Home cycles explained & Outlook

Video and Power Point Presentations that explain housing pricing cycles
and the outlook ahead for 2008. Nicely done. Courtesy of John Burns
Real Estate Consulting.
Housing Cycles:
Lessons Learned Watch our 7-minute educational video about housing cycles

Housing Market Outlook by John Mauldin,

Who will be the next Bear Stearns? Great credit unwinding.

Market will bounce along the bottom for sometime to come

Minyanville - NEWS & VIEWS-Article: "The Great Debt Experiment has now morphed into the Great Credit Unwind, and we are asking ourselves how this will all end. My answer has been ‘I Don’t Know,’ as I wrote in my piece last December. The reason for the answer was that I felt (and still do) that the buildup in debt, leverage and derivatives is so unprecedented that the fallout from the buildup should be unprecedented as well"

Norton's comment: this is a very intriquing article, but you will have to read the whole thing to appreciate it. the bottom of the market has NOT come yet! Especially in the financial sector.

Goodbye fossil fuel! Hello HHO-Water!

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Increase gas mileage because when you convert your car to burn water you save fuel and money. When you use a browns gas
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NASA uses hydrogen and oxygen to fuel its rockets!

Find out more information and do it yourself ... Water for Gas"

Eco-friendly tiny houses-no crisis here!

Tumbleweed Houses : "Buy a House / Build a House"
We build tiny, portable houses here in Sonoma County then roll them off to buyers everywhere. Readymade house prices are listed on the left column of our Houses page. We also sell plans for these houses and larger designs as big as 770 square feet. You can view them here on this website and in the printed Portfolio of homes, featuring all 16 house designs. For more information about building one of our designs yourself, please visit the Build it page

The Job Market in '09 -it's funny?

The Job Market in '09 - [Comedy Channel] • Comedy.VideoSift: Online Video *Quality Control: "New Job Market Video Comedy Related Videos
Here are some other videos related to your Google search for new job market video comedy

Kermit and Ted Koppel explain the Stock Market"

Sovereign Funds shifting out of US dollar assets

World Bank official says sovereign funds likely to shift away from US dollar assets

The Associated Press
Friday, March 28, 2008
SYDNEY, Australia: State-backed sovereign wealth funds are likely to diversify their investments and move away from U.S. dollar-denominated assets, a World Bank official said Friday.

Central banks are likely to follow suit, shifting away from the U.S. dollar over the next "three to five years," World Bank Principal Investment Officer Arjan Berkelaar told a business conference in Sydney.

Sovereign funds, which are either government-owned or controlled, will increasingly switch from high grade fixed income assets such as government treasuries to equities and broader based assets including infrastructure and commodities, he said.

Alternatives include investments denominated in the euro and pound, with some possible interest in the higher yielding Australian and New Zealand currencies, he said.

Norton's comments: consider international investments where the economic growth and currency exchange compare favorably with the US dollar and econ. growth.

Subprime adjustable rate mortgages Maine style

....Caroline Wentworth is trying to save her home in Buxton. She and her husband recently filed for bankruptcy in an effort to prevent foreclosure. Her adjustable rate pushed her mortgage payment from $1,200 to $2,000 per month...The number of homeowners turning for help to agencies such as Pine Tree Legal Services is "off the charts," said Chet Randall, a staff attorney and coordinator of a foreclosure- prevention project.

Maine isn't the kind of state where a drive through a large subdivision reveals home after home up for foreclosure sale.

Instead, the foreclosure problem in Maine reflects the spread-out nature of the state -- a house here, another there, a few more a couple of miles away.

But the lack of visibility doesn't blunt the impact of the mortgage crisis that has washed over Maine, much as it has the rest of the country.

Nearly a quarter of Mainers with subprime mortgages -- the type of loans extended to people with less attractive credit histories -- are at least 60 days behind in their house payments. And nearly one in eight subprime borrowers is in foreclosure, the months-long, agonizing process of losing a home.

Mainers with good credit histories and prime loans also are falling behind on mortgages and facing foreclosure at a much higher rate than in the past

Innovative financing opens floodgates to solar business

Pay for the Power, Not the Panels

By PETER MALONEY March 26, 2008
INNOVATION is driving a boom in solar power, but some of the most compelling advances are taking place in financial engineering rather than photovoltaic technology.

Solar power is simple, clean and easily installed, but manufacturing solar panels is expensive, which is why this energy source is out of reach for many residences and businesses. Lately, however, solar power companies have discovered that they can attract more buyers if they act as financial intermediaries as well as suppliers of equipment and systems used to generate electricity from sunlight

A leading indicator is the spread between yields on speculative “junk” bonds and American Treasury bonds.

Opps, this article was in 1987, Note parallels with 2008

THE COMING DEFAULTS IN JUNK BONDS A FORTUNE study (1987) finds that many of these high-yield, low-quality securities face big trouble. The victims could range from huge institutions to countless small investors.

By Ford S. Worthy REPORTER ASSOCIATES Lorraine Carson, Christopher Knowlton, Terence Pare, Andrew Evan Serwer
March 16, 1987
(FORTUNE Magazine) – LEVINE. Boesky. Siegel. Wall Street's gallery of rogues keeps growing, with every indication of more to come. But while the financial community waits nervously for the next insider trading scandal to break, another kind of shocker is brewing. Not as dramatic, perhaps -- no one is likely to be led off in handcuffs -- but with effects that ultimately could prove more far- reaching. The threat: an unprecedented level of defaults by the companies issuing junk bonds. The fallout might rain down even on people who have never heard of these risky high-yield securities. Hundreds of institutions that have loaded up on the bonds could lose money, ranging from insurance companies to savings and loans. So could thousands of small-time investors who have bought shares in junk bond mutual funds. Undermine investors' confidence in junk bonds and you strike at the heart of Drexel Burnham Lambert, whose senior executive vice president, Michael Milken, pioneered their use ..."

TODAY 2008, Corporate Bankruptcies in America; Waiting for Armageddon

Mar 27th 2008 The Economist. The recent rise in corporate bankruptcies in America may well be a sign of much worse to come...If the debt markets are to be believed, companies could be in at least as much trouble as they were in the previous two downturns, in the early 1990s and at the start of this decade, after the dotcom bubble burst. A leading indicator is the spread between yields on speculative “junk” bonds and American Treasury bonds. A year ago, the spread was only about 280 basis points; the long-term average is around 500 points. This month the spread exceeded 800 points for the first time since March 2003, reaching 862 on March 17th...."

Ten Days That Changed Capitalism

Economist's View: "Ten Days That Changed Capitalism": "Ten Days That Changed Capitalism, by David Wessel, Capital, WSJ (FREE): The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse. ...[T]he government's recent actions don't (yet) register at FDR levels. ... But something big just happened. It happened without an explicit vote by Congress. And... billions of dollars of taxpayer money were put at risk. A Republican administration, not eager to be viewed as the second coming of the Hoover administration, showed it no longer believes the market can sort out the mess. ..."

Norton's comments: Yes, we are witnessing significant historical changes int the way monetary and fiscal policies react and are entangled in our free market economy. This sea change has happened so far without any consent or vote from the legislative branch or judicial branch of our government. We the people has not been engaged as yet and that is the most troubling part about this since it is our tax dollars at risk along with obligations well into the future of the next generation that have been commited without any consent or review. So much for the democratic process!

SEC Openly Invites Corporations To Lie

Can you trust quarterly earnings reports?

The Securities and Exchange Commission sent out a Letter On Fair Value Measurements, (Financial Accounting Standards No. 157) that is tantamount to being an open invitation to lie. Let's take a look at what some are saying about that letter.

Floyd Norris at the New York Times writes If Market Prices Are Too Low, Ignore Them.

The Securities and Exchange Commission is out today with a letter to companies that own a lot of financial instruments whose current market value must be reported to shareholders. For more than a few companies, disclosing market values is neither easy nor convenient.

The issue is the application of SFAS 157, which governs the way companies compute fair value of assets. The rule sets out three categories of assets, with different ways to value them. Category 1 includes assets with easily observable market values. I.B.M. stock closed today at $114.57, and it is not easy to justify a different value if your quarter ended today. Category 2 is a little fuzzier, where there are observable markets that provide a good guide to prices of your asset, even though there is no direct market. And then there is Category 3, which is essentially mark to model.

But one part of the letter stood out to me, providing an excuse for companies to ignore a market value if they don’t like it (italics added):

“Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. Only when actual market prices, or relevant observable inputs, are not available is it appropriate for you to use unobservable inputs which reflect your assumptions of what market participants would use in pricing the asset or liability....”

Cycling For Food: Engineers Work On Pedal-powered Grain Crusher

New jobs for nomadic people in third world countries

ScienceDaily (Mar. 21, 2008) — Heather Klein crisscrosses the campus of Glassboro, N.J.'s Rowan University, from the College of Engineering to the townhouses, the dining hall to the Rec Center, on a blue Huffy 26-inch beach cruiser bicycle.

She’s hoping a clone of the bike, picked up at the K-Mart in Glassboro for about a hundred bucks, may some day make the difference in the lives of people living half a world away.

Klein, 22, a senior civil engineering major from Toms River; Josh Bonzella, 22, a senior civil engineering major from Mullica Hill; and Kevin McGarvey, 22, a senior mechanical engineering major from Williamstown, are working with Dr. Beena Sukumaran, a civil and environmental engineering professor, to develop a pedal-powered grain crusher.

Their goal? To produce a fairly simple mechanical device that people in developing countries can use to process anything from corn to barley. If it’s successful, the grain crusher can help produce food for residents of Third World countries and enable some people to generate an income as they travel from community to community crushing foodstuff for a price.

Economics of pedal power

"Power From The People!"

Every morning, I pedal to generate electricity. The Pedal Generator I ride charges batteries, that run an inverter, that produces 110v AC, that powers LED lights, the monitor on my computer, my cell phones, and many other small battery-powered things. It is the most inspiring workout you can imagine.

Become Part of the Solution - Build Your Own Pedal Generator

New Movies! New Movies! Ultimate Pedal TV, Washing Machine, Bread Machine, Electric Blanket Hand Drill
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Creative Solar solutions with a social purpose

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After Major Cyclone, Bangladesh creative adaptions to Climate Change

If the country is running out of land, Mohammad Rezwan says it will have to look to the water.

MOHAMMAD REZWAN, Teacher: People have to live on water in some way at the time. And it is the most densely populated country in the world, people they will not have any place to live. It is because of climate change.

FRED DE SAM LAZARO: When Rezwan graduated from architecture school eight years ago, he began to use his skills to design a floating community.

Its first building block was a boat to serve both as school bus -- and school.

MOHAMMAD REZWAN: We designed in a way that it has more space and a multi-layered water proof roof on it so that when it rains you still can continue working on it. And there are side windows and the bottom is flat so it can move through the flooded lands.

FRED DE SAM LAZARO: His fledgling nonprofit caught the attention of donors including the Gates and Levi Strauss foundations. Today, there are 41 floating, solar-powered classrooms plying the Natore region in northwestern Bangladesh. For 1,200 students, school is no longer interrupted by flooding.

One boat serves as a library. It makes three-hour stops along the river. Its young patrons can study, check out a book or learn to use the internet.

There's also a floating power station. Eighty percent of Bangladesh's villages lack electricity. Rezwan provides families solar lamps, powered by small batteries that people bring in about once a month to be recharged

Free markets are nothing without FREE people - FREE TIBET!

Beijing Invites Diplomats to Tibet - WSJ.com: "Beijing Invites Diplomats to Tibet
By SHAI OSTER and JAMES T. AREDDY Interactive Map

March 28, 2008 9:28 a.m.

LHASA, China – A group of foreign diplomats has been invited to visit Tibet in the latest effort by Beijing to temper international criticism of its policies there ahead of this year's Olympic Games.
Embassy officials representing the U.S., France, the U.K. and other nations were making an overnight visit to the Tibetan capital Lhasa starting Friday.
The diplomats arrived as 26 foreign reporters concluded their three-day visit with a morning of scripted visits to neighborhood and religious centers in Lhasa on Friday. It offered none of the kind of drama that occurred on Thursday, when sobbing monks used the opportunity of television cameras and reporters to accuse China's government of religious repression"

Video -Investing in your 20s

Video - CNBC.com: "Investing in Your 20s
Choosing the right investment path, with Vern Hayden, Hayden Financial Group; Joseph LaVorgna, Deutsche Bank and CNBC's Melissa Francis"

View the video Here

Brave new World-China Invest. Corp. to buy Dresdner Bank

China Investment Corp in 'intensive talks' to buy whole of Dresdner Bank

By Editor Reuters writes that, “China sovereign wealth fund China Investment Corp (CIC) is in ‘intensive talks’ to buy the whole of Allianz’s Dresdner Bank, a German newspaper [the Sueddeutsche Zeitung (SZ)] reported on Thursday, citing industry ...

Ethanol Folly - causes increase in gas usage!

Ethanol decreases mileage significantly

My Forester was consistently getting between 26 and 30 mpg (up to 31.68) till around Nov/Dec. Then I saw a lot of Ethanol stickers go up at the gas stations I use. I calculate mileage on every tank and soon discovered that my mileage dropped and I get 22-25 mpg, and as low at 20.4 mpg. Tire pressure is the same, air filter is new, and oil is fresh.So I talked to the gas station owners, Subaru, and did some reading online. Come to find out that a 10% misture of Ethanol drop MPG by 20-35%. Even my Subaru guy said this is consistent across most of the vehicles he sees after Ethanl is added to gas. So the political push/lobby that says using 10% Ethanol drops foreign oil dependence by 10% is completely BSing. In reality, it causes us to import even MORE oil since Ethanol reduces mileage much more than 10%.This Ethanol crap has also raised food prices to the point where people are really being affected- not the ones who make big money but the ones who live from paycheck to paycheck- sad indeed. Anyway, I'm trying to get my mileagae back up and have a solution in play. If it works out, I'll post back here.

Norton's comment: I found this to be so for my 1994 Pylmouth Grand Voyager. Mileage went from 22 mpg to 17 mpg this winter using E10 gasoline that is showing up in the Maine market.

Think twice about near-term market bottom

The housing market will look like a slow-draining bathtub

for at least the next couple of years, with defaults and foreclosures likely to exceed new purchases. The unsold inventory will take a long time to recede to normal levels. And until the bottom in housing is visible, no one can be certain how bad the credit losses will be. We are so far outside any historical patterns that forecasts have become exercises in creative writing.

Reader Jeff sent along this cheery view from Ken Murray of Blue Planet Investing (the whole post is worth reading):

The current situation in the US banking market is without precedent. Never before in a time of near full employment and record corporate profitability have we seen such huge levels of bad debts. By our own estimates bad debts in the US banking market are likely to rise to somewhere in the order of $300bn to $450bn. Other estimates set the figure much higher. This is important because the bad debts that have been incurred so far are entirely due to poor underwriting as opposed to a downturn in economic activity. However, a downturn in economic activity is now occurring and, if the US economy is heading for recession as we forecast in 2007, it will give rise to a huge layer of additional bad debts. One that it simply cannot shoulder. It is perfectly conceivable that bad debts may rise to somewhere in the order of $500bn. To put the scale of these losses into perspective the total equity of the US’s top 100 banks stood at $800bn at the end of the third quarter 2007. Losses of $500bn would wipe out 63% of their capital bases and leave many of them insolvent.

To put it mildly, that doesn't exactly point to a lasting recovery in the credit markets.

Central Banks to Buy Junk Mortgages...or Not

March 23, 2008 12:53 PM by Robert Blumen

On Friday, the Financial Times reported Central Banks Float Rescue Ideas. The article states that central banks are considering plans involving the purchase of worthless or nearly worthless mortgage-backed securities from banks. Shortly afterwards, Reuters reported Bank of England denies mortgage purchase plan.

The FT writes,

Such a move would involve the use of public funds to shore up the market in a key financial instrument and restore confidence by ending the current vicious circle of forced sales, falling prices, and weakening balance sheets.

The conversations, part of a broader exchange as to possible future steps in battling financial turmoil, are at an early stage. However, that such a move is being discussed at all indicates the depth of concern that exists over the health of the banking system.

It shows how far the policy debate has shifted in recent weeks as the crisis has spread to prime mortgage assets in the US and engulfed Bear Stearns, the investment bank.

Sun 5pm PST, this just in:

Economist Forecasts Central Bank Action

Central banks and governments in advanced economies will be forced to buy mortgage-backed securities within the next few months to stop the credit crisis, according to a former chief economist of the European Bank for Reconstruction and Development.

"Central banks will be managers for years to come of rather interesting portfolios..."

Significant LT bottom in equity markets?

We are close to, or at, a significant long-term bottom in the equity markets:

Here’s what we are seeing - Investors Intelligence:

• INSIDER ACTIVITY – Buying at a similar rate as at the 2002 bottom.
• NYSE BULLISH % - Breadth in late January traded at levels last seen in 2002-2003.
• BUY/SELL CLIMAXES – First eight weeks of 2008 have seen more selling climaxes than buying climaxes, indicating high accumulation.
• INDUSTRY GROUPS – Our Sector Sum indicator fell in January to its most oversold in over 10 years.
• WALL OF WORRY – Talk of recession, high commodity prices and sub-prime problems have created conditions that favor a long-term reassertion of stock indexes.
• ADVISORS SENTIMENT – Bearish sentiment is close to (but not yet at) levels last shown in October 2002!

comments by Norton: the above may be indicators but we have not seen the results of transparent mark to market of the collaterized derivatives that hidden in the balance sheets of the financial industry or are currently being traded to the FED for safe treasury bills. this will mean the FED will be managing a portfolio of junk on their (the taxpayers) balance sheet for years to come. So, dont hold your breath for a clear turn in the market. it will be volatile and subject to downturns based on unknown further surprises the the financial market and periods when the ARM mortgages are due to be adjusted up for people who can hardly afford their current payment schedule. Watch for another chance to short financials (SKF) and for long term commodities to rain over the continuing US dollar decline and scarce food, water, energy resources.

Going into 'survival mode'-New Englanders

Going into 'survival mode'as economy slides

New Englanders hunker down, channel inner Yankee
By Don Aucoin Globe Staff / March 25, 2008

When a recession hit in the 1970s, Kathleen Carter barely noticed it. She was young, single, working as a bar manager in a restaurant, and on the verge of buying a home. Economic gloom registered only as a distant echo.

* photo gallery Tips for spending and investing wisely
* Discuss How are you cutting back your spending?

more stories like this:

Now she is 55, and the current slowdown is impossible to ignore. Its effects bear down on her every day. She has had to put every household expense under a microscope, and she is cutting back wherever she can......"
consumer spending on basics

Chasing high yield junk seeking extra income

Anyone chasing high yield junk seeking extra income needs to think twice.

SWYSX Daily Chartclick on chart for sharper imageWords To Avoid
High Yield, Yield Plus, Structured SIV, VIE Enhanced "Almost" Like Cash, Toggle, Junk Vehicle, Leveraged

Those in or thinking about getting into any product that uses those words may wish to reconsider. Furthermore, when it comes to funds or products that use the word "Government", make sure the fund invests in genuine government backed securities such as US treasuries or Ginnie Mae securities not agency debt like Fannie Mae or Freddie Mac.
Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.com
Schwab YieldPlus

PIMCO Bullish on Emerging Mrkts - 3 to 5 years

Gold Pushed Higher by Carry Trade and Capital Market Tsunamis: The Market Oracle:: "The value of futures contracts held this month by hedge funds and traders betting against the $ was a record $33.9 billion more than contracts that profit from a gain. Pacific Investment Management Co., which oversees the world's biggest managed bond fund, is selling dollars against the Brazil Real, Mexican Peso, Korean Won, and Singapore $. 'When we think about currencies on a three-to-five-year basis we're very bullish on emerging markets versus the U.S. dollar,' said Pimco. 'That view is only reinforced when you look at interest-rate differentials.'"

Norton's comments: It follows that investments in Brazil (check EWZ, PBR, UDN) will benefit from Real continuing appreciation against the US Dollar. Additionally, even without inflation, Brazil's forecast GNP growth is among the best of the emerging markets.

Dirty Little Secrets Start to Slip Out

What are long term consequences of market values dropping to 1/3 or less?

March 24, 2008 Financial Armageddon.com
Oops. It looks like the dirty little secret that banks and brokers have been trying to keep under wraps is starting to slip out.

For a long time, the financial community has been doing its best to ensure that few really know the value of the dodgy paper it owns. Now, though, a legal filing in connection with a Canadian lawsuit hints at what many of us have already figured out: just how worthless this structured finance rubbish really is (the kind the Federal Reserve is swapping for Treasuries, perhaps?). And that's likely not even taking into account much sharper falls in the housing market.

I wonder if the "haircuts" cited in the following Financial Times report, "Damage to Securities Revealed in Court," are also being used to price the supposedly hard-to-value securities banks and brokers hold on their books? Hmmm....

The first public price estimates for specific structured credit securities to have emerged since the start of the credit crisis show that values have fallen sharply.

Some securities have lost almost a third of their value – even though many were considered to be so safe that they carried top-notch ratings from the credit ratings agencies.

Meanwhile, some subprime mortgage-linked securities issued by groups such as UBS have lost almost 95 per cent of their value..."

Stagnant median family incomes

Grandfather Family Income Report - summary by MWHodges: "FAMILIES UNDER MORE PRESSURE, Because 3 DECADES OF STAGNANT MEDIAN FAMILY INCOMES (inflation-adjusted) resulting in record high debt ratios and record low rates of savings,
• Fewer retirement and medical benefits expected
• More children without a full-time mother as more must work to help make ends meet
• Lower quality education and less parental quality time with their children.

Fed Govt Debt per person

Borrowing from future generations - we must stop it!

Grandfather Government Spending Economic Report by MWHodges: "DEBT means >

Much government growth has been borrowed from the future,
to the tune of $29,926 Debt Per Child (per capita)

According to the Grandfather Federal Government Debt Report we are talking about $9.2 Trillion of DEBT PRINCIPAL, as of Jan. 1, 2008 - - not little 'peanuts'. And, over half of the total federal debt was created in the 1990s."

The Failure of Croney Capitalism

Jesse's Café Américain: "The Failure of Croney Capitalism

Count on the British press to provide a realistic alternative analysis, as compared to the sychophants in the mainstream corporate media and academia in the States.

We differ a bit in prescription for a cure, but the diagnosis could not be more clear or more correct.

THE RED MENACE
The world's markets gambled on financial alchemy. They lost.
By Iain MacWhirter

COME BACK Karl Marx, all is forgiven. Just when everyone thought that the German philosopher's critique of capitalism had been buried with the Soviet Union, suddenly capitalism reverts to type. It has laid a colossal, global egg and plunged the world economy into precisely the kind of crisis he forecast...

As it becomes harder and harder to make money out of making things - just look at the collapse in prices of computers over the last decade - so exotic financial derivatives have been created to boost wealth without engaging in recognisable economic activity. Speculation takes over. British manufacturing has collapsed to a fraction of what it was 20 years ago, and a vast financial services sector has grown up in its place making money largely out of inflation in house prices, ie debt.

Moreover, with globalisation, trillions of dollars have been washing around the world markets looking for a home. This has created a monster: the market in financial derivatives; a Pandora's box of inscrutable financial instruments governed by supposedly failsafe mathematical formulae. Collateralised debt obligations - implicated in the subprime mortgage crisis - are at least rooted in nominal house prices, but they have been detached from the actual mortgages and sold as commodities in the securities market.

Credit default swaps have created a $45 trillion global industry based on nothing at all..."

Norton: it all ends up with the Fed bailout penalizing all holders of US Dollars; that is us the US tax payer...on into the future.

Kicking the Can down the Road

Econbrowser: Kicking the Can down the Road: "So to me, it seems that the Administration is engaged upon a delaying action, and hoping to unload this problem upon the next Administration (an understandable, albeit less than fully public-minded, impulse). Meanwhile, it maintains the best 'optics' in terms of making it look like it's not taking on risks to government funds in order to help out financial firms. In so doing, it's allowing an even bigger build-up of contingent liabilities, surreptitiously. But by virtue of being less transparent, it threatens to present a bigger, and more unpleasant, surprise for future policymakers (of either party)....

Second, whatever the reasons for the Administration's actions, I think a very serious problem is that, by virtue of the Administration's abdication of a substantive role (see Hubbard's comment on this point), the Fed is lending to entitites it does not regulate. The Bear Stearns collapse might have been seen as a case where the Fed had to undertake unconventional actions, because of the rapidity of developments. But with the Administration providing an uncompromising stance, who will step in the next episode? If it's the Fed again, then Blinder's critique will take on heightened relevance."

Norton's comment: the use of the Fed Home Loan Banks as a vehicle to refinance mortgages is a not so transparent way of using tax payer money without any vote or review by the Public. This continues the Bush Administration's technique of running end runs around transparent democratic procedures and assures the magnitude and breadth of these public obligations will not be know until the start of the next administration.

Wall St. Stocks Rally on Philly Fed US Economic Outlook

Wall St. Stocks Rally on Philly Fed US Economic Outlook: The Market Oracle: "Tell me. On what basis did 'analysts' have to predict what the Philly Fed March factory activity headline would be? For that matter, on what basis do 'analysts' have for predicting what weekly initial jobless claims will be.

At the end of each week 'analysts' are sent forms to fill out as to what their forecasts are for economic reports to be released in the next week. For many of these economic reports there is no way to accurately predict the data based on fundamentals - seasonal variation, perhaps, but not underlying economic fundamentals....The chart below shows the behavior of the headline index for the Philly Fed region's factory activity. Notice that the headline was in deep negative territory, but rising, as we entered the 2001 recession. The March reading of the headline, at minus 17.4, is lower than where it was during most months of the last recession. Yes, indeed, the Dow should rally on this because "analysts" had predicted that the headline would be worse than it turned out."

Banking Institutions Present Clear and Present Danger to American Citizens

by anita kunz

Banking Institutions Present Clear and Present Danger to American Citizens: The Market Oracle: "The Die is Cast- The Case Will Die - If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, (i.e., the 'business cycle') the banks and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. Thomas Jefferson, President of the United States 1801-1809......

If Thomas Jefferson were running for the US presidency and spoke the words he uttered two centuries ago, he would be marginalized by today's press just as Ron Paul has been marginalized in his campaign for the US presidency.

Today, private bankers control not only the issuance of money in America , but the corporations [ that will grow up around the bankers ] control what Americans see, read, and hear because of their influence in the media. The clear and present dangers Jefferson warned about two centuries ago are now clearly present. "

Federal Home Loan Banks to Aid Mortgage Market

Home Loan Banks to Aid Mortgage Market - Forbes.com: "WASHINGTON - The Federal Home Loan Bank system can increase purchases of Fannie Mae and Freddie Mac securities by $100 billion over two years in the latest government effort to stabilize the devastated market for mortgage-backed assets.

The 12 regional banks in the system can increase their purchases of securites issued by these government-sponsored enterprises to 600 percent of capital from 300 percent, the Federal Housing Finance Board, which oversees the banks, said Monday.

The aim is to inject liquidity into a market that has seized up amid a global credit crunch sparked by the U.S. housing market downturn.

Created by Congress during the Depression, the self-funded home loan bank system has some 8,100 members around the country: banks, savings and loans, and credit unions. Eight of every 10 U.S. financial institutions belongs to the home loan bank system

Fed's rescue halted a derivatives Chernobyl

Fed's rescue halted a derivatives Chernobyl - Telegraph: "Fed's rescue halted a derivatives Chernobyl
Last Updated: 9:59am GMT 24/03/2008Page 1 of 3

When the Federal Reserve stepped in to save Bear Stearns, most people had no idea what was at stake, writes Ambrose Evans-Pritchard

We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance...."We don't know how much is backed by collateral. We don't know what would happen in a crisis, and if we don't know, nobody does," he said.

Under the rescue deal, JP Morgan Chase will take over Bear Stearns' $13.4 trillion contracts - lock, stock, and barrel.

Ben Bernanke, the Fed chairman, took decisive action
when Bear Stearns began to collapse but JP Morgan is already up to its neck in this soup, with $77 trillion of contracts. It will now have $90 trillion on its books, a sixth of the global(derivatives)market.

Risk is being concentrated further. There are echoes of the old reinsurance chains at Lloyd's, but on a vaster scale."

Wall Street Test Drives New Fed Loans - Forbes.com

Wall Street Test Drives New Fed Loans - Forbes.com: "The Federal Reserve reported Thursday that it directly leant several unnamed investment companies about $31.3 billion in the three first days since it expanded its discount window borrowings beyond commercial banks on Monday. Goldman Sachs (nyse: GS - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Morgan Stanley (nyse: MS - news - people ) previously confimred they were taking advantage of the Fed's new lending facility."

Hold on buying financials just yet?

Fed Denies Discussions to Buy MBS; hold on buying financials just yet?

Earlier I linked to the Financial Times story that suggested central banks were discussing buying mortgage back securities (MBS).

Greg Ip at the WSJ writes: Fed Says Not Discussing Coordinated MBS Buying

The U.S. Federal Reserve, responding to press reports, said it is not discussing coordinated purchases of mortgage-backed securities with other central banks.

ETF Investments shift to financials from commodities this week

Where is the big fall?

Seeking Alpha.com wed. march 19, 2008
One of the most vexing things about this market has been that it hasn’t declined as much as one would think intuitively. Looking back on the LTCM disaster in 1998 the S&P 500 declined over 22% from top to bottom over a relatively short three month period.

That crisis involved just one institution whereas today’s troubles afflict many dozens of financial services companies involving a still untold amount of losses. Yet the S&P 500, heavily weighted by financials, has only declined about 20% from its high. By this measure we’re not even in bear market territory although that could change in a heartbeat
posted on: March 20, 2008 | about stocks: DBA / DBB / DBC / DIA / EFA / EWZ / FXI / GDX / GLD / IEF / IFN / IWM / MDY / QQQQ / RSX / SPY / USO / XLE / XLF

Stomach-churning market - showing promise

Rate cutting by itself won't heal what's ailing the credit market. Other recent moves by the central bank, however, are along the lines of what's needed to stem the problem. These include the Fed allowing securities firms to borrow at the same interest rate as commercial banks, extending the terms of those loans to six months from 28 days and accepting as collateral non-agency mortgage backed debt securities.

J.P. Morgan picking up Bear Stearns for a song (with the backing of a $30 billion government credit line for Bear's troubled holdings) was a bailout in all but name. The move has gone a long way to restoring investor confidence.

What we've seen in the seen in the credit market in recent weeks is akin to a good old fashion run on the banks. But as we've been saying since the credit market started to unravel last summer, any financial problem can be fixed if you throw enough money at it. The Fed has since thrown a heck of a lot of money into the system.

Monetary policy typically acts with a lag of six to nine months. When relative calm returns we could see a powerful rally in stocks in general and financials in particular, thanks to the dramatic decline in short-term rates. Meantime, we may have to endure a few more stomach-churning, 300 point one-day swings in the Dow Industrials before returning to business as usual. Hang in there.

Keep in mind that while we're constructive on the stock market here we're not locked into that forecast. So far, there are enough positive signs that the economy is not in recession or at worst the slowdown will be very mild. However, we're keeping a way eye on jobless claims, which have inched higher but remain below recessionary levels. Likewise, industrial commodity prices are still strong, although they have weakened a bit. If we see these two key economic indicators deteriorate much further it will be cause for concern. courtesy of Leed's Newsletter

Burst Bubble? Commodities' Long-Term Story Remains Intact

Burst Bubble? Commodities' Long-Term Story Remains Intact - Seeking Alpha: "I heard it on TV so it must be true.

All kidding aside, the last two days have been absolutely brutal for the commodities side of our portfolio and Wednesday, the energy stocks also got whacked. And I don’t know about you folks but I haven’t reached that Zen, Buffett-like state where falling prices don’t faze me. They faze me. A lot. In my experience, the periods in which my self-doubts peak are honestly the times I should have been buying. Even in the short time since this website/blog has been up (since 01/2007), the market has already tested me many times and I can’t profess to have bought every time at that bottom. I have regretted it every time."

Mainemade Millionaire - Burt's Bees

Burt's Bees/How I Made My Millions
video - CNBC

Video - CNBC.com
I great entrepreneurial story from Maine. The success story begins when Roxanne Quimby's was a struggling artist living in a Main cabin without running water or power.

Inspiration: Get some hot coffee and listen to this great story.

Crisis Lessons - Wall Street Socialism

Rewarding corruption in the free market

March 18, 2008 by Jeet Heer
I’ve gathered together my thoughts on Wall Street Socialism, developed as squibs on this blog, into a National Post op-ed, available here. As they say in the vulger jargon on the blogosphere, this is the money quote:

The current crisis is pregnant with political and economic lessons. The problem with Wall Street Socialism is not just that it’s hypocritical but that it doesn’t go far enough. The Federal Reserve has already tossed a trillion dollars into the market in a futile attempt to stop the current crisis from spreading; much more will be spent before financial health returns.

If we can afford socialism for the rich, we can certainly also have socialism for the poor. If government is needed to bail out the rich in times of crisis, let’s have a more sharply progressives tax structure, so that the beneficiaries of the current system who are so sheltered from risk pay their fair share. If the state is so willing to intervene to protect the financial status quo, there is no justification for the increasing income inequality that has characterized contemporary capitalism.

Bush's Market-Liberal Scam

Economist's View: "Bush's Market-Liberal Scam": "'Bush's Market-Liberal Scam'
This is from the Ludwig von Mises Institute. They are pleased Bush wasn't able to get his Social Security plan implemented because it would have undermined free market capitalism:
Bush's Market-Liberal Scam, by Llewellyn H. Rockwell, Jr.: President Bush began his second term with a big push for 'Social Security privatization.' ... Let's say Bush had actually achieved his goal of creating private accounts..., and a sizable swath of the American public had invested in safe mutual funds spread across many sectors."

Evidence of "Walking Away" In WaMu Mortgage Pool

Evidence of "Walking Away" In WaMu Mortgage Pool

from Minyanville March 14th
A friend of mine who goes by name "CS" sent me this screen shot of a particular Washington Mutual (WM) Alt-A mortgage pool known as WMALT 2007-0C1. Let's take a look to see what we can see.

Click to enlarge

Let' Do the Math

The total pool size is $513,969,100. $476,069,000 was rated AAA. 92.6% of this cesspool was rated AAA. Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!

Somehow this pool was 92.6% rated AAA in spite of the fact that full doc was provided on only 11% of the loans. This folks is another fine example of how out of whack the rating agencies are.

And if Bear Stearns was loaded up with this garbage, it deserves to go under.

World Reserve Currency - Euro could replace Dollar

The euro could surpass the dollar within ten years

Tuesday, March 18, 2008
Listen to this article When we've said the greenback could lose its reserve currency status to the euro, the idea has often been met with derision. Yet we see evidence that international commercial transactions are moving away from dollar-based invoicing, a sign that the tectonic plates are shifting.

In a post at VoxEU, Jeff Frankel, a Serious Economist (and an American at that) discusses why the euro is a plausible replacement for the dollar as the main coin of international commerce. And Frankel cites a cause not often mentioned:loss of respect for the US as dominant military power. Frankel argues that the savings-rich countries who have benefitted from our armed presence, like Japan and the Gulf States, have seen buying our Treasuries as a fair deal in return to enjoying our protection. But the Bush Administration's unilateralism and recklessness (which have also been accompanied by unprecedented current account deficits, which increase the need for foreign capital greatly) have tried the patience of our creditors.

Are your investment accounts insured?

Who insures your brokerage account if the brokerage goes belly up?

Minyanville - NEWS & VIEWS-Article: "A number of Minyans have asked about protecting their investments against brokerage bankruptcy. Thanks to Bear Stearns, (BSC) this question no longer seems far-fetched.

Most people are familiar with the Federal Deposit and Insurance Corporation, or FDIC. Created in 1933 by the Glass-Steagall Act, the FDIC guarantees deposits held in commercial banks for up to $100,000. But the FDIC does not cover brokerage accounts. If Citigroup (C) were to go bankrupt, asks Minyan George, what would happen to stocks and bonds here there as investments?"

Bailouts put Fed's credibility on the line

FED rescues investment managers from their own mistakes at taxpayer expense ?

Bailouts put Fed's credibility on the line - International Herald Tribune: "The biggest danger is damage to the Fed's credibility if it is seen as unwilling to let financial institutions face the consequences of their decisions. Central banks have long been acutely sensitive to 'moral hazard,' the danger that rescuing investors from their mistakes will simply encourage others to be more reckless in the future.....At the moment, the Fed has committed cash and Treasury bonds that are in its own reserves that total about $800 billion. But having agreed to provide at least $400 billion in short-term loans, and probably more, it is pledging a big share of its own resources to the rescue.

"The Fed is now running on less than a half tank of gas," Laurence Meyer, a forecaster at Macroeconomic Advisers and a former Fed governor, wrote in a note to clients. "The Fed seems to be running out of room for these types of measures."

Comment by Norton: On a positive note, the Fed is aggressively attempting to stabilize the investment market and the economy. Should these temporary cash flow loans be turned into permanent and effectively unsecured loans to both FDIC insured banking institutions and now the non-bank investment businesses, then our taxpayer money will have been used without our consent via any elected body or referendum. The US Congress and the White House should only allow this with the full vote and consent of the House and Senate...just as the public should have a say before we go to war.

A Bunch of Ways to Diversify - MVTV

A Bunch of Ways to Diversify

Minyanville - ENTERTAINMENT-MVTV:
A well-diversified investor is a successful investor. Hoofy and Boo take a look at a way to go beyond stocks and bonds to spread out your risk. Cheers!"

Auction-Rate Bond Paralysis Continues

Gross, SEC Fail to Break Auction-Rate Bond Paralysis

By Jeremy R. Cooke

March 14 (Bloomberg) -- Billionaires Bill Gross and Wilbur Ross and the U.S. Securities and Exchange Commission failed to restore confidence in the $330 billion auction-rate bond market, as borrowing costs for states and municipalities rose.

Auctions for borrowers from San Francisco to Houston were unsuccessful even after Gross, who runs the world's biggest bond fund, and Ross said they were buying municipal debt to take advantage of rising yields. Thirty-year tax-exempt yields rose 5 basis points to 4.88 percent this week. Last week, they fell 18 basis points from a three-year high of 5.01 percent, Municipal Market Advisors data show.

More than 67 percent of auctions in the market that includes cities, colleges, hospitals, student lenders and closed-end funds failed this week, based on data compiled by Bloomberg.

As Auction Gavel Comes Down, Interest Rates Go Up for Hospitals

As Auction Gavel Comes Down, Interest Rates Go Up for Hospitals: "March 14, 2008, 4:03 pm
As Auction Gavel Comes Down, Interest Rates Go Up for Hospitals
Posted by Theo Francis
What are non-profit hospitals doing investing in the obscure — and lately troubled — credit products known as auction-rate securities?"

INVESTMENT - MVTV

Minyanville makes investing advise entertaining with
Hoofy & Boos News & Views
Minyanville - ENTERTAINMENT-MVTV

Finding the intraday turn in the market - TRIN, TRINQ

TheStreet.com : Ten Checkpoints Before Market Liftoff Investing: "The trading indices (TRIN and TRINQ) show volume backing up price action. Volume confirms price action. You can check the TRIN (NYSE) and TRINQ (Nasdaq) indicators, which combine advance/decline and up-volume/down-volume indicators into a single, short-term money flow indicator. The formula is:

In general, a TRIN of less than 1 implies that money is moving into stocks, and greater than 1, out of stocks."

Check this custom interactive chart of TRINQ courtesy of Norton West

Look for Names That Don't Need Money

Look for Names That Don't Need Money
By Jim Cramer

The real banks are companies like Procter & Gamble and Colgate . Or Cisco and Intel . The real banks are Coke and Pepsi . These are the companies with gigantic hordes of cash that have been trying to put it to work either buying other companies are buying back stock. There is a tremendous irony here. You have a real economy that is swimming in cash and good orders, everything from Caterpillar and 3M , to Honeywell and Exxon . And then you have a couple of dozen banks that don't have any more money. If you want to bottom-fish off today's action, why not to go after the companies that don't need money, not the ones that do? At the time of publication, Cramer had no positions in the stocks mentioned

Fed Creates the Dealer's Dole, Affirms Croney Socialism

Jesse's Café Américain: Fed Creates the Dealer's Dole, Affirms Croney Socialism: "Fed Creates the Dealer's Dole, Affirms Croney Socialism


The Fed cuts the Discount Rate by 25 basis points, and creates a new lending facility for the banks to lend to the brokers to be called the Primary Dealer Credit Facility (PCDF) aka the Dealer's Dole or Aid to Dependent Millionaires."

courtesy of Jessie's Roadside Cafe'

Why is the FED staffing up?

Planning a busy year for bank foreclosures

The Federal Deposit Insurance Corp. is planning to beef up its division of resolutions and receiverships, which handles failed banks, by 40% this year. The division currently has 233 employees. Considering that only three banks failed last year, why do they need more examiners?
For now, the FDIC is looking to bring back 25 retired employees with experience in the bank closures of the 1980s and 1990s. No, it's not just a reunion of hard-nosed accountants who closed banks and savings and loans in notorious Friday night raids and liquidated their assets. ...This week Fed Chairman Ben Bernanke put it bluntly: "There probably will be some bank failures." Regulators have some real work ahead of them. The FDIC had 76 banks on its problem bank list at Dec. 31, down from 136 problem banks in 2002 and 213 banks in 1990. This past year's three failures were the first since 2004. Apparently the FDIC expects to have a busy year.

FED bailing out the High Rollers with tax payer money?

Comments by Norton: The Fed may be breaking the decades old rule of being the lending of last resort; that is, only to federally chartered financial institutions. Bill Gross of PIMCO describe these non-financial sector as the "shadow financial system." these businesses look and act like financial institutions but are not backed or regulated by the FED. Much of the risk of financial crisis news has been revealing forcoming collapse of businesses in this market; such as, Bear Stearns and Carlyle Capital. They deal in highly leveraged asset back investment vehicles like SIVs, conduits, money market funds, monolines, investment banks, hedge funds. this is now affecting even AAA bond markets like the municipal bonds that are essential for our towns, cities and states to finance improvements that we are voters approve. The municipal bonds are secure;however, the market and bond insurers backing them may not be now so the auction-rate muni securities market is begging for buyers which is driving up the rates for our municipal projects.

Last week the FED agreed to facilitate getting an adequate supply of secure US treasury bonds to the financial market by offering to swap them for leveraged asset backed securities that the banks have for which they cannot establish a market value or find buyers for. This is reputed to be a temporary loan for 28 days. Then what? Who can mark-to-market these questionable vehicles and who will ultimately buy them? Once this is done, who carries the write down on their balance sheet? The FED or the financial institution?

Also, last week the FED came to the rescue of brokerage firm Bear Stearn indirectly through offering liquidity loans with JPMorgan as their conduit(the only way to make it legal). According to Nouriel Roubini Mar. 14, 2008, "...The FED is acting as if Bear Sterns is illiquid but solvent. That is delusional and the official sector support of an otherwise insolvent institution will end up - like many other recent Fed actions - being paid for by the US tax-payer...."

Read also:
12 Steps to a Financial Disaster by Nouriel Roubini Feb 12, 2008

Carlyle Capital - The Bush, Saudi connections

Carlyle Capital - margins calls go wanting $500 million

When it was established, CCC, run by John Stomber, a Carlyle managing director, leveraged its $670m equity 32 times to finance a $21.7bn portfolio of AAA-rated residential mortgage-backed securities issued by Freddie Mac and Fannie Mae. It borrowed money from at least a dozen banks and firms, including Bank of America, Citigroup and Merrill Lynch, some of whom were said to be selling the assets yesterday....Telegraph.co.uk 03/14/08

The Carlyle Group is a Washington, D.C. based global private equity investment firm with more than $81.1 billion of equity capital under management.[1] The firm operates four fund families, focusing on leveraged buyouts, venture & growth capital, real estate and leveraged finance investments. The firm employs more than 575 investment professionals in 21 countries with several offices in North America, South America, Europe, Asia and Australia; its portfolio companies employ more than 286,000 people worldwide. Carlyle has over 1200 investors in 68 countries.
The firm is well known for the dozens of world political figures and luminaries it has employed. Some of these figures, such as George H. W. Bush and his Secretary of State James A. Baker III, have generated controversy stemming from allegations of conflicts of interest.

Carlyle Capital creditors seize assets (reuters)

Meet the Carlyle Group - news you do NOT want to know

Housing and Energy Crisis. Almost solved.

Comment by Norton: Notice the wind energy mill on the roof. Now, we almost have the housing crisis solved. Add to this recipe a few solar panels for hot water and electrical power. Then add some geothermal units for heating and cooling. This represents really creative residential zoning. Voila! housing and energy crisis solved!

The Big Picture | Real Estate: "latest real estate development concept?"

Financial Mess can be Funny

Minyanville - ENTERTAINMENT-MVTV

Real financial news with a sense of humor

courtesy of Norton West and Minyanville

Financial Crisis - indicators and estimates

Financial Crisis - indicators and estimates: "Financial crisis predictive monitor, short & long term graphs
(gold added,in light blue, with 1/3 the importance of currency)
(The early warning line is based on a 13 week change rate instead of an annual change rate)"
Courtesy of 2008 NowAndFutures.com

Ten ways to crash proof your investments

FundAdvice.com - Ten ways to crash proof your investments: "Ten ways to crash proof your investments
Written by Paul Merriman

Everybody’s a genius in a bull market, the old saying goes. But a bear market creates fear, uncertainty and costly mistakes.

The conventional definition of a bear market is a decline in prices of 20 percent or more, lasting at least two months. Whether Wall Street is in a bear market right now depends on what is being measured. But there’s no question this market has unsettled many investors."

1. Diversify among many stocks
2. Diversify among many sectors
3. Spread to different asset classes
4. Spread amongst different geographic / market areas
5. Include some fixed income investments
6. Active risk management - switch your equity/cash balance in a bear market
7. Avoid paying unnecessary expenses - watch trading costs, mgt. fees.
8. Avoid paying unnecessary taxes - fund managers can limit your taxes, know the tax obligations before you sell. Consider tax - exempt muni bonds
9. Don’t panic - avoid following the market trends during volatility. Sell on rises, buy on dips.
10. Don’t think you can outwit the bear by avoiding all risk. Crashes happen and so do those nasty bear markets. Be patient.
    

Canadian Pension Funds at risk

Mish's Global Economic Trend Analysis: "20 Canadian ABCP Trusts File Bankruptcy

The Québec Pension Plan (Caisse) and the Ontario Teachers' Pension Plan are on the hook for some $33 billion in ABCP as are 40 other trustholders, mining companies, paper companies, etc all of which thought they were buying short term easily marketable notes.......With the Bank of Montreal Missing Margin Calls earlier this month, what had to happen did: ABCP players to seek bankruptcy protection.

The committee working to untangle $33-billion of frozen commercial paper plans to ask an Ontario judge Monday to grant bankruptcy protection to the 20 trusts that issued the paper, as it works to restructure them.

Investors ranging from major corporations to provincial and territorial governments and private individuals have been stuck holding the paper since last August, when the U.S. subprime mortgage crisis tossed financial markets into a tailspin, causing the market for Canadian third-party asset-backed commercial paper to come to a screeching halt."

The crash you don't see

Norton's comments: For all these financial instruments that created so much liquidity in the market these last few years, there are no buyers:

• mortgage-securitization market


• structured-investment-vehicle market


• collateralized-debt-obligation


• leveraged-loan markets


• auction-rate securities market


• credit-default-swap market (is dying)

from MSN 2/29 Jon Markman:
"...Government-sponsored mortgage lenders Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) have caught a break, to be sure, with caps on their lending levels lifted this week, but business is still so poor, largely because of the corrosive effects of their credit derivatives books, as I explained in December, that they will still have a hard road to climb after the rally fades.
And most vividly, far from the gaze of dewy-eyed equity investors, the credit markets continue to crash. Auction-rate securities -- municipal bonds bought as cash equivalents through mainstream brokers because of bonds' modest yield advantages over certificates of deposit -- have been failing all month. How can everything be OK if investments sold to widows and orphans have completely lost their liquidity, with no end in sight? One Seattle stockbroker who put retirees' life savings into auction-rate notes told me he has suffered the first sleepless nights of his career, worrying over when his clients will be made whole....Until banks can identify a new set of chumps to buy complicated, expensive, illiquid investments at outrageous prices, there will be a big smokin' hole in their profit-and-loss statements."

Fed's latest giveaway won't work

The Federal Reserve's $200 billion move on March 11 was perfectly timed to prevent a panic in the financial markets. But that didn't really fix anything, MSN Money's Jim Jubak says -- it merely bought the economy some time to recover.

Tuesday March 14th - Telegraph.co.uk "The Fed's dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60pc of the entire US home loan market. Fannie Mae's share price fell 19pc in panic trading on Monday after Barron's magazine said it may need a rescue package.
"The agency crisis was a Tsunami event," said Tim Bond, global strategist at Barclays Capital."The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody's attention in Washington," he said...."This is not going to be enough," said Hans Redeker, currency chief at BNP Paribas.
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"The Fed is doing absolutely the right thing by soaking up mortgage debt that nobody else wants. This will have an impact on spreads, but we're seeing the deflation of a major bubble. The Fed is still going to have to cut interest rates by 75 basis points next week," he said.
It is a ground-breaking move for the Fed to accept mortgage collateral, even if the debt is theoretically 'AAA-grade' debt. The Fed is constrained by Article 13 of the Federal Reserve Act from buying mortgage bonds outright, but it can achieve a similar effect by letting banks roll over collateral indefinitely. The European Central Bank is already doing this, shielding Dutch, Spanish, German, and some British banks from the full impact of the credit crunch.

Bush supports a strong dollar?

Bush Would Like a Stronger Dollar?

Economic Browser March 12, 2008
That's the title of a post in today's WSJ RealTime Economics:
President George W. Bush said in an interview today with Nightly Business Report that the dollar's fall to record lows against the Euro is not a good thing and he "absolutely" wants a stronger dollar……
(Has he really seen the chart? By Norton)

Comments by economic Browser: When Greenspan attempted to paper over glaring deficits in national security on the heels of the Oslo Peace accord-inspired Sept. 11 box cutter attacks, he set in motion this decline of the US dollar.
I want to suggest that the apparent decline in US hegemonic capital has reduced America's status as the safest place on earth to invest and has reduced the ability of the US to intervene globally to prop up capitalism. However, the bond yields suggest that the US is still a safe place to invest. Or global bond investors are no more sophisticated than real estate investors. Hard to tell, frankly.
Moreover, it seems clear that US fiscal, monetary and energy policy mis-steps have hurt investors regardless of origin more than failing and costly, bloody US colonial policy. Those costs will reveal themselves over the next few decades I imagine.

George Soros - Worst Financial crisis in 60 Years

George Soros and the Worst Financial Market Crisis in 60 Years
:: The Market Oracle :: Financial Markets Forecasting & Analysis Free Website:

“He was just spotted by me on the cover of CBS Marketwatch homepage Fri 523P CST. Will he make to the cover of Time, Newsweek , or Biz Week for Monday?”

The reference was to this growling grizzly shown below. It couldn't have come at a better time (from a contrarian's perspective)!

So there you have it, mainstream media sentiment in microcosm. The sentiment couldn't be any more bearish right now. Everyone is talking about recession and more financial turmoil as if it's inevitable. That by itself is an indication that the stock market has already priced in the worst and an interim bottoming process is well underway."

“He was just spotted by me on the cover of CBS Marketwatch homepage Fri 523P CST. Will he make to the cover of Time, Newsweek , or Biz Week for Monday?”

The reference was to this growling grizzly shown below. It couldn't have come at a better time (from a contrarian's perspective)!

So there you have it, mainstream media sentiment in microcosm. The sentiment couldn't be any more bearish right now. Everyone is talking about recession and more financial turmoil as if it's inevitable. That by itself is an indication that the stock market has already priced in the worst and an interim bottoming process is well underway.

P.S. by Norton: I have been bottom feeding for companies servicing economic infrastructure needs for telecommunication, utility, agriculture industries on the theory that they will be least affected by a recession. Try hard to watch for a bottom and pick a really advantageous price. If it drops then you get it, if not so what.

Leading Indicators all point down

Stock Market Leading Indicators:

All Showing Major Weakness
Mar 12, 2008 - 04:14 AM Market Oracle
By: Donald_W_Dony
Great easy to read charts in this article.....
Bottom line: Leading indicators of the U.S. equity markets are moving in concert lower. These indicators normally lead the stock market by 6-12 months. As there is no technical evidence of any long-term trend reversals or even finding solid price support, this would suggest additional downward pressure can be expected for the equity markets in 2008. This action coordinates with the topping of the 2006-2010 business cycle. The peak in the cycle is associated with rising unemployment, weakening earnings and Fed reduction in interest rates.

Investment approach: As the crest in the 4 year stock and business cycles have developed approximately mid-term, the likelihood of another 1-2 years of down trending equity markets is large. Commodities are one of the few investments that remain in a secular bull market. As the Fed will continue to cut interest rates over the 1-2 years, the USD will drift lower which will escalate inflationary pressures and drive raw material prices higher. ETFs are an excellent vehicle to capture the commodity rise. Gold, oil, agriculture and natural gas will all take advantage of the declining US dollar.

Additional research can be found in the March newsletter. Go to www.technicalspeculator.com and click on member login.

Your comments are alway welcomed.

By Donald W. Dony, FCSI, MFTA

How companies bury their debt

Key Company Statistics you cannot believe

To hide the facts from shareholders, companies disguise long-term debt, stock-option obligations and other nasty numbers in some creatively tricky ways. Here are some of the biggest offenders:
Key Stats for Walgreen, CVS from Yahoo Finance.

Even the high interest money market funds can be at risk from leveraged asset investments Washingon Post March 14th

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Hi Friends:

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Choose either iGoogle or a Yahoo account to design your homepage. It will require that you have a Google email account or Yahoo email account.  Once that is done, you can add elements to build your homepage.  These element are the XML post URLs for the news page or blog you want to see a piece of on your homepage.

 

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Bank Index - reading the tea leaves

FED FIX - Reading the tea leaves

After the FED takes in junk collateral for high grade treasuries yesterday, the market responded with a huge rise. I wonder what the difference is today? The swap temporarily offers the banks the ability to sell treasuries that the public is asking for. It gives the FED a way to utilize the off balance sheet junk investment vehicles that no one will buy. But what happens after the 38 day loan is over? Do they have to take back the junk given the FED as collateral? And if so, do they then have to declare it on their balance sheet and subsequently report more huge write downs? or will the FED take on the effort to dispose of this junk at firesale prices?

$BKX - SharpCharts from StockCharts.com: "$BKX". It was up yesterday and having second thoughts today. Any benefit from this attempt at providing liquidity will take 60 to 90 days or more to show up in the critical leading economic indicators that will point to a recovery. Watch for more bad financial sector news and a further downturn in the market.

Courtesy of Norton West

Meltdown, Anyone?

RGE Monitor - Meltdown, Anyone?

RGE - The Rising Risk of a Financial Meltdown and the Escalating Losses in the Financial System: "Nouriel Roubini Mar 10, 2008
Given the growing turmoil in financial, credit and equity markets my 12 steps scenario to a systemic financial meltdown is becoming more likely by the day; and my estimate that financial losses could end up being at least $1 trillion dollars – considered as an extreme worst case scenario a few weeks ago – is now being endorsed by an increasing number of serious analysts.
Let us consider the details of these seriously worsening financial conditions"..read Dr. Doom's 12 steps to a Meltdown here
courtesy of Norton West

Ethanol Folly

Ethanol Craze Cools As Doubts Multiply - WSJ.com: "Ethanol Craze Cools
As Doubts Multiply Claims for Environment,
Energy Use Draw Fire;
Fighting on the Farm
By LAUREN ETTER November 28, 2007; Page A1"

Little over a year ago, ethanol was winning the hearts and wallets of both Main Street and Wall Street, with promises of greater U.S. energy independence, fewer greenhouse gases and help for the farm economy. Today, the corn-based biofuel is under siege.

courtesy of Norton West

Trade free or die

Trade free or die: Musings of Warren Buffet

- courtesy of Market Watch
By Last update: 7:32 p.m. EDT March 10, 2008
...Finally, trade is one of my bigger hot buttons these days. Recent political stumps have called for the rework of Nafta or its elimination altogether. Careful -- it's a two way street. By eliminating Nafta we might protect a lot of American jobs, but we'd lose just as many if not more by hampering exports. Such a policy tried during the Great Depression only made things worse. Buffett agrees. "Our country's weakening currency is not the fault of OPEC, China, etc. Other developed countries rely on imported oil and compete against Chinese imports just as we do. In developing a sensible trade policy, the U.S. should not single out countries to punish or industries to protect. Nor should we take actions likely to evoke retaliatory behavior that will reduce America's exports, true trade that benefits both our country and the rest of the world."

Prosperity still rules

There's more, but these are the highlights. Buffett is clearly worried about some aspects of the economy, and chagrined at the way at least some corporate American managers, politicians and financial professionals have vacated its proper stewardship.

But he does offer one kernel of optimism in talking about where Berkshire will concentrate future investments: "Despite our country's many imperfections and unrelenting problems of one sort or another, America's rule of law, market-responsive economic system and belief in meritocracy are almost certain to produce everlasting prosperity for its citizens."..."

Buy your Ammo and canned goods

3/10 - Early Stages of Deleveraging  by Analyst Brad Hintz of Sanford C. Bernstein. He reckons that it's only the early stages of the de-leveraging and that the peak of the pressure will happen sometime over the next six months. "Buy your ammo and canned goods," he likes to joke. The markets won't come back until the relentless selling is over, and investors standing awash in cash return to the market.

 

3/7 - Pres. Bush Dismisses Iraq Recession: The War Has 'Nothing To Do With The Economy'. This morning on NBC's Today Show, President Bush denied that the there's any link between the faltering U.S. economy and $10 billion a month being spent on the Iraq war. In fact, according to Bush, the war is actually helping the economy:

 

3/7 Naked Capitalism- Covert Nationalization of the Banking System

We had warned a couple of months ago that a colleague with serious connections into the Treasury and Fed told us they were working on plans for a quasi-nationalization of the banking system. Their view was that while banks would technically be solvent, they'd have enough bad credits that they would be unable to extend new loans....But the Bernanke Fed has branched out. It has sought to lend against a wide-range of assets, actively seeking to replace securities about which the market seems spooked with safe-haven Treasuries on bank balance sheets without creating new cash. By doing this, the Fed hopes to square the circle of helping banks through their "liquidity crisis" without provoking a broad inflation.

 

3/5 Trading the Dow's Inevitable Breakout (parabolic curves)

Wed, 03/05/2008 - 19:14 — The Trader

by Michael Nystrom.  ".....  Now that gold and oil are going up like rockets, the timing simply isn't fortuitous for newcomers to get in on the action for short term trades. These markets are going parabolic, and parabolic rises tend to be followed by parabolic declines. The trick to making big money trading is to get in on the trends early, ride them for a long time, and sell out to the newbies, just as they're going parabolic. Dig? "

 

Comments - Norton West:
 
 

US Dollar decline, stagflation

3/7 Larry Summers Assist Sec Treasury- Mr. Summers ... said federal housing and mortgage policy is "behind the curve." He said the focus on adjustable rate mortgages which are resetting is misplaced; lower interest rates ameliorate that. He estimated 30% of homes with mortgages -- about 15 million in all -- are likely to be worth less than their mortgages. He argued foreclosures are enormously costly and destroy value and thus should be prevented as much as possible. ...He also said estimates that the housing and mortgage bust will reach $400 billion are likely to be "substantially optimistic". (consider the Ultra Short Financials ETF but it is volatile and only buy it low! SKF)

3/6-But as the Bernanke Fed slashes interest rates to stop a slide in the US housing and stock markets, and expands the MZM money supply, at a hyper-inflation rate of +15.7%, it's also simultaneously blowing enormous bubbles in the precious metals and commodities markets. The surge in agricultural and energy prices have led to a +7.5% jump in US producer prices, the biggest 12-month gain in 27-years, and consumer prices are up +4.3%, a 17-year high. See the chart on MZM which is even more inclusive than M3....For now, the ECB wants to see if a steady repo rate at 4% can block gold's advance at 650 euros/oz. But with the Fed determined to slash its federal funds rate in the months ahead, regardless of the inflationary consequences and other foreign central bankers unwilling to tag along, the stage is set for extreme volatility in exchange rates, which in turn can trigger wild gyrations in the commodities markets. (consider ETFs: FXE or UDN if bearish on US Dollar and bullish on Euro)

M3 Money supply data is back http://www.nowandfutures.com/key_stats.html
printed in May 07 but still very informative http://globaleconomicanalysis.blogspot.com/2007/05/real-world-vs-financial-worlf.html

Dr Doom's (Nouriel Roubini) 12 Step Financial Worldwide Collapse scenario-presented at the DAVO Central Bankers conference this February. He predicted the economic recession July 17, 2006.

Investors, what to do?

My November notes still apply...:)

things to watch especially during the next few weeks:

;

TRIN index: shows results of ratios of stocks that advance vs decline and the associated ratio of the volume up and down then plots that on a graph. The bears are about to win out which should show up in a further market decline; This will present some buying opportunities as early as today; My guess is still it will reach the bottom on Friday this week but it could stretch out for several weeks. It can give you a heads up when to buy or sell at or about the highs and lows of market sentiment. Here is where you can see the TRIN chart and explanation:

EDUCATION: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:trin 

CHART: http://stockcharts.com/h-sc/ui you can customize; note the MACD high for August when the mkt. dropped and the same pattern has just taken place in November.

 

Use Yahoo Beta Graphs and add the Bollinger Bands to see the likely range of prices during the day.  You can see Alerts for getting emails when you want to buy or sell. When you are ready, use this to set a Limit Order for a price that is a little BELOW the lower Bollinger Band  and/ or the 200 Day moving average (check that price for 1year, 6mos., 1mos, and 5day periods).

 

1. Buy only those stocks, ETFs or Mutual Funds showing long term up trends (5yr of history) and with these additional criteria (for stocks and ETFs). That way if the market really goes south, the economy really gets into a recession, you will make out ok. For mutual funds you need substantial global exposure since it may give you a cushion against the continuing dollar exchange rate decline against other currencies.

2. Pick countries where PE ratios are low (see article:http://www.marketoracle.co.uk/Article2815.html) and their currency is strong against the dollar.

3. Pick sectors on the rise such as, argricultural commodites, basic and precious metals, industries that service the oil, gas, green, alternative energy markets, India, Brazil, Russia.....watch for these being part of your mutual fund Top Ten profolio investments.

4. PE ratio less than that industry average or less than 20:1. Price / Sales is even a better measure.

5. Good return on equity numbers (use Google, Yahoo Finance or see Reuters stock analyses.)

5a. Yahoo Finance has a Compare with Competitors page that shows comparable ratios - very helpful.

6. Good Cash Flow from operations numbers

7. Beta sensitivity number under 2 and preferrably around 1 - 1.50

8.  Set Limit order price, Below X $ about 10% below current or about the October low so when the market stabilizes, you already have a 5% plus capitacl gains.

9. consider a small portion of your portfolio in Double Inverse EFT related to the dollar(FXI, UDN), so when our idiot Bush Administration continues to talk about a strong dollar but practises benign neglect in letting it fall against many of the world currencies (EURO, YUAN, YEN) then you will have something going UP.  CAUSE, this will be a very short term investment that you will have to follow daily and setup a SELL order when it rises 15-20%.