Goldman Sachs Raking in Massive Profits, Market Review
Stock-Markets / Financial Markets 2009 Jul 19, 2009 - 07:08 AM GMTBy: Global_Research
Due to the fact that Goldman Sachs is currently the favorite of Washington they are raking in massive profits during a time when most banks and brokerage firms are struggling for survival.
Due to a very successful second quarter, Goldman has set aside $226,156 per employee in compensation – a 75% increase per employee. That means annualized compensation could be $1 million per employee for the year. We find this of great interest inasmuch as the recently converted bank received a $10 billion taxpayer bailout via Goldman’s connections in Washington. They also received a myriad of benefits from several other government schemes over the past two years. It is nice to know that in part American taxpayers made this possible while unemployment is running on a U6 basis at 20.5%, and Americans are losing their homes by the millions.
Pay surged 75% in the second quarter and compensation and benefits costs were $6.65 billion, up 37% from the equivalent quarter in 2008.
The immense profits of 33% were mainly due to trading profits of $2.7 billion. Goldman made up 24% of the Black Box program. Program trading made up 73% of all NYSE trading.
High frequency trading is one of the fastest-expanding strategies on Wall Street. The Street is no longer a place of raising capital, but a vast gambling casino. This is moral hazard at its utmost. Needless to say, the most egregious example is Goldman Sachs. A perfect example of too big to fail as an owner of the Fed. There is no question its activities distorts markets. They are leaders in credit default swaps and taxpayers bailed out Goldman via AIG for $13 billion that you were allowed to pay for. In addition, Goldman is the world’s largest insider-trading hedge fund and they are kings of crony capitalism. Almost everything this conglomeration of crooks are involved in is to the detriment of the US economy and the American people collectively. They rig markets with the complicity of our government who they have bought and paid for. They are master manipulators and creators of bankruptcies.
Then we have the arrest of Russian-American programmer Sergey Aleynikov, who allegedly tried to steal Goldman’s secret code to unlocking Goldman’s method of front-running stock, and commodity trades. This platform, that we were told came from the government, allowed rapid fire trading of stocks and commodities. In fact, the industry considers such activity as front running. In this process Goldman says there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways. If that is the case, what is to stop Goldman from doing the same thing? Did they manipulate markets? Their earnings say they did. Goldman was able to read data on trades before it’s committed, and place their own buys and sells according to that nanosecond, thus, allowing them to essentially steal boatloads of money every day from the traders and others worldwide. Goldman was able to front-run any transaction, stealing pennies in each transaction.
The criminals here may be both Sergey and Goldman or just Goldman. We’ll probably never know because the Illuminati protects their own. One thing is for certain and that is that Goldman won’t be using that program any more and markets could well return too normal. All such kinds of market manipulators have to be stopped. The FBI has to get to the bottom of what has really transpired here.
The bogus CPI figures were released for June up 0.7%, the largest increase since July 2008.
The surtax on incomes of $280+k for healthcare will kill small biz, which creates something like 70% of new jobs.
The surtax on wealthier Americans would be imposed based on adjusted gross income, meaning it would also apply to capital gains and dividends, which are currently taxed at a 15 percent rate.
Pollster Frank Lutz says public support for Obama Care has fallen 10 points in the past 3 weeks. That’s why Team Obama is trying to jam it through now – before public dissent chills Congress.
Wells quietly sells $600 million in troubled subprime loans The industry publication said the loans sold for 35 cents on the dollar, about double what most hedge funds were offering.
National Mortgage News: How exactly did the publicly traded Wells wind up with so many crummy non- prime loans from these once highflying firms? Answer: I don't know and Wells isn't talking.
Perhaps one reason the PPIP (Public-Private Investment Program) and the Federal Deposit Insurance Corp.'s 'Legacy Loan' sale initiative (involving whole loans, presumably residential and commercial mortgages) hasn't caught fire is 'sunshine,' that is, the concept of disclosure. If bankers and investment bankers use these government programs that means all the messy details of their crappy investments might see the light of day, which could anger shareholders — and maybe even board members who might lean toward being "activists.
No matter how you do the math, Wells is going to take a nice hit on the sale, if it hasn't done so already. Will the public ever get wind of the NPL sale price (outside this story)? That's hard to say. The Securities and Exchange Commission requires that publicly traded companies disclose "material events" in their 10-Qs and Ks but when you have a mega bank the likes of Wells a $600 million loan auction might garner a sentence in the next earnings report, at best.
Goldman’s record quarter was partly the result of increased leverage and exposure. Why was Goldman allowed to lever up? (Yeah, we all know why.) Zereo Hedge: Why Does Goldman Need A Fed Exemption For VaR Calculations? Lately the topic of Goldman's VaR has taken on significant prominence, not least because as Zero Hedge disclosed yesterday, it hit a record high.
The clue may come from a February 5 letter by the Federal Reserve to Goldman CAO Sarah Smith.
The letter had come in response to GS requests for "temporary exemptions from the application of certain aspects of the Board's Market Risk Rules for state member banks and bank holding companies and the Board's general risk-based capital rules for bank holding companies."
Citigroup is close to a secret agreement with one of its main regulators that will increase scrutiny of the US bank and force it to fix financial, managerial and governance issues.
Pacific Investment Management Co.’s Paul McCulley said the Federal Reserve should push inflation above its long-term target to coax consumers to spend money if the U.S. economy stays mired in recession.
“The way to make monetary policy effective is for the central bank to promise to be irresponsible,” McCulley wrote in a July commentary posted to Pimco’s Web site, citing a 1998 paper written by Princeton University economist Paul Krugman.
“Radically” different central-bank policy may be needed to change inflation expectations if the U.S. economy starts to resemble Japan’s era of deflation, McCulley wrote. He said the U.S. economy is not currently suffering from deflation. In addition to Krugman’s paper, McCulley cited a May 2003 speech by Fed Chairman Ben S. Bernanke as a blueprint for policy.
McCulley and his colleagues at Newport Beach, California- based Pimco, the world’s largest bond fund manager, have forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower growth. The U.S. government may need to enact a second stimulus plan to spur growth in the coming months, McCulley said July 7 in an interview with Bloomberg Radio.
If consumers and businesses continue to hoard cash, monetary policy makers may need to boost inflation until prices are as high as they would have been without deflation, McCulley wrote.
Commuter traffic on the Port Authority of New York and New Jersey’s bridges, trains and tunnels dropped “significantly” in the first half of 2009 as job losses mounted, the authority said today.
Volume on the authority’s six crossings between New York City and New Jersey fell 3.1 percent to 59.4 million vehicles from the same period a year ago, with Lincoln Tunnel traffic dropping 5 percent, the agency said in a statement. Ridership on the agency’s PATH trains declined 3.5 percent to 35.7 million.
Truck traffic dropped 11.2 percent to 3.8 million in the first half, costing the authority $3.6 million in toll revenue.
The average length of unemployment is higher than it's been since government began tracking the data in 1948.
Goldman Sachs, the Wall Street leviathan that is heavily invested in the cap-and-trade carbon market scam, has admitted it has developed and used software that can manipulate such financial markets.
From the mortgage bubble, Goldman learned an important -- and very valuable -- lesson: Government policies, especially if shaped by a network of former Goldman officials, could be used to create vast profits, indeed whole markets.
Having survived, thanks to the million-dollar bailout from Obama and the Joyce Foundation, the Chicago Climate Exchange went on to merge with Climate Exchange Ltd in 2006. Goldman Sachs took a 10% stake in the firm at the time and later increased its holdings to at least 19%. CCX is also 10% owned by Generation Investment Management, a firm founded and chaired by Al Gore and co-founded by the above-mentioned former Goldman CEO, Hank Paulson.
There was a great clamor last week for a second Federal stimulus - because the first one wasn't working. President Obama threw cold water on that idea over the weekend, when he rejected calls for a second stimulus and suggested that we need to be patient and give the first stimulus time to work.
Well, President Obama will soon be changing his tune, says our guest Gary Shilling.
By the third or fourth quarter, Gary says, the government will launch a second stimulus. Next year is an election year, and despite ballooning deficits, politicians won't sit idly by and watch themselves not get re-elected because the economy has failed to recover.
The second stimulus will finally trigger an economic recovery...but it won't happen until next year.
In the meantime, Gary thinks, the stock market will crash again, with the S&P dropping 35% to 600.
More than 175 prominent economists warned that politicians' attacks on the Federal Reserve are putting "the independence of U.S. monetary policy…at risk," and urged Congress to back off lest it undermine the Fed's ability to manage the economy and thwart inflation.
The 185-word petition, initiated by a band of academic economists, reflects growing unease among professors, former Fed officials and some investors that the vehemence of the criticism from Congress of the Fed's handling of the financial crisis suggests a readiness in Congress to weaken the freedom the Fed has to move interest rates as it sees fit.
The US Federal Reserve believes that the recession will end “before long” but predicts that unemployment will remain at high levels for several years to come.
Members of the federal open market committee raised their forecasts for unemployment, according to minutes from their last meeting three weeks ago, and now expect it to reach between 9.8 and 10.1 per cent in the last quarter of this year. They expect it to remain at about 9.6 per cent next year and 8.5 per cent in 2011. [How can the economy improve if unemployment is rising?]
The House proposal aims to extend insurance coverage to 37 million Americans over the next decade, covering more people through Medicaid and providing subsidies to help others meet a new federal mandate to purchase insurance. Democratic aides said the proposal would cost more than $1.2 trillion over the next 10 years, and would ensure that 97 percent of Americans were enrolled in a health plan by 2015.
About half of the cost would be covered by reducing spending on federal health programs, primarily Medicare, which serves the elderly and the disabled. But much of the rest of the money would come from a new tax on families earning more than $350,000 a year and individuals earning more than $280,000. The taxes, which would take effect in 2011, would affect about 2.1 million taxpayers, the nonprofit Tax Policy Center projected.
The surtax would start at 1 percent and rise to 5.4 percent on income exceeding $1 million. Combined with the expiration next year of tax cuts enacted during the Bush administration, the surtax would drive the top federal tax rate to 45 percent, the highest level since lawmakers rewrote the tax code in 1986.
House leaders defended the plan by saying it targets those most able to pay -- the wealthiest 1.2 percent of households -- while honoring President Obama's pledge to protect the middle class from higher taxes.
Mortgage applications in the U.S. rose for a second week as the lowest borrowing costs since May propelled a surge in refinancing.
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 4.3 percent to 514.4 in the week ended July 10, from 493.1 in the prior week. The group’s refinancing gauge jumped 18 percent, while the index of purchases fell 9.4 percent.
“We will see more refis as rates come down,” Robert Dye, a senior economist at PNC Financial Group in Pittsburgh, said before the report. “It’s nice to see mortgage rates coming down; that’ll be a linchpin for the recovery.”
Lower monthly mortgage payments will help limit the damage to household finances caused by mounting unemployment and sinking home values. Economists are incorporating an easing in the housing slump, now in its fourth year, in their forecasts of an economic recovery in the second half of 2009.
Today’s report showed the mortgage bankers’ refinancing gauge increased to 2,009.4 from the previous week’s 1,707.7. The purchase index fell to 258.8 from a three-month high of 285.6 the prior week.
Combined sales of existing and new homes climbed to a 5.1 million annual pace in May, the highest level so far this year. Purchases slumped to a 4.8 million pace in January, the lowest level since comparable records began in 1999.
Pending Sales
In another sign the housing slump may be bottoming out, a July 1 report from the National Association of Realtors showed the number of Americans signing contracts to buy previously owned homes rose in May for a fourth consecutive month.
The share of applicants seeking to refinance loans climbed to 54.9 percent of total applications last week from 48.4 percent.
The average rate on a 30-year fixed-rate loan fell to 5.05 percent, the lowest level since the week ended May 22, from 5.34 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the bankers group’s records began in 1990.
At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $539.88, or about $74 less than the same week a year earlier, when the rate was 6.22 percent.
The average rate on a 15-year fixed mortgage fell to 4.59 percent from 4.83 percent the prior week. The rate on a one-year adjustable mortgage decreased to 6.47 percent from 6.58 percent.
Reporting from Washington -- Despite evidence that banks are regaining their health, the Treasury Department is pressing forward with a highly controversial program to help finance purchases of toxic assets that were at the heart of the nation's plunge into economic chaos last year.
There is no genius in what Goldman Sachs has been doing. They control our government in that they were able to get the latest version of the Inslaw/PTECH/PROMS software and front run the market including their own clients, and too, at the same time fulfill the demand of the “Working Group on Financial Markets” in manipulating our stock and commodity markets. These people are lowlife, white collar, scum. Goldman Sachs is simply a criminal enterprise as is our government.
We are two years into the credit crisis and the commercial credit market continues to shrink. This is where business and manufacturing borrow money on a short-term basis to fund projects. As of July 15th, funding fell $39.7 billion to $1.098 trillion, off from the prior week’s $1.136 trillion. It peaked in August 2007, at $2.2 trillion. That is off 26% in nine months, or $1.1 trillion.
The May net TIC figure was minus $66.6 billion versus minus $38.0 billion in April. That capital has been flowing out of the US for four of the last five months.
MGIC has stopping writing mortgage insurance, because without 20% down it’s unprofitable. The housing and mortgage business are still in freefall and tight credit won’t loosen up anytime soon.
The NAHB, the National association of Home Builders, was 17 in July, up from 15 in June. They obviously see stabilization, which escapes us. They must be overjoyed over the $8,000 taxpayer subsidy tax credit for first time buyers; 60% or more of which will have loan failures. These are almost all subprime loans carried by the FHA, or the American taxpayer. Recovery cannot take place until the foreclosure crisis and the giant inventory overhead is wiped out and that will be in 2013 at the earliest. In 2011 and 2012, we are going to have another subprime crisis. Government did not lean anything.
CIT Group bondholders are discussing whether to swap some of their claims for equity to reduce CIT’s indebtedness. The company needs $6 billion in cash. They have already received $2.33 billion from the taxpayers via the Treasury.
On Thursday the Fed’s balance sheet rose $80.2 billion to $2.07 trillion, basically on a purchase of $64 billion of MBS, mortgage based securities, from banks.
In addition the Fed monetized $1.5 billion of TIP’s. It also monetized $7.5 billion of two and three year paper on Tuesday.
The July employment Report should be terrible. Last year the B/D model only created 25,000 jobs. Over the past three months the B/D ratio created 210,000 jobs per month. That means July’s number will be between 500,000 and 800,000.
Last month in Long Beach, CA loadings inbound fell 23.5%. Outbound was off 26.9% and empties fell 15.1%. The total was off 22.4%.
It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.
The provision would indeed outlaw individual private coverage. Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:
Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.
So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.
From the beginning, opponents of the public option plan have warned that if the government gets into the business of offering subsidized health insurance coverage, the private insurance market will wither.
Drawn by a public option that will be 30% to 40% cheaper than their current premiums because taxpayers will be funding it, employers will gladly scrap their private plans and go with Washington's coverage.
Zero Hedge: The CNBC Business Model - With the recent elimination of anything even remotely approaching journalistic rigor or analysis, and its substitution with endless propaganda and the pitching of "hope" as an investment conduit, many have been scratching their heads over the question of just how
it is that CNBC is still on the air, let alone make money: after all selling hope is a very expensive process.
I provide the answer.
Below is an early segment from CNBC in which Joe Kernan provides his analysis of Schwab's just released results. As the video quality is pretty bad (yeah, I know, sorry) I will summarize how it works:
1. Intro - Kernan: Glowing review of Schwab's EPS "beat"
2. Kernan: "Schwab is a fine, fine company and a fine individual."
3. Kernan: "...and quite a sponsor for us."
4. Kernan: "...and we are ready to just be sponsored on Squawk Box."
5. Conclusion - Kernan: "...I don't think you can have too much [of Schwab]."
6. Cut to Charles Schwab Commercial.
So now you know.
http://zerohedge.blogspot.com/
Treasury officials say the program is still needed because the assets -- complex securities on the balance sheets of banks that have virtually no market to trade in because they are so difficult to value -- still pose a threat.
"The outcry from those in need of loans is substantial," said Lee Sachs, special advisor to Treasury Secretary Timothy F. Geithner. "We need to keep taking steps to help regenerate credit creation in this country.
But some outside critics say the government has moved so slowly to address the toxic assets that the problem is largely fixing itself and that the program's design from the very beginning was so complex that it was bound to fail.
California’s credit rating, the lowest among U.S. states, was cut for the second time in as many weeks as lawmakers and Governor Arnold Schwarzenegger met behind closed doors to resolve a ballooning budget deficit that left the state paying bills with IOUs.
Moody’s Investors Service yesterday lowered California’s credit rating two steps to Baa1 from A2 and said its evaluation may be reduced further unless legislators quickly solve the cash crisis. The announcement was made as Schwarzenegger retreated to his Sacramento office with legislative leaders yesterday for seven hours of talks over how to fix a $26 billion deficit. The negotiations are scheduled to resume later this afternoon.
Michigan's unemployment rate for June of 2009 jumped to 15.2%. That's a 1.1% increase over the prior month.
Rates usually climb or fall by a few tenths of a percent. It's rare to see such a substantial increase or decrease.
But experts say the struggling economy combined with the ailing auto market means Michigan has been hit harder than other states.
International demand for long-term U.S. financial assets fell in May, as Russia, Japan and Caribbean banking centers trimmed their holdings even as China stepped up its purchases.
Total net sales of long-term equities, notes and bonds were a net $19.8 billion in May, compared with buying of $11.5 billion the month before, the Treasury said today in Washington. Monthly foreign investment flows dropped $66.6 billion in May, compared with a decline of $38 billion in April.
While Treasuries have been a haven for investors during the credit crisis, emerging economic powers continue to question the dollar’s status as the U.S. runs up record debt to fund the economic recovery. At a Group of Eight summit last week in Italy, China repeated calls for a “diversified and rational” global currency regime. Russian and Brazilian officials said the issue may come up at the wider G-20 forum in Pittsburgh in September.
“We still need the foreign capital,” David Wyss, chief economist at Standard & Poor’s in New York, said before the report. “We’re still borrowing. It’s important to see a significant inflow.”
China, the biggest foreign holder of U.S. Treasuries, increased its holdings of government notes and bonds by $38 billion to $801.5 billion. Holdings in Hong Kong also increased. Japan, the second-biggest international investor, reduced its total by $8.7 billion to $677.2 billion. Russia’s holdings fell $12.5 billion to $124.5 billion. Holdings at Caribbean banking centers also fell, declining by $9.9 billion to $194.8 billion.
Analysts had anticipated international net purchases of long-term U.S. assets of $16.5 billion, according to the median of five estimates in a Bloomberg News survey.
The Fed's "credibility has been tarnished by the easy credit policies it pursued and the lax regulatory oversight that let institutions ratchet higher their balance sheet leverage and amass huge concentrations of risky, complex securitized products," the report by the Investors' Working Group said. Lawmakers are considering legislation that would enact President Barack Obama's regulatory overhaul, the most sweeping change to financial oversight since the 1930s. Backed by a group of pension funds, the report might sway Democrats in Congress, especially those concerned that the central bank has too many conflicts and inadequate accountability. Obama proposed that the Fed become the main overseer of firms whose collapse could roil markets, and bring hedge funds and private equity under federal scrutiny. The plan would create an agency to monitor consumer financial products. Treasury Secretary Timothy Geithner urged quick action by Congress. - Bloomberg
Mid-Atlantic manufacturing activity contracted at a faster pace in July, a report Thursday from the Federal Reserve Bank of Philadelphia showed.
The bank said its index of general business activity for the manufacturing sector came in at -7.5 in July compared with -2.2 in June, worsening again after a big improvement the month before. In May, the index was at -22.6.
Numbers below zero denote contraction. Economists had expected the index to move to -5.0 in July.
The index has been negative for 19 of the past 20 months, a span that corresponds to the current recession.
Bank of America Corp is operating under a secret U.S. regulatory sanction that requires it to overhaul its board and address perceived problems with risk and liquidity management, The Wall Street Journal reported, citing people familiar with the situation.
Rarely disclosed publicly, the so-called memorandum of understanding (MOU) gives banks a chance to work out their problems without the glare of outside attention, the paper said.
Financial institutions that fail to address deficiencies can be slapped with harsher penalties that include a publicly announced cease-and-desist order, the newspaper said.
Citigroup is close to a secret agreement with one of its main regulators that will increase scrutiny of the US bank and force it to fix financial, managerial and governance issues.
People close to the situation said that the deal had been discussed in recent weeks amid increased pressure on Citi from the Federal Deposit Insurance Corporation, the regulator, and could be finalised soon.
The proposed agreement requires, among other things, that Citi strengthens its board and governance, improves asset quality, better manages expenses and provides more information to regulators on its capital and liquidity, these people added.
The regulator’s action highlights concern over Citi’s financial health, governance and the strength of its management team, led by Vikram Pandit, chief executive. The FDIC is known to be frustrated with the slow pace of Citi’s “toxic” assets sales, its losses and the lack of commercial banking experience at the top.
May net long-term TIC flows declines to $-19.8B vs $11.5B.
The number of U.S. workers filing new claims for state jobless benefits continued to plunge dramatically last week, but the drop in the filings still does not necessarily mean job prospects are improving.
Initial claims for jobless benefits dropped by 47,000 to 522,000 in the week ended July 11, the Labor Department said Thursday. The four-week average of new claims, which aims to smooth volatility in the data, fell by 22,500 to 584,500, the lowest level since January 31 of this year.
The tally of continuing claims -- those drawn by workers for more than one week -- fell by a record 642,000 during the week ended July 4 to 6,273,000, the lowest figure since April 11. The weekly decline almost doubled the previous record in 1983.
Whoa! The new microchips in passports and driver's licenses are susceptible to potential fraud and Big Brother snooping. The RFID (radio- frequency identification) chips are designed to speed border crossings, deter counterfeiting and help keep out terrorists. But a hacker can scan the data from 20 feet. And imagine government tracking your movement.
Massachusetts employers cut more than 2,000 jobs last month as the state unemployment rate jumped to its highest level in nearly 17 years, the Executive Office of Labor and Workforce Development reported yesterday.
The job losses and rise in unemployment represent a setback from May, when the state gained a surprising 5,600 jobs and the jobless rate rose modestly to 8.2 percent. In June, however, employers cut 2,300 jobs and the unemployment rate surged to 8.6 percent, the highest figure since September 1992, the state labor agency reported.
A Chinese-born engineer was convicted yesterday of stealing trade secrets critical to the US space program in the nation’s first economic espionage trial.
A federal judge found former Boeing Co. engineer Dongfan “Greg’’ Chung, 73, guilty of six counts of economic espionage and other charges for hoarding 300,000 pages of sensitive documents in his home, including information about the US space shuttle and a booster rocket.
“The trust Boeing placed in Mr. Chung to safeguard its proprietary and trade secret information obviously meant very little to Mr. Chung,’’ US District Judge Cormac J. Carney wrote in his 31-page ruling. “He cast it aside to serve the PRC (People’s Republic of China), which he proudly proclaimed as his ‘motherland.’ ’’
Federal prosecutors accused the stress analyst of using his 30-year career at Boeing and Rockwell International to steal the documents. They said investigators found papers stacked throughout Chung’s house that included sensitive information about a fueling system for a booster rocket - documents that Boeing employees were ordered to lock away at the close of work each day. They said Boeing invested $50 million in the technology over a five-year period.
Chung was handcuffed and taken into federal custody following the ruling. He is set to be sentenced Nov. 9.
Arizona's unemployment rate jumped half a percentage point to 8.7 percent in June, but a surprising rise in construction jobs offered hope that the sector slammed the hardest during the recession could be improving.
Construction jobs grew by 2,400 in the month, finally breaking a dreary string of 21 consecutive months of losses, the Arizona Department of Commerce reported Thursday.
"It's important to note that over the year employment in construction is still down more than 26 percent," said Lisa Danka, assistant director of strategic investment and research. "It's too early to tell with one month of data if this slight increase in construction can indicate just one month of activity or a longer term (effect)."
Arizona's construction employment peaked at 244,800 in June 2006 and fell to about 141,600 in June, according to state and federal data. [More bogus numbers.]
Retail gas prices dropped Thursday for the 25th consecutive day as America's appetite for petroleum hovers around 10-year lows.
"Demand is about as poor as it's been in a long time," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
The steady drop in pump prices follows almost two months of daily price increases. The rally in gas prices, which peaked on June 21 at $2.693 a gallon, lost steam as more Americans stayed home during the traditional summer driving season. Investors who had pumped millions of dollars into gas futures also started to realize that supply shortages weren't around the corner as expected, Kloza said.
On Thursday, retail gas prices fell 1.2 cents to a new national average of $2.492 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of gas is 18.2 cents cheaper than a month ago and $1.622 cheaper than last year.
Home construction unexpectedly rose in June, building permits surged, and single-family starts made their biggest climb in four years, according to data that adds to evidence the housing sector is beginning to heal.
Housing starts increased 3.6% to a seasonally adjusted 582,000 annual rate compared with the prior month, the Commerce Department said Friday.
May housing starts climbed 17.3% to 562,000, revised from an originally reported 17.2% increase to 532,000.
The Federal Reserve's latest weekly money supply report Thursday shows seasonally adjusted M1 rose by $1.1 billion to $1.654 trillion, while M2 fell $100 million to $8.349 trillion.
Bank of America reported a $2.42 billion profit for the 2nd quarter. Even Ken Lewis said, “this is a steaming pile of S---, our material condition is worsening by the hour.” Anyone can show profits with $45 billion taxpayer injections, the $5.3 billion China construction sale and marking to model not market. Nonperforming assets tripled to $31 billion. Lewis, Paulson and Madoff should be sharing the same cell.
At Citigroup they declared a $4.3 billion income for the 2nd quarter. If you strip out the one time gain of $6.7 billion for the sale of Smith barney, and $1 billion in subprime fantasy markups, you get a loss of $3.4 billion. Nothing but pure fraud.
We were deeply disappointed this week when the Queen of Wall Street, Meredith Whitney, sold out to Goldman Sachs this week.
COMMODITIES
The DOE crude oil inventories fell 2.81 m/b, as gas rose 1.44 m/b and distillates rose 533,000 barrels.
EIA reports natural gas inventories up 90 bcf. This build figure should start to diminish in August as supplies are drawn on for winter heating.
GOLD, SILVER, PLATINUM AND PALLADIUM
Wednesday was another good day for gold and silver. When we saw gold swoop down to $907 to $922 last week, we said that is it. The cartel doesn’t have the physical gold to knock the price down any further, thus, we said it would go right back up as fast as it came down. So far we have been correct, spot gold rose $16.90 to $939.30 and the outside contracts was $0.50 lower. Silver rose $0.37 to $13.20, as September finished $0.04 higher. The dollar was bashed today as China’s foreign exchange reserves grew $178.3 billion to $2.130 trillion. About 70% of those reserves are in dollars, or $1.491 trillion. We hope you bought gold and silver coins and stocks on the dip. The pro gold and silver sentiment is still low, but in spite of that rallies continue. Gold open interest rose 1,288 to 370,509 and silver OI fell 272 to 99,662. The XAU rose 6.24 to 141.12 and the HUI rose 15.16.
The yen fell .0129 to $.9443; the euro rose .0186 to $1.4114; the pound rose .0142 to $1.6412; the Swiss franc rose .0150 to $1.0738; the Canadian dollar rose .0176 to 88.81 and the USDX, dollar index, fell .80 to 79.38.
Oil rose $2.15 to $61.67; gas rose $0.06 to $1.71 and natural gas fell $0.14 to $3.29. Copper rose $0.10 to $2.39 and that is a breakout. Platinum rose $29.60 to $1,164 and palladium rose $4.55 to $248.40. The CRB rose 3.51 to 239.71.
This past week the gold ETF GLD fell 2.1%, a cut of 10.74 tons to net 1,109.81 tons of gold. SLV reported silver unchanged since 6/17, even though silver fell $3.50.
Three banks are still net short positions of 116,457 ounces equal to 322 tons of gold. These three banks held 60.9% of all commercial gold net short positions. Of course, this is short selling abuse.
As of July 7th, two US banks held a net short position of 31,880, 5-ounce contracts. A net short position of 31,880 contracts equal to 159.4 million ounces, or about 4,958 tons of silver. They own 85.2% of the short position.
The gold and silver markets were mixed on Thursday, and that was not unexpected. Gold on the spot market fell $4.20 to $935.00, as the August contract ended off $2.20; $2 better. Spot silver rose $0.03 to $13.23 as September finished $0.06 better. Lease rates for gold is again negative as the central banks try to cap the price. Gold open interest rose 9,498 contracts to 380,007, as silver OI fell 330 to 99,332. The HUI rose 1.18 to 344.41.
The yen rose $0.89 to $.9370; the euro rose .0028 to $1.4192; the pound rose .0038 to $1.6450; the Swiss franc fell .0002 to $1.0736; the Canadian dollar fell .0033 to $.89499 and the dollar index fell .11 to 79.21.
Oil rose $0.42 to $62.00; gas was unchanged at $1.71 and natural gas rose $0.31 to $3.60. Copper was unchanged at $2.39; platinum rose $9.90 to $1,167 and palladium rose $1.65 to $249.65. The CRB rose 1.24 to 240.95.
The Dow rose 95 to 8711; the S&P rose 72 and Nasdaq 132 Dow points. The 10-year T-note was off 5 bps to 3.55%.
On Friday spot gold rose $2.20 to $937.40 and August rose $2.30. Spot silver rose $0.15 to $13.38 and September was $0.03 higher. Gold and silver rose despite a stronger dollar. HSBC is 3 to 6 weeks late making physical silver deliveries. Some buyers are still awaiting April delivery. September is a big physical delivery month and we foresee problems. Gold open interest rose 3,100 contracts to 383,107, as silver OI rose 410 to 99,744. The XAU rose 2.13 to 144.36 and the HUI rose 3.59 to 348. The total delivery notices for silver for the month of July were 18.8 m/oz., or 29% of total dealer inventory. There could be a physical shortage on the way.
The yen fell .0069 to $.9431; the euro was unchanged at $1.4142; the pound fell .0108 to $1.6382; the Swiss franc fell .0009 to $1.0746; the Canadian dollar fell .0018 to $.8966 and the USDX rose .29 to 79.50.
Oil rose $1.53 to $63.50; gas rose $0.05 to $1.77 and natural gas rose $0.01 to $3.68. Copper broke out up $0.03 to $241.90; platinum rose $10.10 to $1,179 and palladium fell $1.25 to $249.l00. The C RB rose 4.10 to 245.05.
The Dow rose 16 to 8539; the S&P fell 4 and Nasdaq rose 11 Dow points. The 10-yar T-bill rose 10 bps to 3.65%.
CANADA
June Leading Indicators fall 0.1%.
EUROPE
French youths burned 317 cars and wounded 13 police officers overnight during the now traditional bout of street violence on the eve of the Bastille Day national holiday, police said Tuesday.
As French troops and their guests of honour from the Indian army made last minute preparations for the July 14 parade on the Champs Elysees in Paris, the suburbs of major cities were contemplating another clean-up operation.
By 6:00 am (0400 GMT), police headquarters in Paris had recorded 317 burnt out cars -- up 6.7 percent on 2008 -- and 240 arrests, almost double the total for the same period last year.
These numbers were expected to increase as fresh reports came in.
The injured officers, 12 members of the police and one gendarme, were mainly suffering from hearing difficulties after being targeted by youths throwing fireworks and small-scale home-made explosives.
France marks Bastille Day as the anniversary of July 14, 1789, when a revolutionary mob stormed the Parisian prison and set in motion the events that would lead to the overthrow of the monarchy.
Today, disaffected youths from bleak suburban housing projects around major cities use it to express their frustration with high unemployment rates and what they see as France's failure to integrate ethnic minorities.
Russia's gold and foreign exchange reserves fell by $8.4 billion to $400.7 billion in the week to July 10, the central bank said Thursday.
The drop follows a $1.4 billion decline recorded in the previous week.
Swiss economic indicator ZEW weakened to reach a neutral level in July, data released Thursday showed, pointing to continued uncertainty over the next few months.
The index, which comprises estimates about current as well as future economic developments, stood at zero in July compared with 9.7 points in June, said Credit Suisse Group (CS), which calculates the indicator together with the Germany-based Centre for European Economic Research. In May, the figure stood at -3.9 points.
This was the first contraction in the index after a continuous climb in the first half of 2009, Credit Suisse said.
Switzerland's economy is expected to contract by around 3% this year.
Spanish home sales fell 32% in May on the year earlier following the collapse of a decade-long housing boom, according to data Thursday from Spain's National Statistics Institute, or INE.
Spanish home sales fell by 48% on year in April and by 24% in March.
French consumer prices rose slightly in June on the previous month, but fell compared with the year-ago period for the second month running, data released Thursday by the French national statistics office Insee showed.
In June, the French CPI index rose 0.1% from May, but dropped 0.5% from a year earlier, Insee said.
The market was expecting consumer prices in the euro zone's second-largest economy to gain 0.2% on the month and to drop 0.4% on the year, according to a Dow Jones Newswires survey of economists.
Fresh food, manufactured products and transport prices fell from May, by 3.8%, 0.2% and 0.4%, respectively, Insee said. On the year, the drops were more significant, with fresh food product prices down 9.2%.
Energy prices rose 3.2% on the month, but were down 17.4% on the year, with oil product prices up 5.4% from May but down 26.1% on the year, Insee said.
In May, the French core inflation rate, which strips out prices and services that tend to be volatile or affected by tax changes, grew 1.5% on the year, down from the 1.6% increase posted the previous month.
Insee said France's European Union-harmonized index of consumer prices, used for comparison across the E.U., was up 0.1% on the month and down 0.6% on the year.
The 16 countries that use the euro posted a smaller-than-expected trade surplus in May with both exports and imports remaining sharply lower compared with last year, data released by the European Union's Eurostat statistics agency showed Friday.
Non-seasonally adjusted figures showed the euro zone's surplus narrowed to EUR1.9 billion in May from EUR2.7 billion in April. The euro zone posted a trade deficit of EUR3.8 billion in May last year.
Although exports surpassed imports for the third consecutive month, the trade surplus was smaller than the market consensus estimate of EUR2.7 billion from a Dow Jones Newswires survey last week.
The figures showed euro-zone exports totaled EUR97.7 billion in May, down 24% on the year, while imports totaled EUR95.8 billion, a 27% drop compared with May 2008. In April, euro-zone exports totaled EUR102.7 billion, while imports totaled EUR99.9 billion, Eurostat said.
EU construction output declines 2.7% MoM and 9.6% YoY in May.
Italian industrial orders rose moderately in May on the month, advancing for the first time since July of last year, as foreign and national demand climbed, statistics agency Istat said Friday.
Industrial orders fell an unadjusted 31.0% on the year in May, a drop for the eighth month in a row, after slipping 32.2% in April and 26.0% in March.
On the month, industrial orders rose a seasonally-adjusted 0.4% compared with a 3.6% fall in April.
Industrial sales were down an unadjusted 25.3% on the year in May. Sales on the month decreased 1.1% in May as national sales fell by 2.7%, while foreign industrial sales were up 3.1%.
The European Central Bank has never wanted to re-liquefy its banking system. They wanted to follow the precepts of classical economics and to let the system purge itself. That was pointed out when the ECB refused to exceed a 12.8% increase in M3, whereas the US, UK and many other countries exceeded 14%. In fact, many are still increasing M3 by 17.5% to 18%. The ECB figure presently is 3.7%.
What is happening is that the ECB has begun to purge its monetary system and few have taken note of it. We believe the ECB wants to get the depression over with quickly and come out the other side quicker and stronger then other nations. They know this will create a bond crisis and they also risk having the eurozone break up. The IMF says the eurozone will contract 4.8% this year, the UK 4.2% and the US 2.6%. We think the ECB has it right. Many believe there will be recovery next year. We only see a flattening out in the US and UK and unless the US adds another stimulus package by an additional $2 trillion, we won’t even get a flattening out.
Due to the misinformation regarding the state of the economy in the eurozone, participants are expecting things to improve and that is not going to happen. The people at the ECB know that the mini-recoveries in the UK and US will not last. The jobs situation in Europe is deteriorating very quickly as well as social unrest. In France workers at a car parts plant are demanding their layoff bonuses that have not been forthcoming and are threatening to blow up the plant. Kidnappings of plant management have now become common.
Public debt in many instances is headed over 100% of GDP. Even in Germany finances are a mess and debt is headed over 80% of GDP. Well, only time will tell who is right. The ECB is taking the classical route or at least that seems to be the direction. No quantitative easing such as the UK, US, Canada and Switzerland are using.
Europe is facing a credit crunch emanating from the ECB - a contraction worse than the US and UK have experienced over the past two years. Spain and Ireland are already undergoing such a contraction. The fallout will be immense. Those in the US and UK should take note because this eventually is what is going to happen in the US and UK, only much, much worse.
Bad bank assets that will have to be written off will be more than $1.2 trillion and that is only the beginning. There is a bit of inevitability in all of this. The ECB is doing what should have been done two years ago. The media is castigating the ECB, calling it lunatic. We do not think so. This is the only way to really solve the problem.
ENGLAND
Lloyds Banking Group Plc, whose largest shareholder is the British government, said it plans to cut a total of 1,200 jobs in its U.K. information technology and insurance units by the end of March.
The announcement brings the number of jobs eliminated by the bank this year to 8,850. Those leaving will include 370 contract and agency employees, the bank said in an e-mailed statement today. The cuts will be partially offset by the creation of 180 new posts in group operations.
In a stunningly misguided program implemented by the British government, all children's book authors who visit schools must register with a national database intended to protect children from pedophiles, and they must pay a fee to do so. Beginning October 12, 2009, the Vetting and Barring Scheme (VBS) will require that all adults who work with children, including authors such as J.K. Rowling and Philip Pullman if they make special visits to schools, will be required to register with the database for a fee of £64 ($105).
The London Times newspaper has apparently censored scores of comments on its own website that expressed vehement opposition to plans by the UK government to implement a mandatory vaccination program for swine flu.
As of today however, the original London Times article that featured the comments (Swine flu vaccine rushed through safety checks) has been completely wiped clean, and the scores of comments expressing refusal to comply with any potential mandatory vaccination program have been sent down the memory hole.
A reader emailed us to notify us that the comments had all been deleted.
UK unemployment rose by a record 281,000 to 2.38 million in the three months to May, the Office for National Statistics has said.
The jobless rate increased to 7.6%, the highest in more than 10 years.
The number of people claiming unemployment benefit increased by 23,800 in June to 1.56 million, which was less than analysts had forecast.
Unemployment among young people has been especially acute, as firms cut jobs to reduce costs in the downturn.
Young people - those up to 24 years old - have been particularly hard hit with unemployment leaping to a 16-year high of 726,000.
The number of those out of work for more than a year rose by 46,000 to 528,000, the highest for 11 years.
CHINA
China’s gross domestic product grew 7.9 percent in the second quarter as the nation became the first of the major economies to rebound from the global recession.
The figure, announced by the statistics bureau in Beijing today, exceeded the 7.8 percent median forecast of 20 economists in a Bloomberg survey and a 6.1 percent gain in the first quarter that was the slowest in almost a decade. [We do not believe these figures.]
LATIN AMERICA
The pace of consumer inflation in Brazil's largest city, Sao Paulo, picked up in the four weeks ended July 15, as food prices accelerated in the period, the Fipe research foundation said Friday.
Fipe, which is affiliated with the University of Sao Paulo, said its consumer price index rose 0.23% in the period, compared with a rise of 0.17% in the four weeks ended July 7.
The figure was in line with market forecasts for an increase of between 0.18% and 0.30%.
Food prices picked up 0.86% in the four weeks ended July 15, compared with an increase of 0.75% in the previous period.
With recent figures indicating inflation is under control and signs of an economic slowdown, Brazil's central bank cut the Selic base interest rate to 9.25% from 10.25% last month.
MEXICO
Mexico’s economy will shrink 7 percent this year as gross domestic product for all of Latin America declines 1.9 percent, the United Nation’s Economic Commission for Latin America and the Caribbean said today.
In December, the organization had predicted region-wide growth of 1.9 percent for this year.
Latin American economies are suffering after trade dropped 38 percent from its peak last year, remittances from citizens living overseas fell and foreign investment dried up, the commission said. Economies may start to recover next year, though not enough to offset the increase in poverty and joblessness caused by the slump, said Alicia Barcena, the commission’s executive secretary.
“Mexico is the biggest concern in the region,” Barcena said. “It’s an economy that depends very heavily on exports to the U.S., it’s one of the countries with the biggest fall in remittances and it’s also being hit by swine flu. Recovery for Mexico will be difficult and highly complicated.”
The effects of swine flu may knock between 0.3 percent and 0.5 percent from Mexican GDP this year, she said.
The Bank of Mexico cut its key overnight rate by a quarter of a percentage point to 4.5% as expected Friday, and signaled a pause in its monetary easing cycle.
"Future actions will be congruent with the balance of risks, taking into account the evolution of the economy as well as a clear outlook for inflation and meeting the [inflation] goal of 3% towards the end of 2010," the central bank said in its policy statement.
The market had expected the Bank of Mexico to lower the overnight rate by 25 basis points, according to the median estimate in a Dow Jones Newswires survey of 22 economists.
The central bank has lowered the overnight rate by 375 basis points since January to cushion a plunge in economic activity as a recession in the U.S. and other major economies cripples international trade.
Mexico sends about 80% of its exports to the U.S., while remittances sent home by Mexican immigrants living in the U.S. are the linchpin of many local economies in some states.
The Bank of Mexico said Friday that a weak U.S. labor market and how it influences the velocity and duration of an economic recovery in the U.S. is a source of concern.
Mexico's gross domestic product is expected to contract 6.3% this year, according the most recent survey of private sector economists by the central bank. GDP is seen growing a modest 2.1% in 2010 on the back of a recovery in the U.S.
"In Mexico, the contraction in economic activity during the first half has been extremely severe," the central bank said. "However, a better performance in overall economic activity is expected in the second half."
The central bank is betting the collapse in economic activity will tame inflation which is nearly double its target.
The annual inflation rate eased to 5.74% at the end of June from 5.98% at the end of May. The more closely watched core index - which excludes volatile energy and fresh produce prices - fell to 5.39% from 5.56%.
The Bank of Mexico reiterated its forecast that inflation will end the year around 4% amid an easing in price pressures for goods and services in recent month.
AUSTRALIA AND NEW ZEALAND
Australian merchandise imports fell A$14 million to A$16.28 billion in June from A$16.29 billion in May in seasonally adjusted terms, the Australian Bureau of Statistics said Thursday.
The bureau said that machinery and transport accounted for the largest proportion of imports in original terms and were valued at A$6.29 billion.
A price index of Australian imports fell 6.4% in the second quarter of 2009 from the first quarter, the Australian Bureau of Statistics said Friday.
The price index for exports fell 20.6% in the second quarter from the first quarter.
Global Research Articles by Bob Chapman
© Copyright Bob Chapman , Global Research, 2009
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