 25, 2008 3:26:12 PM
After hitting a 1-week high of 10.8615 by about 8:00 am ET, the US currency lost ground against its Mexican counterpart in New York afternoon deals on Thursday. Currently, the greenback is trading at 10.70 versus the Mexican peso, compared to Wednesday`s closing value of 10.8500.
Kiwi declines against US dollar, Thursday, September 25, 2008 2:54:07 PM
Extending European deal`s downtrend, the New Zealand dollar declined against the US dollar during New York trading on Thursday. As of 2:45 pm ET, the kiwi dropped to 0.6798 versus the greenback, compared to early high of 0.6908. Presently, the kiwi-buck pair is worth 0.6817.Currently, the kiwi is trading near 22.62 versus the yen and 1.2248 against the Aussie.
Greenback drops to 2-day low versus Brazilian real, Thursday, September 25, 2008 2:44:27 PM
The US dollar dropped against the Brazilian real during New York trading on Thursday. The greenback fell to a 2-day low of 1.8170 versus the real by about 2:30 pm ET from today`s high of 1.8655. The pair that closed yesterday`s deals at 1.8645 is now worth 1.8220.
The Brazilian Census Bureau (IBGE) reported Thursday that unemployment declined to 7.6 percent in August, compared to 8.1 percent in July.
The Brazilian Census Bureau (IBGE) reported Thursday that unemployment declined to 7.6 percent in August, compared to 8.1 percent in July.
Dollar Moves Higher Against Major Rivals, Thursday, September 25, 2008 1:58:46 PM
The U.S. dollar gained on other majors as the U.S. government`s bailout plan may be nearing a solution. The greenback moved away from monthly lows against the euro and sterling and also gained on the yen and franc.
The dollar surged in afternoon trading and hit a three-day high before easing back. The greenback touched as high as 1.4559 giving back some of the gains and moving to 1.4588. The GfK consumer climate survey found that the German consumer sentiment index for October increased to 1.8 points from September`s revised 1.6 points.
The greenback gained sharply against the sterling, hitting as high as 1.8304 in the mid-afternoon. The gain took the greenback away from the five-week low of 1.8668 it reached earlier in the morning.
The dollar gained on the yen, reaching 106.71 in the mid-afternoon, and also climbed to 1.0917 against the Swiss franc. The greenback was mildly lower at 1.0341 against the Canadian loonie.
The dollar surged in afternoon trading and hit a three-day high before easing back. The greenback touched as high as 1.4559 giving back some of the gains and moving to 1.4588. The GfK consumer climate survey found that the German consumer sentiment index for October increased to 1.8 points from September`s revised 1.6 points.
The greenback gained sharply against the sterling, hitting as high as 1.8304 in the mid-afternoon. The gain took the greenback away from the five-week low of 1.8668 it reached earlier in the morning.
The dollar gained on the yen, reaching 106.71 in the mid-afternoon, and also climbed to 1.0917 against the Swiss franc. The greenback was mildly lower at 1.0341 against the Canadian loonie.
US dollar eases from 2-day high versus South African rand, Thursday, September 25, 2008 1:56:26 PM
After hitting a 2-day high of 8.2153 by about 7:50 am ET, the US currency declined against the South African rand in New York deals on Thursday. The dollar-rand pair dropped to 8.0825 at about 10:35 am ET from Wednesday`s New York session close of 8.1733. As of now, the pair is trading at 8.1200.
The Statistics South Africa reported on Thursday that producer price index rose 19.1% in August, faster than the 18.9% increase in July, but slower than the 19.3% rise expected by analysts. Export prices rose 7.8%, while import prices increased 23%.
The Statistics South Africa reported on Thursday that producer price index rose 19.1% in August, faster than the 18.9% increase in July, but slower than the 19.3% rise expected by analysts. Export prices rose 7.8%, while import prices increased 23%.
US dollar weakens against Romanian Leu, Thursday, September 25, 2008 1:34:13 PM
The US currency weakened against its Romanian counterpart in late European deals on Thursday. The dollar-Leu pair declined to 2.5001 by about 7:05 am ET, compared to yesterday`s closing value of 2.5029.
Thursday, the Board of the National Bank of Romania decided to maintain its monetary policy rate unchanged at 10.25% per annum. The decision matched economists` expectations.
Thursday, the Board of the National Bank of Romania decided to maintain its monetary policy rate unchanged at 10.25% per annum. The decision matched economists` expectations.
Today's Markets
(Click on the image for a larger image.)
On the daily chart, notice the following:
-- Although the SMAs are technically in a very bearish position with the shorter SMAs below the longer SMAs, the SMAs are very close together. Compare this to the technical position at the end of June/beginning of July when the 10, 20 and 50 had more daylight between them. The current orientation indicates a bit more confusion about what direction the market wants to go in.
-- Also note there is no clear long-term trend in place. Compare the current situation to the beginning of June/beginning of July situation or mid July to mid-August. The market simply has not run consistently in one direction or the other for a bit.
-- There are a lot of reasons for the market to move in either direction right now. The economy as a whole is not doing well right now. But there are signs a bail-out is all but done. That could give the market a shot in the arm to move higher.
We're Nowhere Near A Bottom In Housing
From Reuters:
The existing home market is about four times the size of the new home sales market, making the existing home market more important.
Record price drops are a sign of weakness. They indicates sellers are desperate to move product (whatever that product is) and are willing to cave in price negotiations. Don't expect this process to end anytime soon -- especially as job losses intensify.
In addition, a larger percentage of the inventory is "distressed". This indicates the problems in the housing sector are intensifying. Again -- not good.
That problem is increasing in the new homes market:
See the above comments on the existing home market, as they apply to the new home market as well (with the exception of the distressed situation).
At the beginning of this year I wrote a piece that I hoped at the end of 2008 we would at least know when we would have some
Prices of U.S. existing homes suffered a record drop in August and the rate of sales tumbled, offering little sign of improvement in the source of the financial crisis in the United States.
The pace of existing home sales decreased 2.2 percent to an annual pace of 4.91 million units while the median national home price declined a record 9.5 percent to $203,100, the National Association of Realtors said on Wednesday.
In what would normally be a potentially bright spot, the overstock of homes for sale shrank. However, the trade group said as many as 2 in 5 home sales were by borrowers who have seen their property lose value or are facing foreclosure.
"The NAR estimates that 35-to-40 percent of all sales are of distressed property, so underlying private activity is weaker than the headlines (imply) and there is little sign of imminent improvement," Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The inventory of existing homes for sale fell 7.0 percent to 4.26 million from the record-high overstock reported in July.
The existing home market is about four times the size of the new home sales market, making the existing home market more important.
Record price drops are a sign of weakness. They indicates sellers are desperate to move product (whatever that product is) and are willing to cave in price negotiations. Don't expect this process to end anytime soon -- especially as job losses intensify.
In addition, a larger percentage of the inventory is "distressed". This indicates the problems in the housing sector are intensifying. Again -- not good.
That problem is increasing in the new homes market:
The annual sales pace was down 11.5 percent from July to 460,000 homes and was sharply off the 510,000 pace expected by economists. The August decline was the biggest since November 2007.
The median sales price of $221,900 was off 5.5 percent from July, the lowest since $211,600 in September 2004.
The August sales pace was the weakest since 401,000 in January 1991.
See the above comments on the existing home market, as they apply to the new home market as well (with the exception of the distressed situation).
At the beginning of this year I wrote a piece that I hoped at the end of 2008 we would at least know when we would have some
The President's Speech
Here is a link to the text:
In actuality, this isn't a bad explanation of the central problem of what went wrong. In fact -- it's actually pretty accurate. Record low interest rates + lack of due diligence = recipe for disaster.
There are a few points I would add.
1.) There was a lack of regulatory oversight. The central problem securitzation causes is it divorces the need to perform due diligence from the loan offices. If I'm not going to hold the loan, there is little incentive to actually perform due diligence. This means some type of oversight is that much more important. And there wasn't any here.
2.) The President talked about the investors not performing due diligence. I would have added the ratings agencies were also to blame for passing out AAA ratings like they are candy.
That's also a pretty damned good explanation of why various investment firms are having trouble right now. I would add a that most of these firms were leveraged to the hilt which means that downward moves in their asset prices is a huge problem.
OK -- snark time. The Republican party can no longer claim they are the party of free market capitalism. They have purchased one of the world's largest insurers, they are agreeing to a huge bail-out, they have banned short-selling.
More to the point -- yes, all of the above could happen. That's the end result of the reckless policies pursued over the last 8 years. When you base an economy entirely on easy credit, you end up with this type of problem. The entire economy is now swimming in debt that is being devalued because people are no longer making complete payments. As a result, the debt on everyone's balance sheet is clogging the nation's financial pipes. It's that simple.
Instead, we're now supposed to come in and bail-out a system that is deeply flawed. Regardless of how it's packaged, it just doesn't feel right.
First, how did our economy reach this point?
Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions -- along with low interest rates -- made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition -- some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.
Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.
Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.
These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.
In actuality, this isn't a bad explanation of the central problem of what went wrong. In fact -- it's actually pretty accurate. Record low interest rates + lack of due diligence = recipe for disaster.
There are a few points I would add.
1.) There was a lack of regulatory oversight. The central problem securitzation causes is it divorces the need to perform due diligence from the loan offices. If I'm not going to hold the loan, there is little incentive to actually perform due diligence. This means some type of oversight is that much more important. And there wasn't any here.
2.) The President talked about the investors not performing due diligence. I would have added the ratings agencies were also to blame for passing out AAA ratings like they are candy.
The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.
That's also a pretty damned good explanation of why various investment firms are having trouble right now. I would add a that most of these firms were leveraged to the hilt which means that downward moves in their asset prices is a huge problem.
I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down.
The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:
More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.
Fellow citizens: We must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem -- and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans, and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill.
OK -- snark time. The Republican party can no longer claim they are the party of free market capitalism. They have purchased one of the world's largest insurers, they are agreeing to a huge bail-out, they have banned short-selling.
More to the point -- yes, all of the above could happen. That's the end result of the reckless policies pursued over the last 8 years. When you base an economy entirely on easy credit, you end up with this type of problem. The entire economy is now swimming in debt that is being devalued because people are no longer making complete payments. As a result, the debt on everyone's balance sheet is clogging the nation's financial pipes. It's that simple.
Instead, we're now supposed to come in and bail-out a system that is deeply flawed. Regardless of how it's packaged, it just doesn't feel right.
Thursday Oil Market Round-Up
On the weekly chart, note the following:
-- Oil broke the 1+ year upward sloping trend line a few weeks ago. This indicates the major rally that has been moving oil higher is over.
-- The 10 and 20 week SMAs are both moving lower
-- The 10 week SMA crossed below the 20 week SMA
-- The 10 week SMA is about to cross below the 50 week SMA
-- Prices are below all the SMAs
-- Prices are using the 50 week SMA as upward resistance rather than support
On the daily chart notice the following:
-- The 10, 20 and 50 day SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices have moved through the 10 and 20 week SMA. However, this is due to a huge market problem caused by the bail-out issue. The assumption was if the bail-out goes through the US economy will stabilize which will increase oil demand. Now it loos as though traders are re-thinking that idea.
-- Prices are still using the downward sloping trend line as resistance.
Bottom line: these are still bearish charts.
Wednesday, September 24, 2008
Wednesday Commodities Round-UP
OK -- back to the charts....
On the weekly CRB chart, notice the following:
-- Prices are below the all the SMAs
-- The 10 and 20 day SMA are both moving lower
-- The 10 day SMA has crossed below the 20 and 50 SMA
-- Prices have broken the uptrend started at the end of the summer last year and have fallen about 50% (that's an eyeballing computation).
Bottom line: the weekly chart is bearish.
On the daily chart, notice the following:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- The 20 day SMA has acted as an important are of activity. While prices have moved above it, they have quickly retreated as well.
-- Prices have been dropping for three months.
Bottom line: this is a bearish chart as well
On the weekly CRB chart, notice the following:
-- Prices are below the all the SMAs
-- The 10 and 20 day SMA are both moving lower
-- The 10 day SMA has crossed below the 20 and 50 SMA
-- Prices have broken the uptrend started at the end of the summer last year and have fallen about 50% (that's an eyeballing computation).
Bottom line: the weekly chart is bearish.
On the daily chart, notice the following:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- The 20 day SMA has acted as an important are of activity. While prices have moved above it, they have quickly retreated as well.
-- Prices have been dropping for three months.
Bottom line: this is a bearish chart as well
Complete and Total Full Disclosure From Bonddad About the Bail-Out Package
So -- why is Bonddad now urging his readers to call Congress critters and ask them to vote against this terrible bill?
Let me back up a bit. I have really attempted to keep partisan politics out of my analysis. I hope I have succeeded but have probably not done as good a job as I would have liked. While I am a conservative Democrat (socially liberal, fiscally conservative) I really come down more in the Lewis Black mold. Towards the end his last special he stated (and I'm paraphrasing here), "In September, I'm hoping the Democrats and Republicans simply decide to not show up. I've been doing this for 30 years. I keep thinking it won't get worse, and it does." That's exactly how I feel about the last 8 years of, well, bullshit. Everybody who is even remotely involved should be kicked out and exiled to the most remote part of the planet possible. They should also be forced to listen to months straight of the worst televangelist on the planet (Robert Tilton comes to mind).
Here's the basic problem. For the last 8 years this country has become a fiscal train wreck. I say this over and over again, but it's worth repeating. According to the Bureau of Public Debt, the US has issued over $500 billion dollars of net new debt per year since 2003. During the good times -- that is, the times when the economy was expanding -- Congress acted more than recklessly with the nation's finances.
On top of that, the remarkable lack of regulatory enforcement is horrendous. How many food recalls have we had? Or toy recalls? Does anyone remember the FBI is investigating literally every major mortgage lender in the US? How about all of the mea culpa's regarding the auction rate securities market? Now everyone is acting like "it wasn't me -- it was the other guy." Bullshit. Everybody who was in Washington watching and participating in this crap is guilty. Plain and simple.
And let's not forget Alan "bubbles" Greenspan who has yet to meet an asset class he cannot inflate into the stratosphere. Mister "I had no idea 0% interest rates and lack of regulatory enforcement would lead to this" who stands as the architect of a failed Ayn Rand policy perspective that is ruining the country fast should be beheaded, his head bronzed and placed on a pike sitting outside the NYSE with a sign below it that reads, "Asset inflation does not equal real GDP growth". Anyone entering the NYSE must ponder this thought for 5 minutes each day and submit a 100 word essay each month on its meaning.
Let me quote a friend who goes by the screen name of New Deal Democrat:
Truer words about the current situation could not be spoken. This was bound to happen. But now collective Washington is now acting as though it's some kind of shock they have to do something. Folks, this has been on the horizon for years. Those of us who talked about it were called chicken littles (or worse). And no -- I take no pleasure in being right.
However, there is one way to prevent this nightmare from happening again. And it is not in bailing out stupid decision makers with yours and my money, or giving this money to Hank Paulson and Ben Bernanke hoping their magnificence and true humility will help them act in the country's best interest. The way to prevent this from happening is to let the idiots who got us in this mess feel the pain from their decisions. And that means let these bastards rot.
Or -- if the government really wants to do it's job like enforce the rules that are existing and then creating a new regulatory framework that works with the current financial industry -- then please do so. But that means growing a spine and saying, "we aren't doing x unless we get y." Period.
Let me back up a bit. I have really attempted to keep partisan politics out of my analysis. I hope I have succeeded but have probably not done as good a job as I would have liked. While I am a conservative Democrat (socially liberal, fiscally conservative) I really come down more in the Lewis Black mold. Towards the end his last special he stated (and I'm paraphrasing here), "In September, I'm hoping the Democrats and Republicans simply decide to not show up. I've been doing this for 30 years. I keep thinking it won't get worse, and it does." That's exactly how I feel about the last 8 years of, well, bullshit. Everybody who is even remotely involved should be kicked out and exiled to the most remote part of the planet possible. They should also be forced to listen to months straight of the worst televangelist on the planet (Robert Tilton comes to mind).
Here's the basic problem. For the last 8 years this country has become a fiscal train wreck. I say this over and over again, but it's worth repeating. According to the Bureau of Public Debt, the US has issued over $500 billion dollars of net new debt per year since 2003. During the good times -- that is, the times when the economy was expanding -- Congress acted more than recklessly with the nation's finances.
On top of that, the remarkable lack of regulatory enforcement is horrendous. How many food recalls have we had? Or toy recalls? Does anyone remember the FBI is investigating literally every major mortgage lender in the US? How about all of the mea culpa's regarding the auction rate securities market? Now everyone is acting like "it wasn't me -- it was the other guy." Bullshit. Everybody who was in Washington watching and participating in this crap is guilty. Plain and simple.
And let's not forget Alan "bubbles" Greenspan who has yet to meet an asset class he cannot inflate into the stratosphere. Mister "I had no idea 0% interest rates and lack of regulatory enforcement would lead to this" who stands as the architect of a failed Ayn Rand policy perspective that is ruining the country fast should be beheaded, his head bronzed and placed on a pike sitting outside the NYSE with a sign below it that reads, "Asset inflation does not equal real GDP growth". Anyone entering the NYSE must ponder this thought for 5 minutes each day and submit a 100 word essay each month on its meaning.
Let me quote a friend who goes by the screen name of New Deal Democrat:
And so, they have finally done it. Washington has finally bet every dollar of earnings and wealth you and I and every other taxpayer has ever made in our entire lives; every dollar that will ever be made by our children's generation; and every dollar that will ever be made by our grandchildren's generation; in an attempt -- that is by no means guaranteed to succeed -- to prop up the reckless and malign neoliberal "shadow banking system" of Wall Street.
This was a crisis that wasn't just foreseeable. It wasn't just foreseen. It was shouted about from the rooftops for almost half a decade. And yet Washington refused to hear, because the shouters were the Dirty Unwashed Hippies who live outside the zone of neoliberal economic consensus that is elective Washington, D.C.
And they will not hear now, either. Awash in their elective sinecures and their corporate campaign contributions, all that remains is the Rendering of the Bill to the suckers and the chumps. That's us.
Pray tell, exactly why did Congressional leaders sit in "stunned silence" on September 18, 2008 as it was explained to them that the collective unpayable $ TRILLIONS of debt of millions of ridiculous mortgages for houses and condos bought at unsustainable values, debt that was packaged and sold and then borrowed against at rates of 30 or 40 to 1 by a shadow banking system that they and the Administration birthed and nurtured, debt that had been booked as ficitious profits by that system, debt that in the real world represented money that was never ever going to be paid back, was in danger of bringing down the entire financial system?
This crisis was not just foreseeable, it was not just foreseen, it was shouted about from the rooftops since 2004, on blogs like Ben Jones' housing bubble blog, by Calculated Risk, by Mike Shedlock, by Russ Winter, by Barry Ritholtz, by Robert Reich, by Paul Krugman, by Joseph Stiglitz, by James Kunstler, by Stirling Newberry -- in short by just about every housing or economic blogger right, center, and left, from bonddad at Daily Kos to blackhedd on Red State, not to mention myself.
And yet two nights ago, Pelosi, Schumer, Frank, Reid, and everybody else in the Capital sat in "stunned silence" as Bernanke and Paulson spelled out the situation for them. Where were they all these years? Protected from the noise of the Dirty Unwashed Hippies beyond the beltway, by their cocktail party neoliberal free market cone of silence in Washington, that's where.
And so, panic-stricken, they will hurriedly and without reading carefully enact into law what will undoubtedly be the "Economic Patriot Act" of the Bush Administration, with all of the corruption and hidden destruction of rights that conveys, an act that has been estimated at costing up to $1,000,000,000,000 (that's $1 TRILLION) of taxpayer moneys. And still may not succeed.
Truer words about the current situation could not be spoken. This was bound to happen. But now collective Washington is now acting as though it's some kind of shock they have to do something. Folks, this has been on the horizon for years. Those of us who talked about it were called chicken littles (or worse). And no -- I take no pleasure in being right.
However, there is one way to prevent this nightmare from happening again. And it is not in bailing out stupid decision makers with yours and my money, or giving this money to Hank Paulson and Ben Bernanke hoping their magnificence and true humility will help them act in the country's best interest. The way to prevent this from happening is to let the idiots who got us in this mess feel the pain from their decisions. And that means let these bastards rot.
Or -- if the government really wants to do it's job like enforce the rules that are existing and then creating a new regulatory framework that works with the current financial industry -- then please do so. But that means growing a spine and saying, "we aren't doing x unless we get y." Period.
Contact Information For Senate Banking Committee
Here is a link to all the members of the Senate Banking Committee.
If you are so inclined, please contact each member and express your displeasure with the bill as proposed.
If you are so inclined, please contact each member and express your displeasure with the bill as proposed.
Dollar Advances Against Most East European Currencies, Wednesday, September 24, 2008 7:35:36 AM
The dollar advanced against the Czech koruna, Slovakian koruna and Polish Zloty during early deals on Wednesday. But the dollar weakened against the Turkish lira and the Hungarian forint, but moved range-bound versus the Estonian kroon
From US, the existing home sales report is scheduled at 10:00 am ET today. The US Federal Reserve Chairman Ben Bernanke`s testimony at Congress`s Joint Economic Committee is also scheduled at 10:00 am ET.
The dollar climbed to a 2-day high of 16.5750 against the Czech koruna by about 7:00 am ET Wednesday. The pair was worth 16.4800 at Tuesday`s close.
Against its Turkish counterpart, the dollar showed weakness during Wednesday`s early deals. At about 3:10 am ET, the dollar-lira weakened to 1.2374, compared to Tuesday`s closing value of 1.2453. Thereafter, the dollar has gained slightly and is presently trading at 1.2423.
The Turkish statistical office, Turkstat said the Production Workers Index rose 0.6% year-on-year and stood at 85.8 in the second quarter from 86.2 recorded in the first quarter. In the first quarter, the number of production workers was up 1.7%. A year-ago, the index was up 2%.
Against the Hungarian forint, the dollar fell after rising to a 2-day high of 164.64 by about 4:05 am ET. Presently the pair is trading at 164.07, compared to Tuesday`s closing value of 164.76.
In economic news, the volume of retail sales in Hungary declined year-on-year in July, a report by the Hungarian Statistical Office said today.
Retail sales volume fell a calendar-adjusted 1.8% in July compared with a 1.9% decline in June. The sales volume at current prices increased to HUF 556.7 billion from HUF 535 billion in the previous month. On a monthly basis, retail sales declined a seasonally and calendar adjusted 0.1% in July compared with a 0.3% fall in the previous month.
The US currency that was worth 20.6720 against the Slovakian koruna at yesterday`s close, hit as high as 20.6850 by about 7:00 am ET Wednesday.
The US dollar started ticking up against the Polish Zloty by about 2:45 am ET Wednesday. The dollar climbed from 2.2430 to 2.2697 by about 7:20 am ET. The pair was worth at 2.2607 Tuesday`s close.
The greenback largely moved sideways against the Estonian kroon during Wednesday`s early trading. The greenback largely bounced between 10.6850 and 10.6420, compared to 10.6470 hit late yesterday in New York. As of now, the pair is trading at 10.66.
From US, the existing home sales report is scheduled at 10:00 am ET today. The US Federal Reserve Chairman Ben Bernanke`s testimony at Congress`s Joint Economic Committee is also scheduled at 10:00 am ET.
The dollar climbed to a 2-day high of 16.5750 against the Czech koruna by about 7:00 am ET Wednesday. The pair was worth 16.4800 at Tuesday`s close.
Against its Turkish counterpart, the dollar showed weakness during Wednesday`s early deals. At about 3:10 am ET, the dollar-lira weakened to 1.2374, compared to Tuesday`s closing value of 1.2453. Thereafter, the dollar has gained slightly and is presently trading at 1.2423.
The Turkish statistical office, Turkstat said the Production Workers Index rose 0.6% year-on-year and stood at 85.8 in the second quarter from 86.2 recorded in the first quarter. In the first quarter, the number of production workers was up 1.7%. A year-ago, the index was up 2%.
Against the Hungarian forint, the dollar fell after rising to a 2-day high of 164.64 by about 4:05 am ET. Presently the pair is trading at 164.07, compared to Tuesday`s closing value of 164.76.
In economic news, the volume of retail sales in Hungary declined year-on-year in July, a report by the Hungarian Statistical Office said today.
Retail sales volume fell a calendar-adjusted 1.8% in July compared with a 1.9% decline in June. The sales volume at current prices increased to HUF 556.7 billion from HUF 535 billion in the previous month. On a monthly basis, retail sales declined a seasonally and calendar adjusted 0.1% in July compared with a 0.3% fall in the previous month.
The US currency that was worth 20.6720 against the Slovakian koruna at yesterday`s close, hit as high as 20.6850 by about 7:00 am ET Wednesday.
The US dollar started ticking up against the Polish Zloty by about 2:45 am ET Wednesday. The dollar climbed from 2.2430 to 2.2697 by about 7:20 am ET. The pair was worth at 2.2607 Tuesday`s close.
The greenback largely moved sideways against the Estonian kroon during Wednesday`s early trading. The greenback largely bounced between 10.6850 and 10.6420, compared to 10.6470 hit late yesterday in New York. As of now, the pair is trading at 10.66.
US dollar hits 5-day high against Icelandic krona, Wednesday, September 24, 2008 7:22:11 AM
During early European deals on Tuesday, the US dollar climbed to a 5-day high against the Icelandic krona. The dollar also showed strength against its Scandinavian counterparts.
Against the Swedish krona, the US dollar traded higher during early deals on Wednesday. At 5:30 am ET, the dollar-krona pair reached a high of 6.5855, compared to 6.5766 hit late New York Tuesday. The pair is currently trading at 6.5774.
The Swedish central bank and the Federal Reserve agreed today on a US$10 billion swap facility in order to improve liquidity conditions in global financial markets. The swap facility will expire on January 30, 2009.
Sweden`s economic tendency indicator, which measures business and consumer confidence in the economy, rose marginally to 86.0 in September from 85.6 in August, results of the latest economic tendency survey released by the National Institute of Economic Research, or NIER, showed today.
Further, the survey found that confidence in the Swedish manufacturing sector continued to decrease in September. The corresponding indicator fell to minus 14 from minus 12 in August. In July, the indicator logged minus 11. The September reading was in line with the consensus forecast.
The confidence indicator for the Swedish industry as a whole declined to minus 2 from minus 1 in August and plus 4 in July. On the other hand, the consumer confidence index rose to minus 14.4 from minus 16.5, while economists were expecting the index to fell to minus 17.
The US currency that closed Tuesday`s North American session at 5.6157 against the Norwegian krone edged higher to 5.6239 at 3:55 am ET Wednesday. The dollar-krone is now worth 5.6115.
Against its Danish counterpart, the greenback showed strength during Wednesday`s early deals. At about 4:05 am ET, the pair reached 5.0972, compared to Tuesday`s closing value of 5.0938. The pair is currently quoted at 5.0850.
Denmark`s national statistics office said today that the consumer confidence index rose to minus 11.1 in September from minus 12.2 in August.
The US dollar traded higher against the Icelandic krona during today`s early deals. At 5:35 am ET, the dollar-krona pair hit a 5-day high of 95.49, compared to Tuesday`s North American session close of 94.67.
The Statistics Iceland announced that the Consumer Price Index or CPI rose 14% year-on-year in September, smaller than the 14.5% rise recorded in August, which was its fastest pace since June 1990. Economists had expected for an increase of 14.2%. This was the first decline in the annual inflation rate since January.
The greenback that closed yesterday`s New York deals at 3.4201 touched a low of 3.4083 against the Israeli shekel at 5:45 am ET Wednesday. The dollar-shekel pair is currently trading at 3.4143.
The US dollar largely bounced between 8.17 and 8.10 against the South African rand during Wednesday`s early deals. The dollar-rand pair that closed Tuesday`s deals at 8.2037 is now worth 8.1525.
In central bank action, the Norges Bank is expected to announce its latest interest rate decision at 8am Eastern Time.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Against the Swedish krona, the US dollar traded higher during early deals on Wednesday. At 5:30 am ET, the dollar-krona pair reached a high of 6.5855, compared to 6.5766 hit late New York Tuesday. The pair is currently trading at 6.5774.
The Swedish central bank and the Federal Reserve agreed today on a US$10 billion swap facility in order to improve liquidity conditions in global financial markets. The swap facility will expire on January 30, 2009.
Sweden`s economic tendency indicator, which measures business and consumer confidence in the economy, rose marginally to 86.0 in September from 85.6 in August, results of the latest economic tendency survey released by the National Institute of Economic Research, or NIER, showed today.
Further, the survey found that confidence in the Swedish manufacturing sector continued to decrease in September. The corresponding indicator fell to minus 14 from minus 12 in August. In July, the indicator logged minus 11. The September reading was in line with the consensus forecast.
The confidence indicator for the Swedish industry as a whole declined to minus 2 from minus 1 in August and plus 4 in July. On the other hand, the consumer confidence index rose to minus 14.4 from minus 16.5, while economists were expecting the index to fell to minus 17.
The US currency that closed Tuesday`s North American session at 5.6157 against the Norwegian krone edged higher to 5.6239 at 3:55 am ET Wednesday. The dollar-krone is now worth 5.6115.
Against its Danish counterpart, the greenback showed strength during Wednesday`s early deals. At about 4:05 am ET, the pair reached 5.0972, compared to Tuesday`s closing value of 5.0938. The pair is currently quoted at 5.0850.
Denmark`s national statistics office said today that the consumer confidence index rose to minus 11.1 in September from minus 12.2 in August.
The US dollar traded higher against the Icelandic krona during today`s early deals. At 5:35 am ET, the dollar-krona pair hit a 5-day high of 95.49, compared to Tuesday`s North American session close of 94.67.
The Statistics Iceland announced that the Consumer Price Index or CPI rose 14% year-on-year in September, smaller than the 14.5% rise recorded in August, which was its fastest pace since June 1990. Economists had expected for an increase of 14.2%. This was the first decline in the annual inflation rate since January.
The greenback that closed yesterday`s New York deals at 3.4201 touched a low of 3.4083 against the Israeli shekel at 5:45 am ET Wednesday. The dollar-shekel pair is currently trading at 3.4143.
The US dollar largely bounced between 8.17 and 8.10 against the South African rand during Wednesday`s early deals. The dollar-rand pair that closed Tuesday`s deals at 8.2037 is now worth 8.1525.
In central bank action, the Norges Bank is expected to announce its latest interest rate decision at 8am Eastern Time.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Icelandic krona slides to 5-day low against US dollar, Wednesday, September 24, 2008 5:47:03 AM
Against the US dollar, the Icelandic krona traded lower during early deals on Wednesday. At about 5:25 am ET, the krona declined to a 5-day low of 95.26 per dollar, compared to 94.67 hit late New York Tuesday. If the krona drops further, 95.7 is seen as the next target level.
A report released by the Statistics Iceland showed that CPI rose 14 % on year in September compared to 14.5% rise in August.
A report released by the Statistics Iceland showed that CPI rose 14 % on year in September compared to 14.5% rise in August.
US dollar hits 2-day high against Czech Koruna, Wednesday, September 24, 2008 6:22:37 AM
Against the Czech Koruna, the US dollar edged higher during early deals on Wednesday. At 6:10 am ET, the dollar-koruna pair reached a 2-day high of 16.5480, compared to 16.48 hit late New York Tuesday. If the pair gains further, 16.60 is seen as the next target level.
Euro extends gains against most majors, hits 2-day high against franc, Wednesday, September 24, 2008 3:29:33 AM
The European currency extended its Asian session gains against the US dollar, the Swiss franc and the Japanese yen. The euro thus reached a 2-day high against the franc. On the other hand, the euro showed choppy trading against the British pound.
The industrial economic situation in France deteriorated further, a monthly business survey published by the statistical office INSEE showed today. The business confidence index eased to 92 in September from 97 in July. The indicator stands eight points below its long-term average and the expected level of 97 in September.
Against the US dollar, the European currency edged higher to 1.4710 during early Asian deals on Wednesday. Thereafter, the euro slipped slightly but rebounded after hitting a low of 1.4648 at 2:05 am ET. The euro-dollar pair is currently trading at 1.4688, compared to 1.4652 hit late New York Tuesday.
The European currency largely bounced between 0.7925 and 0.7909 against the British pound during today`s early deals. The pair is currently trading at 0.7915, compared to 0.7912 hit late New York yesterday.
Against the Swiss franc, the European currency traded higher during early deals on Wednesday. At 3:00 am Eastern Time, the euro-franc pair reached a 2-day high of 1.5971. This may be compared to Tuesday`s closing value of 1.5917.
The euro extended its Asian session gains against the Japanese yen during early European deals on Wednesday. The euro-yen pair is currently trading at 156.18, compared to Tuesday`s closing value of 154.66.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
At 4:00 am Eastern Time, the German research institute Ifo is expected to release results of its business climate survey for September. The expectations index is forecast to climb to 87.3 from 87 recorded in August. The business climate index is expected to log 94.1,down from 94.8 in the previous month. At the same time, the current assessment index is predicted to decline to 101.9 from August`s 103.2.
Elsewhere, the European Central Bank is slated to release the Eurozone current account data for July. In June, the seasonally adjusted current account balance had recorded a deficit of EUR8.2 billion. Meanwhile, the unadjusted current account balance was a deficit of EUR1 billion.
The Italian statistical office ISTAT is also expected to release its report on July retail sales at 4.00am ET. Retail sales are expected to increase 0.1% on a monthly basis, reversing a 0.1% rise seen in June. Year-on-year, retail sales are forecast to decline 0.8%, after recording a much bigger fall of 3.4% in June.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
The industrial economic situation in France deteriorated further, a monthly business survey published by the statistical office INSEE showed today. The business confidence index eased to 92 in September from 97 in July. The indicator stands eight points below its long-term average and the expected level of 97 in September.
Against the US dollar, the European currency edged higher to 1.4710 during early Asian deals on Wednesday. Thereafter, the euro slipped slightly but rebounded after hitting a low of 1.4648 at 2:05 am ET. The euro-dollar pair is currently trading at 1.4688, compared to 1.4652 hit late New York Tuesday.
The European currency largely bounced between 0.7925 and 0.7909 against the British pound during today`s early deals. The pair is currently trading at 0.7915, compared to 0.7912 hit late New York yesterday.
Against the Swiss franc, the European currency traded higher during early deals on Wednesday. At 3:00 am Eastern Time, the euro-franc pair reached a 2-day high of 1.5971. This may be compared to Tuesday`s closing value of 1.5917.
The euro extended its Asian session gains against the Japanese yen during early European deals on Wednesday. The euro-yen pair is currently trading at 156.18, compared to Tuesday`s closing value of 154.66.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
At 4:00 am Eastern Time, the German research institute Ifo is expected to release results of its business climate survey for September. The expectations index is forecast to climb to 87.3 from 87 recorded in August. The business climate index is expected to log 94.1,down from 94.8 in the previous month. At the same time, the current assessment index is predicted to decline to 101.9 from August`s 103.2.
Elsewhere, the European Central Bank is slated to release the Eurozone current account data for July. In June, the seasonally adjusted current account balance had recorded a deficit of EUR8.2 billion. Meanwhile, the unadjusted current account balance was a deficit of EUR1 billion.
The Italian statistical office ISTAT is also expected to release its report on July retail sales at 4.00am ET. Retail sales are expected to increase 0.1% on a monthly basis, reversing a 0.1% rise seen in June. Year-on-year, retail sales are forecast to decline 0.8%, after recording a much bigger fall of 3.4% in June.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
British pound rises to new multi-week high against yen, Wednesday, September 24, 2008 5:21:02 AM
Wednesday morning, the British pound reached a new week high against the Japanese yen and 2-day highs against the currencies of Europe and Switzerland. The pound also showed strength against the US dollar.
Against the US dollar, the British pound gained ground after hitting a low of 1.8507 at 1:35 am ET Wednesday. The pound-dollar pair is currently quoted at 1.8604, compared to 1.8525 hit late New York Tuesday.
The British currency edged down to 0.7928 against the European currency before reversing direction during early European deals on Wednesday. At 4:00 am ET, the pound reached a 2-day high of 0.7892 against the euro, compared to yesterday`s closing value of 0.7912.
The German IFO business conditions survey report for September, the Euro-Zone current account balance data for July and the Italian retail sales report for July released today, likely influenced deals in the euro-pound pair.
The Eurozone current account deficit narrowed to EUR1.7 billion in July on working day and seasonally adjusted basis, the European Central Bank said in a report today. The deficit for June was revised to EUR6.1 billion.
Results of the business confidence survey carried out by the Italian research institute, ISAE showed today that the nation`s business confidence indicator fell to 82.7 in September from 83.3 in August. Economists had expected the index to log a reading of 83.3. The September reading is the lowest October 2001.
German business sentiment fell to 92.9 in September from 94.8 in August, reports said citing a monthly survey from the Munich-based Ifo research institute today. The indicator stood below the expected reading of 94.1.
Against the Swiss franc, the sterling traded higher during early deals on Wednesday. The pound-franc pair that closed Tuesday`s North American session at 2.0127 is currently trading at a 2-day high of 2.0227.
The British currency extended its Asian session gains against the Japanese yen during early European deals on Wednesday. At 3:15 am ET, the sterling-yen pair reached a new multi-week high of 197.48, compared to Tuesday`s close of 195.55. The pair is now worth 197.17.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
At 6.00am ET, the Confederation of British Industry is scheduled to release report on distributive trade for September.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Against the US dollar, the British pound gained ground after hitting a low of 1.8507 at 1:35 am ET Wednesday. The pound-dollar pair is currently quoted at 1.8604, compared to 1.8525 hit late New York Tuesday.
The British currency edged down to 0.7928 against the European currency before reversing direction during early European deals on Wednesday. At 4:00 am ET, the pound reached a 2-day high of 0.7892 against the euro, compared to yesterday`s closing value of 0.7912.
The German IFO business conditions survey report for September, the Euro-Zone current account balance data for July and the Italian retail sales report for July released today, likely influenced deals in the euro-pound pair.
The Eurozone current account deficit narrowed to EUR1.7 billion in July on working day and seasonally adjusted basis, the European Central Bank said in a report today. The deficit for June was revised to EUR6.1 billion.
Results of the business confidence survey carried out by the Italian research institute, ISAE showed today that the nation`s business confidence indicator fell to 82.7 in September from 83.3 in August. Economists had expected the index to log a reading of 83.3. The September reading is the lowest October 2001.
German business sentiment fell to 92.9 in September from 94.8 in August, reports said citing a monthly survey from the Munich-based Ifo research institute today. The indicator stood below the expected reading of 94.1.
Against the Swiss franc, the sterling traded higher during early deals on Wednesday. The pound-franc pair that closed Tuesday`s North American session at 2.0127 is currently trading at a 2-day high of 2.0227.
The British currency extended its Asian session gains against the Japanese yen during early European deals on Wednesday. At 3:15 am ET, the sterling-yen pair reached a new multi-week high of 197.48, compared to Tuesday`s close of 195.55. The pair is now worth 197.17.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
At 6.00am ET, the Confederation of British Industry is scheduled to release report on distributive trade for September.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Kenyan shilling falls to 6-day low against US dollar, Wednesday, September 24, 2008 2:37:43 AM
At 2:20 am ET Wednesday, the Kenyan shilling declined to a 6-day low of 73.50 against the US dollar. If the shilling drops further, 73.6 per dollar is seen as the next target level. The dollar-shilling pair closed Tuesday`s New York deals at 73.15.
US dollar reverses early Asian session losses against majors, Wednesday, September 24, 2008 1:13:14 AM
During early deals on Wednesday, the US dollar reversed its early Asian session losses against its major counterparts.
Against the European currency, the US dollar gained ground after hitting a low of 1.4710 at 8:10 pm Eastern Time Tuesday. The dollar is currently trading at 1.4668 against the euro, compared to 1.4652 hit late New York yesterday.
The US dollar touched a low of 1.8589 against the British pound at 8:10 pm ET Tuesday. Thereafter, the dollar reversed its direction and is currently trading at 1.8533, compared to yesterday`s close of 1.8525.
The US currency that closed Tuesday`s North American session at 1.0865 against the Swiss franc edged down to 1.0834 during early Asian deals on Wednesday. Thereafter, the dollar-franc pair gained ground and reached 1.0882 at 12:45 am ET.
Against the Japanese yen, the US dollar slipped to 105.37 before gaining ground at 9:00 pm ET Tuesday. The dollar-yen pair that closed yesterday`s New York deals at 105.56 is now worth 105.80.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
Traders in Europe await the release of the German IFO business conditions survey report for September, the Euro-Zone current account balance data for July and the Italian retail sales report for July.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Against the European currency, the US dollar gained ground after hitting a low of 1.4710 at 8:10 pm Eastern Time Tuesday. The dollar is currently trading at 1.4668 against the euro, compared to 1.4652 hit late New York yesterday.
The US dollar touched a low of 1.8589 against the British pound at 8:10 pm ET Tuesday. Thereafter, the dollar reversed its direction and is currently trading at 1.8533, compared to yesterday`s close of 1.8525.
The US currency that closed Tuesday`s North American session at 1.0865 against the Swiss franc edged down to 1.0834 during early Asian deals on Wednesday. Thereafter, the dollar-franc pair gained ground and reached 1.0882 at 12:45 am ET.
Against the Japanese yen, the US dollar slipped to 105.37 before gaining ground at 9:00 pm ET Tuesday. The dollar-yen pair that closed yesterday`s New York deals at 105.56 is now worth 105.80.
An index that measures Japanese all-industry business conditions in Q3 was down 10.2 percent compared to the previous quarter, the Ministry of Finance said today in its business survey index. That was higher than the -15.2 percent quarterly decline in Q2.
Traders in Europe await the release of the German IFO business conditions survey report for September, the Euro-Zone current account balance data for July and the Italian retail sales report for July.
The economic reports scheduled for release in the U.S. include existing home sales for August and MBA mortgage applications for September. Additionally, investors may focus on Fed Chairman Ben Bernanke`s testimony at Congress` joint economic committee.
Why Congress Should Oppose the Bail-Out Package
Let's go through all the arguments against this package.
Let's start with the text of the deal:
Note all of the authority given to the Treasury secretary. He buys and sells securities at terms he deems necessary. He appoints firms to be "financial agents of the government." He creates any vehicles used to deal with this mess. In short, he is given a huge swath of power to handle this mess.
He makes literally no reports to Congress. After three months and then "semi-annually thereafter." That is way too much time between reports. Also note there is no mention of what information he is supposed to present to Congress. The Treasury Secretary could come into Congress with nothing -- no reports, not facts, no stories to tell -- and be in compliance with this act.
Did you catch that? There's a great little language shift. The Treasury Secretary's authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion -- then sell some at a loss -- and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It's conceivable the Treasury could but and sell trillions of dollars under this authority.
Excuse me? What country are we living in? Paulson could grant total authority to, say, Goldman Sachs (his former employer) and we the taxpayer would have nothing to say about it.
Folks, this is a boondoggle for several reasons.
1.) There is no oversight. Period. No one should be given this amount of power without any check and/or balance.
2.) Why this huge dollar figure?
He's asking for 25% of the 2007 federal budget in one fell swoop. That's a ton of cash.
3.) Bernanke's statement regarding purchase prices yesterday is pure crap:
Really? I've been involved with finance for 15 years, and I have never heard this distinction before. When I was a bond trader, I do remember getting calls at the end of the month asking for bids on bonds because clients had to mark their portfolios to market. But I don't remember anybody every saying, "let's mark this to "hold-to-maturity." This distinction is bullshit, plain and simple.
This is a huge boondoggle waiting to happen. If we give all of this authority to the Paulson we will live to regret it in a big way. And so will our children.
A friend of mine (New Deal Democrat over at Economic Populist) made an observation. Over the weekend we saw people in Congress "shocked" by what was happening. Paulsona and bernanke also qualify as the "deer in the headlights" for this mess. In other words -- everybody who should have seen this coming is now shocked we're in this mess. The only people to get this right were the bloggers -- or as NDD says, the "dirty hippies." Now, these same people who have gotten nothing right over the last year are desperately seeking money to help stave off a disaster. These people have no credibility on this issue. None. Nada. Zip. Zero.
Please call your Senator and Representatives and tell them to vote no on this piece of legislation unless there are major revisions.
Let's start with the text of the deal:
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Note all of the authority given to the Treasury secretary. He buys and sells securities at terms he deems necessary. He appoints firms to be "financial agents of the government." He creates any vehicles used to deal with this mess. In short, he is given a huge swath of power to handle this mess.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
He makes literally no reports to Congress. After three months and then "semi-annually thereafter." That is way too much time between reports. Also note there is no mention of what information he is supposed to present to Congress. The Treasury Secretary could come into Congress with nothing -- no reports, not facts, no stories to tell -- and be in compliance with this act.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Did you catch that? There's a great little language shift. The Treasury Secretary's authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion -- then sell some at a loss -- and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It's conceivable the Treasury could but and sell trillions of dollars under this authority.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Excuse me? What country are we living in? Paulson could grant total authority to, say, Goldman Sachs (his former employer) and we the taxpayer would have nothing to say about it.
Folks, this is a boondoggle for several reasons.
1.) There is no oversight. Period. No one should be given this amount of power without any check and/or balance.
2.) Why this huge dollar figure?
“One of you mentioned that you will use about $50 billion dollars a month. If that’s the case, and you’re certainly not going to use all $700 billion immediately, and as you can see there are a lot of questions about whether this will work, we understand you’ve done your best and you think this will work best, but it’s clear we’re in uncharted waters. But what about doing this in tranches? Why couldn’t you ask us for $150 billion, and on January 15th or January 20th we would come back, we would assess how this worked and grant some more money if it’s really working?”
He's asking for 25% of the 2007 federal budget in one fell swoop. That's a ton of cash.
3.) Bernanke's statement regarding purchase prices yesterday is pure crap:
``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''
Really? I've been involved with finance for 15 years, and I have never heard this distinction before. When I was a bond trader, I do remember getting calls at the end of the month asking for bids on bonds because clients had to mark their portfolios to market. But I don't remember anybody every saying, "let's mark this to "hold-to-maturity." This distinction is bullshit, plain and simple.
This is a huge boondoggle waiting to happen. If we give all of this authority to the Paulson we will live to regret it in a big way. And so will our children.
A friend of mine (New Deal Democrat over at Economic Populist) made an observation. Over the weekend we saw people in Congress "shocked" by what was happening. Paulsona and bernanke also qualify as the "deer in the headlights" for this mess. In other words -- everybody who should have seen this coming is now shocked we're in this mess. The only people to get this right were the bloggers -- or as NDD says, the "dirty hippies." Now, these same people who have gotten nothing right over the last year are desperately seeking money to help stave off a disaster. These people have no credibility on this issue. None. Nada. Zip. Zero.
Please call your Senator and Representatives and tell them to vote no on this piece of legislation unless there are major revisions.
Tuesday, September 23, 2008
Bernanke to Congress: Please Use Fantasy Prices
From Bloomberg:
This is 100% pure crap, bullshit or whatever else you want to call it.
1.) These are not "firesale" prieces. They are the prices the current market will tolerate. Has it ever occurred to anyone why these assets are priced where they are? They're crap. It's that simple. But ol' free market Ben and laissez faire Paulson won't have any of that market stuff when an investment bank might actually have to lose money.
2.) What Ben is essentially saying is, "please pay a price that has no one has any possibility of ever getting for this paper. That will make everything better. Really." Over pay, screw the taxpayer, and bail out wall street for their really stupid ways.
3.) Consider that most of these assets are backed by mortgages. Also consider that that delinquencies are increasing. Take a look at this chart from the latest Quarterly Banking Profile from the FDIC
This plan is pure bullshit. Plain and simple.
UPDATE: A comment noted that I used incorrect phrasing on the mortgage issue. Mortgage delinquencies are increasing, but most are not delinquent.
Federal Reserve Chairman Ben S. Bernanke signaled that the government should buy devalued assets at above-market values to make its proposed $700 billion rescue package most effective in combating the financial crisis.
``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''
Bernanke's remarks, an unusual departure from his prepared testimony, come as lawmakers and the Bush administration negotiate a rescue plan aimed at easing the worst financial crisis since the Great Depression. The Fed chief said paying prices higher than the bad assets would fetch in the open market would help ``unfreeze'' credit markets and aid the economy.
Analysts said Bernanke is essentially advocating that government use a pricing model that assumes that the debt will be paid in full over a long period of time. That is different from the mark-to-market model used by investment banks that prices assets at what they are worth on a given day.
The risk is that the model does not provide transparent pricing of the assets taxpayers are taking on, said Ann Rutledge, partner at R&R Consulting in New York, a firm that specializes in structured finance. Many of the securities ``are not going to pay at maturity,'' Rutledge said.
This is 100% pure crap, bullshit or whatever else you want to call it.
1.) These are not "firesale" prieces. They are the prices the current market will tolerate. Has it ever occurred to anyone why these assets are priced where they are? They're crap. It's that simple. But ol' free market Ben and laissez faire Paulson won't have any of that market stuff when an investment bank might actually have to lose money.
2.) What Ben is essentially saying is, "please pay a price that has no one has any possibility of ever getting for this paper. That will make everything better. Really." Over pay, screw the taxpayer, and bail out wall street for their really stupid ways.
3.) Consider that most of these assets are backed by mortgages. Also consider that that delinquencies are increasing. Take a look at this chart from the latest Quarterly Banking Profile from the FDIC
This plan is pure bullshit. Plain and simple.
UPDATE: A comment noted that I used incorrect phrasing on the mortgage issue. Mortgage delinquencies are increasing, but most are not delinquent.
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