StockFetcher Forums · General Discussion · Coments on news of the day<< 1 2 3 4 >>Post Follow-up
4,577 posts
msg #92836
Ignore Eman93
5/16/2010 11:08:38 PM

- Ignore miketranz 5/16/2010 8:48:57 PM

Eman,Black Sabbath was one of my favorite groups.I wanted to hear some Sabbath the other day so I went on utube,Black Sabbath 1975 Asbury Park Convention Hall,New Jersey.Then something hit me,wait a minute,I was there! Wow,what a show,in front of maybe 2000 people.They were just becoming popular back then.You wanna talk about hard rock? Those were the days..........



I caught the reunion tour of Black Sabbath w Ozzy like 8 years ago....was a great show.. never saw DIO but always liked him.

FYI..... Stones re-releasing Exile on Main street tomorrow , includes several never released tracks from the same sessions '72.

4,577 posts
msg #92837
Ignore Eman93
5/16/2010 11:33:27 PM

OIL FUTURES: Crude Falls Below $70/Bbl; First Time In 10 MonthsPROVIDED BY Dow Jones & Company, Inc. - 10:32 PM 05/16/2010
SINGAPORE (Dow Jones)--Crude oil drops further to lowest since July 2009, as the dollar continues to strengthen against the euro while demand hasn't entered full recovery.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $69.99 a barrel at 0221 GMT, in the Globex electronic session. July Brent crude on London's ICE Futures exchange to a barrel.

With "(supply-and-demand) fundamentals still not very healthy, prices tend to fall very sharply when sentiment is weak," said David Moore, commodities strategist at Commonwealth Bank of Australia.

"Price declines are being accentuated and accelerated by bearish fundamentals, " said Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates.

Economic concerns that are spreading across the euro zone have significant implications for European oil demand, which could force additional flows of gasoil, gasoline toward a U.S. market that is already oversupplied, analysts said.

Crunk.... still going lower.... the Euro is in free fall...... we will watch as confidence leaves a printed piece of paper of a western financial system...

4,577 posts
msg #92838
Ignore Eman93
5/16/2010 11:49:30 PM

The second debt storm
BY alistair barr,
Copyright © 2010 Dow Jones & Company, Inc. All Rights Reserved.
MarketWatch — 05/14/10
Who will bail out the countries that bailed out the world's corporations?
SAN FRANCISCO (MarketWatch) -- The financial crisis never really went away.

The debt mountain that brought down some of the world's biggest banks and dragged the international financial system to the brink of disaster has simply shifted to governments. Now, it's threatening countries around the globe and if left unchecked could rip the very fabric of Europe's economic system and wreck economic recoveries in the U.S., China and Latin America.

The impact on markets has been severe. The euro has slumped more than 12% against the dollar since the sovereign debt crisis flared in southern Europe. Gold has marched to new highs as investors seek a safe haven and, perhaps most alarming, it is now more expensive to buy insurance against national default than it is to insure against corporate failure.

"The sovereign debt crisis spun out of control in the past week, and we see no easy way to resolve it," said Madeline Schnapp, director of macroeconomic research at TrimTabs Investment Research.

Some investors and analysts are increasingly concerned that governments may be no more capable of repaying their debts than the banks and insurance companies they saved. And, they warn, if a major country comes close to default, it could trigger a financial meltdown that would eclipse the panic that followed the bankruptcy of Lehman Brothers in 2008.

The world has seen sovereign debt crises before. Latin America, Africa and Asia have all experienced upheavals sparked by excessive debt. These crises were all accompanied by stunted economic growth, inflation and weak stock market returns, which make it even harder to pay off debts. As investors and government officials ponder the current state of affairs, they see ominous signs that the developed world may be facing a similarly bleak future.

"The problem of the western world is that we have too much debt," said Daniel Arbess, who manages the Xerion investment strategy at Perella Weinberg Partners. "Rather than reducing our debt, we've been moving it from one balance sheet to another."

"All we're doing is shifting chairs on the deck of the Titanic," he added.

Europe's bailout
Some governments have started to respond to market pressure, with the U.K. pledging billions of pounds in spending cuts this week. Spain and Portugal also unveiled austerity measures. But the problem is so big that investors remain wary.

Stock markets plunged and credit markets shuddered last week on concern Greece and other indebted European countries like Portugal and Spain might default.

"What's happened on a corporate level is now happening on a national level. The first nation to experience this is Greece, but other nations will, too," Schnapp said.

To stop Greece's debt troubles turning into a run on the euro and a global stock market rout, the European Union unveiled an unprecedented package of almost $1 trillion in emergency loans, stabilization funds and International Monetary Fund support on Sunday.

In the days that followed, the European Central Bank bought the government debt of Greece and other countries on the periphery of the region's single-currency zone, such as Portugal, Spain, Italy and Ireland, investors said. Such intervention, known as quantitative easing, has been shunned by the ECB until now.

"Temporarily the crisis in terms of liquidity has been averted, but the underlying problem hasn't gone away," Schnapp added. "Giant debt and expenditures by governments are still there."

TrimTabs cut its recommendation on U.S. equities to neutral from fully bullish on Sunday, in the wake of the European bailout.

The sovereign crisis has been brewing for months.

For much of the financial crisis, investors worried about financial institutions defaulting, rather than sovereign nations. But that pattern has been upended.

In early February, the cost of insuring against a sovereign default in Western Europe exceeded the price of similar protection against default by North American investment-grade companies. That was the first time this had happened, according to data compiled by Markit from the credit derivatives market.

The move "symbolizes how credit risk has been transformed from corporate to sovereign risk, as the solution to the financial and economic crisis was government intervention," Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, wrote in a note to investors at the time.

Since then, the cost of insuring against sovereign default in Western Europe has climbed further, hitting a record of 169 basis points on May 7.

The European bailout pushed that down to 120 basis points on Tuesday. But that's still more expensive than default protection on North American corporate debt which cost 100 basis points on Tuesday. (In the credit derivatives market, 100 basis points means it costs $100,000 a year to buy default protection on $10 million of debt for five years).

While much of the concern has focused on Western Europe, unsustainable government debt is a global problem. And it is developed world governments that are accumulating the biggest debts, not emerging market countries -- a big change from previous sovereign crises.

"Looking beyond the immediate crisis in Europe, I am particularly worried about the next stage involving the U.S., the U.K. and Japan," Xerion's Arbess said.

Debt to GDP ratios in the world's advanced economies will top 100% in 2014, 35 percentage points higher than where they stood before the financial crisis, the IMF estimated last month.

Three percentage points of this increase came from government bailouts of financial institutions, while 3.5 percentage points was from fiscal stimulus. Another four percentage points has been driven by higher interest on government debt and 9 points came from revenue lost from the global recession, according to the IMF.

"Public finances in the majority of advanced industrial countries are in a worse state today than at any time since the industrial revolution, except for wartime episodes and their immediate aftermath," Willem Buiter, chief economist at Citigroup and former member of the Bank of England's Monetary Policy Committee, wrote in a recent note on sovereign risk.

Even though the current epicenter of the crisis is focused on the euro zone, the overall fiscal position of the single currency area is stronger than that of the U.S., the U.K. and Japan, he noted.

"Unless there is a radical change of course by those in charge of fiscal policy in the U.S., Japan and the U.K., these countries' sovereigns too will, sooner (in the case of the U.K.) or later (in the case of Japan and the U.S.) be at risk of being tested by the markets," Buiter said.

Ultimately, these countries face the risk of being "denied access to new and roll-over funding, that is, of being faced with a 'sudden stop,'" he warned.

Economic drag
Once government debt levels approach 100% of GDP, things can get tricky.

That's because a lot of a country's income from taxes and other sources has to be spent on interest payments.

John Brynjolfsson, chief investment officer at global macro hedge fund firm Armored Wolf LLC, illustrated the point with a simple example. With debt at 100% of GDP, interest rates at 3% and real economic growth of 3%, all the extra income collected by a country would be used to pay interest on its debt.

If a lot of government debt is owned by foreigners, like the U.S., the money leaves the country rather than being invested in more productive ways. This dents economic growth.

A study published this year by economists Carmen Reinhart and Ken Rogoff found that, over the past two centuries, government debt in excess of 90% of GDP produced economic growth of 1.7% a year on average. That was less than half the growth rate of countries with debt below 30% of GDP.

"Most lenders realize that once growth disappears, there's little reason to lend more," Brynjolfsson said. "That's because new lending is just going towards paying off old debt, not investment in productive activities."

The U.S. government has spent more than $1 trillion bailing out financial institutions like American International Group (AIG


) and rolling out fiscal stimulus programs to bolster the flagging economy.

In 2009, the government took in about $2.1 trillion in taxes and other revenue and spent more than $3 trillion, according to TrimTabs' Schnapp. The gap, or deficit, is made up by borrowing more money through sales of Treasury bonds and notes.

In coming years, U.S. government debt will exceed 100% of GDP, according to economists at Exane BNP Paribas and elsewhere.

In the next 20 years, if fiscal policies aren't changed, U.S. debt to GDP will exceed 150%, putting the country in the same league as Greece and Portugal, according to recent research led by Stephen Cecchetti, head of the Monetary and Economic Department at the Bank for International Settlements in Switzerland.

And the official data don't tell the whole story, Buiter says.

Fannie Mae (FNM


) and Freddie Mac (FRE


) have been the responsibility of the U.S. government since the mortgage giants were placed into conservatorship by the Federal Housing Finance Agency during the financial crisis in 2008, he noted.

Fannie and Freddie's liabilities at the end of last year's third quarter were almost $1.8 trillion, according to Buiter. This equals 13% of U.S. GDP and should be included in measurements of the country's general government debt, he added.

The U.K. government committed 850 billion pounds ($1.25 trillion) to bailing out banks including Royal Bank of Scotland and Lloyds Banking Group (LYG


) and providing guarantees and insurance to the sector, according to the country's National Audit Office.

The U.K.'s debt to GDP ratio will soon reach 100% and could top 200% in the next two decades if fiscal policies aren't changed, according to Cecchetti's research.

The country's new coalition government, which came to power this week, called for 6 billion pounds in spending cuts starting this fiscal year. Bank of England Governor Mervyn King applauded the plan.

"We are still halfway through the world's worst financial crisis ever," King warned. It's "imperative that our own fiscal problems are dealt with sooner rather than later."

Japan's government debt to GDP, at over 200%, already dwarfs the U.S. and the U.K., a hangover from its own financial crisis at the end of the 1980s.

"The perfect example of sovereign risk that is contained today but could be dramatic in the future is Japan," Pierre-Olivier Beffy, chief economist at Exane BNP Paribas, wrote in a recent note to investors.

Such high debt levels aren't a problem now because Japanese people save so much and invest a lot of that money in the country's bonds. Financial institutions in the country are also big buyers.

With more than 90% of all Japanese government debt purchased domestically, interest payments get funneled back into the country, helping to support economic growth.

However, Japan's population is getting a lot older. At some point, savers may stop buying government bonds and start spending their money in retirement. If that happens, the government may be forced to pay higher interest rates when it borrows.

Rates on 10-year Japanese government bonds are below 1.4%. So, despite huge debt, interest payments aren't too cumbersome. But if rates climb, that would change with painful consequences.

"Japan, as an economy, has never admitted its mistakes. Twenty years ago they transferred the bad private assets to the public balance sheet, while nominal GDP has gone nowhere for 20 years," Kyle Bass, managing partner at global macro hedge fund firm Hayman Capital, said during an April industry roundtable run by Opalesque Ltd.

"When your biggest holders turn into sellers overnight, what do you do? You have to finance yourself at G7 rates," he added. "If they borrow where Germany borrows at a bit over 3%, they are out of business."

Bass is betting on higher Japanese interest rates, similar to positions that other hedge fund firms including David Einhorn's Greenlight Capital and John Paulson's Paulson & Co. have put on.

'Final chapter'
How will all this debt be repaid? Brynjolfsson discusses the three main alternatives.

Developed nations could generate strong productivity gains, while rising exports from their pharmaceutical, technology and financial-services industries could generate better-than-expected income. Combined with "frugality, sacrifice and good fortune," there could be enough money to repay debts, he explained. This may include lower government spending and higher taxes.

Countries could also default, either because they can't pay or won't, Brynjolfsson said. In this scenario, lenders would likely agree to a reduction, or haircut, on the amount of money they're owed -- either voluntarily or after courts impose a settlement.

A third outcome may be inflation, Brynjolfsson said. Sovereign debts would be honored but would be repaid in currency that's worth a lot less than when the debt was sold.

"The sovereign debt problems encountered by most advanced industrial countries are the logical final chapter of a classic 'pass the baby' (aka 'hot potato') game of excessive sectoral debt or leverage," Buiter said.

"First excessively indebted households passed part of their debt back to their creditors - the banks. Then the banks, excessively leveraged and at risk of default, passed part of their debt to the sovereign," he explained. "Finally, the now overly indebted sovereign is passing the debt back to the households, through higher taxes, lower public spending, the risk of default or the threat of monetization and inflation."

Brynjolfsson and other investors are in the inflation camp.

One tell-tale sign of potential inflation is that the U.S. Treasury Department is trying to extend the average maturity of its debt from about 48 months to roughly 84 months, Brynjolfsson said.

"That makes me a little uncomfortable and suspicious," he added.

With lots of short term debt, it's hard to inflate the debt away. That's because interest rates should rise quickly to adjust for higher inflation expectations and investors will charge a higher rate when it comes time to refinance the bonds.

But the longer the maturity of government debt, the easier it is for inflation to kick in before bonds need to be refinanced, Brynjolfsson explained.

Berkshire Hathaway Chairman Warren Buffett said this month that he's bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the financial crisis.

The U.S. will never default on its debt because the dollar is the world's reserve currency. But the country may print more dollars to repay with devalued currency, he suggested.

The European Central Bank's actions this week added to inflation concerns. The bank has been in the market buying the government debt of Greece and other indebted European countries, according to Brynjolfsson. Such quantitative easing could devalue the euro and produce inflation, investors worry.

Xerion's Arbess sees "a round of devaluations of a lot of different currencies."

"That will be accompanied by inflation in the price of non-renewable assets like gold, other precious metals and industrial commodities," he said. "People start to hold on to things that they think will retain value."

Gold hit a record Wednesday

4,577 posts
msg #92839
Ignore Eman93
5/16/2010 11:55:45 PM

Quite a conundrum I would say.......

4,577 posts
msg #92840
Ignore Eman93
5/17/2010 12:50:02 AM

I wounder if AIG is on the hook for any of the Greek default insurance probably collateralize with US mortgage CDOs......

4,577 posts
msg #92841
Ignore Eman93
5/17/2010 12:51:47 AM

If you dont read the whole thing this is the best part...

"First excessively indebted households passed part of their debt back to their creditors - the banks. Then the banks, excessively leveraged and at risk of default, passed part of their debt to the sovereign," he explained. "Finally, the now overly indebted sovereign is passing the debt back to the households, through higher taxes, lower public spending, the risk of default or the threat of monetization and inflation."

4,577 posts
msg #92950
Ignore Eman93
5/20/2010 10:47:54 PM

Kind of old but fitting

54 posts
msg #93029
Ignore crunkle
5/22/2010 1:38:30 AM


I have a curse of usually being too early. That said, it looks like in the last couple of days, the Euro has least for now. Fortunately, one of my rules is not to enter a position unless it's higher than the previous day (saved my a$$ Monday).

I recently read an article from a long-time technician who said that one of his favorite (and most predictable) set-ups is when a stock closes higher than the high of the day in which a recent (30 day?) low was established. Proves to be a fairly reliable short-term trend-reversal indicator. Oil and commodity stocks seem to trend stronger than other sectors. I'll see how things open next week. I'll be looking at UCO. Looks like it could move back up into the 12 area without a lot of strain.

One thing I can just about guarantee, the strength in the dollar is the equivalent of the Emporer's new clothes. When this gets widely accepted, you will see oil prices follow gold. Along the same lines, keep an eye out for eanings estimates to begin to be marked down because of the strong dollar. Tech companies particularly vulnerable.

4,577 posts
msg #93074
Ignore Eman93
5/23/2010 9:39:00 PM

May 24 (Bloomberg) -- The 18-month slump in Treasury zero- coupon bonds is giving way to rising demand as the rate of inflation falls to a 40-year low, turning so-called Strips into the best performers in the U.S. government debt market.

Investment banks increased the securities -- created by separating the interest and principal payments of a bond and selling them at a discount -- by 4.4 percent to $179.4 billion from December through April, according to Treasury Department data. It’s the first time that the market expanded for five straight months since 2006.

The call for Strips, which started in 1985 after former Federal Reserve Chairman Paul Volcker broke the back of inflation, suggests growing bullishness toward the bond market after the Bank of America Merrill Lynch U.S. Treasury Master Index fell 3.7 percent in 2009. Yields on Treasury Inflation- Protected Securities show money managers expect the consumer price index to increase an average 1.94 annually next 10 years, down from 2.43 percent as recently as April 29.

“We are in some sort of a new normal environment and inflation is not going to be a problem anytime soon,” said Jeffrey Caughron, an associate partner in Oklahoma City at Baker Group Ltd., which advises community banks investing $20 billion of assets and is recommending that some clients buy zero-coupon Treasuries. “Strips would be beneficial if we go to anything close to deflation.”

Falling Prices

The consumer price index dropped 0.1 percent in April, the first decrease since March 2009, figures from the Labor Department in Washington showed May 19. Excluding food and fuel, the so-called core rate was unchanged, capping the smallest 12- month gain in four decades.

Slower inflation preserves the value of fixed-interest payments, especially for longer-maturity bonds. Treasury 30-year zero-coupon bonds have returned 16.7 percent this year, including 15.2 percent in May, according to Bank of America Merrill Lynch indexes.

Strips are outperforming the rest of the $7.9 trillion market for Treasuries, the benchmark for everything from corporate bonds to mortgage rates. Government securities have returned 4.4 percent since December, including reinvested interest, the most at this point in a year since gaining 8.6 percent in 1995, according to Bank of America Merrill Lynch indexes.

Beating Stocks

They’re beating the Standard & Poor’s 500 Index, down 2.46 percent in 2010, and the Reuters/Jefferies CRB Index of 19 commodities, which has fallen 11.3 percent. Treasury Inflation- Protected Securities, or TIPS, developed in 1997, have also lagged behind, gaining 3.32 percent on average.

“Inflation is not a near-term concern,” said Tom Girard, the New York-based head of the portfolio management and strategy in the fixed-income group of New York Life Investment Co. The insurer holds Strips among the more than $127 billion in assets under management.

Strips, short for separate trading of registered interest and principal of securities, are created by Wall Street firms that split bonds into their face amount and individual coupon payments.

The amount of Strips outstanding climbed to an eight-year high of $206.9 billion in April 2008, before falling to $171.7 billion in November 2009, according to Treasury Department figures. The decline came as credit markets recovered and concern rose that the unprecedented cash pumped into the economy by the Fed and record borrowing by the Obama administration would spark inflation.

Rebounding From Loss

The securities lost 47 percent on average last year, according to Bank of America Merrill Lynch indexes.

Demand is picking up on speculation the expanding sovereign debt crisis in Europe will slow the global economy and keep the Fed from boosting its target rate for overnight loans between banks from a range of zero to 0.25 percent. Rising rates hurt the value of Strips more than bonds because investors don’t get any payments from the securities to reinvest until they mature.

The gain in Strips “tells me other fixed-income securities usually bought by pension funds probably aren’t also attractive because of credit risk,” said George Goncalves, the New York- based head of interest-rate strategy at primary dealer Nomura Holdings Inc. The firm pushed back its forecast last week for a Fed rate increase to June 2011.

Corporate bonds have lost 0.66 percent this month, the most since they fell 1.88 percent in February 2009, based on Bank of America Merrill Lynch indexes.

Pushing Back

Last week, Citigroup Inc. joined the growing list of bond dealers pushing back forecasts for when the central bank will start raising rates until the first half of 2011. Europe’s debt crisis has led to “the threat of renewed financial instability and heightened risk aversion,” Citigroup, one of the 18 primary dealers that trade directly with the Fed, said in a report.

Demand for Treasuries picked up last week. The yield on the benchmark 3.5 percent note due May 2020 fell 22 basis points to 3.24 percent as investors sought a refuge from losses in higher- risk assets, according to BGCantor Market Data. The yield touched 3.10 percent on May 21, the lowest in a year, as bond prices rose.

The rally is a surprise to most of the primary dealers. At the start of 2010 they predicting investors in Treasuries would lose money again this year as the economy continued to recover and pushed the Fed closer to tightening monetary policy.

‘Economic Slack’

“Even though the recovery appeared to be continuing and was expected to strengthen gradually over time, most members projected that economic slack would continue to be quite elevated for some time,” according minutes of the Federal Open Market Committee’s April 27-28 meeting released last week.

Officials expected inflation to remain “below rates that would be consistent in the longer run with the Federal Reserve’s dual objectives” of maximum employment and stable prices, the minutes said.

Some policy makers said they were concerned about potential spillover to the U.S. from the Greek debt crisis. European officials announced an almost $1 trillion aid package and the Fed decided to open emergency currency swaps a week later.

“With the austerity measures slowing growth and taking pressure off inflation, we’re seeing a drifting back into Treasuries and into Strips,” said Mark Fovinci, who manages $2.8 billion for Ferguson Wellman in Portland, Oregon. “We are coming out of a recession and into recovery, which has been led by exports. The declining euro will take the edge off growth and pressure off inflation.”

Dollar Strength

The dollar has strengthened 8.74 percent this year while the euro has weakened 5.92 percent, according to Bloomberg Correlation-Weighted Indices. The euro dropped to $1.2144 on May 19, the lowest level since April 2006.

Global purchases of U.S. equities, notes and bonds totaled $140.5 billion in March, more than double economists’ estimates, after net buying of $47.1 billion in February, the Treasury said May 17. Purchases of Treasuries rose by the most since June as China, the largest lender to the U.S., added to its holdings for the first time since September.

Demand for Treasuries and dollar-based assets is helping cap borrowing costs as President Barack Obama finances the economic recovery by selling record amounts of bonds to finance a budget deficit that exceeds $1 trillion. More Americans filed applications for unemployment benefits in the week ended May 15 than economists forecast, showing firings remain elevated even as employment rises.

Strips History

Strips were created after the Fed risked losing credibility as inflation reached a 14.8 percent annual rate in March 1980. Volcker, now chairman of Obama’s Economic Recovery Advisory Board, responded by raising rates as high as 20 percent even as the economy slipped into the longest post-World War II recession to win back confidence among investors. By the time Volcker stepped down from the Fed in 1987, inflation slowed to 4.3 percent and benchmark borrowing costs were 6.75 percent.

Zero-coupon securities have traditionally been most popular for investments on which taxes can be deferred, such as individual retirement accounts and pension plans, since any increase in value is accrued annually. At the same time, the known cash value at specific future dates enables savers and investors to tailor their use.

“In this post-crisis environment, it’s back to basics for these pension funds,” said Richard Bryant, senior vice president in fixed income at MF Global Inc. in New York, a broker of exchange-traded futures. “The increase in the amount of long Treasuries held in strip form is because of demand at these yield levels.”

To contact the reporter on this story: Susanne Walker in New York at
Last Updated: May 23, 2010 13:00 EDT

4,577 posts
msg #93075
Ignore Eman93
5/23/2010 9:39:37 PM

Deflation = Bad

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