Plunge Protection Team (once again) to the Rescue!

The DOW fell hard from opening today and the losses accumulated throughout the afternoon - at one point (~ 2:45pm) it was down 800 points and the meltdown was all but assured, but wait! Take note of the hand of God coming into the picture at ~ 2:50 - pulling the DOW back up over 400 points in the last hour of trading.

Free markets?

Absolute Bullshit!

These four malicious, lying, thieving bastards (Heads of The Plunge Protection Team), need to be crucified!

Treasury Secretary Paulson (Chairman of the PPT)

Ben Bernanke (Chairman of the Board, Federal Reserve System)

Christopher Cox (Chairman of the Securities and Exchange Commission)

Walter Lukken (Chairman of the Commodity Futures Trading Commission)

For those who don't know: The Plunge Protection Team (PPT) was created by Ronald Reagan back in 1988 through executive order 12631. The Working Group on Financial Markets, also known as the PPT was created to respond to events in the financial markets surrounding October 19, 1987 ('Black Monday'). They are chartered with providing recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of United States financial markets and maintaining investor confidence".

Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole."

Today however, they are both flooding the market with liquidity AND actively engaged in manipulating the entire market spectrum - using their game of charades in an attempt to game confidence in the markets - an abominable crime!

Remember Martha Stewart and her small-time mischievious "insider trading" - HA!

How about these guys DISTORTING THE ENTIRE US MARKETPLACE? - They should be locked up for LIFE!

WAKE UP PEOPLE! It's almost time to grab the pitch forks and march on Washington!

Signed - a very disgusted Randy

Can't Stop Kondratieff Winter!

Tim Wood, one of the writers/analysts I regularly follow, wrote an article on Friday related to the recent bailout package: It Ain't Gonna Work .

Tim feels (and I'd have to agree) that our financial powers that be (FPTB) have been working hard to fight a secular bear market that actually started in 2000, and their manipulative ways have merely delayed, but will not stop the looming Kondratieff Winter that lies in wait.

Excerpts from It Ain't Gonna Work :

By every historical measure the equity markets slipped into a secular bear market in 2000. As a result, we began to see efforts by the powers that be to keep the market afloat. I have stated all along that manipulation will ultimately not work. I have also stated all along that all this will do is make matters worse in the end. Well, I would think that everyone can now see, matters are indeed much worse. Yet, the Fed, the Treasury and the politicians continue to think that they can “fix” the problem by throwing more money at it. They do not understand that they can’t “fix” this economic crisis. They also do not understand that it is their trying to “fix” things in the past that has created the current situation. All markets as well as the economy must both inhale and exhale. They are trying to prevent the exhaling and it ain’t gonna work.

What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit. Along with that comes deflation and along with that global stock markets enter into extended declines. Real estate declines, economic growth slows, commodities decline, bankruptcies accelerate as the excess credit is purged from the system, the banking system is shaken, the free market is blamed and we move toward national fascist political tendencies. We are now seeing each and every one of these symptoms of K-wave winter. For the record, I did not make up these symptoms to fit the current situation. I have original writings by Nikolai D. Kondratieff and the signs of K-wave winter were quoted from a book by David Knox Barker titled, The K-wave and was published in 1995. Don’t think the powers that be aren’t aware of Kondratieff Winter. They know full well what we are facing and that is why they have tried to hold back its wrath as diligently as they have since 2001.

...Personally, I think that the powers that be helped to make matters worse by postponing the inevitable and that they are now facing checkmate because the dye has now been pretty much cast.


So you ask, sounds pretty scary, but just what exactly is a Kondratieff Winter?

Well, a piece I wrote back in 2007 explains what it is and then goes even further by explaining why/how the Kondratieff Winter of 2001+ was delayed - to now anyway:

Suggest you become familiar with the term, as it will be our destiny: Kondratieff Winter - From Dec 2007 Post


Best Regards

Randy

Will the MASSIVE Gvt bailout plan work?

Our Global economy is currently teetering on the edge of a cliff - caused by a complete collapse of the American Debt bubble and unwinding of the global derivatives complex.

Had American financial policymakers allowed us to take our medicine earlier, we probably could have gotten through this mess, but Alan Greenspan and the Boyz instead decided to follow a consistent policy of delaying our day of reckoning. By lowering rates/increasing liquidity at any inkling of global economic stress (see some of the examples below), they merely covered up the economic problem of the day with more easy credit/debt - which successfully delayed, but significantly increased the size of the problem...

- US Stock Market Crash of 1987
- Japan's Economic Crash of 1990's
- LTCM Hedge Fund Collapse 1994
- Asian Currency Crisis 1997
- Russian Bond Default 1998
- NASDAQ Bubble/Bust

The latest example was the Housing Bubble

Most uninformed Americans actually think the housing bubble created all of our current economic ills, but what they don't realize is: the housing bubble was merely the delayed symptom of easy monetary policies and laxed lending standards - created in large part by Alan Greenspan and his cronies by not wanting to take the harsh economic medicine after the dot-com implosion and 9/11 crisis. Therefore, they delayed the much needed/necessary hardship by lowering/holding rates at 1% (40 year low) - providing the volatile fuel mixture used to inflate the housing bubble.

So, here we are today, sitting on the MASSIVE cumulative effect of all these corrective delays and the problems are GARGANTUAN.

Thus far, in an attempt to save our crumbling foundation of debt, Gvt financial experts (AKA: Plunge Protection Team) have tried three different mortgage work-out plans, pushed through a massive economic stimulus package and simultaneously resorted to a myriad of unprecedented Fed Reserve lending facilities. That wasn't enough, so Bear Stearns was bailed out with your taxpayer dollars, followed by Fannie Mae/Freddie Mac and most recently AIG. Each of these attempt to stop the systemic debt implosion has been more drastic than the previous and each attempt has failed.

It's now being said the proposed $700 Billion Bailout package (a new taxpayer funded Government structure used to buy up the bad debts of sinking US and International banks) will save the day.

So, will it work?

Before answering this question, ask yourself: How many times during this developing economic crisis have our appointed financial wizards told you the crisis is contained - and have they been right even once?

NOT!

Much to Greenspan's despair (because his legacy will now forever change) our inevitable day of reckoning has finally arrived! The problems we now have are far too big for any repair effort - Deleveraging of debt must happen and there is nothing, aside from delaying the inevitable, that Paulson, Bernanke, Cox, Lukken and the rest of this lying band of taxpayer pirates can do about it.

Our system is Hemorrhaging badly and the band aids will slow, but will not stop the massive bloodletting to come.

If you'd like to know more about how we got here and what our future is likely to hold - see link: US Economic Outlook 2008-11+

Lastly, we should never discount the negative implications these bailouts create for the US Dollar - as the World's Reserve: Dollar: Faltering Foundation of US Economic Strength

Regards

Randy

Bailout Plan - What's in store?

Scanned the news this AM - A few links of interest on the MASSIVE Bailout Plan:

Financial Crisis: Washington Pulls Out the Stops

The federal government is embarking on a sweeping approach to fixing the country's rapidly unraveling financial system, offering few details but warning that failing to act could further endanger the economy. At the same time, regulators unveiled several narrower measures on Sept. 19 that are intended to reassure investors and protect financial stocks from being driven down by short-selling, coordinating their actions with governments overseas.

Paulson said: "We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses." He acknowledged the plan would likely prove costly. "We're talking hundreds of billions of dollars—this needs to be big enough to make a real difference," Paulson said. "Until we get stability in the housing market, we're not going to get stability in the financial markets."

In the meantime, to keep the financial markets fluid, Fannie Mae and Freddie Mac would begin buying more mortgage-backed securities, the investments underlying much of the current turmoil. The Treasury would do the same. When the government assumed control of the two mortgage giants, it said both would continue increasing their portfolios for a time, and it announced a program by the Treasury to buy up securities directly from the market.

The Treasury also said it would insure money-market mutual funds—low-risk funds that many consumers and businesses view as equivalent to cash—making available up to $50 billion to prevent losses in the funds in return for fees from the funds. Investors in one prominent fund saw their investments decline this week after Lehman Brothers failed, and at least one other fund's investment manager said it would provide cash to prevent similar losses.

Atop those developments, the Securities & Exchange Commission said it would completely ban short sales—or bets that share prices will fall—of 799 financial companies, following a similar move by British financial regulators on Thursday. The move goes well beyond restrictions adopted Thursday to limit a kind of abusive short-selling called "naked shorting," and some securities experts had warned that such a move could actually harm the market.

In recent days, policymakers have increasingly debated the need for a government-run entity—perhaps modeled on the Resolution Trust Corp. established amid the savings-and-loan crisis of the 1980s—that would take problem securities out of the market to improve liquidity, restore confidence, and prevent a wave of corporate collapses that could have far-reaching effects on the U.S. and world economy. "Lesson No. 1 from that era is: move quickly," says Richard Breeden, the RTC's architect and a former SEC chairman. "Troubled assets don't become more valuable over time; they become less valuable."


Paulson sends mortgage plan to Capitol Hill, Bush calls crisis 'pivotal moment' for America's economy


WASHINGTON (MarketWatch) -- Treasury Secretary Henry Paulson has presented his historic mortgage rescue plan to Congress and the two sides will meet throughout the day on Saturday on the details.

Treasury presented the plan to Congress late Friday, a Treasury spokesman said.
In an unprecedented action, Paulson said Friday that he wants to spend "hundreds of billions" of dollars take unsellable mortgage assets off the balance sheets of financial firms. The hope is that this will unclog the financial system and allow banks to lend funds to each other and clients.

The failure of banks to lend is considered a big risk to the economic outlook. Without access to funds, businesses and consumers will cut back spending. On Saturday, President Bush called the crisis "a pivotal moment for America's economy," in his weekly radio address.

The measures being taken by the administration, the Treasury and the Securities Exchange Commission "require us to put a significant amount of taxpayer dollars on the line," Bush said. "But I'm convinced that this bold approach will cost American families far less than the alternative. Further stress on our financial markets would cause massive job losses, devastate retirement accounts, further erode housing values, and dry up new loans for homes, cars, and college tuitions," he said.

The New York Times reported that Federal Reserve chairman Ben Bernanke warned members of Congress of the risk of a deep and extended recession unless action was taken to clear the toxic mortgage assets from bank balance sheets.

Few details of Paulson's plan have emerged.


Treasury Sends to Congress Proposal to Buy Assets

Sept. 20 (Bloomberg) -- The Bush administration has sent to Congress a $700 billion proposal that gives broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.

The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.

The legislation was forwarded to congressional leaders in both political parties early this morning. The move comes as Paulson and Federal Reserve Chairman Ben S. Bernanke are pressing for action from Congress to help stop a contagion of credit risk that has toppled four financial giants and forced two into mergers as capital flight squeezes Wall Street.

``This is going to be a big package because it's a big problem,'' President George W. Bush said following a meeting with Colombian president Alvaro Uribe at the White House. ``We need to get this done quickly, and the cleaner the better.''

The proposal requires the Treasury secretary to report back to Congress three months after the government first uses its new powers, and then semiannually after that.

Bush said he called leaders in both chambers of Congress and ``found a common understanding of how severe the problem is and how necessary it is to get something done quickly.''

Wide Berth

Under the proposal, the Treasury secretary is given wide berth to take action ``as the Secretary deems necessary'' to hire people, enter into contracts, and issue regulations. The proposal requires the Treasury to simultaneously consider market stability and protecting the taxpayer.

The Treasury plans to hire asset managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, a person briefed on the proposal said yesterday. The proposal specifies that only assets from U.S.-based financial institutions issued or originated on or before Sept. 17 can be purchased.

The authority expires two years after it is enacted.

Bush today said he's unconcerned that the price tag on the package may seem high.

``I'm sure there are some of my friends out there that are saying, I thought this guy was a market guy, what happened to him,'' the president said. ``My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''

Bush said the financial crisis is putting ``hundreds of billions of dollars at risk,'' but ``over time, we're going to get a lot of the money back.''


Crisis On Wall Street; Paulson: Plan Aimed At Solving 'Heart Of Financial Crisis'

Another Taxpayer Bailout - Under Who's Authority?

I can't believe this crap - let Lehman fail and two days later bailout AIG with taxpayer funds. Who authorized this? Certainly not me - I think we should let them fail.

The main reason we're in this crisis today is because we've been living a lie - an economic facade caused by too much easy credit/money, followed by excessive fraud, corruption and manipulation... For too many years TPTB prevented us from taking the required harsh medicine (recessions) needed to cure our economic ills. Now, once again, we are delaying the inevitable and laying a larger (unpayable/unsolvable - except for default or hyperinflation) economic bill on our children - absolutely reprehensible!

Dammit folks - don't you think it's time to take the medicine?

Evening Reports:

The Fed will not comment on reports that it was considering placing AIG into conservatorship, saying it did not have the legal authority to do so.

So, policymakers were called into an emergency meeting tonight:

Attending the meeting on the Capitol Hill were Democratic Senate leaders that included
- Charles E. Schumer of New York
- Richard Durbin of Illinois
- Christopher J. Dodd of Connecticut
- Kent Conrad of North Dakota

The contingent of Republicans included
- Mitch McConnell of Kentucky, the minority leader
- Richard Shelby of Alabama
- John Kyl of Arizona
- Judd Gregg of New Hampshire

House leaders included
- John Boehner of Ohio, the Republican leader
- Spencer Bachus, Republican of Alabama
- Barney Frank, Democrat of Massachusetts.

Members of the leaders’ staffs were asked to leave the meeting shortly after it began.

If the emergency talks fail, the collapse of AIG will be far worse than that of Lehman Brothers.

Many banks and investment funds in the US and around the world would lose their insurance cover at a time when defaults on payments are likely to rise





Insurance giant on a knife edge

The future of insurance giant AIG hangs in the balance as fears grow that it could be the next firm to fold in the wake of the credit crisis.

The state of New York has enabled the firm to access a "multi-billion dollar" finance plan in the short term, but it needs further funds to remain intact.

Analysts say the collapse of AIG would have a devastating impact on markets.

Senior banking executives are reportedly holding negotiations at the US central bank, the Federal Reserve, in an attempt to arrange a rescue bid.

But on Tuesday, Mr Paterson said AIG now had one day to raise another $80bn (£45bn) to save itself from collapse.

The plan appears to be for some form of private sector rescue, perhaps with backing from the Fed, says the BBC's economics correspondent Andrew Walker.

US Treasury Secretary Henry Paulson refused to bail out Lehman Brothers, the fourth-largest investment bank in the US, at the weekend.

But our correspondent says he may deal differently with AIG if he feels the damage caused by its collapse to the wider financial system would be too great.



Fed Readies A.I.G. Loan of $85 Billion for an 80% Stake

In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people briefed on the negotiations.

All of A.I.G.’s assets would be pledged to secure the loan, these people said, and in return, the Fed would receive warrants that could be exchanged for an ownership stake. Stock of existing shareholders would be diluted, but not wiped out.

A person briefed on the matter said the agreement does not require shareholder approval.

The Fed’s action came after Treasury Secretary Henry M. Paulson and Ben S. Bernanke, president of the Federal Reserve, went to Capitol Hill on Tuesday night to meet with House and Senate leaders. Mr. Paulson called the Senate majority leader, Harry Reid, Democrat of Nevada, about 5 p.m. and asked for a meeting in the Senate leader’s office, which began about 6:30 p.m.

A.I.G.’s board approved the proposal at a meeting Tuesday night, the same individual said.

Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.


Fed nears a deal to take over ailing AIG

The Federal Reserve is close to a deal to take an 80 percent stake in American International Group in exchange for an $85 billion loan, according to sources familiar with the negotiations.

AIG’s failure could open the ugliest chapter yet of the financial meltdown.

“The glimmer of hope has turned into a ray of hope,” said the person, who asked not to be named because of the sensitive nature of the talks to help AIG.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with members of Congress to brief them on options the government is considering. The meeting ended without Bernanke and Paulson commenting.

Hoping to stave off what would be the ugliest chapter of the financial meltdown, AIG executives huddled with Fed officials and representatives from top banks at the New York Fed in downtown Manhattan to find the cash the huge insurer needs to stay in business.

One solution: A plan to have the government provide financial backing to ensure that AIG could secure a short-term loan from banks worth up to $100 billion to stay out of bankruptcy court, the person, who had direct knowledge of the talks, said.

He said the discussions had stalled because AIG did not have enough collateral to obtain a loan of that size. Both sides were trying to figure out how to close the gap between the amount AIG needs and the amount of collateral it has.

The person said it was increasingly likely the Fed would step in with taxpayer money.

Shareholders would be severely diluted by the bailout, which involves a bridge loan, according to sources. The government would receive warrants for most of AIG's equity in the bailout being negotiated. CNBC said the deal would give AIG incentive to sell its assets quickly to help pay off the bridge loan.

“This would mean another shareholder wipeout,” said David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich, Conn.

Just days ago, Paulson said the government would not help Lehman Bros. with the kind of taxpayer-backed funding that JPMorgan Chase & Co. received six months ago to buy ailing Bear Stearns.

“They’re too big to fail. AIG touches too many people and too many companies globally, and it would be much more of a disorderly event if it went bankrupt than it was with Lehman,” said Anton Schutz, president of Mendon Capital in Rochester, New York.

Earlier, New York Governor David Paterson told CNBC that the insurer had “a day” to solve its problems. A failure would result in a “catastrophic problem” for the market, said Paterson, whose administration oversees regulation of AIG.

If AIG were to file for bankruptcy, billions of dollars of insurance contracts known as credit default swaps would likely be wiped out. Much of those losses would be absorbed by the companies holding the contracts, which were sold by AIG.

Investors Worry Over AIG's Future - DOW will be down 1,000 points tomorrow if AIG can't find solution

DOW Update

I'm sure most readers here know the DOW took a 500 point spanking today (a 4.5% hit).

What many may not know is: Currently, DOW futures for tomorrow's open are pointing DOWN for ANOTHER 130 points (currently @ 10,800) - may get worse before the night is through.

Anyway, if you remember my July post: DOW: Next Downside Support @ 10,700 , I mentioned 10,700 is a key downside support level and if we break through it, 10,200 becomes the next support - followed by support levels in the 9,000 range - my ultimate DOW prediction for 2008.

So, will the PPT be able to pull a rabbit out of their hat, or will we see 9K before year end?




Thoughts?

Randy

The Disconnect Between Supply and Demand in Gold & Silver Markets

Absolutely the finest explanation I've had the pleasure to read regarding the recent manipulation activity used to smack down Gold and Silver prices of late. A Must Read!

Big Kudos to James Conrad!

The Disconnect Between Supply and Demand in Gold & Silver Markets



.

End of week economic reality check

The DOW had quite a rally this week -- a FED week with very few economic reports due out in the early part. Funny - this PPT routine is becoming quite typical of our new "Free Market Economy". Prior to official Fed Speak, Gold gets crushed, the dollar rebounds and stocks soar on great economic (well, less worse than we thought) news! Then the Fed makes his obligatory worthless statement "We're gonna get tough on inflation soon, we promise - as the world laughs -- knowing these Fed geldings are stuck and WILL NOT RAISE RATES!

Mark my word -- we'll see another cut before a rate hike.

Anyway, I expect the DOW to close lower on Friday than where it is today.

Why Do I think so? Good Question:

With few economic reports due early on and as a show of force for our castrated Fed gods, much of this rally was engineered by the PPT.

Now, with the August game of Fed charades over, and with them now in a better overall position (lower gold/oil, stronger dollar and higher equities markets), it's probably time to drop the crack pipes, take off the clown suits and have an economic reality check.

I expect, as several economic/financial reports come due in the week's latter half, this recent rally to turn into a sell-off as the week progresses.

Due tomorrow:
Initial Unemployment claims, Pending Home Sales and Consumer Credit

Due Friday:
Productivity and Wholesale Inventories

More Importantly:

AIG just took another Major Dump after the closing bell today: Forbes

After the closing bell Wednesday, American International Group turned in a loss of $5.4 billion, or $2.06 per share. AIG has lost more than $18 billion over the last three quarters due to investments tied to subprime mortgages.

Freddy Mac lost another $821 million -- NYT Today

The gloom over the nation’s housing market deepened on Wednesday as Freddie Mac, the big mortgage finance company, reported a gaping quarterly loss and predicted that home prices would fall further than previously projected.

“Basically, things are still bad,” said Steven D. Persky, chief executive at Dalton Investments, a $1 billion fund in Los Angeles. “Freddie Mac is telling us that nobody really knows how much worse they will get.”

Lastly:

RBS is likely to post a Major Loss on Friday -- TimesOnline

and Barclays May Fall Most in a Decade -- Bloomberg

RBS:

The international credit crunch is set to claim its biggest Scottish casualty later this week when the Royal Bank of Scotland unveils a pre-tax loss for the first half of the year that analysts believe could reach £1.7billion.

Such a loss would be the biggest in British banking history and have major consequences not only for the financial sector, but also the Scottish economy.

The results, due to be announced on Friday, will underscore how far-reaching the credit crunch, which began in the United States more than 18 months ago, has been.

Barclays:

Barclays, the U.K.'s third-biggest bank, probably will say tomorrow that net income dropped 42 percent to 1.52 billion pounds in the six months ended June 30, analysts estimate.

Barclays said that it had 4 billion pounds of collateralized debt obligations backed primarily by residential mortgages, 4.2 billion pounds of U.S. subprime loans, 4.5 billion pounds of so-called Alt-A loans, and 12.6 billion pounds of commercial mortgages. Unlike RBS, Barclays hasn't marked down the value of its 7.3 billion pounds in buyout loans. The bank said in May that the loans were ``performing.''

``Many regard Barclays's management as being in denial in terms of writedowns on toxic assets,'' said Gordon of Exane BNP Paribas.

Best regards -- and a sincere thanks to all of you who commented to my Adsense post

Randy

US Dollar Intervention

The Dollar made some gains along with equities yesterday, while commodities and metals fell.

So, can one now assume the dollar crisis is over? NOT a Chance!

Then why the uptick and how long should we expect it to last?

The strengthening dollar can likely be attributed to coordinated global dollar intervention by the central banks of the world -- to prevent a full-blown dollar rout and stave off rapidly spiraling inflationary pressures. Bernanke even stated such in his congressional testimony last week: "Dollar intervention may be justified in Disorderly Times."

In a nutshell: By supporting/manipulating the dollar, short traders are forced to cover, thus causing the dollar to rally and energy prices to fall. When used in conjunction with other instruments in the PPT arsenal (i.e. large gold and energy shorts) the effect can be pronounced.

Timesonline: Ben Bernanke highlights fight against inflation

The dollar rebounded from Tuesday's record lows as Mr Bernanke combined his own emphasis on the Fed's determination to rein-in inflation by again brandishing the threat that Washington could intervene to halt the slide in the US currency.

In a new signal of growing concern at the Fed that the dollar's rapid decline on foreign exchanges is stoking inflationary pressures by driving up America's import bills, Mr Bernanke fired a fresh warning at the markets, making clear that currency intervention remains a weapon at the disposal of the US central bank and Treasury.

“Market intervention is a policy that's been undertaken a few times. I think it's something that should be done only rarely, but there may be conditions in which markets are disorderly where some temporary action is justified,” he said.


Forbes: Time is now for intervention to prop dollar:

Intervention by the U.S. Federal Reserve, undertaken in concert with the European Central Bank and other global economic powers, could be an inflexion point for the dollar after its 6 year fall.

And with the falling dollar playing a substantial role in rising oil prices, official action to back the currency could provide relief for consumers and ease the pressure from inflation, both in the United States and globally.

It would also be a very useful and timely insurance policy against any run on the dollar should global holders of U.S. debt take fright at what may be a massive bill, and proportionally huge supply of new U.S. debt, to backstop Fannie and Freddie and sort out problems in U.S. real estate and banking.

"This is a situation crying out for intervention and leadership," said Nick Parsons, head of market strategy at nabCapital in London.

The Bush administration has long argued that the value of the dollar should be set in the free and unfettered market, though where exactly a free market can be found I am increasingly unclear.
The serial bailouts, first of Bear Stearns and now Fannie Mae and Freddie Mac, have robbed that argument of much of its moral and intellectual authority, though probably not all of its emotional appeal.

So, with that understood, how long should we expect the rally to last?

My bet is: we may see 74-75 as a rebound high for the US Dollar index, but the rally will probably end not later than August 5th... On that day, people will finally realize that Bernanke's hands are tied and can not/will not raise interest rates AT ANY TIME this year. Shortly thereafter, dollar selling will once again commence in earnest -- ultimately overtaking the efforts of our global central bank interventionists.

Bottom line: I still feel 70 will be taken out later this year.

US Dollar Index Daily Chart

US Dollar Index Weekly Chart

DOW COMMENTS

The DOW has rebounded nicely over the last week or so, but I now think it's time for another leg down. With Jobless Claims, Existing Home Sales, New Home Sales, Mich Sentiment and Durable Goods releases due later this week, I think it's likely we'll see a Friday closing number lower than today's 11,632.







Regards

Randy

Fannie and Freddy -- walking dead

I've been hammering Fannie and Freddy since my very first post in 2005 and have always suspected that they were merely walking dead, but the Gvt. couldn't allow the public to know this, so they propped up their carcass of a body just like the characters did their boss in "Weekend at Bernie's"

Well, it now looks like the cat is out of the bag, as former St. Louis Federal Reserve President William Poole said Freddie Mac and Fannie Mae are insolvent and that the government might need to step in to rescue the struggling lenders.

“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole said Wednesday.

In other words, he believes they're virtually bankrupt!

Fannie, Freddie Tumble on Bailout Concern

July 10 (Bloomberg) -- Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans, fell to the lowest levels in 17 years in New York trading after a former Federal Reserve president said the companies may need a government rescue.

Fannie Mae tumbled as much as 24 percent and Freddie Mac slumped as much as 34 percent in New York Stock Exchange composite trading after UBS AG analysts said in a report today that Freddie Mac's decline creates ``challenges'' for the company's plan to raise $5.5 billion

Chances are increasing that the U.S. will bail out Fannie Mae and Freddie Mac because they don't have enough capital to weather the worst housing slump since the Great Depression, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules. The fair value of Fannie Mae assets fell 66 percent to $12.2 billion, data provided by the Washington- based company show, and may be negative next quarter, Poole said.

The companies, created to boost homeownership and promote market stability, own or guarantee about half the $12 trillion in U.S. home loans outstanding. In addition to those obligations, Fannie Mae has $831 billion in company bonds outstanding, while Freddie Mac has $644 billion, according to Bloomberg data.

Government Ties

Congress created Freddie Mac and expanded Fannie Mae in 1970 to promote home buying in the U.S. The companies' charters give the Treasury the authority to buy as much as $2.25 billion in each of their securities in the event of possible default.

The government will likely be forced to take over the companies because of the mortgage meltdown, Poole said.

``We know in a crisis the Federal Reserve tap would be open,'' said Poole, now a senior fellow at the Cato Institute.

The bailout of Bear Stearns Cos. by JPMorgan Chase & Co., arranged by the Fed, demonstrates the government's unwillingness to allow ``large, systemically important'' financial institutions to fail, he said. Bear Stearns collapsed after customers fled amid speculation the company faced a cash shortage.

``I worry about those institutions,'' retired Richmond Fed President Alfred Broaddus said. ``They are huge. They dwarf the Bear Stearns issue. In the very worst case scenario, I don't know how you do it other than extend money and the public takes the loss.''

Bottom line:

This is huge folks! If Fannie and Freddy were allowed to fail (won't be allowed), we would quickly fall into an ECONOMIC DEPRESSION (i.e. lack of new home loan credit = lack of new money circulating, destruction of debt/bond/equity markets, a complete lack of home sales/swiftly building inventories, MANY times more home loan defaults than expected and an ABSOLUTE COLLAPSE IN HOME PRICES -- compounding several times over the current banking/financial system crisis and significant economic pains that we are now experiencing).

If the GVT indeed does bail them out (likely) expect a HYPERINFLATIONARY Spiral -- followed by a depression anyway. We're talking TRILLIONS of new dollars quickly added to a bloated fiat system that is already creating new money at a near 20% annual rate -- adding explosive fuel to a raging forest fire and increasing the velocity of US Dollar decline and ultimately Dollar hegemony collapse.

Once again, the Plunge Protection Team and Gvt are stuck between a rock and a hard-place, and the days of easy fixes have long since past... We should have taken our harsh medicine after the Dot.com crash, but the Maestro (Greenspan) wanted to leave his chair on a high note. Though honored, knighted and revered around the globe, Alan Greenspan (when history is written/analyzed) will likely go down as one of the WORST Fed Chairman EVER! I hope he can sleep well at night, knowing what he hath wrought.

As an aside: for those who don't understand the word hegemony (used above), I highly suggest you read a superb Ron Paul article written back in 2006: The End of Dollar Hegemony

All the best

Randy

Breakdown

Markets tanked again today
- DOW closed down 236
- S&P 500 down 29
- NYSE down 144
- NASDAQ down 59

DOW

S&P 500

NYSE

Note: NASDAQ (below) is the only index listed here that hasn't busted through its earlier year low, but it's only a matter of time.

NASDAQ

Looking at the charts above, one would have to assume the Plunge Protection Team has a real problem on their hands. The last vestige of a propped up pillar of consumer/economic confidence is ready to tumble, and the breakdown is here.

Closing Note:

For those of you who don't know, the NASDAQ lost ~ 80% of its value between 2000-2002. Hitting a peak intraday of 5,132 reached on March 10, 2000 and an all-time low of 1,114 in October 2002. While not as bad, the S&P 500 lost ~ 50% during the same period and the DOW ~ 40%.

To combat the deflationary ills caused by collapsing equity markets, Alan Greenspan spawned a new inflationary cure -- The HOUSING BUBBLE.

Now, this new (BIGGER) bubble is popping and the contagion is spreading globally... Could this crisis spur a similar 80% meltdown in the S&P and/or DOW in the coming months/years ahead? Personally, I don't think it's out of the question...

Looking at it from a different (lighter) perspective: Even if we took the smaller 40% haircut (from the above "prior loss" examples) this time around, we'd still be looking at a DOW in the 8K range and an S&P index in the 900's.

Regardless, it looks like the markets are finally waking up to reality and the ultimate outcome does not bode well for our economy, our country, or our way of life.

Hold on to your hats, because life will soon become far more difficult for millions of Americans.

Best 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

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

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

DOW -- Trouble Ahead?

Last Dec/Jan the major US equity markets experienced significant sell offs, and the Dow nearly plunged through 11,600, but support was found, and for the next couple of months the DOW hovered slightly above the 12,000 range... Then came the month of March 08, when Bear Stearns was imploding and bad news started to pour in from every angle.

At that time, I knew the situation was grave and opined that the Plunge Protection Team (PPT) was wide awake at night, trying to find a solution -- otherwise the last leg of confidence in their "Goldilocks" economic charade would fail.

Here's my Sunday Evening, March 16th, 2008 post: Tumultuous Week Ahead

Lo and Behold, within hours of that post, opening markets around the globe began to tumble -- causing the PPT to panic and come out fighting (on a Sunday night)... With their big cannons and guns ablazing, it was announced the Fed would immediately:

Modify the Discount Window -- On March 16, 2008, the Fed further extended the term for borrowing to 90 days, and further reduced the spread to the target federal funds rate to 25 basis points.

Open the Primary Dealer Credit Facility -- The establishment of the PDCF was announced on March 16, 2008. The Board determined that unusual and exigent circumstances existed in financial markets, including a severe lack of liquidity that threatened to impair the functioning of a broad range of markets, and announced that the PDCF will be in place for at least six months and may be extended as conditions warrant.

These two new unparallelled additions would immediately join two other unprecedented actions taken earlier in the year:

- The Term Auction Facility (TAF) in Dec 07
- The Term Securities Lending Facility (TSLF) on March 11, 08

Within days, easy liquidity created through these four new monetary spigots started to calm markets, and as increasing gains were made many shills began to pronounce: "The Credit Crisis is Over".

Well, here we in June 08 and things aren't looking so well again...

With recent reports of:

- The biggest jobless increase in over two decades
- The largest housing bust since the Great Depression
- Oil/gas at an all-time high
- Contagion spreading across the banking sector (significant losses ahead)
- Recent MBIA and AMBAC downgrades

Last Friday's 400 point drop in the DOW should have been a wake-up call.

Let's look at a chart of the DOW:

Note: I'm not a chartist, but I do have a lot of common sense and believe that anyone can relate to/understand what I'm about to say.

Looking at the chart above, last Friday the DOW closed at 12,209. On the assumption more bad news will follow in the days/weeks ahead, where can one expect to see the next level of downside support and will we eventually break through it?

If you follow the chart over to March 2007, you will see that 11,939 is the next downside support level. If we break through there, it's quite likely we will also test the following downside support level-- found in Jan 08 at 11,634. Now, this 11,700-11,600 level will provide very strong downside resistance and the PPT will fight tooth and nail to prevent failure, but if we DO break through it -- look out below as automated sell signals kick in from around the Globe—potentially creating a selling panic/free-fall.

From there it's a 1,000 point drop to the next downside support level -- July 2006 @ 10,683.

Closing:

I don't expect to open in a free-fall tomorrow or the next day, but want you to be aware that we're only 300 points from breaking through key downside support levels. Once that happens (which I'm sure it will in the coming weeks) the next support level @ 11,700-11,600 becomes very vulnerable -- and if that one doesn't hold, expect all hell to break loose as the last leg of propped-up confidence in our economy gives way to unknown panic/crisis.

With that said, and expecting more bad news to roll in each and every day, I feel quite confident in stating that both of these downside support levels will eventually be broken (this year), but the real question ultimately relates to timing and the PPT -- What else do they have up their sleeves? No one yet knows, but expect a fight.

Best Regards

Randy

Economicrot.blogspot.com

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Bernanke's Next Moves

Federal Reserve Chairman Ben Bernanke this week took the unusual step of defending the US Dollar and stated:

"We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations."

In layman's terms: We understand that our policy of cutting interest rates and injecting massive sums of money into our banking/financial system is causing significant dollar devaluations which is, in-turn, stoking massive inflation and future inflationary pressures. We the Fed, are on top of things and are in the process of formulating new policies to stave off these pressures, so don't bet on future rate cuts and you might even want to plan on seeing future rate increases.

HA! What a bunch of bologna... He's trapped and knows it!

With reports of the biggest jobless increase in over two decades, the largest housing bust since the Great Depression, Contagion spreading across the banking sector -- with massive writedowns to follow, recent MBIA and AMBAC downgrades, and credit crunch phase-2 ready to kick in, he is absolutely, unequivocally a caged animal with no room to move.

If he dare increase rates (he won't) our current, severely understated economic contraction will intensify and the downward sliding economic snowball, gathering momentum, will likely burst into a banking/financial system collapse.

Previously, I stated we'll likely see a 2% FFR in 08 and a 1% rate in 09. Thus far, I've been right in 08 and I still feel strongly I'll be right in 09.

As I see it, the Fed will hold five more FOMC meetings between now and the end of this year and rate announcements will be announced on the following dates:

June 25th
Aug 5th
Sept 16th
Oct 29th
Dec 16th

Baring any drop below 11,700 on the DOW between now and June 25th, I expect the fed to pause at the next FOMC meeting(no action on rates) -- If we do drop below the stated number, expect a new rate cut.

I expect Credit Crunch Phase-2 to kick in by Aug/Sept 08, and it will likely make phase-1 look like a walk in the park, so expect a cut at one of these meetings and another in October 08.

By December, semantic debate over our full-blown economic recession will be over/recession will be unquestionable and our newly elected President will demand action -- so expect another cut.

Bottom Line: Expect a 1.5% or lower FFR between now and the end of this year and a 1% or lower in 09.

Helicopter Ben's recent "strong dollar" talk is just that -- "talk", so don't expect any change from current policy.

US Dollar index going below 70 this year and inflation will intensify... His rant was all smoke and mirrors for the gullible.




Best regards

Randy

Economicrot.blogspot.com

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Interesting day

Today is my wife's birthday and we just got back from a family dinner out (did our part to stimulate the downturning LV economy tonight), so I really don't have much time to post up.

On that note, it was quite an interesting day on Wallstreet. A significant equities downturn was led by the financials once again... And the bad news was exacerbated by Treasury Secretary (and PPT leader) Paulson who added to the glum mood with a downbeat statement, saying it will be months before the problems end.

Note: For him to say such things, I imagine the looming "credit crunch phase-2" is worse than feared and he's making an attempt to prime the masses...

US STOCKS-Wall St ends lower, hammered by bank woes

NEW YORK, June 2 (Reuters) - U.S. stocks ended lower on Monday as financial shares slid on fears of more fallout from the mortgage crisis after Standard & Poor's cut debt ratings of three big securities companies and Wachovia, the fourth-largest U.S. bank, ousted its chief executive.


Morgan Stanley, Merrill, Lehman Ratings Cut by S&P

Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. declined in New York trading after Standard & Poor's lowered credit ratings for the investment banks, saying they may have to book more writedowns on devalued assets.

Morgan Stanley, the second-biggest U.S. securities firm by market value, was cut one level to A+ from AA-, S&P said today in a report. Merrill Lynch, the third-biggest, was also cut one level to A from A+, as was Lehman Brothers, the fourth-biggest. Goldman Sachs Group Inc., the largest of the group, was affirmed at AA-. The outlook on all four New York-based companies remains negative, S&P said.

The downgrades may make it harder for the banks to sell derivatives such as credit-default swaps that are tied to bonds or loans, said Brad Hintz, an analyst at Sanford C. Bernstein in New York. Single-A rated firms are less desirable as trading counterparties for fixed-income derivatives that extend longer than five years, he said.

``You'll see derivatives profitability drop off over a period of time,'' Hintz said of the three downgraded investment banks. ``We estimate somewhere around 1 percent to 1.5 percent of fixed- income revenues are at risk.''

The firms are also likely to have to post more collateral on the trades they've already made with other parties, raising their costs, Hintz said.

Collateral

In its last quarterly filing, Merrill said a one-notch downgrade of its credit rating would require it to post an additional $3.2 billion of collateral on over-the-counter derivative trades.

Morgan Stanley estimated in a regulatory filing that a single level downgrade would mean posting an extra $973 million. Lehman said a one level downgrade requires about $200 million of additional collateral.

Morgan Stanley spokeswoman Mary Claire Delaney declined to comment, as did Merrill spokeswoman Jessica Oppenheim and Lehman spokesman Mark Lane.

Morgan Stanley, Merrill and Lehman sank in New York Stock Exchange composite trading. The cost of insuring against a default on each of the companies' debt jumped initially and then retreated later in the day.

Lehman fell $2.98, or 8.1 percent, to $33.83 in NYSE composite trading, while Merrill lost $1.30, or 3 percent, to $42.62. Morgan Stanley dropped $1.13, or 2.6 percent, to $43.10. Goldman declined $4.07, or 2.3 percent, at $172.34.

Writedowns

The S&P rating ``actions reflect prospects of continued weakness in the investment banking business and the potential for more write-offs, though not of the magnitude of those of the past few quarters,'' Tanya Azarchs, an S&P analyst, said today.

S&P suggested the banks may have to sell more stock to help offset the charges, according to Hintz. The report said financial institutions have raised too much capital in the form of so-called hybrid securities, exceeding S&P's limits on such instruments.

``The risk of further equity dilution probably has gone up,'' Hintz said.

The biggest banks and securities firms have booked about $387 billion of writedowns and credit losses since the beginning of last year, as the collapse of the subprime mortgage market prompted a contraction in credit markets worldwide. So far, the firms have raised about $270 billion of capital.

`Negative Outlooks'

S&P revised its outlook on Bank of America Corp. and JPMorgan Chase & Co. to negative. Citigroup Inc. was taken off review for a downgrade and given a negative outlook, while Wachovia Corp. was placed on review for a downgrade.

Wachovia shares fell to the lowest level since July 1995 after the bank ousted Chief Executive Officer Kennedy Thompson today, signaling the company may report a second-quarter loss.

``The outlooks on the large financial institutions sector in the U.S. are now predominantly negative,'' S&P said in today's statement.

Best regards
Randy

OPEC and the Dollar Peg

As I've pointed out in the past, the 1974 US-Saudi Arabian Joint Commission on Economic Cooperation established the Dollar as the sole Monetary Instrument for the purchase of oil through OPEC and this action reaffirmed the US Dollar as the World's reserve currency after the years of currency turmoil brought about by Nixon yanking the gold-dollar peg in 1971.

This agreement has allowed the US Dollar to flourish for many years, as countries who needed oil had to earn or borrow dollars to buy oil and trillions of these Petrodollars were eventually recycled through New York and London banks -- allowing for the creation of new credit, holding dollar interest rates lower than they would have been otherwise, and helping to expand our credit/debt bubble economy.

I have also pointed out that: (with the exception of IRAN and mainly due to inflation pressures internal to their domestic economies: 1) Vietnam removed their dollar peg; 2) IRAN (an OPEC Nation) no longer accepts US Dollars for oil and opened their own Oil Bourse this year; 3) Kuwait (an OPEC Nation) has pulled their dollar peg; 3) Venezuela (an OPEC Nation) has been very vocal about moving to price oil in other currencies.

Well, the OPEC rhetoric is heating up:

U.A.E., Qatar May Drop Dollar Pegs Within Months

May 26 (Bloomberg) -- The United Arab Emirates and Qatar could abandon their currency pegs to the U.S. dollar in favor of a basket of currencies within months, and Saudi Arabia may follow the move late next year, The National said, citing a Merrill Lynch & Co. report.

Gulf states have been under pressure to drop their dollar pegs after inflation hit record levels. Kuwait dropped its currency's peg to the dollar last May, but others have all kept their links, citing the need to keep currencies fixed until they form a monetary union in 2010, and the limited inflationary impact of the weak dollar.

The heat is on, so today Henry Paulson, US Treasury Secretary and leader of the US Plunge Protection Team, met with Saudi's Finance minister to reiterate his typical B.S. propaganda about supporting a "Strong Dollar" and publicly stated that any dollar-peg transition would be a "sovereign" decision... Yea right! I wonder what is stated behind closed doors?

Paulson says strong dollar in US interest, Saudi peg 'sovereign decision' UPDATE

JEDDAH Saudi Arabia - US Treasury Secretary Henry Paulson reiterated his support for a strong dollar today after meeting with Saudi Arabia's finance minister, but he also said the decision on whether to maintain the Saudi currency's dollar peg is entirely up to that country's government.

Asked about increasing talk that Saudi Arabia and other Persian Gulf countries might decide to remove their currency pegs to the dollar, given the effects of its plunge, Paulson signalled the US would not try to deter them.

'That is a sovereign decision,' Paulson said, adding, 'the dollar peg I think has served this country and this region well.'

On the same question, Saudi Arabia's finance minister Ibrahim al-Assaf said 'We have no intention of de-pegging or revaluation.'

Well folks, as I see it, it's only a matter of time. We have very few barganing chips left and our geopolitical goodwill is completely shot. When the dollar peg is eventually removed and then when oil is priced against a "basket" of currencies vs just the dollar, we'll be praying for the God-send of $4 gal gas.

Hold on to your hats!

Randy

FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution

One of the finest videos I've seen on the Federal Reserve Banking System. This clip runs about 50 minutes long, but I guarantee it will be well worth your time. I plan to leave this post towards the top for a couple of weeks. Really hope you take the time to watch. (NOTE: Click Start twice and give it a few seconds to load)

Find out why some feel the Federal Reserve's practices are a violation of the U.S. Constitution and others feel it's simply "a bunch of organized crooks." Discover why experts agree the Fed is a banking cartel that benefits mainly bankers and their corporate clients as well as a Congress that would rather increase the National Debt to over $9 trillion than raise taxes. Find out how the corporate media facilitates the partnership between the Fed and Congress and why it fails to disclose what's going on. Lastly, find out how the Federal Reserve-member banks are owned and controlled by an elite group of insiders.

Thursday's Economic News Roundup

The Major US indices closed in the green today on good news from Ford and an unexpected drop in US Jobless claims:

Wall Street rallied Thursday after the government's jobless claims data and Ford Motor Co.'s first-quarter results helped reinject some optimism about the economy into the market.

The Dow Jones industrial rose more than 80 points as investors focused on the Labor Department data showing weekly unemployment claims dropped and word that Ford had a $100 million profit in the first quarter.

Investors were also able to set aside any concerns about another drop in factory orders for big-ticket manufactured goods and weak forecasts from Amazon.com Inc. and Starbucks Corp.

OK, I'll give the indices credit for this, but what of other news today?


New home sales plunge to lowest level in 16 1/2 years, prices drop by largest amount in 38 years

Sales of new homes plunged in March to the slowest pace in 16 1/2 years as a two-year housing downturn extended into the start of another spring sales season. The median price of a new home in March compared to a year ago fell at the fastest clip in 38 years.

Sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991, the Commerce Department reported Thursday.

The median price of a home sold in March dropped by 13.3 percent compared with March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.


As financial markets grow increasingly worried about inflation pressures, Freddie Mac reports that fixed-rate mortgages move higher--Rates on 30-year mortgages now top 6%

"Average rates on mortgages increased across the board this last week as the most recent economic data raised inflationary concerns in the capital markets," said Frank Nothaft, Freddie Mac's chief economist.

Fueling those concerns was a bigger-than-expected 1.1% jump in wholesale prices and a renewed surge in energy costs, which have pushed gasoline and crude oil prices to record levels.


US Airways, following Delta & Northwest, Reports Loss

US Airways Group Inc. said Thursday it swung to a loss in the first quarter, punished like other airlines by the rising cost of jet fuel.

US Airways said it lost $236 million, or $2.56 a share, in the January-March period, compared with a profit of $66 million, or 70 cents a share, a year earlier. Excluding special items, the net loss was $239 million, or $2.60 a share.

US Airways' earnings report came a day after Northwest Airlines Corp. and Delta Air Lines Inc. reported combined losses of more than $10 billion. Most of those losses came on write-downs to reflect a decline in market value.


Motorola 1st-qtr loss widens as mobile-device sales plunge and it forecasts 2nd-qtr loss

Struggling cell phone maker Motorola Inc. disappointed investors Thursday when it posted a wider first-quarter loss and failed to meet revenue forecasts.

The suburban Chicago company, which is in the midst of a massive reorganization that includes splitting itself into two publicly traded companies, said it lost $194 million, or 9 cents per share, for the quarter that ended March 31.

Sales fell about 21 percent to $7.45 billion, down from $9.43 billion a year ago.


Microsoft reports 11 pct profit drop

Microsoft Corp.'s third-quarter profit fell 11 percent, the software maker reported Thursday as executives renewed their warning that they may go hostile or walk away from their $44 billion-plus offer for Yahoo Inc. if Yahoo doesn't agree to a deal by Saturday

Sales of Windows software were not as strong as Microsoft or analysts had predicted in the quarter, despite Microsoft's comments that sales of Vista licenses -- now at 140 million, up from the 100 million mark reached in January -- are on track.

Revenue in that division fell 24 percent to $4.02 billion.


American Express profit falls 6%; New York-based credit-card company slips as U.S. cardholders struggle to make their payments.

American Express Co.'s first-quarter profit slipped 6% as the credit-card lender saw more U.S. cardholders fail to make their payments, it said Thursday.

Like other lenders, the New York-based company has been writing off more loans as unpaid as U.S. borrowers struggle with slumping home prices, rising costs, and a less certain job market.
The company's total provisions for credit losses amounted to $1.27 billion, a 48% increase from the first quarter of 2007.

U.S. card services profit fell 19% to $523 million in the first quarter compared with the same period a year earlier, as profit from international card services rose 30% to $133 million.

The writeoff rate in U.S. card services, including both on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans, increased to 5.3% from 3.7% a year ago - faster than the company anticipated.


United hikes fares 3% to 5%, blaming fuel costs; The second-largest U.S. carrier increases almost all of its domestic airfares for the third time in two weeks.

United Airlines, the second-largest U.S. carrier, raised nearly all its domestic airfares by 3% to 5% Thursday as it struggles to cope with soaring fuel costs.

The widespread increase is the third in a row initiated by United in just over two weeks, and will likely entice other carriers to follow suit. The Chicago-based carrier's last two attempts were quickly matched by competitors and remain in place in many markets.

The move comes just two days after Delta Air Lines Inc. Chief Executive Richard Anderson said domestic carriers need to raise tickets 15% to 20% just to break even at existing fuel prices.

"This is the most challenging financial period in the history of the industry," said John Heimlich, chief economist of the Air Transport Association. "Just at the same time we have this unprecedented surge in jet fuel prices with no end in sight, we're bumping up against a weakening economy."


My Thoughts:

Maybe I'm biased, but based on the news reports above, it certainly doesn't look like our economy is getting any better... Could the PPT and pundits possibly be trying to lull the cattle into a false sense of security while leading them to the slaughterhouse? Oh well, until the sheeple (cattle) pull their heads out of the sand there is really nothing I can do about it...


OK, last but certainly not least, here is a very good opinion article that I thought you would enjoy:

The U.S. Dollar has Been the Gold Bug’s Best Friend – Until the “Amero” Debuts

As all gold bugs know, gold’s historic rise since 2001 has largely been attributed to the dilution of the U.S. dollar. Trade deficits, government overspending and the more recent sub-prime mortgage debacle have all helped deflate the greenback while driving up the price of gold.

However, what would happen if the U.S. dollar just disappeared? How would gold and other hard assets be valued then?

This week the three NAFTA amigos, President George Bush, Prime Minister of Canada Stephan Harper and Mexican President Felip Calderon met to ram new polices down our throats which will impact gold and other commodity prices going forward.

The reopening of the North American Free Trade Agreement is the first strategic move toward a North American Union that will create a new currency to compete with the Euro.

On Tuesday, the U.S. dollar sank yet again with the Euro breaching the psychologically significant $1.60 mark for the first time.

It’s only a matter of time before the U.S. dollar collapses to the point of no return internationally. With the Fed unable to manage the slide with higher interest rates due to the economic slowdown in the U.S., the three amigos are setting up the chess pieces for the inevitable next move: the creation of a North American currency, the “Amero.”

The Hallmark of Bush’s presidency could very well be the creation of the Amero, the perfect solution and savior to the failing U.S. dollar. Whether it’s Bush or the next president, at some point in the not too distant future the dollar will be abandoned and a new game will begin.

International trade has already started to price commodities in Euros as foreign governments holding dollars have lost their shirts while holding Euros has increased their buying power.

The Euro was introduced with the same degree of stealth such that the citizens of Europe had little choice but to adopt it.

Some thought a European union was an impossible dream but now they have 27 nations under its authority with more members waiting in the wings.

The U.S. is already facing economic hardship which will only get worse. The Amero will be introduced to the American public as the administrations solution to recover from the current financial mess.

In Canada, the Canadian dollar has been trading at close to par for several months. Canadian politicians can easily sell the idea of the Amero by simply making promises of cheaper gas prices (Americans pay amongst the lowest prices in the western world.) Plus many Canadians who live near the border travel to the U.S. for major shopping binges buying assortment of much cheaper goods from dairy products, used cars, electronics and clothing. If they can get the same prices at home, the NAU will be an easy sell.

As far as the Mexicans are concerned well, doesn’t nearly everyone already speak Spanish from California to Florida?

In the interim, gold’s still got a long way to go so stay tuned. However be aware that the Amero will put the brakes on gold’s march as the illusion of strength and power will put confidence into the world’s latest fiat money system. Also know that in the history of mankind, fiat money systems have always failed. The U.S. dollar is the latest victim. Bill Ridley: jameswinston.com/


Best regards

Randy