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States declare Fiscal Emergency: NY and California Mish's Global Economic Trend Analysis: New York Governor Warns Of Economic Crisis : "Era of ‘buy now and pay later, and later’ is over New York is the second state in five days to declare a fiscal emergency. See Schwarzenegger Announced Intention To Slash State Workers' Pay Till Budget Passes for more on the crisis in California"

UPDATE 1-Merrill sees $6 bln writedown at Citigroup in Q3 | Reuters : "July 30 (Reuters) - Merrill Lynch expects Citigroup Inc (C.N: Quote, Profile, Research) to write down about $6 billion in the third quarter and lowered its earnings estimate for the quarter to a loss, but ruled out the possibility of a capital raise. The brokerage, which has a 'neutral' rating on the stock, cut its third quarter estimate to a loss of 28 cents a share from a profit of 13 cents. The brokerage said that collateralized debt obligations (CDOs) backed by 2006-2007 vintage subprime mortgages may need to be marked to around 22 cents on the dollar. Merrill said Citigroup carries its net subprime related CDO super-senior positions at $18.1 billion, which was less than half of its September 2007 valuation of $43 billion."

John Murphy at stockcharts.com SECTOR ROTATION MODEL... One of our readers asked where we are in the Sector Rotation Model. That model shows the normal sector rotation that takes place at various stages in the business cycle. The chart shows that basic materials and energy are market leaders at a market peak. As the economy starts to slow, money starts to rotate out of those two inflation-sensitive groups. Basic materials peak first and energy last. This week's downturn in basic material stocks suggests that the topping process is moving even further along. Energy may be the next to roll over. As the economy slows, money flows into consumer staples, healthcare services, and utilities. That's where we appear to be right now. One way we can tell that a bottom is near is when money starts to flow into financial and consumer discretionary stocks. So far, there's no sign of that happening. That leaves us in the midst of a bear market with money flowing toward staples, healthcare...

CDO's at 20 percent of their face value - are you getting the picture? Bloomberg.com: Worldwide : "July 29 (Bloomberg) -- Merrill Lynch & Co., the third- biggest U.S. securities firm, will sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings imperiled by mortgage losses."

Four big banks sign onto the 'covered bond' concept in a new bid to ease the strains in U.S. mortgage markets. By Colin Barr, senior writer Last Updated: July 28, 2008: 3:39 PM EDT NEW YORK (Fortune) -- By issuing covered bonds, a bank borrows money from investors, using assets on its balance sheet - such as home mortgage loans - as collateral. Until now, covered bonds haven't been issued in the U.S., though the concept has long been in use in Europe. But with the housing bust threatening to push the economy into recession - the International Monetary Fund warned Monday that "a bottom for the housing market is not visible" - policymakers and financial institutions have been trying out new ideas in hopes of making mortgages more available, while breaking the cycle of falling house prices and rising foreclosures. "I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions...

Bust Up These Beasts - Forbes.com : by Steve Forbes "The Treasury/Fed/Congressional rescue of Fannie Mae and Freddie Mac is only a stopgap. Unless fundamentally restructured, these two debt-bloated giants will sooner or later blow up. The once implicit, now explicit, government guarantee for these two quasi-government entities was the reason that they could be leveraged to the hilt, with a debt-to-equity ratio of almost 25-to-1. Instead of just packaging mortgages and selling them off, the companies kept hundreds of billions in these instruments in their own portfolios to fatten profits--and enrich their politically connected managers and political allies. They also went into the junk-mortgage business, buying more than $170 billion worth of dodgy paper."

The Plunge Protection Team gets one right: The members of the President’s Working Group on Financial Markets (aka, The Plunge Protection Team) fired off a letter denouncing a Senate measure designed to curb speculation in the oil futures markets. The working group — which consists of Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox and Commodity Futures Trading Commission Acting Chairman Walter Lukken — called the measure a bad idea. The four noted in their letter that the bill would “significantly harm U.S. energy markets without evidence that it would lower crude oil prices.” What’s more, they said, the bill’s “unprecedented restrictions on market participation could reduce market liquidity, hinder the price discovery process and limit the ability of market participants to manage and transfer risk.”

7/25/2008 9:09 AM ET (RTTNews) - Orders for durable goods unexpectedly increased in the month of June, according to a report released by the Department of Commerce on Friday, with the growth reflecting an increase in demand for goods meant to last for at least three years. The report showed that durable goods orders rose 0.8 percent in June following a revised 0.1 percent increase in May. The increase came as a surprise to economists, who had expected orders to decrease by about 0.3 percent. Peter Boockvar, equity strategist at Miller Tabak noted, "In the government stimulus package, there was a depreciation tax credit that expires by year end, so companies have to now use it or lose it."

Jesse's Café Américain : "National Madness posted by Jesse July 24, 2008 excerpt by Gilbert Keith Chesterton 'This slow and awful self-hypnotism of error is a process that can occur not only with individuals, but also with whole societies. It is hard to pick out and prove; that is why it is hard to cure. But this mental degeneration may be brought to one test, which I truly believe to be a real test. A nation is not going mad when it does extravagant things, so long as it does them in an extravagant spirit. But whenever we see things done wildly, but taken tamely, then the State is growing insane..."

Bond maven Bill Gross has raised his estimate of losses from the credit crunch to $1 trillion. One has to note that his firm is a large holder of Freddie and Fannie debt and he issued this pronouncement the day after the GSE rescue bill passed the House and looks certain to become law. Note also that this is far from the gloomiest view on record. Well respected analyst Frank Venerose now predicts $2 trillion in credit related losses; Hedge fund Bridgewater, whose research is read by central banks, expects $1.6 trillion in markdowns; hedge fund manager John Paulson, who bet aggressively and successfully on the subprime debt debacle, anticipates $1.3 billion.

It is 2012 when the Federal Reserve and the US Treasury will realize that the unthinkable Titanic has sunk and with it went more than three trillion dollars in ballooning budget deficit. According to savvy smart money investors, Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson's request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac. Does Paulson have a choice at this stage? He really does not have a choice. He has to keep the ship afloat and for that he can borrow from the future knowing well very few in the past Administrations are held countable in America for their failed and senseless policies. Can Paulson’s plan really save Fannie Mae and Freddie Mac?

By Joseph A. Giannone 1:50 p.m. 07/24/2008 NEW YORK (Reuters) - New York Attorney General Andrew Cuomo filed a civil lawsuit on Thursday against UBS AG, accusing the Swiss bank of deceptively steering customers into auction-rate securities that this year became impossible to sell amid the credit crunch. The suit, filed in New York state court, accuses UBS of deceptively selling auction-rate securities to customers as cash equivalents. Cuomo also accused unidentified senior executives of wrongdoing, citing subpoenaed e-mails that he said detailed how they dumped $21 million in personal holdings as the auction-rate market collapsed and while the bank still sold the securities to customers.

Mish's Global Economic Trend Analysis: Death Spiral Financing at WaMu, Merrill Lynch, Citigroup : "Quite unbeknownst to the general public at the time, downside protection was built into these equity raises to protect these investors. They are called “look back” provisions or “full ratchet” compensation. We believe it is more accurate to call them “death spiral” securities. They work as follows. The investors in the equity raise would have their investment “protected” by a provision which states that should the bank afterwards raise money at a lower price than what they paid, these investors would be compensated retroactively by having their initial investment priced at this lower price, thereby being issued new shares for free. It doesn’t take a mathematician to see how these provisions can result in massive dilution should the bank subsequently raise even a paltry amount of capital. A new offering will trigger a lower price because of the dilution it would cause, which would...

Mish's Global Economic Trend Analysis: July 22, 2008: "...You Know The Banking System Is Unsound When.... : Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it... Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back...."

Jesse's Café Américain : Nouriel Roubini. Nouriel is a professor of economics at NYU Stern School of Business July 20, 2008 "Most financial institutions are putting increasing numbers of assets in the illiquid buckets of Level 2 and Level 3 assets. While FASB 157 should prevent manipulation of the valuation of such illiquid assets, forbearance by the SEC, the Fed and other regulators allows a massive amount of fudging. An insider told me that in a major financial institution the approach is as follows now: top management decide in advance what the announced writedowns should be and folks dealing with the toxic/illiquid assets come up with totally ad hoc assumptions to make sure that such illiquid assets are valued consistently with the decided-in-advance amount of writedowns and losses. This is not earnings smoothing; this is active manipulation and falsification of financial results aimed at creating even more obfuscation of the true state of financial institutions. This obf...

Jesse's Café Américain : "Hank Paulson had an interesting quote about bailing out hedge funds today: 'We also need additional powers to manage the resolution, or wind-down, of large non-depository financial institutions, such as larger hedge funds, so as to limit the impact of a failure on the broader financial system.' Huge oil trading loss sinks energy trader SemGroup By Robert Campbell Tuesday July 22, 3:58 pm ET Guardian UK NEW YORK (Reuters) - SemGroup LP declared bankruptcy on Tuesday after $3.2 billion in oil-trading losses torpedoed what had been the 12th-largest private U.S. company...."

Eleven reasons America is the new top socialist economy - MarketWatch : "A little history: The core principles of conservative economic ideology are grounded in Nobel economist Milton Friedman's 1962 classic 'Capitalism and Freedom.' Too late to stop President Lyndon Johnson's Great Society, those principles became the battle cries energizing conservatives since Reagan: Unrestricted free markets, free enterprise and free trade; deregulation, privatization and globalization; trickle-down economics and trickle-up wealth to an elite plutocracy destined to rule the new American capitalist utopia... It's backfiring! You folks turned our America from a great capitalistic democracy into a meddling socialist economy. Still you don't get it. You're acting like teen addicts tripping on an overdose of "greed-is-good" testosterone while your caricature of conservative economics would at best make a one-line joke on Jay Leno. Here are 11 reasons your mani...

By Ambrose Evans- Pritchard Last Updated: 6:53am BST 21/07/2008 The global economy is at the point of maximum danger - Telegraph : "Risks have been socialised. Any rewards will go to capitalists... It feels like the summer of 1931. The world's two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution. The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a "chance of a global recession". Plainly, the IMF cannot or will not offer any useful insights. Its "mean-reversion" model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True "m...

By RACHEL BECK 07.18.08, 12:28 PM ET NEW YORK - Federal rescue plans are all the rage in Washington right now, for what seems to be everything but the dollar. The U.S. currency is not going to get a bailout, even though its steep decline is feeding inflation and straining the economy. Federal Reserve Chairman Ben Bernanke and other officials have assured us that the government is on the case of the plunging dollar. Talk is cheap - they won't likely do anything about it. That's because the Bush administration since taking office nearly eight years ago has not supported any U.S.-led intervention in foreign-exchange markets despite the greenback's steep decline. That action would involve buying the ailing currency to boost its value. "It would take a rare set of circumstances to get the U.S. right now to intervene," said David Gilmore, a managing partner in Foreign Exchange Analytics in Essex, Conn.

naked capitalism: "Is America too big to fail?" : "From the International Herald Tribune: In the narrative that has governed American commercial life for the last quarter-century, saving companies from their own mistakes was not supposed to be part of the government's job description.... So it made for a strange spectacle last weekend as the current Bush administration, which does cast itself in the Reagan mold, hastily prepared a bailout package to offer the government-sponsored mortgage companies, Fannie Mae and Freddie Mac. The reasoning behind this rescue ... The mortgage giants were too big to be allowed to fail... From Calculated Risk: Here is another cartoon from Eric G. Lewis, a freelance cartoonist living in Orange County, CA (used with permission). Eric drew this cartoon in 2007, when many people in south Orange County, CA were stunned that prices could fall in their areas."

Forbes, Robert Lenzner 07.17.08, 8:53 AM ET ...Undoubtedly, this spike in bank shares was due in large part to hedge funds, which began covering some of the massive short positions they've built up over the past 18 months. For example, billionaire George Soros--Croesus was told--has covered much of his shorts in financial stocks. Why chance another public policy move by regulators to shut off this automatic feeding trough?... Croesus has been informed about a disheartening problem at Merrill Lynch (nyse: MER - news - people )--$6 billion of illiquid securities, called auction rate preferreds, that are owned by some 40,000 customers of the thundering herd. It seems these 40,000 investors can't sell these supposedly secure money-market-type instruments, which require auctions, and turn them into hard cash. And the issuers of these securities--closed-end mutual funds, like some in the BlackRock (nyse: BLK - news - people ) group, municipal authorities and student loan organization...

Question: I’m 34 years old and have been investing 10% of my income in my 401(k) for 11 years. My balance of $160,000 is less than it was a year ago, despite continued contributions and company match. In fact, the Standard & Poor’s 500 stock index fund where I have most of my money is at or near its level when I started investing. Given inflation, dividends and the fact that I’ve been contributing steadily over time, have I made anything? Or have I been a total fool for my diligence? —Darin Knight, Vancouver, Washington Answer: A total fool for having saved for retirement? Not in my book. • Where Americans Do (and Don't) Cut • How Safe Is Your Money, and How to Protect It • Retired? Build Your Own Portfolio If nothing else, you’ve managed to build a nice nest egg valued at $160,000 before reaching the age of 35. If that’s being a fool, I wish the world were full of fools like you. Most people can only dream that they’d gotten the jump on retirement that you have..."

What happened to American / Maine ingenuity? And this is NOT April Fools Day either! WCSH6.com | Portland, ME | Swedish Man Converts Car To Run On Firewood : "STOCKHOLM, Sweden (AP) -- One Swedish retiree is chopping his gasoline bills with wood. Tore Blomqvist has converted his car to run on wood gas. The 78-year-old former mechanic says that's what they did during the gas shortages of World War II. Wood is partially burned in a contraption on the back of his car. The resulting combustible gas is fed into the engine instead of gasoline. He says a recent 300-mile drive cost him just 17 bucks for four bags of firewood, instead of nearly $120 for gasoline. (Copyright 2008 by The Associated Press. All Rights Reserved.) "

Write Your Representative : "Write Your Representative" Do you want your money / taxpayer money being committed WITHOUT YOUR CONSENT to buy equity in the failing Fannie Mae and Freddi Mac? I dont!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Offering extended credit and loans to them is bad enough but NOT buying EQUITY! Sincerely, Norton West hfnorton@gmail.com South Portland Maine 04106

PickensPlan : "America is in a hole and it's getting deeper every day. We import 70% of our oil at a cost of $700 billion a year - four times the annual cost of the Iraq war. I've been an oil man all my life, but this is one emergency we can't drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil. On January 20, 2009, a new President gets sworn in. If we're organized, we can convince Congress to make major changes towards cleaner, cheaper and domestic energy resources."

There is insurance beyond FDIC -- does your bank offer it? - MarketWatch : "no national insurance program for all banks. However"..It's called the Certificate of Deposit Account Registry Service, or CDARS. See this page for more information. If your bank participates in the program, you can have up to $50 million dollars in Certificates of Deposit and still have full FDIC coverage for your funds. How does it work? You deposit money into CDs at your bank. Your bank spreads the CDs out among enough other banks to ensure that the part of your money in each bank is under the FDIC limits. In other words, you get the benefit of having 5, 10, or even 50 bank accounts with less than $100,000 in each account -- without the headache of opening, tracking and managing all those accounts yourself. All you have to do is sign a document agreeing to allow the bank to spread your money around. CDARS says there are no additional fees to you. And you only get the one bank statement.

Some good news for the US Market and betting on the future naked capitalism: Mirable Dictu! Global Investors Overweight US Stocks : "The US is emerging as the one bright spot in the global gloom, despite the credit mayhem. A net 7pc of investors are overweight in US equities, clearly betting that most of the bad news is already in Wall Street prices. The figure was negative in May..... 'The US has now become the country of cheap manufacturing. You've got 20pc wage inflation in emerging markets so FDI (foreign direct investment) is flowing back there,' said Karen Olney, Merrill's chief European equity strategist."

naked capitalism: Merrill: US May Face "Financing Crisis" : "And the global investment brain has suffered a stroke, an ischemic shock triggered by a sudden catastrophic lack of confidence mixed with heady deleveraging... Now to Evans-Pritchard (hat tip reader Dwight): Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world. The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors. "Japan was able to cut its interest rates to zero," said Alex Patelis, Merrill's head of international economics. "It would...

Mish's Global Economic Trend Analysis: Contact Your Senator: Say No To Fannie Bailout : "Hats off Shelby and Bunning. The latter is threatening to Filibuster Paulson's proposed bailout of Fannie Mae and Freddie Mac. See Paulson Crosses Rubicon Lands In 5th Dimension for Paulson's absurd proposal asking Congress for 'authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence'. Earlier today Senators Bunning and Shelby Blasted Bernanke on Monetary Policy." Norton's comment: Using taxpayer money to buy equity in these GSEs' is further taxation without representation.....plus I can buy it myself if I want to. Additionally, WHY not let them fail and reorganize in a responsible way? This plan resques the execs (rich) from their irresponsibilities and greed (it is socialism for the rich) while punishing the poor taxpayer by dictating our support of someone elses misdeeds. This sounds alot like the Saudi vers...

DENVER — Faced with a surge in the number of proposed solar power plants, the federal government has placed a moratorium on new solar projects on public land until it studies their environmental impact, which is expected to take about two years. The Bureau of Land Management says an extensive environmental study is needed to determine how large solar plants might affect millions of acres it oversees in six Western states — Arizona, California, Colorado, Nevada, New Mexico and Utah. Norton's comment: Well of course! There is more big money interest and lobbyists for oil! The voting public must insist on our money going for renewables and not more tax breaks / continuing tax credits for big oil!

Worst Financial Crisis since Great Depression RGE Media Alert:by Nouriel Roubini Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust. Dozens of large regional/national banks (a’ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust. Some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly. Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a ...

Business of Green » Business Blog » International Herald Tribune » Blog Archive » Legislating green consumerism : "Opponents call it an eco-dictatorship. Proponents say it’s one of the most effective ways of cutting energy consumption so the European Union can meet its ambitious goals on cutting greenhouse gases. On Wednesday the European Commission is expected to make proposals for how energy efficient goods like computers, shower heads and window frames must be. The rules would tighten existing standards for some products and introduce new rules on a range of others. The goal is to force consumers to make greener choices. Goods that fail to meet minimum standards could be banned from the European market. The commission also would force more towns, cities and regions to make environmental considerations an important factor in procurement policies." Norton's comment: If the USA is not going to end up on the scrap heap of fallen empires, then we whill have to be this ...

naked capitalism: Vote of No Confidence: Dollar Tanks (And More on Fannie and Freddie) : "So much for the notion that the not-quite-a-rescue-plan for Fannie and Freddie would calm troubled markets. Equities gave a raspberry yesterday and overnight, the TED spread widened 11 basis points to 133 basis points (a sign interbank funding trouble may be nigh) and today the currency markets, which initially seemed to take the news in stride, beat a path away from the dollar"

The Big Picture | Mortgage Insurance Industry: 70% of Previous Buyers Don't Qualify : "The spreading restrictions are a symptom not only of the housing and credit crisis but of the mortgage-insurance industry's own huge losses. The insurers face massive borrower defaults on loans that were approved when securing a mortgage was far easier.'"

Mish's Global Economic Trend Analysis: Bank Credit Is Contracting : "Paul Kasriel has three other charts all showing a marked slowdown. The key story, however, is that bank credit is contracting along with commercial paper. Consumer credit will eventually follow with a pending $2 Trillion Reduction In Credit Card Lines Coming Up. This is deflation in action and amazingly few see it."

Customers line up at recently seized IndyMac to withdraw money - San Jose Mercury News : "Click photo to enlarge A long line of customers enter IndyMac Federal Bank Monday, July 14, 2008, at... ( Nick Ut )«1»PASADENA - Hundreds of worried IndyMac Bancorp. customers lined up today to pull as much money as they could from the failed financial institution. However, federal regulators said it could be years before the affairs of the bank were fully resolved. Charles Tengeri, a retired school teacher, was the first customer to emerge from the Pasadena headquarters of the bank. He held a check for $171,000 - an amount that he said represented most of his savings. 'I didn't think this could happen,' he said. 'But I'm glad to get anything out.' Customer Harvey Solvan said he had more than $100,000 in the bank seized Friday by federal regulators. 'It's a question of how much we can get and how soon,' he said while waiting in line. Solvan spent Sunday nig...

Bloomberg.com: Worldwide : By Carol Massar and Eric Martin July 14 (Bloomberg) ``I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,'' Rogers, 65, said in an interview from Singapore. ``So we're going to bail out everybody else in the world. And it ruins the Federal Reserve's balance sheet and it makes the dollar more vulnerable and it increases inflation...'' "``These companies were going to go bankrupt if they hadn't stepped in to do something, and they should've gone bankrupt with all of the mistakes they've made,'' Rogers said. ``What's going to happen when you Band-Aid and put some Band-Aids on it for another year or two or three? What's going to happen three years from now when the situation's much, much, much worse?''"

naked capitalism: Whither Citigroup's $1.1 Trillion of Off Balance Sheet Assets? : "It seems so long ago that the Treasury's failed effort to organize an SIV bail-out entity, the MLEC, was regular front page news in the financial press. Citigroup was to be the biggest beneficiary of this operation. Well, the MLEC never came to be, and Citi still has those pesky off balance sheet assets to contend with. Bloomberg provides an update, and it isn't pretty: At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank's $2.2 trillion balance sheet....was a cornerstone of his turnaround plan. Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books..."

Credit Crisis Losses Pass $1.6 Trillion as Credit Contraction Ensures Recession :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website : "$1.6 Trillion in Losses and Counting One of the great privileges I have is getting to read a wide variety of economic research. While I get a lot of material direct from the source, I also have a wide network of people who read other sources and send me what they think is important. When Ambrose Evans-Pritchard wrote this week about a report done by Bridgewater Associates, it got my attention, and fortunately this report was sent to me by a few friends. In my book, Bridgewater is one of the top analytical groups in the world. I pay attention and give strong credence to what they write. And this report is quite sobering. First, let's look at what Evans-Pritchard wrote in the London Telegraph: 'Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis ma...

Press TV - Assad: Iran war will cost US, Israel dear : "Assad: Iran war will cost US, Israel dear Mon, 14 Jul 2008 14:48:22 Syrian President Bashar al-Assad Syria has cautioned that a military attack on Iran over its nuclear program would have serious repercussions for US, Israel and the world. 'It will cost the United States and the planet dear,' Bashar al-Assad said in an interview with France Inter radio on Monday. 'Israel will pay directly the price of this war. Iran has said so. The problem is not the action and reaction. The problem is that when one starts such an action in the Middle East, one cannot manage the reactions that can spread out over years or even decades,' he said. He criticized the US government, stressing an attack on Iran would be far from rational."

Jul 11, 2008 - 11:01 AM By: Mike_Stathis You see folks, as long as the world is dependent on oil, the dollar remains backed by crude since you can only buy it with the dollar (with one rare exception to be mentioned shortly). This dollar-oil link helps keep the dollar as the universal currency. And because the entire world must use the dollar, you can imagine how that dilutes the inflationary effects seen in America due to the Fed's printing presses. Thus, the dollar-oil link ensures the Fed's inflation machine is spread throughout the globe. Without the dollar's link to oil, the inflation seen in America would be much more severe. This is the secret that virtually no one realizes. It is not a conspiracy. It is a fact. And the few in Washington who realize it are never going to admit it. But consider why it is that America has such good relations with the Saudis. After all, it was President Nixon who negotiated with the Saudi Royal family to demand dollar payments for oil s...

By PAUL JACKSON Published: July 11, 2008 It’s over for the Pasadena-based thrift that once ruled the Alt-A mortgage roost. On Friday evening, the Federal Deposit Insurance Corp. closed Indymac Bancorp Inc. (IMB: 0.28, -9.68%) and its $32.01 billion in total assets, and total deposits of $19.06 billion. In other words, ladies and gentlemen, we have our first really serious bank failure of the current credit and mortgage crisis, and the fifth FDIC-insured bank failure so far this year. In fact, the fall of IndyMac is the largest thrift failure in history . As conservator, the FDIC said it will establish and operate IndyMac Federal Bank, FSB — not to be confused with the now-defunct IndyMac Bank, F.S.B. — to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by the now-defunct bank.

Sunday, 13 July 2008 20:37:17 GMT Forget microeconomics. The currency market these days is trading almost exclusively on two macro themes. One - are Fannie and Freddie about to cause a systemic collapse of the US financial system? Two – is Iran really trying to provoke a military response from Israel? If the answer to either one of those questions is yes, the dollar may buckle under pressure.

The upside of $200 oil : "The upside of $200 oil Rising oil prices don't have to mean an economic apocalypse Craig Offman, National Post Published: Friday, July 11, 2008"

Zipcar taxing nonesense Tax Centre | Money | Financial Post Taxing green enterprises? Who is working for the tree huggers?

OPEC Leader Issues Warning About Iran and Oil Supply - NYTimes.com By JAMES KANTER Published: July 11, 2008 VIENNA — "The head of the Organization of the Petroleum Exporting Countries warned on Thursday that oil prices would experience an “unlimited” increase in the event of a military conflict involving Iran because the group’s members would be unable to make up the lost production... We really cannot replace Iran’s production — it’s not feasible to replace it,” Abdalla Salem el-Badri, the OPEC secretary general, said in an interview. Iran, the second-largest producing country in OPEC after Saudi Arabia, produces about four million barrels of oil a day out of the daily worldwide production of close to 87 million barrels."

Statement: Secretary Paulson On Fannie And Freddie - Forbes.com : "Today our primary focus is supporting Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) in their current form as they carry out their important mission. We appreciate Congress' important efforts to complete legislation that will help promote confidence in these companies. We are maintaining a dialogue with regulators and with the companies. OFHEO will continue to work with the companies as they take the steps necessary to allow them to continue to perform their important public mission." Norton's comment: Here comes the fun.

Not to worry, though. "The government doesn't expect the entities to fail and no rescue plan is imminent," the Journal reported, citing "people" who seem to know a lot. See full story. Is there any surer sign of an impending disaster than a reassurance from the White House that it doesn't expect it to happen? Here are a few other things the Bush administration didn't expect: Terrorists to fly airplanes into buildings. Saddam Hussein to have been telling the truth about not having any weapons of mass destruction. Iraqis to object to a long-term occupation by a foreign power. Hurricane Katrina. People in New Orleans to object to the government's response to Hurricane Katrina. The Democrats to take control of Congress. The Democrats to cave in so easily on important issues after they took control of Congress. Scooter Libby to get caught. Jack Abramoff to get caught. Abu Ghraib to be discovered. Scott McClellan to smell the coffee. The housing bubble. Th...

Bloomberg.com: News : "Australian Confidence Slump, Loan Drop Show Economy Is Slowing By Victoria Batchelor July 9 (Bloomberg) -- Australian consumer confidence fell to a 16-year low and home-loan approvals dropped by the most in eight years, pushing down the nation's currency on speculation the central bank won't raise interest rates again this year"

Bloomberg.com: News : "`The foreclosure problem is getting worse and will stay with us well into the next decade,'' Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania, said in an interview. ``The job market is eroding and homeowners have less equity. Lenders are much less willing to work with you if you've got negative equity, and you're more likely to give up your house if you're deeply underwater.'' Foreclosure activity is the highest since the Great Depression of the 1930s, said Rick Sharga, RealtyTrac's vice president of marketing. Home prices, which fell the most on record in April, according to the S&P/Case-Shiller index of 20 U.S. metropolitan areas, have created a cycle where shrinking equity drives homeowners into foreclosure, which in turn further pushes down home prices, Sharga said."

implicit Fed backing for the large investment banks – into place From the Financial Times: on Monday, with the support of the Treasury, the Securities and Exchange Commission and the Fed signed a memorandum of understanding that, in effect, puts the key elements of a Fed regulatory structure – and implicit Fed backing for the large investment banks – into place. What this amounts to is a straightforward Fed reach for important new regulatory authority, an unprecedented step in which a weak SEC – chastened after the failure of Bear Stearns – has been complicit. It would be perfectly acceptable if the agreement covered only the emergency period the markets are now experiencing, but it has no time limit. The agreement is very bad news for US taxpayers. Fed involvement with the regulation of investment banks will introduce moral hazard into the securities business for the first time and pave the way for a vast new US government liability. The agreement between the Fed and the SEC will ser...

8 Great Ways to Fight Stock Market Stress : MarketClub Trader’s Blog : "8 Great Ways to Fight Stock Market Stress July 9, 2008 · Filed Under General Good Wednesday to everyone! Today’s guest article comes from Blain Reinkensmeyer of StockTradingToGo.com, a site that provides free investment tips for online stock trading. You can read over 100 free stock education articles and share investment ideas on his stock forum with over 5,000 other investors. Yesterday I had the chance to chat with Blain about the market’s current state and his words really conveyed an air of confidence. His post below covers 8 keys…that we all fall short on. So read and apply! Trader facing a market plunge

Fannie, Freddie stabilize after OFHEO comments - Forbes.com : "If Fannie and Freddie were to have to add portions of their securitizations business back on to their balance sheets, Fannie Mae would need to raise $46 billion in cash to meet capital requirements, while Freddie Mac would need to raise $29 billion, Lehman Brothers analyst Bruce Harting wrote in a research note Monday. Analysts widely agreed any accounting rule change likely would not affect Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac's regulator already requires reserves for off-balance sheet securitizations, Keefe, Bruyette & Woods Inc. analyst Frederick Cannon wrote in a research note Tuesday. Because of those requirements already in place, and the government's support of the GSEs role in stabilizing the mortgage market, Cannon said it is unlikely the pair would be affected by new accounting standards" Norton's comment: How do they get away with keeping this bond activity and risks O...

Mish's Global Economic Trend Analysis July 8, 2008 One never knows what to expect from California. In a fitting sign of the times, a California group proposes George W. Bush Sewage Plant. A California group submitted a proposal Monday to rename a sewage treatment plant after President Bush, calling the initiative a fitting tribute to the outgoing chief executive and the 'mess' he'll leave behind. The Presidential Memorial Commission of San Francisco wants to switch the name of the Oceanside Water Pollution Control Plant to the George W. Bush Sewage Plant." Norton's comment: Do I have to be on the board to vote for this?

Mish's Global Economic Trend Analysis: Indymac Says "No Bids On Its Mortgage Loan Portfolio" : Indymac has been notified that it is no longer considered a 'well capitalized bank'. A Stakeholder Letter' posted on Indymac's Corporate Blog describes the grim situation. As we stated in our financial update on May 12, 2008, we have been working with our investment bankers to raise additional capital. To-date, we have not been successful with these efforts, and, while we will continue these efforts with our bankers and others, we don’t expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets." IndyMac specialized in so-called Alt-A mortgages that usually didn't required borrowers to provide documentation on their incomes. Alt-A was riskier ``than the subprime loans because at least with subprime, you knew you were lending to someone who has a bad credit record,'' said Christopher T...

5 big holes in your 401(k) nest egg - MSN Money : " Rolling over rollover rights to an IRA Especially at small and midsize plans, investment options are lousy and expenses outrageously high; anything over 1.0% in fund expense ratios is suspect. But the Employee Retirement Income Security Act, or ERISA, which lays out 401(k) rules, does give older workers, who tend to have the biggest balances, an escape clause into individual retirement accounts. "Technically, ERISA allows an employee, once they reach age 59 1/2, the ability to roll out of the current 401(k) and into an IRA while still allowing payroll contributions to the 401(k)," says Greg Plechner, a principal of Greenbaum and Orecchio of Old Tappan, N.J. These are called in-service rollovers, but because administrators hate to lose assets, your plan may discourage or even forbid them. If you qualify for this exemption and you're stuck in a lousy, expensive plan at work, you have leverage to demand your rights. St...

Bloomberg.com: U.S. : By Neil Unmack July 4 (Bloomberg) Leveraged-buyout loan defaults may be ``significantly higher'' than ratings companies' estimates as about $500 billion of debt used to fund the takeovers comes due, the Bank for International Settlements said. Companies bought by private-equity firms worldwide must repay the high-risk, high-yield loans and bonds by 2010, the Basel, Switzerland-based bank said in a report today, citing Fitch Ratings data. They may find it hard to raise the cash because of a slump in demand for collateralized debt obligations that pool the loans, BIS said. Investors are shunning structured debt instruments such as CDOs, the main buyers of leveraged loans, after the credit-market seizure caused by the U.S. subprime mortgage collapse, the BIS said. The ability of LBO firms to refinance may be crimped further as banks tighten lending criteria after reporting $402 billion of credit losses and asset writedowns."

June/July 2008 – New tipping-point in the global systemic crisis: When the illusion that the crisis is under control fades away… : "June/July 2008 – New tipping-point in the global systemic crisis: When the illusion that the crisis is under control fades away… Sorcerer's apprentices are doomed to repeat the same mistakes on and on. In 2007, the authorities' and large financial institutions' attempt to conceal the subprime crisis (1) (which had already started hitting hard on the markets in February-March 2007) resulted in a severe and sustainable shock in summer 2007. Well, in the coming weeks we will experience a “remake” of the same scenario, i.e. a serious aggravation of the January-March 2008 financial crisis at the beginning of summer 2008. In this 25th issue of the Global Europe Anticipation Bulletin, our team therefore decided to describe five of the seven trends currently at work and soon to result in this new tipping-point of the global systemic crisis (the la...

Oil price shock means China is at risk of blowing up - Telegraph : "The monumental energy price increases will be a 'game-changer' for Asia"

Last Updated: 1:21am BST July 1, 2008 A year ago, the B ank for I nternational S ettlements startled the financial world by warning that we might soon face challenges last seen during the onset of the Great Depression. This has proved frighteningly accurate.... Bill White, the departing chief economist, has now penned his swansong, the BIS's 78th Annual Report, released today. It is a disconcerting read for those who want to hope the global crisis is over. "The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said. Bill White of the BIS has renewed fears of a global slump "These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding o...

Posted on Friday, July 4th, 2008 by bsetser Brad Setser: Follow the Money : "But one thing hasn’t gone wrong. The US net international investment position — if US direct investment abroad is valued at its market value — actually improved, absolutely and relative to US GDP... The US economy has absorbed its share of blows over the last year: Jobs have disappeared; Oil prices have soared; Consumer confidence is way down; An important broker-dealer collapsed, prompting the Fed to facilitate the take-over of a very-troubled financial institution by a less-troubled financial institution; And more financial institutions could have faced trouble absent access to Fed liquidity support. There isn’t a lot for the US economy to celebrate this fourth of July.

naked capitalism : "Paul Kedrosky posted on a report published in a Swiss paper (he courteously provided the English translation) of the results of a study prepared for hedge fund Bridgewater Associates that projects that total losses to the financial system from the credit crisis will reach $1.6 trillion. Note that losses taken to date are only $400 billion. This is consistent with the off-the-cuff view of Ted Forstman in an interview with the Wall Street Journal that we are only in the second inning of the credit crisis ."

Factsheet - Special Drawing Rights (SDRs) : "Why was the SDR created and what is it used for today? The Special Drawing Right (SDR) was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in world foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets— gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF. However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capit...

Bush says backs strong dollar policy - Yahoo! News : "'In terms of the dollar, the United States believes in a strong dollar policy and believes the strength of our economy will be reflected in the dollar,' Bush said when asked what world leaders could do to improve the economy and intervene to boost the dollar."

Hubbert Peak of Oil Production "There are currently 98 oil producing countries in the world, of which 64 are thought to have passed their geologically imposed production peak, and of those 60 are in terminal production decline.... "This GAO peak oil report is a clarion call for leadership at the highest level of our country to avert an energy crisis unlike any the world has ever before experienced and one that we know could happen at any time. Only the President can rally the country to take the urgent steps necessary. Potential alternatives to oil are extremely limited. Technology won't save us without time and money to develop and scale them up... GAO Full Report "... [B]y 2015 these technologies could displace only the equivalent of 4 percent of projected U.S. annual consumption. Under these circumstances, an imminent peak and sharp decline in oil production could have severe consequences, including a worldwide recession. If the peak comes later, however, these te...

25 Reasons To Remain Cautious Bennet Sedacca Jul 01, 2008 11:00 am One of these 25 reasons for caution: see initiate article from Todd Harrison Nov 06, 2007 3:30 pm "...Taking a look at the major institutions and their Level III Assets... It's been an active day behind the scenes as we chew through the dew and sort it all out. It is worth mentioning that the discussion we had earlier regarding the November 15th FASB Rule 157 is picking up steam behind the scenes. If we look at the major institutions and divide their Level III assets by their equity capital base, we arrive at the following calculations: Citigroup: Equity base: $128 billion, Level III: $135 billion. Ratio: 105% Goldman: $39 billion, Level III: $72 billion. Ratio: 185%. Morgan Stanley: $35 billion. Level III: $88 billion. Ratio: 251%. Bear Stearns: $13 billion. Level III: $20 billion. Ratio: 154%. Merrill Lynch: $42 billion. Level III: $16 billion. Ratio: 38%. Again, whether this "matters...

EcoTrekker » 101 Ways to Use Less Gas : "101 Ways to Use Less Gas Thursday, June 5, 2008 at 9:57am by admin By Alisa Miller" Fuel costs are rising, summer is approaching with its typically higher gas prices, and there is no end in sight. Any way to save money by using less gas is a welcome relief. From using alternate transportation to changing how it works, the following suggestions will help you find a way to use less gas. While you may not be able to take advantage of all these great tips, there is sure to be enough to help you and your wallet.

" June 26, 2008, 11:12 am WSJ.com Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars Posted by Keith Johnson Oil at $135? That was just the opening skirmish in the “peak oil” wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least.... That’s the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets, who just a few months ago figured $200 oil would be a thing of the distant future—like 2012. Mr. Rubin laughs off recent attempts to take the steam out of global oil markets. Saudi production promises of 200,000 barrels a day doesn’t dent the 4 million barrel-per-day decline from aging fields every year, for starters. And it will just be “gobbled up” by increasing domestic consumption in Saudi Arabia, like other oil-producing countries that subsidize fuel. "Our analysis suggests that about half of the number of cars c...

Is the World Bank working for George Bush? The Guardian has a leaked copy of a World Bank study that finds biofuels to be the biggest culprit in global food price increases. This finding will not only feed calls to scrap biofuels (save perhaps those derived from sugar) but may lead to a recognition that resource challenges cannot be pursued in isolation. In particular, food, water, and energy scarcity are interconnected problems and need to be addressed on an integrated basis. It also disputes the claim that increased consumption of meat in developing economies played a significant role in food price inflation. A potentially inflammatory element is that the report was completed in April and allegedly deep-sixed so as not to discomfit President Bush..."

By Tom Brennan Web Editor cnbc.com | 03 Jul 2008 | 01:47 PM ET Don’t max out your 401(k) contributions, Cramer said. That money could be better spent. You definitely don’t want to turn down the free money that comes with a company 401(k) match. Cramer’s rule of thumb is to only contribute as much as your company is willing to put in. If your company will match 3%, then only put 3% of your pay into a 401(k). But too often these retirement options have high management fees and your investment choices are limited. That’s why Cramer recommends that any extra money you have beyond a company’s match go into an IRA. They get the same great tax benefits of a 401(k), they cost less and grant you more freedom of movement...."

A New Paradigm By Chris Nelder | Energy and Capital | Wednesday, July 2nd, 2008 Want some proof? Here are the top-performing diversified U.S. stock-fund categories, according to MarketWatch: Category Q2 Avg. Return YTD Avg. Return Midcap Growth 5.2%- 8.3% Small-Cap Growth 4.2- 11.3 Midcap Core 4.1- 6.0 Multicap Growth 2.0- 10.5 Large-Cap Growth 1.8- 10.0 U.S. Diversified 0.6- 9.7 Yes, that's right, the top performing stock funds are down 6-11% on the year. As for the major averages, they're down 12-14% this year.... The fact is, the Fed is whistling past the graveyard. Or sticking their finger in a leaky dike. Or whatever metaphor you like. While most investors are shaking their heads in confusion and dismay over a recession that just won't go away, it all makes perfect sense to those who really understand the implications of peak oil... I hold a very simple thesis: Without an ever-growing supply of cheap and plentiful energy, the old investing strategies simply don't ...

July 2, 2008 In June equity funds (-7.50%) suffered their worst one-month decline since September 2002. The old adage "sell in May and go away" was fairly apt this year. - Semi-annual statements may disappoint, with the average fund declining 9.86% for the six-month period ended June 30, 2008. - With the skyrocketing price of oil and other commodities, it was not surprising to see Natural Resources Funds (+24.50%) and Commodities Funds (+19.51%) at the top of the quarter's charts.

By Marianne Lavelle Posted U.S.News & World Report 5/27/07 "...The brunt of the problem is borne by the poor on every continent; those who have the resources, like that flashy conspicuous wealth capital in the desert, Las Vegas, grab all the water they can find. In less arid parts of the United States, Americans take tap water for granted, but that's only because of hundreds of thousands of miles of underground pipe laid generations ago, much of it now decaying. Studies by government, environmentalists, and utilities agree that cities and towns will need to spend $250 billion to $500 billion more over the next 20 years to maintain the drinking water and waste-water systems we equate with modern living. The only debate is how to pay for it, in a country accustomed to paying about $2.50 per 1,000 gallons—the lowest price for tap water in the developed world..."

THE GREATER DEPRESSION AND WHAT YOU SHOULD DO ABOUT IT July1, 2008 Daily Reckoning by Doug Casey All over the world, but especially in the U.S., currencies are being inflated radically; M3 is rising at about 18% per year. Without exception, interest rates eventually reflect inflation. Therefore interest rates are going to rise radically. Governments are currently suppressing rates by lending money cheaply and promiscuously, to keep both borrowers and commercial lenders from going under. But rates are soon going to explode –especially long-term rates. My guess is that we’ll see at least the levels of the early ’80s, which would mean 15%+ for long-term Treasury bonds. And I’ll say that’s coming within a couple or three years at the outside. The government wants low rates, obviously, because low rates make it a lot easier for homeowners to pay their mortgages, among other things. But they forget that low rates also discourage saving – which is the one thing that can actually bring down re...

Tue Jul 1, 2008 4:30pm BST NEW YORK, July 1 (Reuters) - Standard & Poor's on Tuesday raised its ratings on Countrywide Financial Corp. after the largest U.S. mortgage lender was acquired by Bank of America (BAC.N: Quote, Profile, Research). S&P raised Countrywide's counterparty rating to 'AA,' the third-highest investment-grade level, from the highest junk level of 'BB-plus' to align it with ratings of Bank of America. The upgrade reflects expectations that Bank of America will honor Countrywide's debt, S&P said in a statement" Norton's comment: in the big picture, this doesnt mean much at this point. Banks and investment firms are still showing junk securitized assets at face value when they should be written down. They are leaking this news out in small portions...10 billion dollars at a time so as to not panic the market and loss all the faith of the consumer. Watch for more to come. Bank Index: Click for Chart