Wednesday, June 25, 2008

New Home Sales Data was released today

A government survey released today showed sales of new homes in May tumbled 2.5 percent across the United States.

The report said that new home sales declined to a seasonally adjusted pace of 512,000 homes (that means: across the nation a total of 42,666 homes sold in May -- seasonally adjusted of course).

"New homes are still a tough sell. Despite aggressive pricing, half of completed new homes are still sitting on the market after 8.5 months, the highest median months reading since 1982," said Patrick Newport, a US economist at Global Insight.


Randy

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The U.S. recession, the dollar, oil and IRAN

From Paris, Max Keiser, journalist and broadcaster speaks to Afshin Rattansi in Tehran.

Mr. Keiser absolutely nails the real issue that no one in America is talking about!

Could it be that the news we receive through our corporate owned media system is being controlled (not allowed to talk about this subject)? Hmmm...


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Tuesday, June 24, 2008

We Ain't seen nothin Yet

Since the end of the housing boom in 2005, I've been stating the housing correction in Las Vegas would be significant and we'd likely see a 50% haircut (peak to trough) in home prices. Thus far, odds are looking pretty good that I'll ultimately be correct (Maybe even too optimistic).



Four years of gains wiped out in just one.

Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.

Las Vegas saw the biggest declines, with prices falling 26.8% in the past year.

With so many homes on the market and foreclosures rising, prices are likely to keep falling, said Patrick Newport, an economist with Global Insight

"We expect the 20-city Case-Shiller composite to fall another 15% to 20%, to a bottom at the end of 2009, translating to a peak-to-trough drop of 30% to 35%," wrote Michelle Meyer, an economist for Lehman Bros.

After accounting for 4.5% inflation over the past year, real home prices are down in every region in the nation.

Closing:

Thus far, the decline in bubble-region home prices has been quick, but I still feel we've got a long way to go. Significant banking/credit issues will soon to come to light again while unemployment numbers are due to increase significantly. Combine these issues with billions in Option Arm Resets, massive inflationary pressures and soon-to-be crucified equities markets and the result is a toxic Witch's Brew of economic misery that will continue to force massive downside price pressures across the nation.



Bottom Line: We ain't seen nothing yet!

Regards
Randy

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Jim Cramer: The Flip-Flop that Ought to be Illegal

I've always felt Cramer was a complete idiot and this video confirms it. He either belongs in Jail for his blatant lies & guiltless flip-flops -- which has resulted in major losses for the many who follow him, or in an insane asylum for his combined narcissistic and multiple personality disorders.

I hope this video causes so much controversy/backlash that the networks move to fire his rotten ass! This lunatic needs to lose EVERYTHING -- including what little dignity he may still have.

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Consumer Confidence Plunges!

Public pessimism is growing over our country's poor economic condition. A drop in the just released US consumer confidence index to 50.4, leaves the index at a 16 year low -- just slightly above prior recorded lows of 47.3 in 1992 and a 50.1 in 1980.

Additionally, this reading was the fifth-weakest since the Conference Board started the index in 1967.

The index has now dropped by more than half since last July, when it was at 111.90


Consumers made a grim assessment of their present situation and their future prospects also. The present situation index dropped to 64.5 from a revised 74.2 in May.


The index of consumer expectations — the forward-looking part of the monthly survey — fell to its lowest level ever (41.0 from a revised 47.3 in May) amid growing concerns about jobs, economic expectations and increasing prices at the pump and in the grocery store.


Regards

Randy

Monday, June 23, 2008

I'm Baack!

The Family camping trip was very enjoyable. We spent a couple of days at Navajo Lake in UT which sits at an elevation of 9,200 feet, so while Vegas baked in 110 degree afternoon temps, we enjoyed cool nights in the 40's and afternoons in the 70's. No phone, TV or internet service to distract, so my days were spent 1) monitoring the beer supply -- ensuring it was ice cold and would last the trip and 2) determining what would be BBQ'd next... Really tough days indeed... Picture below:



Enough about my weekend and moving on to today's Economic News:

The DOW fought to stay in the green today but closed slightly in the red. With all the economic reports due later this week (Consumer Confidence, New Home sales, Durable Orders, Existing Home Sales, Initial Claims, Personal Income and Spending, etc) I imagine it's quite possible to see it fall below key support levels by end of week. Keep an eye on 11,650... If we break it, look out below!

With that said, Helicopter Ben also speaks this week. Markets will be on edge for what he says ("I'm an inflation fighter"), more than what he does (which is nothing). Though he will talk tough, unless he wants to crater the banking/financial/housing markets more than that seen thus far, I can't imagine that he will increase rates at any point later this year (remember I'm predicting a 1.5% FFR by EOY).

More Goldilocks Economic News Reports today:

EU puts severe restrictions on largest Iran bank

Iran's largest bank will today be subjected to an asset freeze and severe restrictions over its operations in the City of London after the European Union decided to impose fresh sanctions on Tehran.

In its latest attempt to put pressure on Iran over the development of its nuclear programme, the EU yesterday agreed to impose the restrictions on Bank Melli, which has branches in Paris and Hamburg and a unit in London called Melli Bank.

The EU also agreed to impose sanctions targeted on individuals and businesses, which the west alleges are linked to Iran's nuclear and ballistic programmes.

Israel 'will attack Iran' before new US president sworn in, John Bolton predicts

John Bolton, the former American ambassador to the United Nations, has predicted that Israel could attack Iran after the November presidential election but before George W Bush's successor is sworn in.

Note: You may wonder why I talk about IRAN so much and question how it relates to our economy...

Well, If IRAN is bombed, expect a few Chinese Silkworm missiles to sink a couple of Oil tankers in the Strait of Hormuz and consequently, gas to spike to $10 within a week -- potentially causing fuel shortages, and delays/shortages/price hikes in everything brought to market (food, etc). This could potentially lead to social unrest in certain areas. The significance of this event can not be understated

GM Cuts Truck Production, Adds No-Interest Financing

General Motors Corp. reduced its North American truck production plan and added no-interest loans on many 2008 models after a consumer shift to cars contributed to a 16 percent drop in its U.S. sales through May.

``No one knows where the bottom is in this sales environment,'' David Healy, an analyst at Burnham Securities Inc. in Sierra Vista, Arizona, said in an interview. ``GM has plenty to be worried about since they derive so much of their sales from these large trucks.''

The company will idle 7 pickup and sport-utility vehicle plants in the U.S., Mexico and Canada for as long as 12 weeks this year under its latest production cut, Sapienza said. The reduction is in addition to a plan to close four North American factories and trim output by 500,000 units by 2010

United to Eliminate 950 Pilot Jobs

United Airlines said on Monday that it planned to reduce its fleet and eliminate about 950 pilot jobs beginning this summer, in addition to the 1,600 salaried positions it has already said it will cut.

United’s parent, UAL, which is based in Chicago, has made a series of moves in recent weeks to battle rising fuel costs, including grounding at least 70 planes.

UPS Reduces Profit Forecast on Fuel Costs, Economy

United Parcel Service Inc., the world's largest package-delivery company, lowered its second- quarter profit forecast because of rising fuel costs and a slowing U.S. economy.

``The weak U.S. economy, record high fuel costs and shippers trading down -- you combine all these things and it's a tough environment,'' said Craig Hutson, a bond analyst in Chicago at independent research firm Gimme Credit LLC.

Last week, FedEx Corp. posted its first quarterly loss in 11 years and projected earnings that fell short of analysts' estimates. The second-largest package-shipping company also blamed fuel costs and slowing demand for express shipments.

Citigroup Readies More Job Cuts Under Pandit's Plan

Citigroup Inc. may begin another round of job reductions as soon as this week under a plan drawn up in March to cut the trading and investment-banking workforce by 10 percent, said a person with knowledge of the matter.

The largest U.S. bank has eliminated about half of the 6,000 jobs targeted since then, said the person, who declined to be identified because Citigroup hasn't disclosed the plans publicly. Citigroup employs more than 300,000 people worldwide and has announced about 13,000 job reductions this year.

The world's largest banks and brokerage firms have slashed more than 80,000 jobs since subprime mortgage defaults infected credit markets and led to almost $400 billion of writedowns and losses.

``I see more downsizing to come,'' said Andy Mantel, managing director of Pacific Sun Investment Management Ltd. in Hong Kong. ``Banks need to take precautionary measures.''

If you haven't already seen this video, suggest you do -- it's quite fitting: Job Market 2009

Scuffles break out in line for Wis. food vouchers

MILWAUKEE (AP) — Pushing and shoving broke out Monday among some of the 2,500 people hit hard by recent floods who lined up outside a county office in hopes of collecting free food vouchers.

Some residents told the Milwaukee Journal Sentinel they heard from friends or at food pantries that they could get free vouchers to replace food lost in recent floods and power outages. However, the Marcia P. Coggs Human Services Center was only taking names for a state voucher program.

Scuffles began breaking out around 7 a.m. with people shoving, pushing, and taking a door off its hinges, bringing police in dozens of cars, authorities said.

"The food crisis in Milwaukee — and throughout the United States — is worse than many of us have realized," Hines said in a statement. "We expect long lines for free food in Third World countries; we don't expect a line of 2,500 people waiting for food vouchers at the Marcia P. Coggs Center."

Have a great evening

Randy

Friday, June 20, 2008

Won't be posting

Going out of town for the weekend on a camping trip. Please feel free to dig through some of my archives or watch a couple of the videos (all listed on right side of page).


Have a great weekend

Randy

Israelis 'rehearse Iran attack'

Israelis 'rehearse Iran attack'

Israel has carried out an exercise that appears to have been a rehearsal for an attack on Iran's nuclear facilities, US officials have told the New York Times.

More than 100 Israeli fighter jets took part in manoeuvres over the eastern Mediterranean and over Greece in the first week of June, US officials said.

Iran insists its programme is peaceful, but Israel sees Iran's development of the technology as a serious threat.

Tehran is defying a demand from the UN that it stop the enrichment of uranium.

The UN Security Council approved a third round of sanctions against Iran over the issue in March 2008.

'Signals'

Several US officials briefing the New York Times said the exercise was intended demonstrate the seriousness of Israel's concern over Iran's nuclear activities, and its willingness to act unilaterally.

"They wanted us to know, they wanted the Europeans to know, and they wanted the Iranians to know," a Pentagon official is quoted as saying by the newspaper.

"There's a lot of signalling going on at different levels."

The exercise involved Israeli helicopters that could be used to rescue downed pilots, the newspaper reported.

The helicopters and refuelling tankers flew more than 1,400km (870 miles), roughly the distance between Israel and Iran's main uranium enrichment plant at Natanz.

The New York Times reported that Israeli officials declined to discuss the details of the exercise.

A spokesman for the Israeli military said the air force "regularly trains for various missions in order to confront and meet the challenges posed by the threats facing Israel".

Warnings

Israeli Prime Minister Ehud Olmert warned on 4 June that drastic measures were needed to stop Iran obtaining nuclear weapons.

He said Iran must be shown there will be devastating consequences if it did develop such weapons.

Israeli deputy Prime Minister Shaul Mofaz - a former defence minister - said earlier this month that military strikes to stop Iran developing nuclear weapons looked "unavoidable".

In 1981, Israeli jets bombed the Iraqi nuclear reactor at Osirak, 30km (18 miles) outside Baghdad.

Israel said it believed the French-built plant was designed to make nuclear weapons that could be used against Israel.

Will Israel bomb Iran?

Reports that Israel has plans for an attack on Iran's nuclear facilities refuse to go away. The New York Times today carries a story on a major military exercise Israel carried out this month, described as a "dress rehearsal" for such a raid.

Such reports surface periodically. Back in 2005, the Sunday Times ran a big story with details of how Israeli forces practised destroying a mock-up of Iran's Natanz uranium enrichment plant in the Negev desert.

Virtually a year after the Sunday Times story, the New Yorker's ace investigative reporter, Seymour Hersh, wrote a cracking tale about how George Bush had increased clandestine activities inside Iran and intensified planning for a possible major air attack to stop Iran's nuclear programme.

As timing is everything, the question that poses itself with the latest incarnation of this "plan to attack Iran" story is why now?

This week, Gordon Brown announced new sanctions against Iran, including financial measures already agreed in principle by the EU and a vaguer reference to oil and gas sanctions yet to be decided on. Brown appeared to have bounced the EU into the new measures as Brussels had not agreed on their timing.

Be that as it may, the EU has now adopted a harder line towards Iran, as the US has been urging for some time. But is George Bush losing his ardour to hit Iran? A recent interview with the Times indicated that America's lame duck president had "mellowed" after eight years in office - talking up multilateral diplomacy instead of military action as a way out of the Iranian nuclear impasse.

Yet the recent resignation of Admiral William Fallon as head of US forces in the Middle East was seen as a victory for the hawks in the administration as he was perceived to be an opponent of military action. But if we take Bush's comments to the Times, a US military strike seems less likely than before.

There have been signs that Israel, which is widely believed to have nuclear weapons of its own, is none too pleased that the US has backed off its hawkish stance. Israel publicly disagreed with the America's recent national intelligence estimate which concluded that Iran had stopped its nuclear weapons programme in 2003, although it continued to enrich uranium.

The New York Times report indicates that Israel is keeping the military option open. Whether it will actually go ahead with a strike is another matter, given the difficulties of ensuring success, not to speak of the political repercussions should there be massive civilian casualties.

But it can be surmised that Israel wanted its dress rehearsal to be leaked to serve as a clear warning to Tehran of the risks it faces should it pursue uranium enrichment, which can lead to a nuclear bomb. Such a tough line is no bad thing politically for Ehud Olmert either as the Israeli prime minister is currently engulfed in a corruption scandal. Being tough with Iran also protects him against accusations that he is being weak in agreeing to an Egyptian-brokered truce with Hamas in Gaza.

In any event, Israel is not just relying on leaks to the New York Times to get its message across to the Iranians and everyone else about its resolve in stopping Iran developing an atomic weapon. Israel last September bombed what was alleged to be a covert nuclear reactor in Syria being built with North Korean help.

According to the New York Times, Iran is taking the risk of an Israeli attack seriously enough to be strengthening its air defences. Israeli sabre-rattling and bluster may have an unintended consequence. It could speed up Iran's bomb. North Korea showed that if you have bomb, people are more inclined to talk to you rather than attack you.

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Thursday, June 19, 2008

China Vs The U.S. - The Battle For Oil

China's sky-rocketing growth and shortage of sufficient resources is forcing China to set its sights outside its borders in a frantic search for oil, but the major oil-producing countries are kept off-limits by the United States, forcing China to do business with the rogue states, African dictatorships, Iran and former Russian states - to get the oil they desperately need. Featuring field encounters, archival footage, news reports and maps to outline the latest threat in world geopolitics.

Part 1


Part 2


Part 3


Part 4


Part 5

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Wednesday, June 18, 2008

Economic News Roundup 6/18/08

Ready for a 300-point Drop in the S&P 500?

A Royal Bank of Scotland credit strategist, Bob Janjuah, rattled investors around the world today with predictions that the S&P 500, now trading near 1340, could plunge to 1050 by September, as “‘all the chickens come home to roost’ from the global boom.”

“A very nasty period is soon to be upon us — be prepared,” he said, according to the Daily Telegraph.

Bits and pieces of Janjuah’s warning to RBS clients seem to be floating around the Internet. However, RBS spokespeople said the note was for RBS clients only.

Janjuah’s argument is that the European and U.S. economies will show a lot of weakness this summer. That will put the U.S. Federal Reserve and possibly the European Central Bank in a bind: If they raise interest rates, they would slow an already weak economy right before a U.S. presidential election. If they don’t hike rates, they would allow inflation to increase uncontrollably. Unchecked inflation would seriously disturb the world’s investors.

Janjuah reportedly wrote:

The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets.

RBS issues global stock and credit crash alert

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

RBS warning: Be prepared for a 'nasty' period
Such a slide on world bourses would amount to one of the worst bear markets over the last century.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Treasury's Paulson repeats strength of US economy will be reflected in dollar

WASHINGTON (Thomson Financial) - US Treasury Secretary Henry Paulson today repeated that he believes the US is taking the right steps to improve its economic situation in light of the ongoing housing and credit crisis, and said the value of the dollar will ultimately reflect the soundness of the overall US economy.

What a crock of S@!t! this bozo needs to find a different line because his daily strong-dollar jawboning is growing quite old. OK Paulson, Actions speak much louder than words. Defend the US Dollar by raising rates and lets see what happens! Can't do it -- can ya?

Bank and economic fears drive Dow to 3-month low

The Dow industrials sank to their lowest close in three months on Wednesday after slipping below 12,000 for the first time since mid-March, as worries about a weak economy compounded credit sector concerns and drove shares of banks, autos and transportation companies sharply lower.

The Dow fell to an intraday low at 11,993.64 -- its lowest level since the Federal Reserve's mid-March rescue of Bear Stearns rattled investors who were already worried about the health of the banking sector.

"The autos, financials and transport sectors are very sensitive to the perception that economic growth is waning," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston. "We've had little evidence the economy is at (its) bottom."

Worries were surfacing over the reading of the U.S. second-quarter gross domestic product, due in July, he said. A Reuters poll of economists see the GDP's growth rate slowing to an annual pace of 0.2 percent in the second quarter, which would be the weakest since 2002.

Paulson to Urge New Fed Powers

Treasury Secretary Henry M. Paulson Jr. plans to call today for the Federal Reserve to be given new, explicit powers to intervene in the workings of Wall Street firms to protect the financial system, adapting his vision of how the financial world should be regulated to reflect the lessons of the collapse of Bear Stearns.

"Our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk," Paulson plans to say in a speech today, according to prepared remarks obtained by The Washington Post. But the central bank "has neither the clear statutory authority nor the mandate to anticipate and deal with risks across our entire financial system."

As I stated in Tail Wagging the Dog back in March: The Federal Reserve, a private banking institution authorized by Congress to loan money created from nothing and charge interest for doing so, is already a powerful, rouge institution that operates without Congressional oversight. Should we now hand them more power? The answer can be made in Two words: ABSOLUTELY NOT!

Banks' Dividends Domino; Fifth Third's Is The Latest

Shares of Fifth Third Bancorp tumbled on Wednesday as the Cincinnati-based bank became the latest regional bank to butcher its dividend and initiate a plan to raise more $2.0 billion in extra capital.

The banking company said second-quarter earnings are expected to be one to five cents a share, a fraction of the 40 cents predicted by analysts surveyd by Thomson Financial. The company is reeling from a rise in bad loans. Fifth Third's key states for operations include Ohio, Michigan and Florida, all hit hard by the U.S. housing downturn.

On Wednesday, Standard & Poor's Equity Research downgraded the bank to sell from hold, citing possible credit weakness. Moody's Investors Service said it's reviewing the bank's long-term deposit and debt ratings for a possible downgrade.

Washington Mutual plans to lay off hundreds

Washington Mutual, battered by the nationwide housing downturn, is poised to announce another round of layoffs Thursday that will affect at least several hundred employees nationwide across all departments.

Washington Mutual to end 2 complex mortgage types

Washington Mutual Inc. said Wednesday it would stop offering two types of complex mortgage products, the latest change to its mortgage business intended to help it recover from the mess in the mortgage and credit markets.

The nation's largest thrift said it would no longer offer negative amortizing loan products or WaMu Mortgage Plus loans.

The switch follows WaMu's decision in late 2007 to shutter its subprime mortgage operations and cease buying mortgages from brokers. The thrift continues to struggle with costs associated with delinquent borrowers and rising foreclosures, and in April agreed to a $7 billion cash infusion from private investors.

Hedge star John Paulson says credit crisis not over

The credit crisis is not over, and losses in the financial sector are set to be around $1.3 trillion, according to star hedge fund manager John Paulson, who says he remains short credit.

Paulson, who earned $3.7 billion in 2007 according to Alpha Magazine by going short the subprime sector during the U.S. mortgage meltdown, also said a deterioration in consumer spending was set to drive the U.S. economy into recession this year.

"I don't think we're through the credit crisis. There are lots of problems out there, and I think we'll continue to experience problems for the remainder of the year," he told the GAIM International 2008 hedge fund conference in Monaco.

"I believe we're going to go into recession, I think the second half (of the year) will be worse than the first half, and I think the recession will last into 2009 ... The primary factor leading to recession will be a decline in consumer spending, and I believe that will be more pronounced in the coming months."

He also said his funds had minimum exposure to equity markets because of a likely recession and that it was too early to start distressed debt investing, though a huge opportunity would eventually emerge.

"I do think, long-term, distressed presents an opportunity that is as much as $10 trillion. That is a reflection of how much the credit markets were overvalued on the upside."

Loan crisis: how the credit crunch has hit postgraduates

Sallie Mae's exit from the loan market has left postgrads like Victor Schonfeld stranded

One morning last week, nine months into my PhD, I discovered by accident that the loan which made my degree feasible, and which I had taken out for a year, was no longer available after that. I'd been looking into transferring to a university that might better match the evolution of my PhD in English and I mentioned to their fees office that my PhD has full funding from Sallie Mae UK. "Oh, those loans were ceased, we got an email," came the casual reply. "Can you self-fund?"

I rushed to phone my own university's financial office for enlightenment. "Yes, well, that is a problem," came the reply.

Sallie Mae, a major American lender that set up in Britain just two years ago, had not told borrowers that they were no longer lending in Britain to postgraduates. Nor was there any warning from Royal Holloway, the University of London college responsible for certifying my annual costs and delivering semi-annual cheques. The financial office explained that they're overloaded with student crises and had trusted Sallie Mae to inform its borrowers.

It looks like I will not have a Dr before my name and I'll have to put my aim of teaching university students to write fiction on hold. I'm pushing on with my novel about elitism and intelligence in America and going back to my film-making career.


Regards

Randy

Look out below!

The DOW lost another 131 points and even broke through the psychological 12,000 level today. As I've stated before, keep your eyes on 11,900, 11,700 and 11,600. If we fall below 11,600 (which I certainly expect, as the PPT loses control sometime later this year -- and probably quite soon) then look out below!

DOW -- Trouble Ahead?

Tumultuous Week Ahead


DOW Daily and Weekly Charts Below





Randy

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Tuesday, June 17, 2008

Open Forum

Feel free to post up your thoughts, comments or links of interest here

Videos of Interest

The global "Credit Crisis" is back: Stephen Long, ABC Lateline covers ongoing problems and longer term impacts -- a short video: watch to the end.




Economic Consequences of Attacking Iran




Wake Up, Peons




Ross Perot is back! Launches Public Information Website

The American people must wake up and face the reality that promises made in the past will soon bankrupt this nation.

"The economic crisis facing America today is far greater than anything since the Great Depression," said Perot. "Our federal government continues to spend us deeper into debt. The American people must get directly involved and demand an end to deficit spending. Perotcharts.com

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Monday, June 16, 2008

Economic News Of Interest

SoCal Home Prices Plunge 27% in May

Housing prices across Southern California plunged a record 27% in May, signaling that more trouble lies ahead for builders and lenders exposed to the region.

Sales volume in the market fell 15% from a year ago, marking the slowest May in more than 20 years, according to DataQuick Information Systems.

The median price fell to $370,000 from $505,000 in the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura.

Sales of foreclosed homes repossessed by lenders continue to dominate many of the inland markets, such as Riverside County, where foreclosure sales totaled 57% of all home sales volume, DataQuick said.

As housing prices fall, the domino effect is that loan-to-value ratios are ballooning for many borrowers, which in turn creates more foreclosures as buyers find themselves unwilling to continue paying the mortgage on their houses.

This trend has already forced Wachovia (WB - Cramer's Take - Stockpickr) to increase loss estimates on its large portfolio of option ARM mortgages it has written in the state. Some analysts, and investors shorting the stock, say the company is still under-reserved for losses tied to loans going bad in the state.

Builders' confidence matches record low

Homebuilders' confidence in the weak housing market fell in June, matching the record low in a monthly industry assessment index, a trade group said Monday.

Sales volume will continue to erode in the months ahead and hurt the general economy, according to David Seiders, chief economist of the National Association of Home Builders.

"Obviously, this isn't terribly encouraging," Seiders said. "Housing still occupies a major place in the slowdown process ... putting pressure on GDP growth and the labor market."

The NAHB/Wells Fargo housing market index for June fell 1 point to a seasonally adjusted reading of 18, down from May's reading of 19. Economists surveyed by Thomson/IFR expected the index to rise to a reading of 20.

A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales. June's reading ties the record low level reached in December 2007.

Empire State Manufacturing Mayhem

Even as foreigners showed their confidence in the U.S. economy by purchasing Treasuries in April, manufacturing conditions in New York continued to deteriorate in June, indicating a weaker-than-expected U.S. economy.

The New York Federal Reserve Bank's Empire State Manufacturing Index fell 5 points to -8.68, the fourth negative reading in the last five months. Economists polled by Thomson Reuters IFR Markets had a median forecast of -0.5 for June.

Lehman Bros braced for 28% drop in British property prices

The troubled Wall Street bank Lehman Brothers is preparing for a 28% fall in British house prices in one of the gloomiest scenarios outlined about the impact of the credit crunch on the property market.

The bank is struggling to convince its clients that it has taken the most conservative possible approach to the value of its property-related assets.

Lehman made a $2.8bn (£1.4bn) quarterly loss - its first since the bank was spun off by American Express in 1994. Dick Fuld, chief executive, said: "I'm very disappointed with these financial results. We lost $2.8bn. All I can say is that's just totally unacceptable. This is my responsibility."

Analysts were briefed on a swingeing write-down in the value of its mortgage-related UK property interests.

Ian Lowitt, the bank's chief financial officer, said Lehman had $9.3bn in exposure to residential property outside the US, most of which is in Britain. About two thirds of this is through high-risk mortgages. He said Lehman had reduced the value of these British holdings to reflect a "peak-to-trough decline in house prices of approximately 28%". Prices have so far fallen by about 7%.

Oil prices hit a new record high

Oil prices have jumped to a new record near 140 US dollars (£70) a barrel.

Light, sweet crude for July delivery reached 139.89 dollars on the New York commodity markets, a jump of more than four dollars after the greenback weakened in value and a fire halted production on a North Sea platform.

The surge came despite promises from Saudi Arabia over the weekend to boost output by 200,000 barrels a day next month - a move that was widely hoped to have reduced some of recent upward pressure on oil prices.

Analysts blamed the latest hike on the drop in the value of the dollar against the euro, making oil less expensive to investors dealing in other currencies.

AIG chief Sullivan is ousted

American International Group Inc.'s chief executive has been forced out after a tumultuous three-year tenure marked by financial difficulties at the insurance giant and a plunging stock price.

AIG said Sunday that chief executive officer Martin Sullivan is leaving the world's largest insurer and the board, and will be succeeded by Chairman Robert Willumstad, a former top-ranking executive at Citigroup.

"During the tenuous reign of Sullivan as CEO over the past three years, the stock price of AIG has been on a downward spiral. As such investor confidence has waned," wrote Stifel Nicolaus analysts Michael Paisan and Mariza Costa in a research note Monday. "The change could signal that the financial crisis is taking a greater toll on the company than previously thought."

The company's profit has been squeezed by write-downs on the balance sheet, and some of its businesses have suffered as a result of exposure to the slumping U.S. real estate market.

Dollar falls back after G8 focuses on inflation

The dollar came under pressure Monday after a meeting of the Group of Eight finance ministers in Japan focused on inflation rather than foreign exchange, deflating expectations of a strong statement in support of the U.S. currency.

The greenback also lost a bit more ground after an index of manufacturing conditions in the New York region fell further this month. The Empire State survey index fell to negative 8.7 this month from negative 3.2 in May, indicating industry is contracting.

With inflation fears rising along with the price of oil and other commodities recently, the market has raised bets that the Federal Reserve will be lifting interest rates later this year, which would boost the dollar's appeal.

But with continued signs that the U.S. economy remains weak, and while a hike in rates in Europe "is almost a foregone conclusion," the dollar might be set to lose its recent firmness against major counterparts, according to Simpson.

"The dollar's rally has run out of steam for now and the risk appears to be to the downside," he said.

Bear Stearns Subprime Funds May Draw U.S. Charges, People Say

Federal prosecutors and the U.S. Securities and Exchange Commission may bring criminal and civil charges in a probe of Bear Stearns Cos. hedge funds whose collapse ignited the subprime mortgage crisis last year, people familiar with the investigations said.

The U.S. Attorney in Brooklyn and the Washington-based SEC may announce the actions as soon as this week, said one of the people, who declined to be identified because the case isn't public. Prosecutors told a New York state judge last month they would decide by mid-July whether to bring a criminal case against former Bear Stearns hedge fund managers Ralph Cioffi, 52, and Matthew Tannin, 46, a lawyer at the proceeding said.

``It was always a question of when the indictments would start rolling out, it was not a question of if,'' said Jacob Frenkel, a former federal prosecutor in private practice in Maryland. Indictments are inevitable ``because of the clamoring for accountability for anyone of note with what would be perceived as a substantial role in the mortgage-driven economic crisis.''

Fed chief still doesn't get it

Ben Bernanke's tough talk on inflation suggests the economy may be improving. He's wrong, and his comments will backfire.

"Helicopter" Ben Bernanke made a big splash last week when speaking before the Boston Fed. He opined that the risk of a "substantial slowdown" had diminished, and he talked tough about controlling inflation and inflation expectations. I suspect he will regret his comments.

After all, they were voiced by the same Federal Reserve chairman who was remarkably sanguine last summer and fall as the mortgage debacle was building a head of steam.

Bernanke has given sellers a green light to get out of stocks. He will not be able to ride to the rescue of the bulls until much more damage has been inflicted on stocks and the economy.

He understood neither the housing/credit bubble nor the ramifications of its unwinding. Now, he appears to believe the economy may be improving -- when to me it seems obvious that the economy is in a recession and will only get worse.

I cannot overemphasize the point that I've made many times and which lies at the heart of my book "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve": We bailed out an equity bubble with a real-estate bubble. The bulk of gross domestic product growth in the 2003-07 up-cycle was a function of mortgage-equity extraction, and 30% to 40% of new jobs were created in real-estate-related industries. Now that's all gone.

What's left are debts that people can't service (due to living beyond their means), further exacerbated by the inflation that's squeezing everyone's paychecks.

It's very important for people to understand that the world's financial system is deleveraging, a process that's starting to affect a lot of different markets. The price of credit will continue to rise (due to said deleveraging and inflation), even as global economies weaken.

Trillions of dollars of financial instruments will need to find homes. With supply outpacing demand, buyers of those instruments will be in a position of requiring lower prices (i.e., higher interest rates), causing more dislocations down the road.

Given that backdrop, I believe the chance of Bernanke raising interest rates is essentially zero. I think the Fed's next move will be to ease rates, though I don't know if that will be three months or six months from now.

What I do know is that Bernanke is not really serious about containing inflation, as is obvious by how far the Fed has let it climb. He cares only about avoiding a downturn. So, when it looks like push has come to shove, Bernanke will ease again.

Push is coming to shove, and there's nothing he can do to stop that.

US Recession hurting Mexico -- Mexicans sending less money home

The challenges the Chavollas face tell of a looming financial crisis that reaches across Mexico, where families who depend on money sent from relatives in the United States - called remittances - are opening up lighter envelopes or waiting longer to get them.

Jesus Cervantes, the director of statistics for the central bank, attributed the drop to reduced migration to the U.S., a crackdown on illegal laborers there and rising unemployment among those in the U.S., where construction jobs - which employ nearly a quarter of Mexican migrants - are in short supply.

Those problems are compounded by what Mexicans living in the United States say is a run-up in prices, led by increases in gasoline.

Martin Valdez, who owns a tortilla shop in Ucacuaro, said he is seeing a growing number of young Mexicans returning to the village. Some have been deported. Others couldn't find decent jobs in the U.S. Others found the search for work just wasn't worth the hassle.

"Personally, I know 10 people that haven't gone or . . . came back from the States," said Valdez, who graduated from Arlington Heights High School in Fort Worth. "A lot of them prefer to stay here and just tough it out here in Mexico."

If the number of returnees grows dramatically, that could be a problem for Mexico, said Rodolfo Garcia Zamora, an economist and immigration expert at the Autonomous University of Zacatecas.

"The Mexican economy is not prepared for a massive return of immigrants from the United States," Garcia said. "The government, on both the state and federal level, has not taken this problem seriously. In terms of social and political stability, it would be extremely delicate."

The remittance slowdown is sending economic shockwaves throughout Ucacuaro and surrounding villages. Salvador and Juana Pulido estimate that remittances from Texas cover half the costs of his small farming operation, now hit with higher prices for feed and fertilizer.

"I couldn't survive doing this without the help from my children," Salvador Pulido said.

Senate Budget chairman aims to undo special-treatment loan

WASHINGTON (AP) -- Senate Budget Committee Chairman Kent Conrad said Saturday he is donating $10,500 to charity and refinancing his loan on an apartment building after reviewing documents showing he received special treatment from Countrywide Financial Corp.

Conrad said it appears that Countrywide waived 1 point on his mortgage for a Bethany Beach, Del., vacation home. He said he would donate the equivalent amount of money to Habitat for Humanity.

Conrad said it also appears he was given special treatment on a mortgage when he was financing the purchase of a Bismarck, N.D., apartment building from his brothers. He said he would refinance that loan with another lender.

"I called (Mozilo). I said, 'I'm buying this property. Would you be interested in the mortgage?' And he said, 'Yeah. Call these people and we'll take a look,'" Conrad said.

"I did not think for one moment - and no one ever suggested to me - that I was getting preferential treatment," Conrad said. (My Comment: Yea right -- just another blatant example of Washington's rampant cesspool of a Quid pro quo favor system -- you greedy crook!)

Small Businesses hang on tight and fight to survive in tough economy

Small business is risky business these days.

Costs are rising, profits are shrinking and the ability of the big guys to keep prices relatively lower is drawing away customers.

Things are so bad that many small enterprises, which account for about 99 percent of the country's businesses, say they are hanging by a thread that may soon snap.

"We are basically losing money every month, about $1,000 a month. It's been about two, three months now," said Tom Weisbecker.

Weisbecker owns Isaly's in western Pennsylvania where patrons sit on green barstools at a Formica countertop and gobble the legendary Slammer, a sandwich stuffed with a half-pound of chipped ham and smothered in onions and cheese. Prices for many of those ingredients have skyrocketed in the past year.

"We know our customers are already feeling the pinch with the gas prices and when they go to the grocery store. We're trying to hold out, but we can't go on much longer," said Weisbecker.

The feeble employment market may be making consumers less willing to spend. Also, paychecks aren't going as far as they did before food and fuel costs rose.

"In a good economy, you can makes mistakes. But in a bad economy ... you can't afford to make a mistake," said Larry Lagattuta.

"I am three very bad decisions away from bankruptcy at any given time," said Lagattuta, who has been running Enrico Biscotti Co. on the Pittsburgh Strip for 15 years.

Over Christmas, he made hundreds of shipments; 2007 was his best year ever.

The last quarter was his worst.

A National Small Business Association survey of 500 small business owners in February found that sales and profits had dropped and job growth was at the lowest point in 15 years, problems that could have a significant impact on an already shaky U.S. economy.

Bank loans may become harder to secure

The credit crisis triggered by bad home loans is spreading to other areas, forcing banks to tighten credit and probably extending the credit crisis that's dragging down the economy well into next year, and perhaps beyond.

That means consumers are going to have an increasingly difficult time getting bank loans for car purchases, credit cards, home equity credit lines, student loans and even commercial real estate, experts say.

When financial analyst Meredith Whitney wrote in a report last October that the nation's largest bank, Citigroup, lacked sufficient capital for the risks it had assumed, she was considered a heretic.

However, Whitney was proved correct: Citigroup pushed out its CEO, sought foreign investors and slashed its dividend. Her comments now carry added weight on Wall Street, and she has a new warning for ordinary Americans: The crisis in credit markets is far from over, and it increasingly will affect consumers.

"In fact, we believe that what lies ahead will be worse than what is behind us," Whitney and colleagues at Oppenheimer & Co. wrote in a lengthy report last month about threats faced by big national banks, including Bank of America, Wachovia and others.

Whitney argues that the worst is still ahead because the financial tools that enabled credit to flow so freely to homeowners and consumers for most of this decade are likely to remain in a prolonged shutdown indefinitely.

"After years of inherently flawed underwriting, banks face the worst yet of the credit crisis — over $170 billion in write-downs and charge-offs from consumer loans," Whitney told McClatchy. The same kind of losses from housing may be ahead for credit extended to consumers, she said.

Higher borrowing costs are on top of tighter lending. The Whitney report estimated that by 2010 credit card issuers would withdraw more than $2 trillion in credit that they've been extending to consumers.

"We're already seeing examples of people seeing their credit limits reduced," said Joseph Ridout, a spokesman for Consumer Action, a consumer rights group based in San Francisco.

More troubling, he said, some banks are doubling interest rates on customers who are current on payments but considered a credit risk because of changes in their credit profile. The hikes apply to credit-card debt already racked up.

Las Vegas's $2B City Crossing mixed-use project files for bankruptcy protection

City Crossing, a $2 billion mixed-use development in Henderson, has filed for Chapter 11 bankruptcy protection.

The 126-acre, 6-million-square-foot project by the Plise Development & Construction broke ground last year at St. Rose Parkway and Executive Airport Drive.

Roughly $30 million in site improvements, including grading, utilities and roads, are now under construction.

On June 2, City Crossing 1 LLC, a Plise-controlled entity, filed to reorganize $180 million in debt. The project, which consists of 15 parcels, is secured by raw land near the Henderson Executive Airport.

Its current appraised value is $250 million, company officials said. But the housing market implosion has tightened credit markets and devalued real estate backed loans.

"We've been working to refinance the existing debt at City Crossing over the last several months," said Mitchell Stipp, Plise's chief operating officer. "All of our lenders, except for one local community bank, have been willing to work with us and negotiate mutually acceptable terms."

That's it for all the news that fits our economic reality!

Regards

Randy

Sunday, June 15, 2008

IRAN has Bush over a Barrel

If you follow this blog regularly, you know I've been talking about IRAN for a couple of years now, and I've been predicting that we'll probably start dropping bombs before the end of Bush's tenure in office.



Why do I feel this way? Well, it's complicated, but I'll try to keep the explanation simple:

The US Dollar has been the World's reserve currency since the end of WWII. This reserve status was seriously threatened in 1971, when Nixon removed the Dollar/Gold peg and changed the dollar from a "commodity" to a "Fiat" currency.

The US-Saudi Arabian Joint Commission on Economic Cooperation of 1974 restored waning confidence in the dollar by mandating that OPEC sell its oil for US Dollars ONLY. Any country who needed oil now needed to earn or borrow dollars to pay for their oil -- creating a huge worldwide demand for the US dollar and any excess dollars eventually got recycled back to the US.



For many years, this excess dollar recycling created a boon for America and these Petrodollars were used by our banking system to create new credit/debt -- helping our economy to grow.

If there were no good reasons for other countries to buy all those American dollars, the dollar would decline in value until the US economy could no longer afford to import goods from abroad.

Additionally, this excess foreign savings that America has grown used to would also dry up—putting us in quite the predicament.

The deal with OPEC however, means other countries have no choice but to buy all those excess American dollars, which props up the value of the dollar and allows the American "import economy" to go on year after year.

Effectively, America's main export is US dollars, and it is absolutely imperative to preserve a captive market for those dollars among oil-consuming countries -- the continued viability of the US economy depends on it. Americans today can still afford to consume because the economy is inundated with cheap imports, but a continued falling dollar will significantly raise the prices of imported goods and our cost of living.

For three decades, America has reaped the benefits of trading our printed dollars (created from nothing) for oil, but as our trade deficits continued to grow beyond comprehension and foreign policy blunders created new enemies, things started to change.

IRAN's Oil Bourse and refusal to take US Dollars for Oil

For decades, most worldwide oil trading took place on the New York Mercantile Exchange (NYMEX) and the London-based International Petroleum Exchange (IPE). This monopoly has recently come under threat.

In Feb 2008, IRAN opened its own oil Bourse (oil trading platform -- similar to NYMEX & IPE) and then refused to accept dollars for their Oil. (Note: Russia has taken similar steps recently and their new Bourse now trades oil for the ruble).

Theses new monetary threats are seriously jeopardizing the artificial "dollar-for-oil" prop and if the threat is not eliminated soon, the status of the US dollar as the world's reserve currency could be called to question.



Recap: Oil replaced gold in the mid 70's as the underlying peg for the USD and until Iran's recent actions all oil transactions around the globe had to be made in USD's. For three decades, oil provided the foundation for the World's reserve currency, but that foundation is starting to crack...


Shifting gears a bit

Though I disagree with Time author Robert Baer's assertion (that Bush can't attack IRAN) made in the article below, Mr. Baer has several very good points that I think everyone needs to think about.

How Iran Has Bush Over a Barrel

If wasn't clear before it should be now: the Bush Administration can't afford to attack Iran. With gas already at $4 a gallon and rising almost every day, Iran figuratively and literally has the United States over a barrel. As much as the Administration is tempted, it is not about to test Iran's promise to "explode" the Middle East if it is attacked.

The Iranians haven't been shy about making clear what's at stake. If the U.S. or Israel so much as drops a bomb on one of its reactors or its military training camps, Iran will shut down Gulf oil exports by launching a barrage of Chinese Silkworm missiles on tankers in the Strait of Hormuz and Arab oil facilities. In the worst case scenario, seventeen million barrels of oil would come off world markets.

One oil speculator told me that oil would hit $200 a barrel within minutes. But Iran's official news agency, Fars, puts it at $300 a barrel. I asked him if Iran is right, what does that mean?

"Four-dollar-a-gallon of gasoline only reflects $100 oil because the refiners' margins are squeezed," he said. "At $300, you have $12 a gallon of gasoline and riots in Newark, Los Angeles, Harlem, Oakland, Cleveland, Detroit, Dallas."

In either case, whether at $200 or $300, Bush does not want to be the President who leaves the White House on a mule-drawn cart. But Iran's blackmail is not just about oil. The Iranians truly believe they have us hostage in Iraq — our supply lines, the acquiescence of the Shi'a in the occupation. It would all change in an instant, though, especially if we were to borrow Iraq to attack Iran. The way Fars put it: "In Iraq, fighters would rise up in solidarity with each other and begin ... making the Tet Offensive in 1968 Vietnam."

If this all sounds very alarming, Iran meant it to, and it seems to be working. On Tuesday Bush was talking about the prospect of new sanctions rather than attacking.

Which leaves Israel. Are the Israelis, who have a lot more on their minds than the price of gas in the United States, going to launch a pre-emptive attack? One hard and fast rule in the Middle East is never rule out Israel's readiness to turn the table over. But an Israeli hawk on Iran, with close ties to Israel's Ministry of Defense, told me to forget about it. "There's not a chance Israel will do anything. Maybe there's a window after the American elections and the new President but even that's doubtful. Washington does not have the stomach for another war."

Israel cannot attack or contain Iran on its own; it needs the full military might of the United States behind it. So in the meantime Israel can only huff and puff, hoping new sanctions on Iran will do the trick.

Closing:

I certainly hope Bush/Cheney aren't stupid enough to wage war with IRAN, but the recent resignation of CENTCOM Commander Admiral William Fallon -- over Iran policy -- really makes one wonder what the heck they are up to.

Once again, take a good look at the Strait of Hormuz below and realize that nearly 40% of the worlds oil passes through it and right by IRAN. What would happen to the price and supply of oil IF war were to happen?


Regards

Randy

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Saturday, June 14, 2008

Las Vegas Downturn Gathering Momentum

I've been warning folks about the looming Las Vegas downturn since the height of our economic boom back in early 2006 and since that time I've provided readers with periodic Las Vegas economic updates (a couple of my posts below -- more can be found on right side of this blog):

The Las Vegas Economic Downturn Has Started

Las Vegas's Economic Downturn Getting Worse


Today's update will highlight some of the more recent LV economic woes, illustrating that the issues are gathering momentum and won't end anytime soon.



Las Vegas economy looks like busted flush

On the surface, the Las Vegas economy looks dangerously like a busted flush.

As if the housing crisis wasn’t bad enough, hotel occupancy is down, visitors are spending less, commercial projects are running into trouble and convention revenues are dwindling.

Even the city’s casino operators, traditionally seen as relatively recession-proof, reported a sharp downturn in their fortunes in the first quarter, in part because they have expanded their leisure and retail offerings, which are more sensitive to the fortunes of the broader economy.

Harrah’s, the world’s largest gaming group, with eight casinos on The Strip, including Caesars Palace, reported a first-quarter loss of $187.8 million after what Gary Loveman, its chief executive, described as a “lousy” March. The Tropicana resort filed for bankruptcy protection this month because it could not sustain its debt payments. Since November, shares in Las Vegas Sands, the owner of the Venetian and Palazzo resorts, have fallen by 38 per cent, while MGM Mirage, which controls Bellagio, Mirage and eight other Strip casinos, has dropped by 42 per cent.

But there are still $36 billion of new hotel, gambling and housing resorts being built, including an entire quarter-mile stretch at the centre of The Strip.

If recent developments are anything to go by, the chances are that a good portion of the new corporate construction will run into difficulties and some will be scrapped.

LAS VEGAS ECONOMY: Gaming revenues tumble again

The slumping national economy has affected the bottom line of Nevada casinos much like what happened in the wake of the terrorist attacks of Sept. 11, 2001.

For the fourth straight month and the fifth month out of the last six, gaming revenues decreased as gamblers cut their discretionary spending.

The gaming win in April was just above $1 billion statewide, a 5.05 percent decrease compared with $1.053 billion won from gamblers in April 2007.

Frank Streshley, the control board's senior research analyst, said the amount casino customers wagered on slot machines declined for the sixth straight month, an economic indicator that shows casino customers are spending fewer dollars.

"You have to assume high gasoline prices have cut into people's budgets," Streshley said. "You can go through every reporting market, and there are declines with what people are spending on slot machines. It falls in line as to how people are spending less in other areas as well."

Airline cuts to squeeze Las Vegas resorts

Airline capacity cutbacks combined with U.S. economic softness look set to take more money off the tables at Las Vegas Strip resorts after the summer, likely forcing room rate discounts on top of already declining visitor rates.


Work is under way to add more than 40,000 luxury hotel rooms to the gambling corridor -- about one-third more than today -- but it looks as though operators will have trouble filling them up.

The Airline cutbacks will likely mean higher fares for remaining seats as well as more time-consuming travel routes, Jacob said, which could deter potential Las Vegas visitors

Hooters Casino Sale Termination Spells Trouble For Owners

The ownership of the Hooters Casino Hotel in Las Vegas has found itself in deep financial trouble as a plan to sell the resort has fallen through. 155 East Tropicana, an investment and holding company, was forced to terminate the potential sale of the casino to Hedwigs Las Vegas Top Tier after the purchaser failed to make a $500,000 payment due by a June 6th deadline.

Although Hedwigs' offer was unsolicited, and despite Hedwigs forfeiting a non-refundable $5.5 million in deposits and payments for extensions, East Tropicana still finds itself in an untenable position regarding its debt.

Moody's Investment Service has downgraded Tropicana's corporate rating and the rating on its secured notes, as well as its default probability.

Lenders give Herbst Gaming more time to repay debts

Herbst's reliance on budget-conscious customers drives down profits


Herbst Gaming reached an agreement with lenders this month that buys the company more time to work out a deal with them and potentially avoid bankruptcy court despite the company’s worsening finances.

The agreement includes suspending payments on bond debt until Sept. 30. Most of the company’s $1.1 billion in debt is in bank loans, which carry less risk than corporate bonds.

The company’s slot route and small casino business benefited for many years from Las Vegas’ population growth but is now feeling the brunt of the slowdown, as Herbst caters to budget-conscious customers who are more affected by a downturn, Farrell said.

Herbst had $16.5 million in losses in the first quarter due to higher gas costs and the economic slowdown, with slot route operating profit down 6 percent in the first quarter compared with a year ago and the company’s casino business down 5 percent over the same period.

Casino Bonds Crush Harrah's as Recession Hurts

Casino bonds are generating the worst returns for investors as companies from Apollo Management LP's Harrah's Entertainment Inc. to Herbst Gaming Inc. risk bankruptcy under the weight of their debt.

High-yield, high-risk casino bonds, which returned 10 percent during the last recession in 2001, are the biggest losers this year, according to Bank of America Corp., as consumers get slammed by record gasoline prices and the worst housing-market slump since the Great Depression. The debt has lost 4.4 percent, compared with junk bonds' average return of 1.4 percent.

Until the latest economic slowdown, casino bonds had gained a reputation for being recession-resistant, said Bruce Monrad, who manages $1.2 billion of below investment-grade debt at Northeast Investment Management Inc. in Boston.

Herbst Gaming, operator of 8,400 slot machines in Nevada, stopped paying interest last month, Tropicana Entertainment LLC and Greektown Casino LLC filed for bankruptcy in May and bond prices show Harrah's and Station Casinos, which piled on more than $25 billion of combined debt in the past year to go private, are also at risk of default.

High oil prices and falling property values are curbing spending on gambling at a time when casino operators have committed to spend more than $10 billion through 2009, according to Deutsche Bank AG. They invested $7.8 billion last year.

Casinos took on a record debt load before the economy's latest slowdown.

``This would probably be the most leveraged'' the gaming industry has ever been, said Michael Paladino, an analyst at Fitch Ratings in New York. ``There's going to be an increase in defaults.''

Moody’s offers glum Vegas outlook

Bond rating agency Moody's Investors Service released its most negative report yet on the Las Vegas Strip Wednesday.

Moody's analysts say this downturn will have a more negative effect on earnings than the period following the Sept. 11 terrorist attacks and will dampen earnings for the next 12 to 18 months.

While that seems hard for many to believe (witness many fewer layoffs and the simple fact that travelers are still free to travel) Moody's offers an able argument, already hinted at by analysts and economists.

"Las Vegas largely sidestepped trouble by using price discounts to lure skittish travelers," the report said. "Now, with consumers' anxieties centered on their economic well-being, that strategy is unlikely to be as effective. Las Vegas operators are preparing for an extended period of weak demand will have to turn to other levers, such as reduced capital spending or less aggressive financial policies, to hold up through the next year or more."

Las Vegas Office vacancies soar to seven-year high - result of 4,000 office jobs lost in 2007

Southern Nevada's office market further softened during the first quarter as a cooling economy ratcheted up unemployment resulting in a glut of available inventory. The valley had a 13.4 percent, first-quarter vacancy rate, 2.5 percent more than a year ago, and higher than the 2001 recession peak vacancies, Colliers International Las Vegas reports.


"There is no doubt that the Las Vegas office market is struggling through the current sluggish economy," Colliers' managing partner Michael Mixer said. "In 2007, office employment in the Las Vegas area decreased by 4,000 jobs."

Vacancy rates could creep higher in the future with 1.4 million square feet of new projects under construction in the first quarter, such as Centra Realty's $20 million, 100,000-square-foot Seven Series at Hughes Airport Center at 740 Pilot Road. There is also another 3.5 million square feet planned for future development, including an eight-story, 173,210-square-foot Class A office tower addition inside Hughes Center at 3893 Howard Hughes Parkway.

While demand for office space over the past two years was strong, it simply couldn't keep pace with new supply.

Las Vegas Restaurants implement survival techniques as business slows

Stumbling home sales and slipping resort earnings grab all the headlines these days, but the housing and hotel sectors aren't the only industries suffering from faltering consumer spending.

Restaurants are enticing fewer customers as well.

Industry members credit the restaurant slump to slower spending among three segments: Local consumers struggling with falling home equity and higher fuel prices; executives reining in corporate expense accounts for hurting businesses; and a 6.6 percent decline year over year in March in the number of local visits from conventioneers, who typically spend lavishly on meals out while in town.

State numbers on taxable sales reveal the dip in food-and-beverage spending.Taxable sales among restaurants in Clark County have fallen three of the past 12 months, including a 10.3 percent drop in February year over year.

Closing:

As I've pointed out before, this downturn will be much larger than any that have come before it. Gaming revenues have fallen ONLY ONCE since 1970 -- in the aftermath of the Sept. 11 terror attacks (they dropped a mere 1 percent from 2001 to 2002).

Thus far, compounded by the housing crisis, higher debt loads, higher gas prices, higher airfare/reduced flights, increasing layoffs, reduced credit availability, etc, the gaming losses have been far worse than that experienced in 01/02.

As stated in a previous post of mine: Las Vegas Preforeclosures Hit Record:

“ Las Vegas lives off the margin. Good times, fat margins; lean times, no margin. LV has no plan B, there's nothing to take up the slack from a decrease in visitor volume. Even dollar rich foreigners aren't going to hold up employment that is based on a volume service industry and housing construction.”

Regards

Randy

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Friday, June 13, 2008

DOW Surges on good news!

Thursday's retail sales reports came in twice as high as expected, while jobless claims rose significantly more than expected.

Meanwhile, today's inflation data came in mixed: May's officially reported (manipulated) Consumer Price Index rose a larger-than-forecast 0.6 percent, driven by everyday essentials like gas and food -- the biggest increase in six months. However, the (severely skewed) "Core CPI", which excludes energy and food prices, came in as expected, with a mere 0.2% rise in May.

Additionally, today's Consumer Sentiment figures, impacted by rising unemployment concerns and record gas prices, fell hard -- to the lowest registered since 1980 (Note: that would be a 28 year low for my math challenged readers).

All this great news, provided a boost to the DOW and it regained ~ 220 points over the course of the last two days. (sarcasm for those who don't know me)

Here's an interesting report from Yahoo finance, Market Update:

Stocks spiked in the final minutes of Friday’s session, ending the session with a 1.5% gain. The day’s optimistic tone was established early on as oil prices stepped lower and core economic data met economists’ expectations. The session’s advance helped position stocks to finish the week just below the unchanged mark. (My Comment: I wonder who was doing all the last minute buying? Hmm...)

With that behind us, lets take a gander at other rosy economic reports of the day:

Foreclosures Rise 48% in May as Repossessions Double

June 13 (Bloomberg) -- Banks repossessed twice as many homes in May and foreclosure filings rose 48 percent from a year ago as falling house prices trapped borrowers in mortgages they couldn't afford, RealtyTrac Inc. said in a report today.

The percentage of total outstanding U.S. homes in some stage of foreclosure in the first quarter was 2.47, the Washington-based Mortgage Bankers Association reported. The average over the last 30 years has been 0.98 percent, the industry group said.

Lenders took possession of 73,794 houses in May, more than doubling the 28,548 REOs in May 2007, RealtyTrac said.

``Right now, lenders are afraid to lend and buyers are afraid they'll be under water in a year, so unless something dramatic happens we're going to continue to see the trend go in the wrong direction,'' said Rick Sharga, RealtyTrac's vice president of marketing.

Corn surges to record highs

NEW YORK - Corn prices surged to a new record this week, dashing meat producers' hopes for lower animal feed costs.

Corn jumped to a record of $7.30 a bushel on the Chicago Board of Trade Friday after hitting new record prices for six days in a row.

The surge in price was mainly due to wet weather in the Midwest, which has drowned crops. Investors and analysts are now fearing supply of the grain could be in jeopardy since much of the crop has already been damaged.

US Airways to slash 1,700 jobs, cut more capacity

US Airways Group Inc said it will reduce its work force by 1,700, or about 5 percent, and will cut more capacity than planned and introduce new fees as the airline industry battles record fuel prices and a weakening economy.

Downgrade Flattens Fifth Third Bancorp

Fifth Third Bancorp's dividend may be doomed, according to one analyst who foresees a halved dividend and capital infusion plan in the regional bank's future.

On Friday, BMO Capital Markets Analyst Peter Winter downgraded Fifth Third Bancorp to market perform from outperform on expectations that net charge-offs will be much higher than anticipated. "Housing conditions and the overall economy have gotten much worse since March 31," Winters said.

Ford to Have More `Targeted' Buyouts at U.S. Plants

June 13 (Bloomberg) -- Ford Motor Co. will conduct additional ``targeted'' buyouts at some U.S. plants as the world's third-largest automaker shrinks its workforce to match dwindling sales.

The plan for more early departures underscores the pressure on Ford after losses of $15.3 billion over the past two years. Even with 38,000 U.S. production workers taking buyouts since 2006, the automaker may have too many plants and employees amid a 12-year decline in U.S. market share.

Chrysler raises prices 2 percent on 2008 inventory

Chrysler LLC is raising prices by an average 2 percent on most of its remaining 2008 vehicles in response to rising costs of steel and other raw materials.

The increase will take effect on vehicles shipped to dealers starting Monday, and won't affect vehicles already in dealers' inventories.

Chrysler's sales were down 25 percent in May, a month in which the whole market dropped 11 percent when compared with May of last year. Through the first five months of the year, Chrysler's sales were off 19 percent, with huge drops in larger vehicles that make up most of its lineup.

Moody's may cut Lehman's 'A1' rating on ouster of CFO

Moody's Investors Service on Friday placed Lehman Brothers Holdings A1 rating on review for a possible downgrade. The move follows Lehman's announcement that Chief Financial Officer Erin Callan is leaving. The ratings agency noted that although the purpose of the management change appears to be an effort to assure accountability for its losses and to strengthen risk and financial controls, the decision may, in fact, further erode investor confidence.

Lehman Employees Lost $10 Billion as Shares Declined

June 13 (Bloomberg) -- Lehman Brothers Holdings Inc.'s employees lost at least $10 billion as shares of the fourth- largest U.S. securities firm plummeted 74 percent from the high last year.

Office Max shares fall on index change

NEW YORK (AP) -- Shares of office-supply retailer OfficeMax Inc. hit a 52-week low on Friday, after Standard & Poor's said it would replace it on the S&P 500, effective at the close of trading

Bad economy means less access to college

Federal panel says economic downturn means fewer loans for some college students

The struggling economy is likely to make it tougher for college students to obtain and pay for loans this fall, members of a federal education panel said Friday.

The panelists, hosted by the U.S. Department of Education's Advisory Committee on Student Financial Assistance, said students face higher interest rates on loans issued by private entities like banks or may not qualify for loans at all as lenders tighten their requirements in light of the sub-prime mortgage crisis and other economic factors.



Regards
Randy

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Wednesday, June 11, 2008

DOW Outlook and Economic Reports

The Dow Jones Industrial Average fell another 205 points today - closing at 12,083.

Since the start of trading last Friday, the DOW has lost 4% of its value and we're now only ~ 150 points away from the key downside resistance levels I warned you about last week: DOW -- Trouble Ahead?

The issue now is: we may see some additional losses later this week, as a potentially toxic mix of retail sales, jobless claims and inflation data is due for release tomorrow and Friday -- could this trigger a new selloff? Will we actually fall below key downside support? Will the Plunge Protection Team be ready and save the day once again?


Economic Reports due tomorrow:

- Import/export prices @ 08:30 EST (Consensus: 2% change)
- Jobless Claims @ 08:30 EST (Consensus: 365K)
- Retail Sales @ 08:30 EST (Consensus: .5% & .7% excluding autos)
- Business inventories @ 10:00 EST (Consensus: .3% increase in inventories)

Economic Reports due Friday:

- CPI @ 08:30 EST (Consensus: 0.5% & .2% excluding food and energy)
- Consumer Sentiment @ 10:00 EST (Consensus: reading of 59.8)

NOTE: Friday's CPI and Consumer Sentiment are biggies! Take a look at the Sentiment chart below -- last month's University of Michigan report showed U.S. consumer confidence fell to a 28-year low in May. Another grim reading on Friday could wreak havoc on the markets.

In Closing: Regardless of what the shills are saying, all is not well with our world economy and I doubt the DOW will hold up the the increasing downside pressures... Taking a quick peek as I pen this brief post -- even the Asian Markets are tanking tonight: Major World Indices .

- Shanghai is down > 3% and below 3,000
- Hang Seng is down 2.5%
- Nikkei 225 is down 2.5%
- Taiwan Weighted down 2.5%
- Straits Times down 2%

Bottom Line: We may very well see an interesting close to this week -- w/DOW possibly closing below key support levels. If it DOES break through this first resistance level, get ready for a serious fight in the days/weeks ahead, as the PPT will defend 11,700 - 11,650 with everything in their arsenal... And if that level doesn't hold, look out below!

Best regards and good night

Randy

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Tuesday, June 10, 2008

NAFTA Superhighway and North American Union: a Scary Reality

I've been warning you about the North American Union (NAU) for quite some time now: AMERO and the North American Union.

My thoughts on the NAU: Mexico has Cheap labor and Canada has Abundant Natural Resources

Once again, just like NAFTA, the NAU will lower America's Standard of living through job outsourcing.

I hope we can all agree that corporate bottom lines were the main reason for outsourcing our US manufacturing base... So today we receive cheap imported goods at our borders, and these goods get handled by Union dockworkers and then get put on American Trucks (high labor costs cutting into corporate profits). Suppose now we now take all these cheap imports from Asia and offload them in Mexico (Mexican labor with Mexican wages and few benefits), put them on Mexican trucks and ship products to final destination (anywhere in US or Canada) via the NAFTA Superhighway.

Ultimately, this move increases bottom-line profits for BIG BUSINESS, and we all know big business controls our elected representatives through huge campaign contributions, high power lobbyists and special perks...

End result: That Giant Sucking sound (loss of American Jobs) will merely get louder and our standard of living continues to fall -- until it becomes cheap enough to employ American workers once again.


Anyway, the reason for this post is: a friend of mine over at ECONOMY IN CRISIS just posted up a new article illustrating that, though officially denied, the plan is still intact, yet few seem to take an interest -- while those who do get marginalized. What's it going to take folks?


NAFTA Superhighway and North American Union: a Scary Reality

The NAFTA Superhighway is not a myth, but instead represents a road leading to a troubled future. In an attempt to facilitate and create a North American trade bloc, quickly transporting cheap imported goods from China to America’s many Wal-Marts – our leaders are creating a North American Union and a massive highway – four football fields wide – running from Mexico to Canada. The highway promises to import a surplus of goods, destroy any country-side in its path and ease a process of outsourcing American jobs south-of-the-border to cheaper rates of pay and lower environmental standards.



While most other major national newscasters have blindly accepted the government’s line that the “NAFTA Superhighway” is a “myth,” Lou Dobbs has refused to be fooled. In search of the truth, Mr. Dobbs sent investigative reporter Bill Tucker to Texas to see for himself.

The evidence Mr. Tucker uncovered was powerful, compelling, and shocking. It confirms everything we here at the NAU War Room have been saying about the government’s hidden drive to absorb America into a “North American Union” (NAU) with Canada and Mexico, anchored by a massive “NAFTA Superhighway” designed to speed cheap Red Chinese and foreign goods from Mexico into the U.S. and Canada.

NAFTA Superhighway and North American Union: a Scary Reality

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Fed Charts to Ponder

Discount Window Borrowings of Depository Institutions from the Federal Reserve


Total Borrowings of Depository Institutions from the Federal Reserve


Net Free or Borrowed Reserves of Depository Institutions


Non-Borrowed Reserves of Depository Institutions

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